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l Appeals Nos. 1174 of 1965 and 1935 of 1966.
Appeals from the judgment and decree dated October .14, 1959 of the Madras High Court in Appeal No. 471 of 1955.
H. R. Gokhale, P. section Padmanaban and D. N. Gupta, for the appellant (in C.A. No. 1174 of 1965) and respondent No. 1 (in C.A. No. 1935 of 1966).
V. P. Raman, Shyamala Pappu, Vineet Kumar, P.S. khera and R. Nagaratnam, for the appellants (in C.A. No.1935 of 1966) and respondents Nos.
1 to 4 (in C.A. No. 1174of 1965).
C.B. Agarwala and R. Gopalakrishnan, for respondent No. 12 (in C.A. No. 1935 of 1966).
206 The Judgment of the Court was delivered by Bachawat, J.
One James Henry Wapshare owned several estates including Naduvattam in the Nilgiris known as the Ouchterlony Valley Estates, having tea, coffee, cardamom and cinchona plantations.
He lived in Naduvattam and Ootacamund with his wife Nellie, daughters Violet and Dorothy and sons James and Edward.
In 1927 he formed a limited company known as the Ouchterlony Valley Estates limited,having a share capital of Rs. 15 lakhs and conveyed the estates to the company.
All the shares of this company, sometimes referred to as the "old company" were held by him and the members of his family.
The company borrowed Rs. 10 1/2 lakhs from the Imperial Bank of India against the issue of debentures.
The loan was secured by a mortgage of the estates under a debenture trust deed dated May 13, 1927 and was repayable on May 15, 1937.
In default of payment within November 15, 1937 the trustee under the debenture trust deed was authorised to enter into possession of the estates and sell them.
By an agreement dated August 16, 1936 Peirce Leslie & Co. Ltd., referred to as the appellant company, was appointed as the secretary of the old company.
On April 15, 1937 the old company was served with a notice.
that in default of payment of the loan within November 15, 1937 the trustee for the debenture holders would take possession of the estates and sell them.
On May 18, 1937 James Henry Wapshare died leaving behind him his widow and his sons and daughters.
In November 1937 after prolonged negotiations between the Wapshares and the appellant company it was settled that the company would purchase all the estates except Naduvattam for Rs. 10 lakhs.
On December 29, 1937 formal agreements were executed providing that the old company would convey to the appellant company all the estates except Naduvattam for Rs. 10 1/2 lakhs and the appellant company would convey Naduvattam to Mrs. Nellie Wapshare for Rs. 50,000 and would at the same time advance Rs. 50,000 on the hypothecation of Naduvattam crops.
By January 10, 1938 the appellant company paid the entire purchase price and took possession of the estates and the entire dues of the Imperial Bank of India were liquidated.
On March 30, 1938 the old company passed a special resolution for its voluntary winding up and appointed Capt.
F. Murcutt as its liquidator.
The appellant company promoted a new company known as Ouchterlony Valley Estates Ltd., for the purpose of acquiring the ' estates.
The new company was incorporated on September 5, 1938.
Fifty per cent of its shares were held, by the appellant company.
Formal conveyances of the Naduvattam estate in favour of Mrs. Nellie Wapshare and of the other estates in favour of the new company were executed by the old company between January and May 1939.
On the execution of the con 207 veyances the new company entered into possession of the estates conveyed to them.
, As soon as the affairs of the old company were wound.
up the liquidator made ,up the final accounts of tile winding up and called the final meetings of the company and its creditors.
On or about November 29, 1939 a copy 'of the final accounts and the return of the holding of the meetings were filed with the registrar of joint stock companies and were registered under 'section 209H of the Indian Companies Act, 1913.
In view of section 209H(4), the old company stood dissolved with effect from March 1, 1940.
On December 21, 1950 Mrs. Nellie, Violet, Dorothy, James and Edward Wapshares instituted the present suit against the appellant company, impleading the appellant company as defendant No. 1, 12 persons said to be its directors and officials as defendants 2 to 13, Capt.
F.A. Murcutt as defendant No. 14, the new company as defendant No. 15 and the old company as defendant No. 16.
The plaintiffs prayed for a decree declaring that the old company had not been wound up in accordance with law and was still in existence as a corporate personality, a declaration that the old company was the real owner of the aforesaid properties and the new company held them in trust for the old company, a decree vesting or re transferring the properties to the old company and alternatively to the plaintiffs and accounts.
The plaintiffs alleged that the appellant company as the secretary and manager of the old company was bound in a fiduciary character to protect its interest and by availing itself of this character gained pecuniary advantage by purchase of the properties from the old company in 1939, that the agreement for sale and conveyances in respect thereof were induced by fraud, fraudulent concealment, misrepresentation, undue influence an improper means, that the new company was controlled by the appellants that all the defendants were privy to the fraud, that the winding up of the old company was procured by the defendants fraudulently,, that the plaintiffs discovered the fraud in September 1949, and the plaintiffs were the only shareholders of the old company and as such were entitled to maintain the suit.
Defendants 4, 11 and 14 died during the pendency of the suit.
The defunct old company impleaded as defendant No. 16 did not appear but the other defendants contested the suit.
The Subordinate Judge, the Nilgiris, Ootacamund, dismissed the suit.
, He held that (1) there was no fiduciary relationship between the appellant and the old company; (2) the impugned agreements and conveyances were not induced by fraud, fraudulent concealment, undue influence or improper means and were valid and binding on the old company and the plaintiffs; (3) the suit was barred by limitation; (4) the old company was dissolved in ,accordance with law and was not in existence and (5) the plaintiffs had no locus standi to maintain the suit .
The plaintiffs filed an appeal from the decree.
The Madras High Court allowed 208 the appeal in part and passed a decree asking the appellant to pay to the plaintiffs Rs 1,50,000.
The High Court held that (1) there was a fiduciary relationship between the appellant and the old company, (2) the appellant by availing itself of its fiduciary character gained a pecuniary advantage of Rs. 1,50,000 and to the extent of this unjust 'enrichment was bound to reimburse the plaintiffs; (3) the suit was not barred by limitation and (4).
in spite of the dissolution of the old company the plaintiffs were entitled to maintain the suit.
Aggrieved by this decree the appellant company filed C.A. No. 1174 of 1965 and the Wap shares have filed the cross appeal C.A. No. 1935 of 1966 on the strength of certificates granted by the High Court under Act.
133(1)(c) of the Constitution.
The following three questions arise in these appeals (1) was there a fiduciary relationship between the appellant and the old company and if so, did the appellant company by availing themselves of this fiduciary character gain a pecuniary advantage of Rs. 1,50,000.
(2) is the suit barred by limitation; and (3) are the plaintiffs as shareholders of the old company entitled to maintain the suit.
It is a settled rule of equity that any person bound in a fiduciary character to protect the interests of another person should not put himself in a position where his interest and duty conflict.
If by availing himself of his fiduciary character or by entering into any dealings under circumstances in which his interests are ,or may be adverse to those of such other person he gains for himself a pecuniary advantage, he must hold for the benefit of such other person the advantage so gained, see Trusts Act,s.88.
But there is no rule which incapacitates a trustee from dealing with a cestui que trust.
In Coles vs Trecothick(1) Lord Eldon said : "a trustee may buy from the cestui que trust, provided 'there is 'a distinct and clear contract, ascertained to be such after a jealous and scrupulous examination of all the circumstances, proving, that the cestui que trust intended, the trustee should buy; and there is no fraud, no concealment, no advantage taken, by 'the trustee of information acquired by him in the character of 'trustee.
I admit, it is a difficult case to make out, wherever it is contended that the exception prevails.
" As stated in Kerr on ,Fraud and Mistake, 6th Ed. page 192 "Thus a trustee for sale may purchase the trust estate, if the cestui que trust fully and clearly understands with whom he is dealing and makes no objection to the transaction, and the trustee fairly and honestly (1) 9 Ves.
June.234,247;32E.R.592,597. 209 discloses all that he knows respecting the property and gives a just and fair price, and does not seek to secure surreptitiously any advantage for himself.
The onus however, rests upon the trustee, and he is bound to produce clear affirmative proof that the parties were at arms ' length, that the cestui que trust had the fullest information upon all material facts, and that having this information he agreed to and adopted what was done.
" The appellant company was the secretary of the old company, was in charge of its correspondence and accounts and was actively engaged in assisting it and its shareholders in selling the estates.
In course of its employment the appellant acquired intimate knowledge of the income, prospects and the market value of the properties.
We agree with the High Court that the appellant stood in a fiduciary relationship towards the old company and was bound to protect its interests.
The appellant entered into an agreement with the old company for the purchase of the properties.
It promoted the new company to which the properties were subsequently conveyed.
Fifty per cent of the shares of the new company were held by the appellant company and the new company was managed and controlled by it.
The onus is upon the appellant company to establish affirmatively that the transaction was righteous and that it did not gain any pecuniary advantage by availing itself of its fiduciary character.
We are inclined to think that the appellant company has discharged this difficult burden of proof.
Since 1931 the Wapshares were keen on selling the estates.
From time to time there were offers from intending buyers but none of them materialized.
In 1936 there was a 'slump in tea and coffee prices.
There was a possibility that the tea restriction scheme would be abolished and there would be a further slump in tea prices.
The old company was indebted to the Imperial Bank of India for Rs. 10 1/2 lakhs against the issue of debentures secured by an English mortgage over all the estates.
The Bank was pressing for the payment of its dues.
There was every likelihood that in default of payment by November 15, 1937 the trustee for the debenture holders would enter into possession of the estates and sell hem without intervention of court.
The old company was not in a position to liquidate the debt without selling the estates, In April 1937 M/s. Kuruvilla Bros. agreed to purchase the properties.
On May 18, 1937 James Henry Wapshare died.
In July 1937 the deal with Kuruvilla Bros. fell through.
The Wapshares and the old company tried their best to raise loans and for that purpose issued advertisements and contacted several banks and insurance companies but they were unable to raise any loan.
In the beginning of November 1937, 210 the Wapshares had before I them a firm offer from Arbuthnot Lathem & Co. for purchase of the estates for Rs. 14 lakhs.
But the Wapshares were not willing to sell Naduvattam.
The bungalow at Naduvattam was the home of the Wapshare family.
Naduvattam was the highest altitudinal estate, grew the best tea in the area and had a very good name in the London tea market.
The appellant had previously offered to buy all the estates, for Rs. 111/2 lakhs only.
The Wapshares wanted the appellant to make an offer which would enable them to retain Naduvattam and at the same time to liquidate the Bank 's dues.
At the insistence of the Wapshares interviews were arranged at Calicut on November 4, and November 6, 1937 between Dorothy and Robert representing the Wapshares and Mr. Thorne representing the appellant.
Mr. Thome could not offer more than Rs. 10 lakhs for all the estates excluding Naduvattam.
He told the Wapshares that they should accept the, offer of Arbuthnot Lathem & Co. as they would get Rs. 14 lakhs by selling all the estates.
The Wapshares were anxious to retain Naduvattam and were inclined to accept the appellant 's offer.
They took some time for consideration and at the same time asked the Arbuthnots for time till, November 10, for consideration of their offer.
On November 10, Dorothy sent a telegram to the appellant company informing them that the family was agreeable to their new proposal.
The draft agreement was sent by the appellant on November II.
In the beginning of November Mrs. Wapshare was ill and was in a hospital in Bangalore.
But on November 10, she was well enough to discuss the appellant 's proposal.
On November 12, she came to Ootacamund and on November 13 she went to her lawyer Gonsalves, discussed the matter, with him and gave her consent.
Gonsalves was approached to put the bargain in a legal form.
He took exception to the draft agreement, but found the formal agreements to be free from blemish.
At a meeting held on November 18, 1937 the shareholders of the company unanimously accepted the proposal.
Mrs. Wapshare, Dorothy, Robert and Edward were present at the meeting.
The meeting was also attended by E.W. Simcock, chairman of the company, H. M. Small, the director, nominated by the Imperial Bank of India and C. K. Pittock.
All the Wapshare 's were sui juris ' Dorothy was a shrewd young lady and the best business brain in the family.
The Wapshares knew the value of the properties intimately.
They knew that Naduvattam if sold separately would not fetch more than Rs. 2 lakhs.
Yet they chose to retain Naduvattam and sell their estates for Rs. 10 lakhs instead of selling all the estates for Rs. 14 lakhs.
The reason was that there was no other, buyer willing to pay more than Rs. 10 lakhs for the other estates.
They had decided not to sell Naduvattam and they were satisfied that ft. 10 lakhs was a just and fair price for the other estates sold separately from Naduvattam.
The appellant 's offer enabled them 211 to keep Naduvattam and at the same time to liquidate the Bank 's dues.
The deal was satisfactory to them in every way.
They obtained all necessary legal advice.
The documents were in proper legal form.
There was no fraud, no concealment and no undue influence.
No advantage was taken by the_ appellant of any information acquired by them in their character as secretary.
The Wapshares clearly understood that they were, dealing with the appellant company, had the fullest information about all material, facts and that having this information they agreed to sell.
They made no complaint about it for 12 years.
Their long acquiescence 'in the sale is evidence that the transaction was fair in all respects, see Parks vs White(1).
On the whole and especially having regard to the long acquiescence we hold that the transaction was just and fair and that the appellant did not gain any pecuniary advantage by availing themselves of their fiduciary character or under 'circumstances in which their interests were in conflict with those of the old company.
In saying so we must not be understood to say that we encourage transactions of this type.
Having regard to their fiduciary character the appellant company might well have avoided entering into the transaction.
The next question is with regard to limitation.
The convey ances in favour of the new company were executed on January 14, 1939 and May 15, 1939.
Simultaneously with the execution of the conveyances the new company entered into possession of the properties.
Even before that date by January 10, 1938 the appellant company had taken possession of the properties.
The suit was filed on December 21, 1950 when the Indian Limitation Act, 1908 was in force.
The plaintiffs cannot claim relief on the ground of fraud and consequently article 95, has no application.
Section 10 does not apply as the properties are not vested in the new company for the specific purpose of making them over to the old company or to the plaintiffs.
Article 144 does not apply for several reasons.
In the plaint there is no prayer for recovery of possession.
The plaintiffs claim declaratory reliefs, a decree vesting or re transferring the properties to the old company or to the plaintiffs and accounts.
Such a suit is governed by article 120.
The High Court passed a decree for money and not for recovery of immovable properties.
A suit for such a relief would be governed by article 1 20.
Even if the suit is treated as one for recovery of possession of the properties it would be governed by article 120 and not by article 144.
The old company could not ask for recovery of the properties until they obtained a reconveyance from the new company '.
The cause of action for this relief arose in 1939 when the properties were 11 Ves.
June. 209,226; ,1074.
212 conveyed to the new company.
A suit for this relief was barred under article 120 on the expiry of six years.
After the expiry this period the old company could not file a suit for recovery of possession.
In Rani Chhatra Kumari Devi V. Prince Mohan Bikram Shah(1) the Privy Council held that in a case where the property was not held by the trustee for the specific purpose of making it over to the beneficiary 'and the trust did not fall within section 10, a suit by the beneficiary claiming recovery of possesSion from the trustee was governed by Art 120.
Sir George Lowndes said. "The trustee is, in their Lordships ' opinion, the owner of the trust property, the right of the beneficiary being in a proper case to call upon the trustee to convey to him.
The enforcement of this right would, their Lordships think, be barred after six years under article 120 of.
the Limitation Act, and if the beneficiary has allowed this period to expire without suing, he cannot afterwards file a possessory suit, as until conveyance he is not the owner.
" It follows that the suit is barred by limitation.
The third question relates to the maintainability of the suit.
The plaintiffs sued to recover properties belonging to the old company.
The company went into voluntary liquidation and was wound up.
As already stated the company stood dissolved on March 1, 1940 under section 209H of the Indian Companies Act, 1913.
No application was made within 2 years to declare the dissolution to be void under section 243.
Apart from s.243 the dissolution might possibly be set aside in a suit on the ground of fraud, but the plaintiffs failed to establish any fraud affecting the dissolution.
The dissolution has put an end to the existence of the company.
In these circumstances, the appellant contends that all the properties and the rights of the old company.
if any, have vested in the Government by escheat or as bona vacantia and the plaintiffs cannot sue for the recovery of its properties.
The plaintiffs dispute the right of the Government to take the properties by escheat or as bona vacantia, and they contend that on the dissolution of the old company, its assets have now vested in its shareholders.
The common law of England recognises the right of the Crown to take property by escheat or as bona vacantia.
Escheat proper was the lord 's right of re entry on real property held by a tenant dying intestate without lawful heirs.
It was an incident ,of feudal tenure and was based on the want of a tenant to perform the feudal services, see Halsbury 's Laws of England, vol.
16, (1) L.R. 58 I.A. 279.
213 art 830 On the tenant dying intestate without leaving any lawfull heirs his estate came to an end and the lord was in by his own right and not by way of succession or inheritance from the tenant, see: Attorney General of Ontario vs Andrew F. Mercer(1).
In most cases, the land escheated to the Crown as the lord paramount, in view of the gradual elimination of intermediate or mesne lords since 1290 The Crown takes as bona vacantia goods in which no one else can claim a property.
In Dyke vs Walford(2 ) it was said that "it is the right of the Crown to bona vacantia, to property which has no other owner.
" The right of the Crown to take as bona vacantia extends to personal property of every kind, see: In re.
Wells, Swinburne Hanham vs Howard(3).
Escheat of real property of an intestate dying without heirs was abolished in 1925 and the Crown now takes all his properties as ,bona vacantia.
On the dissolution of a company the Crown took its real property by escheat and its personal property as bona) vacantia.
Technical escheat of the property of a dissolved company was abolished in 1929 and now under section 354 of the English Companies Act, 1948 all the property and rights of a dissolved company is deemed to be bona vacantia and accordingly belongs to the Crown.
The right of the Government to take by escheat ' for want of an heir or successor or as bona vacantia for want of a rightful owner has been recognised in our country for a long time.
Statute 16 & 17 Victoriae, C. 95, section 27, an Act to provide for the government of India asserted that "all real and personal estate within the said territories escheating or lapsing for want of an heir or successor, and all property within the said territories devolving as bona vacantia for want of a rightful owner, shall (as part of the revenues of India) belong to the East India Company in trust for Her Majesty for the service of the government of India." By section 54 of the Government of India Act, 1858 the existing provision was continued in force and was construed as referring to the Secretary of State in Council in place of the company.
Section 20(3) (iii) of the Government of India Act, 1915 provided that the revenues of India received for His Majesty would include "all movable or immovable property in British India escheating or lapsing for want of an heir or successor, and all property in British India devolving as ' bona vacantia for want of a rightful owner.
" Section 174 of the Government of India Act, 1935 provided : "Subject as hereinafter provided, any property 'in India accruing to His Majesty by escheat or lapse or as bona vacantia for want of a rightful owner, shall, if it is (1) 8 A.C. 767, 772.(2) ; ,496;13E.R.557,580.
(3) [1933] 1 Ch.29,49.
214 property situate in a Province, vest in His Majesty for the purposes of the government of that Province, and shall in any other case vest in His Majesty for the purpose of the, government of the Federation.
" Article 296 of the Constitution now provides "Subject as hereinafter provided, any property in the territory of India which, if this Constitution had not come into operation,, would have accrued to His Majesty or, as the case may be, to the Ruler of an Indian State by escheat or lapse, or as bona vacantia for want of a rightful owner, shall if it is property situate in a State, vest in such State, and shall, in any other case, vest in the Union.
" These enactments show that in this country the Government takes by escheat immovable as well as movable property for want of an heir or successor.
In this country escheat is not based on artificial rules of common law and is not an incident of feudal tenure.
It is an incident of sovereignty and rests on the principle ,,of ultimate ownership by the State of all property within its jurisdiction.
"Private ownership not existing, the State must be owner as ultimate lord", see: Collector of Masulipatam vs C. Vencata Narainapah(1).
The rules of English feudal law relating to mesne lords are not applicable, and consequently the zamindar could not take by escheat the land of a tenant dying without heirs.
The right of escheat belongs to the Government only, see Ranee Sonet Kowar vs Mirza Himmut Bahadoor(2).
The Government has the right to take all property within its jurisdiction by escheat for want of an heir or successor and as bona vacantia for want a a rightful owner, see : Bombay Dyeing & Manufacturing Co. V. State of Bombay("), Legal Remembrancer vs
Corporation of Calcutta (4),.
Consequently the property of an intestate dying without leaving lawful heirs, and the property of a dissolved corporation passes to the Government by escheat or as bona vacantia.
The property taken by escheat or as bona vacantia belongs to the Government, subject to trusts and charges, if any, previously affecting it.
As already stated, technical escheat of the real property of a dissolved company was abolished in England in 1929 and section 354 of the Companies Act 1948 now provides that all property and rights of a dissolved company shall be deemed to be bona vacantia and shall accordingly belong to the Crown.
There was no statutory provision like section 354 before 1929.
In the absence of such a provision, the Crown took the real property of a company dissolved before 1929 by escheat 'and its personal property (1) 8 M. I. A. 500, 525.
(3) ; ,1146.
(2) L.R. 3 I.A. 92, 101.
(4) 215 as bona vacantia, except in so far as its right, was cut down by statute, see : In re.
Wells(1).
Likewise in this country, the Government, took by escheat or as bona vacantia all the properties of a company dissolved under the Indian Companies Act, 1913 except in so far as its right was cut down by that Act.
P. B. Mukherjee, J. expressed a similar opinion In re U.N. Mandal 's Estate (2).
Accordingly the shareholders or creditors of the dissolved company cannot maintain any action for recovery of its assets.
No effective relief can be given in such action, as the company is ' not a party and the assets cannot be restored to its coffers.
On this ground in Coxon vs Gorst(3) an action by creditors for recovery of moneys due to the dissolved company was dismissed, and in.
In re.
Lewis & Smart Ltd. (4) it was held that a pending misfeasance summons abated on the dissolution of the company.
The plaintiffs ' contention that the properties of a dissolved company passed to its shareholders is based upon American law, which is stated in American Jurisprudence, 2d, Corporations, aft.
1659 thus : "Apart from statutory provisions which frequently embody the following rule also, the general equitable rule now followed in this country is that upon the dissolution of a corporation, the property and assets of the corporation constitute a trust fund 'for the benefit of its creditors and stockholders.
This rule necessarily displaces and makes obsolete the early common law rules as to the reverter If real estate and the escheat of the personal estate of corporation in such a case, and practically makes obsolete the doctrine as to the extinguishment of the debts owing by and to the corporation in such cases.
Stated in another way, the rule is that after the dissolution of a corporation, its property passes to its stockholders subject to the payment of the corporate debts.
The inherent jurisdiction of equity over trusts embraces the power to administer the assets of a dissolved coloration.
" The subject of dissolution of corporations is discussed in articles 1628 to 1696 of the book.
The corporation is dissolved by a judgment of court (article 1645).
For the purpose of complete winding up of its affairs, statutes provide that even after dissolution the corporation shall continue to exist and may sue or be sued for a limited period, see articles 1662, 1668, 1669, 1671, 1673, Statutes also provide for appointment of a trustee for the dissolved corporation and their effect is to convert its properties into 'a trust fund and to abrogate the common law rule of escheat, articles 1676, 1677.
The stockholders of the dissolved corporation can accordingly maintain an action against the trustee for distribution (1) ,49.(3) (2) A.T.R. , 498.(4) 216 of the surplus assets after payment of the debts.
of the corporation, see Bacon vs Robertson (1).
The law in our country is very different.
Here the winding up precedes the dissolution.
There 'is no statutory provision vesting the properties of a dissolved company in a trustee or having the effect of abrogating; the law of escheat.
The shareholders or creditors of a dissolved company cannot be regarded as its heirs and successors.
On dissolution of a company, its properties, if any, vest in the government.
In Coxon vs Gorst(2) page 78 Chitty, J. summarily rejected the contention that a chose in action vested in a company passed on the dissolution to its creditors.
He said : "This supposed vesting in the creditors of the company 's closes in action is a mere fiction with nothing in the statute to support it, and is in the teeth of the provisions of the statute.
follows that the plaintiffs are not entitled to maintain this suit.
A question may arise whether the Government takes the pro perty of a dissolved insolvent company subject to a trust for payment of its debts, see in this connection, In the matter of Chandbali S.S. Co.,(3) and In Re Wells(4 ) at pages 38 and 50.
But that question does not arise in the present case and we express no opinion on it.
In the result, C.A. No. 1174 of 1965 is allowed, the decree passed by the High Court is set aside and the decree passed by the Trial Court is restored.
C.A. No. 1935 of 1966 is dismissed.
There will be no order as to costs in this Court and in the High Court.
C.A. No. 1174/65 allowed.
v.p.s.
C.A. No. 1935/66 dismissed.
(1) 15 Law ed.
(2) (3) , 284 286. | One W owned several tea, coffee and other.
plantations.
In 1927, he formed a limited company and conveyed his estates to the company.
All the shares of the company were held by him and the members of his family.
The company borrowed Rs. 10 1/2 lakhs from the Imperial Bank of India 'against the issue of debentures secured by an English mortgage.
The loan was repayable on March 15, 1937.
In default of payment within November 15, 1937 the trustee under the debenture trust deed was authorised to enter into possession of the estates and sell them.
The appellant company was appointed as the secretary of the company.
Since 1931, the family was keen on selling the estates, but none of the offers materialised.
In 1936, there was a slump in tea and coffee prices and there was a possibility of a further slump.
The Bank was pressing for the payment of its dues and the company was not in a position to liquidate the debt without selling the estates.
The family 'tried unsuccessfully to raise loans.
In the beginning of November 1937, the family had a firm offer from A.L. & Co. for the purchase of all the estates for Rs. 14 lakhs, but the family wag anxious to retain one of them.
The appellant company offered Rs. 10 lakhs for all the estates excluding the estate which the family wanted to retain.
The family knew that this estate, if sold separately, would not fetch more, than Rs. 2 lakhs and yet they chose to retain it and to accept the appellant 's offer.
At a meeting all the shareholders (members of the family) unanimously accepted the, proposal.
There all sui juris and had business acumen.
They knew the value of he properties and accepted Rs. 10 lakhs as a just and fair price.
The offer enabled them to retain the estate which they wanted to retain and at the same time enabled them to liquidate the Bank 's dues.
They had legal advice and the documents were in proper legal form.
The meeting was also attended by the chairman of the company and the director nominated by the Imperial Bank.
After the transfer, the company went into voluntary liquidation and it stood dissolved on March 1, 1940, under section 209 H of the Companies Act, 1913.
The appellant took possession of the properties on January 10, 1938 and promoted a new company to which the properties were transferred by conveyances dated January 14, 1939 and May 15, 1939 50 % of the shares of the new company were held by the appellant company which managed and controlled the new company.
The members of the family made no complaint about 'the transaction for 12 years, but, on December 21, 1950, they instituted a suit against the appellant and others alleging that the old company had not been wound up in accordance with law and was still in existence, that the old company was the real owner of the properties and the new company held them in trust for the old 204 company, that the appellant took advantage of its fiduciary capacity and gained pecuniary advantage and that the various sales and conveyances were vitiated by fraud, and prayed for 'a decree vesting or retransferring the properties to the old company or the family.
The trial court dismissed the suit, but the appeal to the High Court was allowed in part.
In appeal to this Court, on the, questions : (1) (a) Whether there was a fiduciary relationship between the appellant and the old company, and (b) Whether the appellant gained a pecuniary advantage by availing itself of the fiduciary character; (2) Whether the suit was barred by limitation; and (3) Whether the members of the family as shareholders of the old company were entitled to maintain the suit, HELD : (1) (a) The appellant company was the secretary of the old company, was in charge of its correspondence and accounts and was actively engaged in assisting it and its share holders in selling the estates.
In the course of such employment it acquired intimate knowledge of the income, prospects and market value of the properties.
Therefore, the appellant stood in a fiduciary relationship towards the old company and was bound to protect its interests.
Having regard to its fiduciary character, the appellant should have avoided entering into the transaction.
[209 B D; 211 D] (b) But, there is no rule, which incapacitates a trustee from dealing with a cestui que trust, provided there was no fraud and no advantage was taken by the trustee of any information acquired by him in the character of a trustee.
The onus, however, is upon the trustee to establish affirmatively that the transaction was righteous and that he did not gain any pecuniary advantage by availing himself of his fiduciary character.
in the present case, the appellant had discharged this difficult onus.
The transaction was just and fair and the appellant did not gain any pecuniary advan tage by availing itself of its fiduciary character, nor was there any conflict between its own interests and those of the old company.
, No advantage was taken by the appellant of any information acquired by it in its character as secretary and, the circumstances ,how that there was no fraud, no concealment and no undue influence.
The long acquiescence of the members of the family in the sale is also evidence that the transaction was fair in all respects.
E; 211 E D] Coles vs Trecothick, ; , 247; ; , 597 and Parks vs White, , 226; , 1074, applied (2) The suit was barred by limitation.
[212 D] A suit by a beneficiary, claiming recovery of possession from the trustee is governed by article 120 of the Limitation Act, 1908.
The plaintiffs had not established fraud and consequently article 95 of the Limitation Act has no application.
Section 10 of the Act also does not apply, because, the properties were not vested in the new company for the specific purpose of making them over to the old company or to the plaintiffs.
In the plaint there was no prayer for recovery of possession.
The old company could not ask for recovery of the properties until they obtained a reconveyance from the new company.
The suit is not there fore governed by article 144 of the Limitation Act and since the ' period under article 120 is 6 years from the date of cause of action and the cause of action in the present case arose in 1939 when the conveyances were executed, the suit was barred.
[211 F H] 205 Rani Chhatra Kumari Devi vs Prince Mohan Bikram Shah, L.R. 58 I.A. 279, applied.
(3) The plaintiffs were not entitled to maintain the suit.
[216 C] As the plaintiffs failed to establish any fraud affecting the dissolution of the company, the dissolution has put an, end to its existence.
On the dissolution of the company, its properties, if any, Vested in the Government The right of the Government to take by escheat for want of an heir or successor or as bona vacantia for want of a rightful owner has been recognised in our country.
The various Government of India Acts and the Constitution show that the Government takes by escheat immovable as well as movable property for want of an heir or successor.
It is an incident of sovereignty and rests on the principle of ultimate ownership by the State of all property within its jurisdiction.
Unlike the law in the United States, winding up 'under the Indian Law precedes dissolution and there is no statutory provision vesting the properties of a dissolved company in a trustee or having the effect of abrogating the law of escheat.
The shareholders or creditors of a dissolved company cannot be regarded as its heirs or successors.
Therefore, the Government took by escheat or as bona vacantia all properties of a company dissolved under the, Indian Companies Act,. 1913, except in so far as its right was cut down by that Act.
Accordingly, the shareholders or creditors of the dissolved company cannot maintain arty action for recovery of its assets As the company was not a party and the assets could not be restored to its coffers, no effective relief could be given in such an action.
D E; 214 C D, F; 215 B C; 216 A B] Collector of Masulipatam vs C. Vencata Narainapah, 8 M.I.A. 500, 525, in re.
Wells , 49, Coxon vs
Gorst, and In re.
Lewis and Smart Ltd. , applied.
Bombay Deying and Manufacturing Co. vs State of Bombay, ; , 1146 and Legal Remembrancer vs Corporation of Calcutta; , , 204, followed.
In re.
U. N. Mandal 's Estate, A.I.R. 1959 Cal.
493, 498, approved. |
ecial Leave Petition (C) No. 8566 of 1988.
From the Judgment and Order dated 9.10.1987 of the Andhra Pradesh High Court in W.P. No. 306 of 1983.
R. Mohan for the Petitioner.
The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J.
This petition is for leave to appeal under Article 136 of the Constitution from the judgment and order of the High Court of Andhra Pradesh dated 9th October, 1987.
The question that was urged before the High Court and the question which is sought to be raised in this petition is whether the respondent Pradesh Rayons Ltd. which is manufacturing Rayon Grade Pulp, a base material for manufacturing of synthetics or manmade fabrics is an industry as mentioned in Schedule I of the Water (Prevention and Control of Pollution) cess Act, 1977 for the purposes of levy of Water Cess under the Act.
The water (Prevention and Control Of Pollution) Act, 1974 was passed by the Parliament to "provide for the prevention and control of water pollution and the maintaining or restoring of wholesomeness of water, for the establishment, with a view to carrying out the purposes aforesaid, of Boards for the prevention and control of water pollution, for conferring on and assigning to such Boards powers and functions relating thereto and for matters connected therewith".
For the aforesaid purposes, the Act contemplated creation of State Boards at State level and the Central Board at the national level.
Thereafter, the being Act 36 of 1977 was passed (hereinafter called 'the Act ').
The preamble to the said Act states that the said Act was "to provide for the levy and collection of a cess on water consumed by persons carrying on certain industries and by local authorities, with a view to augment the resources of the Central Board and the State PG NO 383 Boards for the prevention and control of water pollution constituted under the ".
Therefore, the said Act was passed only for the purpose of providing for levy and collection of cess on water consumed by persons carrying on certain industries with a view to augment the resources of the Central Board and the State Boards.
Section 2(c) stipulates A `specified industry ' means any industry specified in Schedule T. Section 3 provides as follows: "3.
Levy and collection of cess. (1) There shall be levied and collected a cess for the purposes of the and utilisation thereunder.
(2) The cess under sub section ( I) shall be payable by (a) every person carrying on any specified industry; and (b) every local authority, and shall be calculated on the basis of the water consumed by such person or local authority, as the case may be, for any of the purposes specified in column (1) of Schedule II, at such rate, not exceeding the rate specified in the corresponding entry in column (2) thereof, as the Central Government may, by notification in the Official Gazette, from time to time, specify.
" Therefore, this section provides for levy and collection of cess from the specified industries.
Specified industry is one which is mentioned in Schedule I which is as follows: "1.
Ferrous metallurgical industry.
Non ferrous metallurgical industry.
Mining industry.
Ore processing industry.
Petroleum industry.
Petro chemical industry.
Chemical industry.
Ceramic industry.
PG NO 384 9.
Cement industry.
Textile industry 11.
Paper industry.
Fertilizer industry.
Coal (including coke) industry.
Power (thermal and diesel) generating industry.
Processing of animal or vegetable products industry.
" Therefore, the short question, is, whether the industry run by the respondent herein for manufacturing Rayon Grade Pulp, a base material for manufacture of synthetics or man made fabrics is one of the industries mentioned in Schedule I hereinbefore.
In this case, the respondent company was registered as company in 1975.
The supply of energy to the company commenced on August 22, 1981 and the production began from September 1, 1981.
The company manufactures rayon grade pulp of 26250 tonnes per annum.
The Company was served with a notice on 12th August, 1981 to furnish the quantum of water consumed for assessment under the Act.
Based on the returns filed by the respondent as required under section S of the Act, assessment of water cess was made by an order dated 31st December 1981.
Aggrieved by the said order the respondent filed an appeal before the Appellate Committee constituted under the Act.
The Appellate committee by its order dated 30th November, 1982 conformed the orders of the assessment passed by the petitioner.
Before the Appellate Committee various contentions were urged and only one of such contention survives now and is agitated before us, namely, that the Rayon Industry is nOt included in Schedule I of the said Act.
The Appellate Committee by its order said as follows: "We are unable to agree with the arguments advanced by the learned counsel.
The appellant industry is manufacturing Rayon Grade Pulp which comes under the category of textile industry as it involves the production of Rayon Grade Pulp.
a base material for manufacture of synthetic of man made fibres. ' ' PG NO 385 From the aforesaid, it appears that the Appellate Committee was of the view that the respondent herein was manufacturing Rayon Grade Pulp which comes under the category of Textile mentioned in Schedule I of the Act.
Textile industry is item No. 10 in the aforesaid Schedule.
Aggrieved by the decision of the Appellate Committee, the respondent herein filed writ petition challenging the constitutional validity of the Act as well as the levy of cess on water on the ground that it was not one of the industries mentioned in the Schedule.
The High Court by its order dated 9th October, 1987 rejected the contention relating to the constitutional validity but upheld the contention that the respondent 's industry was not an industry which is mentioned in Schedule I and as such was not liable to pay cess.
It is the propriety or the correctness of that decision which is sought to be canvassed before us by this petition.
It must, therefore, be made clear that we are not concerned with the correctness or otherwise of the decision of the High Court about the constitutional validity of the Act in question.
That is not at issue before us since the petitioner, Andhra Pradesh State Board for Prevention and Control of Water Pollution has not challenged that finding.
The only question is whether the respondent is an industry as mentioned in the aforesaid schedule.
The High Court in the impugned judgment has held that Rayon Grade Pulp is not covered by any of the items specified in the said Schedule.
We are of the opinion that the High Court was right.
Before us it was sought to be canvassed that Rayon Grade Pulp is covered either by Item No. 7 which is chemical industry or 13y item No. 10 which is textile industry or item No. I1 which is paper industry.
We are unable to accept the contention.
It has to be borne in mind that this Act with which we are concerned is an Act imposing liability for cess.
The Act is fiscal in nature.
The Act must, therefore, be strictly construed in order to find out whether a liability is fastened on a particular industry.
The subject is not to be taxed without clear words for that purpose; and also that every Act of Parliament must be read according to its natural construction of words.
See the observations in Re Micklethwait, ; , 456.
Also see the observations in Tenant vs Smith, ; and Lord Halsbury 's observations at page 154.
See also the observations of Lord Simonds in St. Aubyn vs AG, ; at 485.
Justice Rowlatt of England said a long time ago, that in a taxing ACt one has to look merely at what is clearly said.
There is no room for any intendment.
There is no equity about a tax.
There is no presumption at to tax.
Nothing is to be read in, nothing is to be implied.
One has to look fairly at the language used.
See the observations in Cape Brandy Syndicate vs IRC, [1921]J 1 KB PG NO 386 64 at 71.
This Court has also reiterated the same view in Gursahai Saigal vs C.I.T. Punjab, ; ; S.L. T. Madras vs V. MR.
P. Firm, Muar, [1965] I SCR 815.
and Controller of Estate Duty Gujarat vs Kantilal Trikamlal, ; The question as to what is covered must be found out from the language according to its natural meaning fairly and squarely read.
See the observations in IRC vs Duke of Westminster, [1936] AC I at 24, and of this Court in A V Fernandez vs The State of Kerala, ; Justice Krishna Iyer of this Court in Martand Dairy & Farm vs Union of India, has observed that taxing consideration may stem from administrative experience and other factors of life and not artistic visualisation or neat logic and so the literal, though pedestrian, interpretation must prevail.
In this case where the question is whether a particular industry is an industry as covered in Schedule I of the Act, it has to be judged normally by what that industry produces mainly.
Every industry carries out multifarious activities to reach its goal through various multifarious methods.
Whether a particular industry falls within the realm of taxation, must be judged by the predominant purpose and process and not by any ancillary or incidental process carried on by a particular industry in running its business.
Chemical process would be involved to a certain extent, more or less in all industries, but an industry would be known as a chemical industry if it carries out predominantly chemical activities and is involved in chemical endeavours.
We fail to see that Rayon Grade Pulp could be considered even remotely connected as such with chemical industry or textile industry or paper industry.
In all preparations, there is certain chemical process but that does not make all industries chemical industries.
The expression "chemical" means, according to Collins English Dictionary.
any substance used in or resulting from a reaction involving changes to atoms or molecules or used in chemistry.
The Concise Oxford Dictionary, 8th Edition page 170 defines "chemical ' ' as made by or relating to, chemistry.
Broadly and literally, in our opinion, it can be said that the Rayon Grade Pulp is neither chemical industry nor textile industry nor paper industry.
We find it difficult on a broad and literal construction to bring the industry of the respondent into any of these categories.
In other words, to find out the intention of the legislation, if possible it should be PG NO 387 found out from the language used in case of doubt.
The purpose of legislation should be sought for to clarify the ambiguity only, if any.
The fairest and most rational method, says Blackstone, to interpret the will of the legislator is by exploring his intentions at the time when the law was made, by signs the most natural and probable.
And these signs are either the words, the context, the subject matter, the effects and consequence, or the spirit and reason of the law.
See Commentaries on the Laws of England by Blackstone (facsimile of 1st edition of 1765, University of Chicago Press, 1979 Vol. 1 p. 59.).
The words are generally to be understood `in their usual and most known signification ', although terms of art `must be taken according to the acceptation of the learning in each art, trade and science.
If words happen still to be dubious, we may establish their meaning from the context, which includes the preamble to the statute and laws made by the same legislator on the same subject.
Words are always to be understood as having regard to the subject matter of the legislation.
See Cross Statutory Interpretation, 2nd Edition page 21.
This Court in Lt Col. Prithi Pal Singh Bedi etc.
vs Union of India & Ors., [1983] I S.C.R. 393 at page 404 of the report reiterated that the dominant purpose in construing a statute is to ascertain the intention of the Parliament.
One of the well recognised canons of construction is that the legislature speaks its mind by use of correct expression and unless there is any ambiguity in the language of the provision the Court should adopt literal construction if it does not lead to an absurdity.
Therefore, the first question to be posed is whether there is any ambiguity in the language used.
If there is none, it would mean the language used, speaks the mind of Parliament and there is no need to look somewhere else to discover the intention or meaning.
If the literal construction leads to an absurdity, external aids to construction can be resorted to.
To ascertain the literal meaning it is equally necessary first to ascertain the juxtaposition in which the rule is placed, the purpose for which it is enacted and the object which it is required to subserve and the authority by which the rule is framed.
Bearing the aforesaid principle in mind, we find that there is no absurdity in the literal meaning.
The purpose of the Act is to realise money from those whose activities lead to pollution and who must bear the expenses of the maintenance and running of the State Board.
It is a fiscal provision and must, therefore, not only be literally construed but also be strictly construed.
Having regard to the literal expression used and bearing in mind the purpose for the legislation, we arrive at a result that certain PG NO 388 industries have to pay the expenses of the maintenance and functioning of the State Boards.
Considering the principle broadly and from commonsense point of view, we find nothing to warrant the conclusion that Rayon Grade Pulp is included in either of the industries as canvassed on behalf of the petitioner here and as held by the High Court in the judgment under appeal.
In this case, we must also note that neither the water Pollution Board nor any authorities under the Act nor the High Court proceeded on any evidence how these expressions are used in the particular industry or understood in the trade generally.
In other words, no principle of understanding in "common parlance" is involved in the instance case.
In that view of the matter, we are of the opinion that the contention sought for by the petitioner is of no substance.
Our attention, however, was drawn to the decision of a learned single Judge of the High Court of Kerala in M/s. Gwalior Rayon Silk Mfg.
(Wvg.) Co. Ltd., Mavoor vs The Appellate Committee for Water Cess, Trivandrum and others, A.I.R. 1983 Kerala 110.
There, the learned single Judge of the Kerala High Court held that industry manufacturing rayon grade pulp is chemical industry.
The High Court has observed that the product of the Pulp Division of a rayon silk manufacturing company is rayon grade pulp, extracted from bamboo or wood.
The High Court noted that the pulp produced in the Pulp Division of the company is the raw material for the Staple Fibre Division.
The High Court further observed that the pulp in question is a chemical used as chemical raw material, in the form known as chemical cellulose, for preparation of fibres.
The High Court noted that for the scientist cellulose is a carbohydrate an organic compound, a saccharide and for the layman also it is a chemical like salt and sugar.
Manufacture of pulp from wood or bamboo involves consumption of large quantities of water which get polluted in the process; and "chemical industry ' ' in the context in which it is used in Schedule I of the Act, can therefore, include an industry manufacturing rayon grade pulp.
We are unable, with respect, to accept the circuitous process of reasoning of the Kerala High Court.
As mentioned hereinbefore, looked at from this circuitous method every industry would be chemical industry.
It could not have been the intention to include all industries because every industry has to go to certain chemical process more or less and, therefore, it could not be so construed.
Such expression should, therefore, be construed reasonably, strictly and from a commonsense point of view.
The High PG NO 389 Court of Kerala has set out in the said judgment the company 's case in that case which also produced Rayon Grade Pulp and the manufacturing process consisted only of isolating cellulose present in bamboo and wood by removal of "lignin" and other contents, and that the resultant product is not chemical cellulose.
It explained the process as under: "The actual process of manufacture of Rayon grade pulp is by feeding the raw materials on the conveyors leading to the chippers, where they are chipped into small pieces in uniform sizes.
The raw materials are washed by a continuous stream of water before they are fed into chippers for removal of their adhering mud and dirt.
The chips are then conveyed into Digesters, where they are subjected to acid pre hydrolysis, using dilute sulphuric acid solution.
The spent liquor is then drained out, and the chips washed to remove the acid.
The chips are again cooked using a solution containing cooking chemicals at high temperature of above 160C. After the chips are thus cooked the pressure is released, and the material is collected in a blow tank, from where the chipped pulp is sent to "Knotter Screen" for removal of uncooked particles.
The pulp is washed in a series of washers in a counter current manner.
The washed pulp is bleached in a multi staged Bleaching Plant, and converted into sheets in a continuous machine.
The pulp sheets so obtained are sent to other factories for their conversion into Staple Fibre.
" The said High Court also relied on a passage from the "Book of Popular Science" Grolier, 1969, Vol. 7, p. 55 which reads as follows: "Just what is a chemical, after all? Presumably it is a pure chemical substance (an element or compound) and not a mixture.
Thus sulphuric acid is a chemical .
But common salt and sugar, with which all of us are familiar, are also pure chemical substances .
The truly chemical industries, which manufacture chemicals, are seldom well known to the public.
This is because we, as consumers, do not ordinarily make use of chemicals in their pure form.
Instead they are converted into products that reach the consumer only after a number of operations . " (Emphasis supplied) PG NO 390 As mentioned hereinbefore, the expression should be understood not in technical sense but from broad commonsense point of view to find out what it truly means by those who deal with them.
Bearing the aforesaid perspective in mind, we are unable to agree with the view of the Kerala High Court expressed in the aforesaid judgment.
In that conspectus of the Kerala High Court everything would be included in the process of chemical.
In the aforesaid view of the matter we are of the opinion that the High Court of Andhra Pradesh in the impugned judgment was right and the High Court of Kerala in the judgment referred to hereinbefore was not right.
In the aforesaid view of the matter this petition fails and is accordingly dismissed. | The respondent, Andhra Pradesh Rayons Ltd., manufacturing Rayon Grade Pulp, a base material for the manufacture of synthetics or man made fabrics, was assessed by the petitioner under the provisions of which provided for levy and collection of Water cess from the specified industries enumerated in Schedule I of the Act.
On appeal, the Appellate late Committee confirmed the order of assessment on the ground that the respondent was manufacturing Rayon Grade Pulp which came under the category of Textile industry.
The respondent filed a writ in the High Court challenging the levy Inter alia on the ground that it was not one of the industries mentioned in the Schedule.
The High Court upheld this contention.
Before this Court, it was sought to be canvessed by the petitioner that Rayon Grade Pulp was covered either by Item No. 7 of the Schedule, which was chemical industry, or item No. 10 which was textile industry, or item No.11 which was paper industry.
Dismissing the petition, it was, PG NO 380 PG NO 381 HELD: (I) The Act being fiscal in nature must be strictly construed.
The question as to what is covered must be found out from the language according to its natural meaning, fairly and squarely read.
[385F; 386B] (2) In a taxing Act one has to look merely at what is clearly said.
There is no room for any intendment.
There is no equity about a tax, there is no presumption as to tax.
Nothing is to be read in, nothing is to be implied.
[385H] (3) Whether a particular industry is an industry covered in Schedule I has to be judged normally by what that industry produces mainly, its predominant purpose and process, and not by any ancillary or incidental process carried on by it.
[386D] (4) Chemical process would be involved to a certain extent, more or less in all industries, but an industry would be known as a chemical industry if it carries out predominantly chemical activities and is involved in chemical endeavours.
[386E] (5) Taxing consideration may stem from administrative experience and other factors of life and not artistic visualisation or neat logic and so the literal, though pedestrian, interpretation must prevail.
[386C] (6) One of the well recognised canons of construction is that the legislature speaks its mind by use of correct expression and unless there is any ambiguity in the language of the provision the Court should accept literal construction if it does not lead to an absurdity.
[387E] (7) There is no absurdity in the literal meaning.
Broadly and literally it can be said that the Rayon Grade Pulp is neither chemical industry nor textile industry nor paper industry.
[387G;386H] In Re Micklethwait., [1885] II EX 452. 456; Tenant vs Smith; , ; St. Aubyan vs AG., [1951] 2 All E.R. 473; Cape Brandy Syndicate vs IRC.
, at 71; Gursahai Saigal vs C.I.T. Punjab, ; ; C.I.T. Madras vs MR.
P. Firm, Muar, ; ; Controller of Estate Duty, Gujarat vs Kantilal Trikamlal, ; ; IRC vs Duke of Westminster, at 24; AV Fernandez vs The State of Kerala, ; ; Martand Dairy & Farm vs Union of India, [1975] Supp.
SCR 265; Lt Col. Prithi Pal Singh Bedi vs Union of India, , referred to.
PG NO 382 M/s. Gwalior Rayon Silk Mfg.
(Wvg.) Co. Ltd. Mavoor vs The Appellate Committee for Water Cess, Trivandrum, A.I.R. 1983 Kerala 110.
overruled. |
Appeal No. 873 of 1966.
Appeal by special leave from the judgment and order dated March 26, 1965 of the Calcutta High Court in I.T. Ref.
No. 107 of 1960.
Sukumr Mitra and D. N. Mukherjee, for the appellant.
Niren De, Attorney General, section C. Manchanda and R. N. Sachthey, for the respondent.
It was stipulated internal that the lessee could assign the lease with the consent of the lessor.
He could after the structures on the premises so as, to convert them into a cinema if necessary.
After expending Rs. 35,000/ on some alterations to the premises the assessee felt the necessity of having some more money in order to convert the building into a cinema.
He entered into a lease on February 23, 1946 with three persons, namely, Nani.
Gopal Dutt, Makhan Lal Dutt and Shiv Kumar Khanna.
By this lease, the building which was called 'Khanna Cinema house ' at 157, Upper Circular Road, Calcutta was demised to the lessees for a period of 30 years.
The lessees agreed to pay under the indenture of lease Rs. 55 200/ to the lessor towards the cost of erecting the said cinema.
The rent which was agreed to be paid was Rs. 2,100/ per month.
It was payable with effect from June 1, 1946.
It is necessary to set out the relevant portion of the lease "And whereas the lessor obtained sanction from the Corporation of Calcutta and other necessary authorities and commenced the erection of a Cinema House the estimated total cost of which is about Rs. 1,00,000/(Rupees one lac).
And whereas the lessees agreed to pay to the lessor a sum of Rs. 55,200/ (Rupees Fifty five thousand and two hundred) towards the cost of the erection of the said cinema house according to their suggestion and other charges and expenses 464 incurred therefore by the lessor.
And whereas the construction of the said Cinema House is almost complete and is expected to be completed by the end of March, One Thousand Nine Hundred and Forty six and whereas the lessee have called upon the lessor to grant to them a lease of the said Cinema House which the lessor has agreed to do upon payment by the lessees of the said agreed sum of Rs. 55,2,00/ (Rupees fifty five thousand and two hundred), towards the costs of building the said Cinema House and whereas the lessees have paid to the lessor the said sum of Rs. 55,200 (Rupees Fifty five thousand and two hundred) for which separate receipt has been granted by the lessor." After the Cinema House had been completed the lessees entered into possession and started exhibiting shows there.
For the assessment year 1947 48 the corresponding account ing year being the financial year ending March 31, 1947, the Income tax Officer sought to treat the sum of Rs. 55,200/ received by the assessee as his income.
The contention of the assessee was that the aforesaid amount should be treated as capital receipt.
Alternatively if it was to be treated as salami (premium) and was to be taxed as a revenue receipt it should be distributed evenly over the entire term of the lease i.e. 30 years.
The Income tax Officer did not 'accept either of the contentions of the assessee.
It was held by him that the lease was pot permanent but was temporary and that the salami had been fixed as an advance payment of rent and not as payment for transfer of the lease hold interest.
According to him the system of accountancy for this source of income being on, cash basis the whole of the receipt of salami was liable to be taxed as one year 's income in the year of the receipt.
The assessee appealed to the Appellate Assistant Commissioner who agreed with the Income tax Officer.
In his view the lessees were under no legal obligation to contribute towards the cost of construction of the cinema house and the sum of Rs. 55,200/ constituted payment of advance rent.
The assessee appealed to the Tribunal which held that the receipt of the aforesaid amount was in the nature of advance payment of rent since the assessee was short of funds at the time the lease was entered into and that the lease was for a short term and that the amount in question represented consolidated rent for thirty years paid in advance.
The High Court answered the question which was refer red in the affirmative and against the assessee.
According to the High Court the only object of the payment of the sum of Rs. 55,200 could be to advance the cost of construction or to meet the existing liabi lities of the assessee for completing the cinema house.
It was observed: 465 "Further it should be noted that the period of lease is only for 30 years and the assessee 's investment on the Cinema is about Rs. 60,000/ , Rs. 35,000/ being the costs of construction and Rs. 25,000/ being costs of machinery with a liability to pay Rs. 750/ rent to the owner of the plot.
As a result of this lease he has got a rent of Rs. 2,100/ for a term of 30 years.
Thus there is no question of payment of any salami as no further inducement for grant of the lease was necessary.
It is obvious that if the cost of construction of the Cinema House would have been met in its entirely by the assessee and thereafter if the assessee would have granted the lease to the lessee, the rent would certainly have been much higher.
Thus, the said sum of Rs. 55,200/ in the absence of a different recital can only be deemed to have been paid as an advance rent in respect of the said Cinema House.
" On behalf of the appellant assessee it has been urged that he sum of Rs. 55,200/ was paid to the lessor in lump for completing the cinema house without which the lessee could not have used the building for the purpose of exhibiting cinematograph films.
According to the recitals in the deed which must be given due effect the lessees agreed to give this amount towards the cost ,if erection of the cinema house according to their suggestion and 'or defraying other charges and expenses.
The payment of rent was expressly stipulated at the rate of Rs. 2,100/ per month and there was no indication whatsoever that any different or higher rate of rent was agreed to.
It is further submitted that there was no material or evidence on which it could be found that the cinema would have fetched, any higher rent, the admitted cost of construction being about Rs. 1,00,000/ .
Alternatively the sum of Rs. 55,200/ could be regarded only as payment of salami (premium) and could not be treated as revenue receipt, the payment being of a non recurring nature.
It seems to us that the departmental authorities as well as the High Court were in error in treating the amount of Rs. 55,200/as advance payment of rent.
The lease by which the cinema house was demised did not contain any condition or stipulation from which it could be inferred that the aforesaid amount had been paid by way of advance rent.
The transaction embodied in the indenture of lease was clearly business like.
The lessees wanted the building for running it as a cinema house and the lessor agreed to give it to them but apparently represented that he did not have enough money to complete it in accordance with the suggestions and requirement of the lessees.
The lessees agreed to pay him the aforesaid amount by way of a lump sum without 466 making any provision for its adjustment towards the rent or repayment by the lessor.
The essential question, however, is whether on the terms of the lease and in the absence of any other material or evidence could it be hold that the sum of Rs. 55,200/was paid by way of advance rental ? The view which has been expressed by the Tribunal as also the High Court that the lease was for a comparatively short period of thirty years and that the aforesaid amount had to be spread over that period by way of rent in 'addition to a rental of Rs. 2,100/ per month cannot be sustained as no foundation was laid for it by any cogent evidence The departmental authorities can well be said to have based their decision on mere conjectures as there was nothing whatsoever to substantiate the suggestion that the real rental value of the cinema house was in the region of Rs., 2,250/ per month and not Rs, 2,100/ which was the agreed rent.
It can equally well be said that the payment of the amount in question to the appellant was in the nature of a premium (salami).
In the words of Lord Greene M. R. in Henriksen V. Grafton Hotel Ltd.(") "A payment of this character appears to me to fall into the same class as the payment of a premium of a lease, which is admittedly not deductible.
In the case of such, a premium it is nothing to the point to say that the parties if they had chosen, might have suppressed the premium and made a corresponding increase in the rent.
No doubt they might have.
done so, but they did not do so in fact.
" Fazl Ali J.,(as he then was in Commissioner of Income tax, Bihar & Orissa vs Viswesh war.
Singh(2) referred to the distinction between a single payment made at the time of the settlement of the demised property and recurring payments made during the period of its enjoyment by the lessee .
This distinction, according to the learned Judge, is clearly recognised in section 105 of the Transfer of Property Act which defines both premium and rent.
This is what was observed at page 545 "It is obvious that if the premium represents the whole or part of the price of the land it cannot be income.
As pointed out by Sir George Lowndes in the Commissioner of Income tax, Bengal vs Messrs. Shaw Wallace & Company,: income in the Indian Income tax Act 'connotes a periodical monetary return, coming in 'with some sort of regularity or expected regularity from definite sources.
The premium of salami which is paid once for.
all 'and is not recurring payment, hardly satisfies this test.
I concede that in some cases ' where the rent is ridiculously low and the premium abnormally high, it may be possible to argue that the premium includes advance rent. . (1) 24 T. 453.
(2) 467 It has not beep even remotely suggested in the present case that the rent of Rs. 2100 per month was ridiculously low as compared with the, amount of Rs. 55,200 paid in lump sum.
It is true that the question whether premium is a capital, or a revenue receipt cannot be decided as a pure question of law.
Its decision necessarily depends upon the facts and circumstances of each case.
It would not, however, be wrong to say that prima facie premium or salami is not income and it would be for the income tax authorities to show that facts exist which would make it a revenue receipt.
There is another factor which is of substantial importance in the present case.
According to the terms of the lease the payment of rent was to commence not from the date of the lease which was February 23, 1946, but with effect from June 1, 1946.
It is also not disputed that the lessees entered into possession after the cinema house had been completed which was subsequent to the date of the lease.
these facts coupled with the payment of a lump sum which was of a non recurring nature showed that the amount in question had all the characteristics of a capital payment and was not revenue.
This would be.
in accord with the principles laid down by this Court in Member for the Board of Agricultural Income tax vs Sindhurani Chaudhu.
rani & Others(1) which was a case of settlement of agricultural land but in which the principles governing the payment of premium or salami have been fully discussed.
For the reasons given above we hold that the question which was referred to the High Court ought to have been answered in the negative and in favour of the assessee.
The appeal is accordingly allowed.
with costs in this Court and the High Court and the answer returned by the High Court is hereby discharged.
G.C. Appeal allowed. | On July 19, 1945 the assessee took an lease certain premises in Calcutta on a monthly rental.
He made some alterations in the premises so as to convert it into a cinema house but found himself short of money.
As permitted by the terms of his lease he leased the premises on February 23, 1946 to certain parties.
According to the terms of the indenture the lessees agreed to pay him Rs. 55,2GO towards construction of the cinema house which would on completion be let to them at a monthly rental of Rs. 2,100 payable with effect from June 1, 1946.
The Income tax authorities treated the sum of Rs. 55,200 thus received as taxable ;and the High Court on reference held the same.
in appeal by the assessee this Court had to consider whether the receipt was taxable.
HELD : (i) The departmental authorities as well as the High Court were in error in treating the amount of Rs. 55,200 as advance payment of rent.
The lease by which the cinema house was demised did not contain any condition or stipulation from which it could be inferred that the aforesaid amount had been paid by way of advance rent.
The transaction embodied in the indenture of lease was clearly business like.
The lessees wanted the building for running it as a cinema house and the lessor agreed to give it to them but apparently represented that he did not have enough money to complete it in accordance with the suggestions and requirement of the lessees.
The lessees agreed to pay him the aforesaid amount by way of a lump sum without making any provision for its adjustment towards the rent or repayment by the lessor.
On the terms of the lease and in the absence of any other material or evidence it could not be held that the sum of Rs. 55,200 was paid by way of advance rental.[465 G 466 B] (ii) The question whether premium is a capital or a revenue receipt cannot be decided as a pure question of law.
Its decision necessarily depends upon the facts and circumstances of each case.
It would not however be wrong to say that prima facie premium or salami is not income and it would be for the income tax authorities to show that facts exist which would make it a revenue receipt.
[467 B] According to the terms of the lease, in the present case ' the payment of rent was to commence not from the date of the lease which was February 23, 1946 but with effect from June 1, 1946.
The lessees entered into possession after the cinema house had been completed which was subsequent to the date of the lease.
These facts coupled with the payment of a lump sum which was of a non recurring nature showed that the amount in question had all the characteristics of a capital payment and was not revenue.
[467 C D] Henriksen vs Grafton Hotel Ltd., , Commissioner of Income tax, Bihar & Orissa vs Visweshwar, [1939] 7 I.T.R. 536 and 463 Member for the Board of Agricultural Income tax vs Sindhurani Chaudhurani & Ors., , applied. |
Civil Appeal No. 282 of 1955.
Appeal by special leave from the judgment and order dated March 20, 1953, of the Bombay High Court in Income tax Reference No. 31 of 1951.
A. V. Viswanatha Sastri and I. N. Shroff, for the appellants.
K. N. Rajagopal Sastri and D. Gupta, for the respondent.
April 12.
The Judgment of the Court was delivered by KAPUR, J.
This is an appeal against the judgment and order of the High Court of Bombay in a reference under section 8(5) of the Taxation on Income (Investigation Commission) Act, 1947 (Act XXX of 1947), hereinafter termed the 'Act '.
The assessee company was the applicant before the High Court and is the appellant 919 before us and the Commissioner of Income tax, Bombay City, was the respondent in the High Court and is the respondent here also.
Being a reference under section 8(5) of the Act, it was heard and decided by three judges of the High Court.
The assessee company is a private limited company which was incorporated on May 6, 1943, with a paid up capital of Rs. 20 lacs.
It was promoted by two groups of persons who for the sake of convenience may be called the 'Morarka Group ' and the 'Bubna Group '.
The Apollo Mills Co., Ltd. of Bombay with a capital of Rs. 50 lacs divided into 25 lacs shares of Rs. 2 each, had as its Managing Agents M/s. E. D. Sassoon & Co. Ltd., who for the sake of brevity, will be referred to in this judgment as the Sassoons '.
They held 19,76,000 shares out of the 25 lacs.
The promoters of the assessee company entered into an agreement with the Sassoons on April 27, 1943, by which the Sassoons agreed to transfer their Managing Agency in the Mill Co. for Rs. 12 1/2 lacs to the promoters of the assessee company and the whole of their holding of 19,76,000 shares at Rs. 4 4 0 per share, i.e., for Rs. 83,98,000.
These shares were to be transferred to the promoters or to the company which they were proposing to float.
By clause (3) of this agreement the sale of the Managing Agency and the transfer of the shares was to be simultaneously completed and neither party could require the completion of the one without the other.
On November 1, 1943, a tripartite agreement was entered into between the Sassoons as Assignors, the promoters of the company as Confirming Parties and the assessee company as Assignees.
By that agreement the Managing Agency rights were for .ally transferred to the assessee company so also the Share Certificates for the whole of holding of the Sassoons in the Mill Co. and the necessary blank transfer deeds went) Before the agreement of April 27, 1943, and during the course of negotiations with the Sassoons the promoters of the assessee company entered into an arrangement with some share brokers for the sale of a large portion of the total holding of 19,76,000 shares 920 of the Mill Co. The price of these shares varied from Rs. 5 8 0 to Rs. 5 13 0.
In all 10,00,000 shares out of the total holding of the Mill Co. were sold to these brokers and: they in turn sold these block of shares in smaller lots to a number of purchasers.
Some shares were sold later; 1,20,000 shares were transferred to 13 nominees of the Morarka Group at cost price.
As a result of sale of all these 13,74,000 shares the assessee company received a sum of Rs. 16,52,600 as excess over the purchase price.
The remaining shares the assessee company retained.
The assessee company submitted that the profits of the entire holding of the shares had not been worked out and had therefore not been transferred to the profit and loss account.
The assessee company was taxed by the Income tax Officer but the sum of Rs. 16,52,600 which was the excess of the sale price over the purchase price of 13,74,000 shares was held not to be profit and therefore not taxable.
When the Act came into force the case of the assessee company was referred to the Investigation Commission by the Central Government and the Investigation Commission made its report on November 9, 1949, in Case No. 406A.
By this report the Commission directed that appropriate assessment be made under the Indian Income tax Act for the assessment year 1945 46 and the Excess Profits Tax Act for the corresponding chargeable accounting period.
At the instance of the assessee company the Commissioner of Income tax, Bombay City, by his order dated May 1, 1951, referred the following question to the High Court: "Whether on the facts found by the Commission the sum of Rs. 16,52,600 being the excess price realised by the sale of 13,74,000 shares of the Mill Company, was 'profit ' and as such taxable or whether it was either of the nature of a capital appreciation or a casual and non recurring receipt and as such exempt from taxation under Section 4(3)(vii) of the Income tax Act." The High Court reformulated the question as follows: 921 "Whether there were materials to justify the finding of the Tribunal that the transaction of purchase and sale of 13,74,000 shares was an adventure in the nature of trade?" and answered the question so formulated in the affirmative and therefore against the assessee company.
In its application for reference under section 8(5) of the Act the assessee company wanted some other questions also to be referred but the Investigation Commission only referred the question which has been set out above.
The assessee company therefore took out a Notice of Motion on November 8, 1952, which was dismissed by the High Court on the ground that either the questions which were sought to be raised did not arise out of the finding of the Commission or they were included in the question which had been referred and answered by the High Court.
Although the High Court did not so hold, the Notice of Motion was barred by time, being filed after more than six months allowed under section 66(2) of the Indian Income tax Act.
Against this judgment and order of the High Court the assessee company has come in appeal to this Court by special leave.
This appeal is brought against the judgment of the High Court answering the question referred and therefore in its advisory jurisdiction.
The jurisdiction which this Court exercises in appeal is of the same character and therefore any question which was not referred to the High Court cannot be allowed to be raised at this stage.
Consequently the constitutional question in regard to discrimination under article 14 of the Constitution which is now sought to be raised cannot be raised.
The main question which would then survive for decision is the nature of transaction relating to the sale of 13 lacs odd shares and whether or not the sale was an adventure in the nature of trade and therefore the amount of Rs. 16,52,600 the excess of sale price over the purchase price of the share is a Revenue Receipt and therefore taxable profits or is it a Capital Receipt and therefore not liable to tax.
The Investigation Commission by their order dated May 1, 1949, found: 922 (1) that a distinction should be made between the 6 lacs shares which the assessee company intended to and did retain and the 13 lacs odd shares which it intended to and did sell; the former was kept in order to enable the assessee company to make their Managing Agency rights effective.
(2) During the negotiations between the Sassoons and the promoters of the.
assessee company, the promoters of the assessee company had started negotiations with certain brokers for the transfer of 13 lacs odd shares soon after the arrangement between the Sassoons and the assessee company was completed.
(3) From the very beginning the intention of the promoters of the assessee company was to sell all the 13 lacs odd shares and in pursuance thereof they were sold.
(4) The paid up capital of the assessee company was Rs. 20 lacs only and according to the agreement they had to take the whole block of shares belonging to the Sassoons and pay for the shares as well as for the Managing Agency both of which were separately valued in the agreement.
It was therefore necessary and it was intended to sell the 13 lacs odd shares in order to pay off the Sassoons both for the Managing Agency and the shares.
The inference drawn from this by the Commission was that a distinction had to be drawn between the 6 lacs shares which the assessee company intended to retain and did in fact retain and the 13 lacs odd shares which they intended to sell and did sell.
(5) that the intention to sell which the assessee company entertained from the very outset was a complete answer to the argument that the acquisition was in the nature of an investment.
In giving its finding the Commission said: "Aggregating the 121 lakhs paid for the Manag ing Agency right and the full price of 6 lakhs and odd shares at Rs. 4 4 0 per share, the capital investment must amount to 121 lakhs and 251 lakhs, i.e., 38 lacs and odd.
By deducting therefrom the profits of Rs. 16,52,600, the Company showed a capital investment of Rs. 21,54,200 and with the addition 923 of a few sundry items, it was brought up to Rs. 22,06,408 (see para 7 supra).
" From this finding the inference drawn by the Commission was that the sale of 13 lacs odd shares was an adventure in the nature of trade.
The High Court reformulated the question which has already been quoted and it was contended that the High Court was in error in narrowing down the scope of the question referred by the Commission.
It is not necessary to adjudicate upon this argument because in our opinion taking the question as referred to be a proper question arising out of the report of the Investigation Commission the answer to the first part thereof would,still be in the affirmative.
Inconsidering the question whether the transaction is or is not an adventure in the nature of trade we have to take into consideration the intention of the assessee keeping in view the "legal requirements which are associated with the concept of trade or business".
The inference from the facts found by the Investigation Commission, i.e., whether the assessee company 's transaction in purchasing and selling 13 lacs odd shares is or is not an adventure in the nature of trade is a mixed question of law and fact and the legal effect of the facts found by the Investigation Tribunal is a question of law.
See M/s. Ramnarain Sons (Pr.) Ltd. vs Commissioner of Income tax, Bombay (1).
It was argued on behalf of the assessee company that: (1) that the dominant idea with which the whole transaction was entered into was to obtain the Managing Agency of the Apollo Mills; (2) that the assessee company was forced to buy the whole block of shares, i.e., 19,76,000 shares by the Sassoons because they were not prepared to part with the Managing Agency without the whole of their stock in the mill company; (3) that as the assessee company did not not have sufficient amount of money, their capital being only Rs. 20 lacs, it was to implement the tripartite agreement dated November 1, 1943, that the sale was made; and (1) (1961] 2 S.C.R. 904, 908. 924 (4) that the Memorandum of Association of the assessee company showed that it was a holding company and dealing in shares was not one of its objects.
The agreement shows that the Sassoons had separately evaluated the Managing Agency and the shares held in the Apollo Mills Co.
As the Investigation Commission has found, it was never the intention of the assessee company to retain the whole block of shares.
Before the agreement was entered into they had made arrangement for the sale of the bulk of shares which were to be transferred by the Sassoons and therefore division of the shares into two sets was made by the promoters of the assessee company and the assessee company themselves and was not the result of anything done by the Investigation Commission.
In; support of his contention that the amount of Rs. 16,52,600 was in the nature of Capital Receipt, reliance was placed on the judgment of this Court in M/s. Ramnarain 's case (1) but there are certain features and details which distinguish that case from the present case.
It was held in that case that the question had to be decided in the light of the intention of the assessee and the assessee in that case bad purchased the shares of the Dawn Mills not as a business transaction.
That was clear from the fact that the assessee bad purchased the shares at Rs. 2,321 8 0 per share and the market price was only Rs. 1,610, and the purpose of acquisition of such a large block of shares at a price exceeding the market price by a million rupees was the acquisition of the Managing Agency, which yielded the inference that the intention of purchasing the shares in that case was not to acquire them as a part of the trade of the assessee in shares but for obtaining the Managing Agency of the Mills.
There was no separate price paid for the Managing Agency and the shares purchased and the Managing Agency acquired were both assets of a capital nature and the shares did not constitute stock in trade of a trading venture.
In the present case the facts as shown were entirely different.
(1) ; , 908. 925 Counsel for the assessee company also relied on Kishan Prasad & Co. Ltd. vs Commissioner of Income tax, Punjab (1).
In that case the Managing Director of the company which was formed for the purpose of carrying on general business and trade of commercial undertaking and dealing in bills, hundis and other securities, entered into an agreement with a sugar syndicate by which the company was to be given the Managing Agency of a Mill of the sugar syndicate when such mill was erected in lieu of the company subscribing shares worth 3 lacs, and undertaking to sell shares worth 2 lacs.
It was further provided that if the mill was not erected the assessee company was to be paid a commission on the amount invested by them.
The Managing Director died and the assessee company sold the shares and thus received Rs. 2 lacs more than they had expended.
The question was whether Rs. 2 lacs were receipts from business and not a mere appreciation in capital.
It was held that that amount was not a result of an adventure in the nature of trade but was merely the result of an investment.
It was found as a fact that the object of the company was merely to obtain the Managing Agency of the mill which would have been an asset of an enduring nature bringing profits but there was from the very inception no intention on the part of the company to resell the shares either at profit or otherwise.
It appears that it was not contested that the conclusion to be drawn from those facts was that the investment in the purchase of shares in the circumstances of the case of a capital nature, and profits arising therefrom were an accretion to the capital.
In that ease the court was trying to find out the intention of the assessee (the company) and taking all the circumstances into consideration it, came to the conclusion that it was a case not of profits arising out of an adventure in the nature of trade but the, intention of the assessee company was to invest its monies and therefore the excess arising out of sale of the shares was an accretion to the capital.
That case must be taken to have been decided on its facts as (1) 926 indeed was the decision in M/s. Ramnarain Son 's case (1).
Counsel for the assessee company referred to other cases: Tata Hydro Electric Agencies, Bombay vs The Commissioner of Income tax, Bombay Presidency & Aden (2); Commissioner of Income tax, Central and United Provinces, Lucknow vs Messrs. Motiram Nandram (3), Jones vs Leeming (4) and Commissioner of Inland Revenue vs Reinhold (5).
It is unnecessary to re view these cases in any detail because they are clearly distinguishable in material respects and were decided on their own special facts.
In Tata Hydro Electric Agencies ' case (2) the question for decision was whether 25% of the commission earned which was paid to the two financiers was expenditure deductible under section 10(2)(ix) and it was held that it was not because the obligation to make the payment was in consideration of acquiring the Managing Agency and the right to conduct business and not for the purpose of producing profits in the conduct of business.
Similarly in Commissioner of Income tax vs Messrs. Motiram Nandram (3) the expenditure was for securing the agency which was to carry on business.
Sir George Rankin said at p. 81: "The question in such a case a,% the present must be "what is the object of the expenditure?" and it must be answered from the standpoint of the assessees at the time they made it that is, when they were embarking upon the business of organizing agents for the company." Jones vs Leeming (4) was a case of an isolated transaction.
The finding was that it was not in the nature of trade.
Commissioner of Inland Revenue vs Reinhold(5) was ' decided on its own facts.
Another case decided by this court upon which counsel for the appellant relied was Saroj Kumar Mazumdar vs Commissioner of Income tax, West Bengal, Calcutta (6) but that case was also decided on its own facts and it was held that there was no clear evidence in support of (1) [1961] 2.C.R. 004, 908 (3) (1939) L. R. 67 I. A. 71 (5) (1953) 34 T C. 389.
(2) (1937) L. R. 64 I. A. 215.
(4) (6) [1959] SUPP.
2 S C.R. 846.
927 the inference of the Appellate Tribunal that the land was purchased with the sole intention of selling it later at a profit.
The English and Scottish cases on which the appellant relied were considered by the House of Lords in Edwards vs Bairstow (1).In that case the assessees who were the respondents embarked on a joint venture to purchase and complete a spinning plant agreeing between themselves not to hold it but to make a quick resale.
With that object in view they approached and there were diverse negotiations and the whole plant was sold in about two years ' time at a profit of about pound 18,000 and for that purpose incurred commission for help in effecting sales, for insurance and other expenses.
The General Commissioners found that it was not an adventure in the nature of trade to justify an assessment to income tax under Case 1 of Schedule D to the Income tax Act, 1918.
It was held that the facts led inevitably to the conclusion that the transaction was an adventure in the nature of trade and that the Commissioner 's inference to the contrary should be set aside.
Counsel for the respondent next relied on a Judgment of this Court in G. Venkataswami Naidu & Co. vs The Commissioner of Income tax (2) in which it was held that the presence of all the relevant factors may help the Court to draw the inference that the transaction is in the nature of trade but it is not a matter of counting the number of facts and circumstances for and against.
What is important is to consider the distinctive character and it is the total effect of all the relevant factors that determines the character of the transaction.
All these cases are illustrative.
As was said by Gajendragadkar, J., in the above mentioned case the totality of circumstances of a case and the pros and cons have to be considered and inference drawn from those facts whether a particular transaction was in the nature of trade or was merely an investment and the resulting excess from the transaction was therefore profit which was taxable or was merely an accretion to the capital.
In the instant case (1) ; (2) [1959] SUPP.
1 S.C.R. 646.
928 the pi of its from the transaction that consisted of buying the Managing Agency of the Mill Company and the block of shares held by the Sassoons were in our view the profits of an adventure in the nature of trade.
The two groups, Morarka and Bubnas, put Rs. 20 lacs into the assessee company which was floated for the acquisition of the Managing Agency and shares of the Mill Company which were beyond the holding capacity of the assessee company.
That company never intended to hold the whole block of shares.
It or its promoters before even entering into the agreement of purchase and during the course of negotiations for the purchase had entered into arrangements with different brokers for the sale of shares or at least of a bulk of those shares which were subsequently sold at a profit and but for that sale the transact ion could not have been completed by the assessee company.
The purchase of shares was not with the intention of holding them, the intention of the assessee was just the contrary and by the sale at a profit of the shares actually sold the assessee company expected to and did finance the completion of the transaction and thus was enabled to secure the Managing Agency and keep 6 lacs shares.
This inescapably was a transaction of a commercial nature.
It had all the attributes of an adventure in the nature of trade.
The contention that dealing in buying and selling of shares was not one of its objects is without substance.
The Investigation Commission found that dealing in shares was within the objects of the assessee company and this is one circumstance in the totality of the circumstances which must be considered, though by itself it is not determinative of the question.
All the circumstances lead to the inference which was rightly drawn by the Investigation Commission and by the High Court.
The answer to the first part of the question referred by the Investigation Commission must therefore be in the affirmative.
It was contended that the question should not have been reframed and we have therefore proceeded to answer the question as framed by the Investigation Commission.
In our opinion the question even as framed must be answered in the affirmative.
929 The Notice of Motion to raise other questions in the High Court was rightly dismissed.
Apart from the fact that the Notice of Motion was barred by time and there was no application for condonation of delay, the questions which were sought to be raised were rightly held either to be covered by the question answered or they did not arise at all.
The constitutional question under article 14 of the Constitution cannot be raised in these proceedings because as we have said above this Court is exercising its advisory jurisdiction and its power is confined to the questions which arise in an appeal.
This appeal must therefore be dismissed with costs.
Appeal dismissed. | The assessee company was promoted with the idea of obtaining the Managing Agency of the Appollo Mills from M/s. Sassoon total of 25 lakhs shares of RS.
2 each.
According to the agreement the assessee company bad to take the whole of the block of shares belonging to the Sassoons and pay at Rs. 4 4 0 per share Rs. 12 1/2 lakhs for the managing agency.
As the assessee company had only RS.
20 lakhs as its paid up capital, it was necessary to sell 13 lakhs odd shares in order to pay off the Sassoons both for the Managing Agency and the shares.
Therefore during the course of negotiations the promoters of the assessee company entered into an agreement with some brokers for the sale of Rs. 19,76,000 shares.
As a result of the sale of shares the assessee company received a sum of Rs. 16,52.600 as excess over the purchase price which amount on taxation was held by the Income tax Officer not to be profits and therefore not taxable.
The case of the assessee company was referred to the Investigation Commission.
The Commission found that it was not the intention of the assessee company to retain the whole block of shares and that the sale of 13 lakhs odd shares was an adventure in the nature of trade, and directed that appropriate assessment be made, under the Indian Income tax Act and Excess Profits Tax Act.
At the instance of the assessee company the question was referred to the High Court under section 8(5) of the Taxation on Income (Investigation Commission) Act, 1947, which held that there were materials to justify the finding of the Commission that the purchase and sale of about 13 lakhs odd shares was an adventure in the nature of trade.
An appeal was taken to the Supreme Court against this order.
Held, that in considering the question whether the transac tion was or was not an adventure in the nature of trade, the court had to take into consideration the intention of the assessee 918 keeping in view the "legal requirements which are associated with the concept of trade or business" In the present case, the transaction that consisted of buy ing the managing agency of the Mill Company and the block of shares held by Sassoons was inescapably one of a commercial nature and had all the attributes of an adventure in the nature If of trade.
Held, further, that the jurisdiction which this Court would exercise in appeal was of the same character that a High Court would exercise.
Thus the question under article 14 of the Constitution could not be raised in these proceedings because this Court like the High Court was exercising its advisory jurisdiction and its power was confined to the question which arose before the High Court.
M/s. Ramnarain Sons (Pr.) Ltd. vs Commissioner of Income tax, Bombay; , , Tata Hydro Electric Agencies, Bombay vs The Commissioner of Income tax, Bombay Presidency & Aden, (1037) L.R. 64 I.A. 215, Commissioner of, Income tax, Central and United Provinces, Lucknow vs M/s. Motiram Nandram, (1939) L.R. 67 I.A. 71, Jones vs Leeming, [1930) A.C. 415, Commissioner of Inland Revenue vs Reinhold, and Saroj Kumar Mazumdar vs Commissioner of Income tax, West Bengal, Calcutta, [1959] SUPP.
2 S.C.R. 846, distinguished.
Kishan Prasad & Co. vs Commissioner of Income tax, Punjab, , Edwards vs Bairstow, ; and G. Venkataswami Naidu & Co. vs The Commissioner of Income tax, [1959] SUPP.
1 S.C.R. 646, discussed. |
Appeal No. 812 of 1966.
Appeal by special leave from the judgment and order dated May 13, 1965 of the Rajasthan High Court in D.B. Civil Ref.
No. 18 of 1963.
M. C. Chagla and K, Baldey Mehta, for the appellants.
Sanpat P. Mehta, 0.
P. Mathotra, J. B. Dadachanji and 0.
C. Mathur, for the respondent.
The judgment of the Court was delivered by Shah, J.
The respondent carries on the business of fabricating steel doors, windows, sashes and other goods".
On April 20, 1957, the respondent submitted in pursuance of an invitation by the Executive Engineer, Ajmer Central Division, its tender for providing and fixing " S.H. Windows 'W ' Type", "S.H. Windows 'W1 ' Type" "T.H. Windows" and "Composite Windows" of certain sizes "in accordance with the specifications, designs, 'drawing and instructions".
The tender wag accepted and the respondent carried out the contract.
The Sales Tax Officer 'B ' Circle, Jaipur City included in the taxable turnover of the respondent Rs. 23,480/ received under the contract.
He held that the contract with the Executive Engineer was one of sale of goods and the respondent had with a view, to promote sales of goods manufactured by it "voluntarily offered to fit" the goods and had made no separate charge for that service.
The Deputy Commissioner Excise & Taxation in appeal held that from the acceptance of the tender, two contracts resulted : one for providing doors and windows and another for "fixing" those doors and windows in a specified building, and that the price of, the supplied but not the charge for service, was taxable.
He accordingly remanded the case with a direction to assess tax on.
the price for sale of materials only.
The Board of Revenue exercising revisional power confirmed the order passed: by the Deputy Commissioner observing that the contract undertaken by the respondent was not a contract of service.
The following question was referred by the Board of Revenue to the High Court of Rajasthan "Whether on the proper interpretation of the contract between the applicant and the Executive Engineer, C.P.W.D.,.
Ajmer, regarding; the providing and fix ' of the steel windows to the Accountant General 's 507 Office, Jaipur, and looking to the terms of the transaction of the, type undertaken by the applicant the Board were justified in holding that the contract was,, divisible between two parts representing the sale of the window, , and the labour charges in fixing the same and thus partly liable to sales tax ?" The High Court held that the contract between the respondent and the Executive Engineer was a "building contract" and the amount received by the respondent was not taxable.
The relevant terms of the tender which was accepted by the Executive Engineer were : "Item Rate tender for Works I/We hereby tender for the execution for the President of India of the work specified in the under written memorandum within the time specified in such memorandum at the rates specified therein, 'and in accordance in all respects with the specifications, designs, drawing, and instructions in writing referred to in Rule 1 hereof and in Class 11 of the conditions of contract and with such materials as are provided for by and in all other respects in accordance with such conditions so far as applicable." This recital was followed by a memorandum setting out the general description,, of the building in respect of whichthe window leaves, were to be supplied the estimated cost of thecontact and the description and the number of items of work offered to be done ' The items of work offered to be done were "providing and fixing" four different types of windows.
The relevant conditions were "1.
The work shall be executed.
as per the specifications attached.
The work is to be completed in, 6 months from the date: of award of works.
The windows, are to be fitted with rawl plugs in cut stoneworks.
Work will be executed either by plain glass or ground glass as may be decided by the Engineer in Charge,.
Note 1. 2.
We are offering windows which will be glazed with plain glass only.
If at a later date it is 508 desired to have windows glazed with ground glass, the difference in cost of glass will have to be Paid by you.
3. 4. 5.
The quotation is based on the current prices of mild steel billets fixed by the Government.
Should there be any change in the controlled price of billets supplied to us, proportionate revision in the cost of rolled sections used in the fabrication will be made in the quotation.
Sales Tax or any other tax is applicable will be extra.
Work will be completed in 6 months from the date of order.
" These were followed by, specifications relating to the steel to be used in the fabrication, glazing, fittings and finish of the windows.
The respondent offered to execute and complete the "work" mentioned in the written memorandum according to the specifications and conditions.
In the view of the High Court the contract was for work, in the execution of which some movable property passed : it was not a contract for sale of windows and for rendering service in connection with the fixing of those windows.
Counsel for the State of Rajasthan contends, that the respondent carried on the business of fabricating and selling window and door leaves and sashes etc.
and entered into a contract for "sale of windows", and to promote sale of its manufactured goods, undertook to fix the windows without demanding any charge for that service, and the High Court was in error in holding that the contract was one of service in the execution of.
which property in the materials supplied by the respondent passed.
Counsel urged that the terms of the tender were not decisive and the Court was entitled to ascertain the true effect of the contract as disclosed by the nature of the work, and the "invoice" for payment made out by the respondent.
Counsel submitted that it is usual for manufacturers or dealers in specialized articles to arrange to "fix and "service" the articles.
sold by them and on that account the contract does not acquire the character of a contract of service.
He gave instances of sale of motor tyres, luggage carriers, air conditioning units, refrigerators and contended that in undertaking to install or fix these units or articles the sellers do not enter into a works contract merely because they undertake to install or for the articles sold.
so as to make them fit for immediate service.
But whether a particular contract is one for sale of goods or is 509 a contract for service depends upon the main object of the parties gathered from the terms of the Contract, the circumstances of the transaction, and custom of the trade, and no universal rule applicable to all transactions may be evolved.
As observed in Halsbury 's Laws of England, 3rd Edn., Vol.
34 article 3 at p. 6 A contract of sale of goods must be distinguished from a contract for work and labour.
A contract of sale is a contract whose main object is the, transfer of the property in, and the delivery of the possession of, a chattel as a chattel to the buyer.
Where the main object of work undertaken by the payee of the price is not the transfer of a chattel qua chattel, the contract is 'one for work and labour.
The test is whether or not the work and labour bestowed and in anything that can properly become the subject of sale; "neither the ownership of the materials, nor the value of the 'skill and labour as compared with,the value of the materials is conclusive, altho ugh.
such matters may be taken into consideration in determining, in the circumstances of a particular case, whether the contract is in substance one for work and labour or one for the sale of a chattel.
" What did the respondent agree to do when it offered its tender ? Did the respondent agree to sell the window leaves as described in the tender or did it,, as part of a works contract, agree to "fix" windows of certain Specifications in the building intended to be used for the offices of the Accountant General ? On a consideration of all the circumstances, We are of the view that the object of the respondent was to enter into a works contract.
That clearly appears from the terms of the tender and its acceptance.
The windows were to be fabricated according to the specifications with glass plain or ground as decided by the Engineer in Charge, and were to be "fixed" within six months from the date of its acceptance "to the building with rawl plugs in cut stone work.
" The rate quoted by the respondent was based on the current price of mild steel billets, and the price was to be revised in the light of cost revision of the controlled price of steel supplied to the respondent.
The contract undertaken by the 'respondent was to prepare the window leaves according to the specifications and to fix them to the building.
There were not two contracts one of sale and another of service.
"Fixing" the windows to the building was also not incidental or subsidiary to the sale, but was an essential term of the contract; The window leaves did not pass to the Union of India under the terms of the contact as window leaves.
Only on the fixing of the windows as stipulated, the contract Sup.
C1169 14 510 could be fully executed and the property in the windows passed on the, completion of the work and not before.
It was said by this Court in The State of Madras vs Gannon Dunkerley & Co. (Madras) Ltd.(1) that in a building contract which is one.
entire and indivisible, there is no sale of goods.
In the case of a building contract the property in materials used does not pass to the other party to the contract as movable property.
In the absence of an agreement to the contrary, the materials in the construction of a building become the property of the other party, to the contract only on the theory of accretion.
In The Government of Andhra Pradesh vs Guntur Tobaccos Ltd.(2) this Court pointed out (at p. 255): "A contract for work in the execution of which goods are used may take one of three forms.
The contract may be for work to be done for remuneration and for supply of materials used in the execution of the works for a price; it may be a contract for work in which the use of materials is 'accessory or incidental to the execution of the work; or it may be a contract for work and use or supply of materials though not accessory to the execution of the contract is voluntary or gratuitous.
In the last class there is no sale because though property passes it does not Pass for a price.
Whether a contract is of the first or the second class must depend upon the circumstances; if it is of the first, it is a composite contract for work and sale of goods; where it is of the second category, it is a contract for execution of work not involving sale of goods.
" The contract in question in this case is of the second variety.
Counsel relied upon Patnaik and Company vs State of Orissa(3) and Mckenzies Ltd. vs The State of Maharashtra.
(4) But in both these cases the Court held on a consideration of the terms of the contract and the circumstances that the assessees had agreed to and did supply "motor bus being one for sale of chattels, they were liable to pay sales tax.
Our attention was also invited to Commissioner of Sales Tax, Maharashtra State, Bombay vs Arun Electrics.(5) In that case a firm of electrical contractors undertook the job of installing electrical fittings in the houses of their customers, which involved the supply and fixing of goods, such as wire, brass clips, wall brackets 'and tube lights with accessories.
The assessees charged (1) 9 S.T.C. 353.(3) 16 S.T.C. 364 (S.C.).
(2)16 S.T.C. 240 (S.C.).(4)16 S.T.C. 518 (S.C.).
(5)16 S.T.C. 385.
511 their customers consolidated rates for the materials consumed and labour involved, in carrying out the contracts.
The Sales Tax Officer charged to tax under the Bombay Sales Tax Act, 1959, the value of materials supplied in carrying out the contracts.
It was held by the High Court of Bombay that the transaction of the assesses with their customers was not a pure works contract, but a combination of two distinct and separate contracts, one for the supply or the sale of goods for consideration, and the other for the supply of work and labour, and only that part of the contract, which consisted.
of supply of goods for consideration, was liable to tax under the Sales Tax Act.
That case was brought in appeal to this Court at the instance of the assessees.
This Court in Arun Electrics, Bombay vs Commissioner of Sales Tax, Maharashtra State(1) discharged the answer recorded by the High Court, holding that the conclusion recorded by the Deputy Commissioner and the Tribunal were based on no evidence, and the High Court could not record, on the facts found, an answer to the question referred.
The Deputy Commissioner had proceeded only upon the terms of the invoice in which a charge was made for supplying and "fixing" the materials and providing light points complete with 1/8 CTS wire, brass clips, tapes and all approved accessories.
The conclusion of the departmental authorities was not based on any intention of the parties as disclosed by the evidence, but plainly on the terms of the bill which was ambiguous.
In The State of Madras vs Richardson & Cruddas Ltd. (2 ) the assessees without a formal contract agreed to supply fabricate and erect steel structures for a sugar factory.
The assessees completed the contract.
A bill was submitted by the assessees for charges for fabrication, supply and erection of steel structures at certain rates.
The High Court of Madras on a consideration of the evidence held that there was a stipulation for a consolidated lump sum Payment of Rs. 1,160/ per ton for fabricating, supplying and treating at site all steel work etc; there was no stipulation for passing of property in the goods to the factory before actual completion of the erection work; there the contract did not contemplate dissecting the value of the goods supplied and, the value of work and labour bestowed in the execution of the work; and the predominant idea underlying the contract was the bestowing ,of special skill and labour by the experienced engineers and mechanics of the assessees.
This Court agreed with the High Court and held that the contract was a works contract and not a contract for sale.
Our attention was invited to a judgment of the Court of Appeal in Love vs Norman Wright (Builders) Ltd. (3) In that case the (1) 17 S.T.C. 576.
(3) (2) 21 S.T.C. 245.
512 respondents contracted With the Secretary of State for War to do the work and supply the material mentioned jot the Schedules to the contract, including the supply of 'black out curtains, curtain rails and battens and their erection at a number of police stations.
It was held by, the Court ' of Appeal that the respondents were liable to pay purchase tax.
Reliance was placed upon the observations made by Goddard, L.J. at p. 482: "If one orders another to make and fix curtains at his house the contract is one of sale though work and labour are involved in the making and fixing, nor does it matter that ultimately the property was to pass to the War Office under the head contract.
As between the plaintiff and the defendants the former passed the property in the goods to the defendants who passed it on to the War Office.
" We do not think that these observations furnish a universal test that whenever there is a contract to "fix" certain articles made by a manufacturer the contract must be deemed one for sale and not of service.
The test in each case is whether the object of the party sought to be taxed is that the chattel as chattel passes to the other party and the services rendered in connection with the installation are under a separate contract or are incidental to the execution of the contract of sale.
In the present case, the specifications of the windows were set out in the contract.
The primary undertaking of the respondent was not.
merely to supply the windows but to "fix" the windows.
The service is not rendered under a separate contract nor is the service shown to be rendered customarily or normally as incidental to the sale by the person who supplies window leaves.
The "fixing" of windows in the manner stipulated required special technical skill.
If the windows were not properly "fixed" the contract would not be complete, and the respondent could not claim the amount agreed to be paid to it.
We agree with the High Court that it was only upon the "fixing" of the window leaves and when the window leaves had become a part of the building construction that the property in the goods ' passed under the terms of the contract.
The appeal fails and is dismissed with costs.
Y.P. Appeal dismissed. | The respondent, a fabricator of steel windows, submitted a tender for 'Providing and fixing ' window leaves in a building.
The window leaves.
were to be fabricated according to the specifications in the contract and.
were to be fixed within six months from the date of acceptance to the: building with rawl plugs in cut stone work.
The 'rate quoted by the respondent was based on the current price of mild steel billets and the price was to be revised in the light of cost revision of the controlled price of steel.
The tender was accepted and the respondent carried out the contract.
The Sales Tax Officer levied sales tax on the amount received. under the contract holding that the contract was for sale of goods and to promote its sale the respondent undertook to fix the windows without demanding any charge for that service.
But in appeal the Deputy Commissioner Exercise & Taxation held that two contracts resulted : one for Providing windows and the other for fixing them in the building, and that the price of goods supplied, but not the charge for service was taxable.
The Board of Revenue confirmed the order passed by the Deputy commissioner observing that the contract was not a contract of service.
On reference, the High Court held that it was a building contract and amount received was not taxable.
In appeal, this Court, HELD : It was a contract for rendering service and the amount received by the respondent was not taxable.
Whether a particular contract is for sale of goods or is a contract for service depends upon the main object of the parties gathered from the.
terms of the contract, the circumstances of the transaction, and the custom, of the trade, and no universal rule applicable to all transactions can be evolved.
[509 A] In this case, the primary undertaking of the respondent was not merely to supply the windows but to 'fix ' the windows.
This service was not rendered under a separate contract, nor was shown to be rendered customarily or normally as incidental to the sale by the person who supplied ' window leaves.
The fixing of the windows in the manner stipulated required special technical skill.
If the windows were not properly 'fixed ' the contract would not be complete, and the respondent could not claim the amount agreed to be paid to it.
It was only upon the 'fixing ' of the window leaves and when the window eaves had become a part of the building construction that property in the goods passed under the terms of the contract.
[512 E G] The State of Madras vs Gannon Dunkerley & Co. (Madras ) Ltd. 9S.T.C. 353; The Government of Andhra Pradesh vs Guntur Tobaccos Ltd., 16 S.T.C. 240: (S.C.); Patnaik and Company vs State of Orissa, 16 S.T.C. 364 (S.C.); Mckenzies Ltd. vs The State of Maharashtra, 16 S.T.C. 518 (S.C.); Commissioner of Sales tax, Maharashtra State, Bombay vs Arun.
, 506 Electrics 16 S.T.C. 385; Arun Electrics, Bombay vs Commissioner of Sales Tax, Maharashtra State, 17 S.T.C. 576; The State of Madras vs Richardson Cruddas Ltd., 21 S.T.C. 245; Love vs Norman Wright (Builders) Ltd., [1944] 1 K.B. 484, referred to. |
Appeals Nos. 272 to 274 of 1966.
Appeals by special leave from the judgment and order dated July 28, 1961 of the Madras High Court in O.S.A. Nos. 65, 70 and 71 of 1956.
K.N. Balasubramaniam and R. Thiagarajan, for the appel lant (in all the appeals).
R.Gapalakrishnan, for respondents Nos. 2 to 4 (in C.A. No. 272 of 1966), respondents Nos. 1 and 2 (in C.A. No. 273 of 1966) and respondent No. 1 (in C.A. No. 274 of 1966).
The Judgment of the Court was delivered by Bachawat, J.
On February 23, 1953 the appellant instituted C.S. No. 56 of 1953 on the Original Side of the Madras High Court under the summary procedure of Order 7 of the Original Side Rules against Hajee Ahmed Batcha claiming a decree for Rs. 40,556/1/2/ and Rs. 8,327/12/9/ said to be due under two I promissory notes executed by Haji Ahmed Batcha.
On March 9 1953, Hajee Ahmed Batcha obtained leave to defend the suit on condition of his furnishing the security for a sum of 516 Rs. 50,000 to the satisfaction of the Registrar of the High Court.
On March 26, 1953 Hajee Ahmed Batcha executed a security bond in favour of the Registrar of the Madras High Court charging several immoveable properties for payment of Rs. 50,000.
The condition of the bond was that if he paid to the appellant the amount of any decree that might be passed in the aforesaid suit the bond would be void and of no effect and that otherwise it would remain in full force.
The bond was attested by B. Somnath Rao.
It was also signed by K. section Narayana Iyer, Advocate, who explained the document to Hajee Ahmed Batcha and identified him.
All the properties charged by the bond are outside the local limits of 'the ordinary original jurisdiction of the Madras High Court.
The document was presented for registration on March 29, 1.953 and was registered by D. W. Kittoo, the Sub Registrar of Madras Chingleput District.
Before the Sub Registrar, Hajee Ahmed Batcha admitted execution of the document and was identified by Senkaranarayan, and Kaki Abdul Aziz.
The identifying witnesses as also the Sub Registrar signed the document.
Hajee Ahmed Batcha died on February 14, 1954 and his legal representatives were substituted in his place in C.S. No. 56 of 1953.
On March 19, 1954 Ramaswami, J. passed a decree for Rs. 49,891/13/ with interest and costs and directed payment of the decretal amount on or before April 20, 1954.
While passing the decree, he observed : "It is stated that the defendant has executed a security bond in respect of their immoveable properties when they obtained leave to defend and this will stand enured to the benefit of the decree holder as a charge for the decree amount.".
Clauses 3 and 4 of the formal decree provided "(3) that the security bond executed in respect of their immoveable properties by defendants 2 to 4 in pursuance of the order dated 9th March 1953 in application No. 797 of 1953 shall stand enured to the benefit of the plaintiff as a charge for the a amounts mentioned in clause 1 supra; (4).that in default of defendants 2 to 4 paying the amount mentioned in clause 1 supra on or before the date mentioned in, clause 2 supra the plaintiff shall be at liberty to apply for the appointment of Commissioners for, sale of the aforesaid properties.
" The appellant filed an application for (a) making absolute the charge decree dated March 31, 1954 and directing sale of the properties; and (b) appointment of Commissioners for selling them.
On April 23, 1954 the Court allowed the application, appointed Commissioners for selling of the properties and directed that the relevant title deeds and security bond be handed over 5 17 to the Commissioners.
The Commissioners sold the properties on May 29 and 30, 1954.
The sales were confirmed and the sale proceeds were deposited in Court on July 2, 1954.
All the three respondents are simple money creditors of Hajee Ahmed Batcha.
The respondents Venkata Sastri & Sons filed O.S. No ' 13 of 1953 in the Sub Court, Vellore, and obtained a decree for Rs. 5,500 on March 27, 1953.
Respondent H.R. Cowramma instituted O.S. No. 14 of 1953 in the same Court and obtained a money decree on April 14, 1953.
The two decree holders filed applications for execution of their respective decrees.
One Rama Sastri predecessors of respondents H.R. Chidambara Sastri and H.R. Gopal Krishna Sastri obtained a money decree against Hajee Ahmed Batcha in O.S. No. 364 of 1951/52 in the Court of the District Munsiff, Shimoga, got the decree transferred for execution through the Court of the District Munsiff, Vellore, and filed an application for execution in that Court.
On June 7, 1954 the aforesaid respondents filed applications in the Madras High Court for (i) transfer of their execution petitions pending in the Vellore courts to the file of the High Court and (ii) an order for rateable distribution of the assets realized in execution of the decree passed in favour of the appellant in C.S. No. 56 of 1953.
The appellant opposed the applications and contended that as the properties were charged for the payment of his decretal amount, the sale proceeds were not available for rateable distributing amongst simple money creditors.
The respondents contended that the security bond was invalid as it was not attested by two witnesses and that the decree passed in C.S. No. 56 of 1953 did not create any charge.
Balakrishna Ayyar, J. dismissed all the applications as also exemption petitions filed by the respondents.
He held that the decree in C.S. No. 56 of 1953 did not create a charge on the properties.
But following the decision in Veerappa Chettiar vs Subramania(1) he held that the security bond was sufficiently attested by the Sub Registrar and the identi fying witnesses.
The respondents filed appeals against the orders.
On March 28, 1958 the Divisional Bench hearing the appeals referred to a Full Bench the following question "Whether the decision in Veerappa Chettiar vs Subramania lyer (I.L.R. requires reconsideration.
" The Full Bench held "In our opinion, such signatures of the registering officer and the identifying witnesses endorsed on a mortgage document can be treated as those of attesting witnesses if ' (1) the signatories are those who have seen the execution or received a personal acknowledgment (1) I.L.R. 518 from the executant of his having executed the document, (2) they sign their names in the presence of the executant and (3) while,so doing they had the animus to attest.
The mere presence of the signatures of the registering officer or the identifying witnesses on the registration endorsements would not by themselves be sufficient to satisfy the requirements of a Valid attestation; but it would be competent for the parties to show by evidence that any or all of these persons did in fact intend to and did sign as attesting witness as well.
" The Full Bench held that the decision in Veerappa Chettiar 's Case(1) can be held to, be correct to this limited extent only and not otherwise.
At the final hearing of the appeals, the Divisional Bench held that ( 1 ) a charge by act of parties could be created only by a document registered and attested by two witnesses; (2) the security bond was not attested by two witnesses and was therefore invalid; (3) the decree in C.S. No. 56 of 1953 should be construed as containing nothing more than a recital of the fact of there having been a security bond in favour of the plaintiff; and the sale in execution of the decree must be regarded as a sale in execution of a money decree; and (4) tie respondents were entitled to an order for rateable distribution.
Accordingly, the Divisional Banch allowed the appeals, directed attachment of the sale proceeds and declared that the respondents were entitled to rateable distribution along with the appellant.
The present appeals have been filed after obtaining special leave from this Court.
The following questions arise in these appeals : (1) Is the security bond attested by two witnesses; (2) if not, is it invalid? (3) does the decree in C.S. No. 56 of 1953 direct sale,of the properties for the discharge of a charge thereon, and (4) are the respondents entitled to rateable distribution of the assets held by court.? As to the first question, it is not the case of the appellant that K.S. Narayana Iyer is an attesting witness.
The contention is that the Sub Registrar D.W. Kittoo and the identifying witnesses Senkaranarayana and Kaki Abdul Aziz attested the document.
In our opinion, the High Court rightly rejected this contention.
Section 3 of the gives the definition of the word "attested" and is in these words : "Attested", in relation to an instrument, means and shall be deemed to have meant attested by two or more witnesses each of whom has seen the executant sign or affix his mark to the instrument, or has seen some other person sign the instrument in the presence and by the (1) I.L.R. 519 direction of the executant, or has received from the executant a personal acknowledgment of his signature or mark, or of the signature of such other person, and each of whom has signed the instrument in the presence of the executant; but it shall not be necessary that more than one of such witnesses shall have been present it the same time and no particular form of attestation shall be necessary.
" It is to be noticed that the word "attested", the thing to be defined,.
occurs as part of the definition itself.
To attest is to bear witness.
to a fact.
Briefly put, the essential conditions of a valid attestation under section 3 are : (1 ) two or more witnesses.
have seen the executant sign the instrument or have received from him a personal acknowledgment of his signature; (2) with a view to attest or to bear witness to this fact each of them has.
signed the instrument in the presence of the executant.
It is essential that the witness should have put his signature animo attestandi, that is, for the purpose of attesting that he has seen the executant sign or has received from him a personal acknowledgment of his signature.
If a person puts his signature on the document for some other purpose, e.g., to certify that he is a scribe or an identifier or a registering officer, he is not an attesting witness.
"In every case the Court must be satisfied that the names were written animo attestandi", see Jarman on Wills, 8th ed. 137.
Evidence is admissible to show whether the witness had the intention to attest.
"The attesting witnesses must subscribe with the intention that the subscription made should be complete attestation of the will, and evidence is admissible to show whether such was the intention or not," see Theobald on Wills, 12th ed.
p. 129.
,In Giria Datt vs Gangotri (1)the Court held that the two persons who had identified the testator at the time of the registration of the will and had appended their signatures at the foot of the endorsement by the Sub Registrar, were not attesting witnesses.
as their signatures were not put "animo attestandi".
In Abinash Chandra Bidvanidhi Bhattacharya vs Dasarath Malo(2) it was held that a person who had put his name under the word "scribe" was not an attesting witness as he had put his signature only for the purpose of authenticating that he was a "scribe".
In Shiam Sundar Singh vs Jagannath Singh (3) the Privy Council held that the legatees who had put their signatures on the will in token of their consent to its execution were not attesting witnesses and were not dis qualifled from taking as legatees.
The Indian lays down a detailed pro cedure for registration of documents.
The registering officer is; (1) A.I.R. 1955 S.C. 346,351.
(3) (2) I.L.R. 5 under a duty to enquire whether the document is ' executed by the person by whom it purports to have been executed and to satisfy himself as to the identity of the executant, section 34(3).
He can register the document if he is satisfied about the identity of the person executing the document and if that person admits execution, [section 25(1)].
The signatures of the executant and of ,every person examined with reference to the document are endorsed on the document, (section 58).
The registering officer is required to affix the date and his signature to the endorsements (section 59).
Prima facie, the registering officer puts his signature on the document in discharge of his statutory duty under section 59 and not for the purpose of attesting it or certifying that he has received from the executant a personal acknowledgment of his signature.
The evidence does not show that the registering officer D.W. Kitto put his signature on the document with the intention of attesting it.
Nor is it proved that he signed the document in the presence of the executant.
In these circumstances he cannot be regarded as an attesting witness see SurendraBahadur Singh vs Thakur Behari Singh(1).
Like identifying witnesses Senkaranarayana and Kaki Abdul Aziz signatures on the document to authenticate the fact that they have identified the executant.
It is not shown that they put their signatures for 'the purpose of attesting the document.
They cannot therefore be regarded as attesting witnesses.
It is common case that B. Somnath Rao attested the document.
It follows that the document was attested by one witness only.
As to the second question, the argument on behalf of the respondents is that section 100 of the attracts section 59 and that a charge can be created only by a document signed, registered and attested, by two witnesses in accordance with section 59 where the principal money secured is Rs. 100 or upwards.
The High Court accepted this contention following its earlier decisions in Viswanadhan vs Menon(2) and Shiva Rao vs Shanmugasundara swami (3) and held that the security bond was, invalid, as it was swami attested b one witness only.
We are unable to agree with this opinion.
Section 100 is in these terms "Where immoveable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property ', and all the provisions hereinbefore contained which apply to a simple mortgage shall, so" far as may be, apply to such charge.
(1) (2) I.L.R. [1939].Mad.
(3) I.L.R. [1940] mad.
521 Nothing in this section applies to the charge of a trustee on the trust property for expenses property incurred.
in the execution of his trust, and, save as otherwise expressly provided by any law for the time being in force no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge.
The first paragraph consists of two parts.
The first part concerns the creation, of a charge over immoveable property.
A charge may be made by act of parties or by operation of law.
No restriction is put on the manner in which a charge can be made.
Where such a charge has been created the second part comes into play.
It provides that all the provisions hereinbefore contained which apply to a simple mortgage shall; so far as may be, apply to such charge.
The second part does not address itself to the question of creation of a charge.
It does not attract the provisions of section 59 relating to the creation of a mortgage.
With regard to the applicability of the provisions relating to a simple mortgage, the second part of the first paragraph makes no distinction between a charge created by act of parties and a charge by operation of law.
Now a charge by operation of law is not made by a signed, registered and attested instrument.
Obviously, the second part has not the effect of attracting the provisions of section 59 to such a charge.
Likewise the legislature could not have intended that the second part would attract the provisions of section 59 to a charge created by act of parties.
Had this been the intention of the legislature the second part would have been differently worded.
If a charge can be made by a registered instrument only in accordance with section 59, the subsequent transferee will always have notice of the charge in view of section 3 under which registration of the instrument operates as such a notice.
But the basic assumption of the doctrine of notice enunciated in the second paragraph is that there may be cases where the subsequent transferee may not have notice of the charge.
The plain implication of this paragraph is that a charge can be made without any writing.
If a non testamentary instrument creates a charge of the value of Rs. 100 or upwards, the document must be registered under section 17 (1) (b) of the Indian .
But there is no provision of law which requires that an instrument creating the charge must be attested by witnesses.
Before section 100 was amended by Act 20 of 1929 it was well settled that the section did not prescribe any particular mode of creating a charge.
The amendment substituted the words "all 522 the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge," for the words "all the provisions hereinbefore contained as to a mortgagor shall, so far as may be, apply to the owner of such property, and the provisions of sections 81 and 82 shall, so far as may be, apply to the person having such charge.
" The object of the amendment was to make it clear that the rights and liabilities of the parties in ,case of a charge shall,, so far as may be, the same as the rights, and liabilities of the parties to a simple mortgage.
The amendment was not intended to prescribe any particular mode for the creation of a charge.
We find that the Nagpur High Court came to a similar conclusion in Baburao vs Narayan(1).
It follows that the security bond was not required to be attested by witnesses.
It was duly registered and was valid and operative.
As to the third question, we find that the decree dated March 19, 1954 declared that the security bond in respect of the immovable I properties would enure for the benefit of the appellant as a charge for the decretal amount.
This relief was granted on the ,oral prayer of the plaintiffs.
We are unable to agree with the High Court that in view of the omission to amend the plaint by adding a prayer for enforcement of the charge, the decree should be construed as containing merely a recital of the fact that a security bond had been executed.
In our opinion, the decree on its true construction declared that the security bond created a charg e over the properties in favour of the plaintiffs for payment of the decretal amount and gave them the liberty to apply for sale of the 'properties for the discharge of the encumbrance.
Pursuant to the decree the properties were sold and the assets are now held by the Court.
The omission to ask for, an amendment of the plaint was an irregularity, but that does not affect the construction of the decree.
It was suggested that the decree was invalid as the High Court had no territorial jurisdiction under clause 12 of its Letters Patent to pass a decree for sale of properties outside the local limits of its ordinary original jurisdiction.
For the purpose of these appeals, it is sufficient to say that the respondents cannot raise this question in the present proceedings.
If the decree is invalid and the sale is illegal on this ground, the respondents cannot maintain their applications for rateable distribution of the assets.
They ,,can ask for division of the sale proceeds only on the assumption that the properties were lawfully sold.
It is therefore unnecessary to decide whether the objection as to the territorial jurisdiction of the High Court has been waived by the judgment debtor and cannot now be agitated by him and persons claiming through him, having regard to the decisions in Seth Hiralal Patni vs Sri Kali (1)I.L.R. ,1819 822., 523 Nath(1), Behrein Petroleum Co. Ltd., vs P. J. Pappu (2) , Zamindar of Etiyapuram vs Chidambaram Chetty(1).
As to the 4th question we find that the immoveable properties have been sold in execution of a decree ordering sale for the discharge of the encumbrance thereon in favour of the appellant.
Section 73(1) proviso (c) therefore applies and the proceeds of sale after defraying the expenses of the sale must be applied in the first instance in discharging the amount due to the appellant.
Only the balance left after discharging this amount can be dis tributed amongst the respondents.
It follows that the High Court was in error in holding that the respondents were entitled to rateable distribution of the assets along with the appellant.
In the result, the appeals are allowed, the orders passed by the Divisional Bench of the Madras High Court are set aside and the orders passed by the learned Single Judge are restored.
There will be no order as to costs.
G.C. Appeals allowed.
(1) ; ,751 2.
(2) ; ,462 3. | The appellant filed suit No. 56 of 1953 against H for recovery of certain monies on the basis of promissory notes.
As the suit was under 0. 7 of the Madras High Court Original Side Rules H was given leave to defend it on furnishing certain security.
Accordingly H executed in favour of the Registrar, Madras High Court, a security bond charging certain properties 'for the payment of Rs. 50,000,.
The document was attested by only one witness.
At the time of registration it was signed by two identifying witnesses and the Sub Registrar.
The trial Judge decreed the appellant 's suit and the decree mentioned that the charge created by H 's security bond would enure for the benefit of the decree holder.
In execution proceedings the properties in question were sold and the proceeds deposited in court.
At this stage the three respondents who also held money decrees against H applied to the Court for ratable distribution of the assets realised in the execution of the appellant 's decree in suit No. 56 of 1953.
The trial Judge dismissed their applications.
In Letters Patent Appeals the High Court held that in the absence of attestation by the two witnesses the security bond executed by H was invalid inasmuch as a charge on property created under section 100 of the attracted the provisions of section 59.
As to the decree passed in suit No,.
56 of 1953 the High Court held that in view of the decree holder 's omission to amend the plaint by adding a prayer for enforcement of the charge the decree should be construed as containing merely a recital of the fact that a security bond had been executed.
On these findings the High Court held that the respondents were entitled to rateable distribution.
Against the High Court 's orders the appellant filed appeals in this Court.
On the question of attestation he contended that the sub Registrar and the two identifying witnesses must also be treated as having attested the security bond.
HELD : (i) The essential conditions of a valid attestation under section 3 of the are : (1) two or more witnesses have seen the executant sign the instrument or have received from him a personal acknowledgment of his signature; (2) with a view to attest or to hear witness to this fact each of them has signed 'the instrument in the presence of the executant.
It is essential that the witness should have put his signature animo attestendi, that is, for the purpose of attesting that he has seen the executant sign or has received from him a personal acknowledgment of his signature.
If a person puts his signature on the docu 514 meat for some other purpose, e.g., to certify that he is a scribe or an identifier or a registering officer, he is not an attesting witness.
[519 C D] Prima facie the registering officer puts his signature on the document in discharge of his statutory duty under section 59 of the and not for the purpose of attesting it or certifying that he has received from the executant a personal acknowledgment of his signature. [520 B C] In the present case the evidence did not show that the registering officer and the identifying witnesses signed the document with the intention of attesting it.
Nor was it shown that the registering officer signed it in the presence of the executant.
The document could not therefore be said to have been attested by these witnesses and must be held to have been signed by one attesting witness only.
[520 D] Veerappa Chettiar vs Subramania, I.L.R. , Girja Datt vs Gangotri, A.I.R. 1955 S.C. 346, Abinash Chandra Bidyanidhi Bhattacharya vs Dasarath Malo, I.L.R. 56 Cal.
598, Shiam Sundar Singh vs Jagannath Singh, 54 M.L.J,.
43 and Surendra Bahadur Singh vs Thakur Behari Singh, , referred to.
(ii)Section 100 of the does not attract the provisions of section 59.
[521 C D] The first paragraph of section 100 consists of two parts.
The first part concerns the creation of a charge over immovable property which may be by act of parties or by operation of law.
No restriction is put on the manner in which a charge can be made.
[521 C] When such a charge has been created the second part comes into play.
It provides that all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge.
The second part does not address itself to the question of creation of a charge.
It does not attract the provisions of section 59 relating to the creation of a mortgage.
The second part moreover makes no distinction between a charge created by act of parties and a charge by operation of law.
Obviously the provision of section 59 are not attracted to a charge by operation of law.
Likewise the legislature could not have intended that the second part would attract the provisions of section 59 to a charge created by act of parties.
[521 D E] If a charge can be made by a registered instrument only in accordance with section 59, the subsequent transferee will always have notice of the charge in view of section 3 of the Act.
But the basic assumption of the doctrine of notice enunciated in the second paragraph is that there may be cases when the subsequent transferee may not have notice of the charge.
The plain implication of this paragraph is that A charge can be made without any writing.
[521 F G] If a non testamentary instrument creates a charge of the value of Rs. 100/ or upwards the document must be registered under section 17(1) (b) of the Indian .
But there is no provision of law which requires that an instrument creating the charge must be attested by witnesses.
[521 G H] The object of the second part of the first paragraph of section 100 is to make it clear that the rights and liabilities of the parties in case of a charge shall so far as may be the same as the rights and liabilities of the parties of a simple mortgage.
It was not intended to prescribe any particular mode for the creation of a charge.
[522 B] 515 It followed that the security bond in the present case was not required to be attested by witnesses.
It was duly registered and was valid and operative.
[522 C] Viswanadhan vs Menon, I.L.R. and Shiva Rao vs Shanmugasundaraswami I.L.R. , disapproved.
Baburao vs Narayan, I.L.R. , 819 822, approved.
(iii)The decree in suit No. 56 of 1963 on its true construction declared that the security bond created a charge over the properties in favour of the plaintiffs for payment of the decretal amount and gave them the liberty to apply for sale of the properties for the discharge of the encumbrance.
Pursuant to the decree the properties were sold and the assets were held by the court.
The omission to ask for an amendment of the plaint was an irregularity, but that did not affect the construction of the decree.
[522 D E] (iv)The immovable properties had been sold in execution of a decree ordering sale for the discharge of the encumbrance thereon in favour of the appellant.
Section 73(1) proviso (c) therefore applied and the proceeds of the sale after defraying the expenses of the sale must be applied in the first instance in discharging the amount due to the appellant.
Only the balance left after discharging this amount could be distributed among the respondents.
[523 B] (v)Since the respondents ' own case rested on the assumption that the properties were lawfully sold they could not be allowed to raise the objection that the High Court had no territorial jurisdiction for sale of properties outside the local limits of its ordinary original jurisdiction.
[522 G] Seth Hiralal Patni vs Sri Kali Nath, ; , 751 52, Bahrein Petrolium Co. Ltd. vs P. J. Pappu, ; , 462 63 and Zamindar of Etiyapuram vs Chidambaram Chetty, I.L.R. 43 Mad . 675 (F.B.), referred to. |
Appeals Nos. 2516 to 2519 of 1966.
Appeals from the orders dated February 10, 1965, March 31, 1965 and March 19, 1965 of the Punjab High Court in Letters.
Patent Appeals Nos. 38, 36, 100 and 74 of 1965, respectively and.
Civil Appeals Nos. 806 and 807 of 1967.
850 Appeals from, the jadgment and orders dated September 28, 1964 of the Punjab High Court in civil writ Nos. 2159 and.
2309 of 1963.
V. D. Mahajan, and R. N.Sachthey, for the appellants (in all the appeals).
Hardev Singh, for the respondents (in C.As.
2517 and 2519 of 1966) and for the respondents (in C.As.
Nos. 806 and 807 of 1967).
Civil Appeal No. 2518 of 1966 The Judgment of the Court was delivered by Ramaswami, J.
In this case the respondent is a partnership firm carrying on the business of buying and selling cotton and also of ginning and pressing cotton at Bamala.
The respondent purchased unginned cotton and after ginning the cotton by a mechanical process and removing the seeds sold the ginned cotton to customers outside, the State.
For the period from 1st April, 1961 to 31st March, 1962 the respondent paid purchase tax on the purchase turnover.
In respect of cotton seeds sold by it to registered dealers, the respondent claimed deduction from the purchase turnover under section 5 (2) (a) (vi) of the Punjab Sales Tax Act, 1948 (Act No. 46 of 1948).
But, the assessing authority did not allow the deduction holding that the goods sold viz., cotton seeds were not the goods in respect of which purchase tax had been levied.
In other words, the assessing authority took the stand that the uncotton underwent a manufacturing process and the goods produced were different from those purchased.
So the respondent firm was assessed to pay a tax of Rs. 16,452 by the order of the assessing authority dated 11th September, 1963.
The respondent firm thereafter filed a writ petition No. 1917 of 1963 in the Punjab High Court for quashing the assessment.
The writ petition was allowed by the High Court which quashed the assessment and directed the assessing authority to redetermine the tax in the light of its judgment.
In allowing the writ petition of the respondent the High Court followed its previous decision in Patel Cotton Company Private Ltd. vs State of Punjab & Ors.(1).
The appellants preferred a Letters Patent Appeal which was dismissed.
The present appeal is brought by, certificate from the judgment of the Punjab High Court dated 31st March, 1965.
It is necessary at this stage to set out the relevant provisions ,of the Punjab Sales Tax Act, 1948 (Act No. 46 of 1948) (hereinafter called the Act).
Section 2(ff) omitting immaterial portions defines 'purchase ' thus: (1) 15 S.T.C. 865.
851 "Purchase, with all its grammatical cognate expressions means the acquisitions of goods specified in Schedule C. . " Schedule C Entry (1) and Entry (3) read thus "(1) Cotton, that is to say, all kinds of cotton (indigenous or imported) in its unmanufactured state whether gined or unginned, baled, pressed or otherwise, but not including cotton waste". " (3) Oil seeds that is to say, seeds yielding nonvolatile oils used for human consumption or in or in the manufacture of varnishes, soaps and the like or in lubrication and volatile oils used chiefly in medicines, perfumes, cosmatics and the like".
Section 5 (2) (a) (vi) of the Act is to the following effect "5 (2).
In this, Act the expression "taxable, turnover" means that part of dealer 's gross turnover during any period which remains after deducting therefrom (a) his turnover during that Period on (vi)the purchase of goods which are sold not later than six months after the close of, the year, to a Registered Dealer, or in the course of inter State trade or commerce, or in the course of export out of the country".
Section 2(c) of the (Act No. 74 of 1956) defines 'declared goods ' to mean goods declared under section 14 to be of special importance in inter State trade or commerce.
Under section 14 of this Act certain goods were declared to be of special importance in inter State trade or commerce and they included cotton, that is to say all kinds of cotton (indigenous or imported) in its unmanufactured state, whether ginned or unginned, baled, processed or otherwise, but not including cotton waste.
Section 15 of the has been amended from time to time.
Originally section 15 read as follows : "15, Restrictions and conditions in regard to tax on sales or Purchases of declared goods : Notwithstanding anything contained in the sales tax law of any State the tax payable by any dealer, under that law in respect of any sales or purchases of declared goods made by him inside the State shall not exceed two per cent of the sale price thereof, and such tax shall not be levied at more than one stage in a State".
(1) Sup.
C.I.169 5 852 This section was amended by the Central Sales Tax (Amendment) Act (No. 16 of 1957) and again by Central Act No. 31 of 1958 and the amended section reads as follows : "15.
Restrictions and conditions in regard to tax on sale or purchase of declared goods within a State : Every sales tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely : (a)the tax payable under that law in respect of any, sale or purchase of such goods inside the State, shall not exceed two per cent of the sale or purchase price there of, andsuch tax shall not be levied at more than one stage; (b)where a tax has been levied under that law in respect of the sale or purchase inside the, State of any declared goods and such goods are sold in the course of inter State trade or commerce, the tax so levied shall be refunded to such person in such manner and subject to such conditions as may be provided in any law in force in that State".
On behalf of the appellants the argument was stressed that ginning process was a manufacturing process, and ginned cotton and cotton seeds were different commercial commodities and the respondent was not entitled to the exemption under section 5 (2) (a) (vi) of the Act.
It was said that unginned cotton was transformed into two distinct commercial commodities and there was no substantial identity between unginned cotton and ginned cotton or cotton seeds.
It was argued that the ginning process required complicated machinery of manufacture.
Reference was made in this connection to the mechanical aspect of the ginning process described in Encyclopaedia Britannica, Vol.
6: "Hand separation of lint and seed was replaced rapidly use of saw type gins in the United States after the inventions of Eli Whitney in 1794 and of Hokden Holmesin 1796.
Whitney 's gin was improved upon by Holmes.who substituted toothed saws for the hooked cylinder and flat metal ribs for the slotted bar used by Whitney.
The saws, metal ribs and doffing brush in these early models persist in modem gins, with no basic change in ginning principle having be en made, although some modem gins substitute an air blast for the doffing brushes.
853 Additional gin machinery has been developed to keep pace with changes in harvesting practices which have resulted in a trend from careful hand picking to, rougher hand and machine harvesting.
These developments include seed cotton driers, seed cotton cleaners, burr extractors, greenboll traps and magnetic devices for removing metal.
Line cleaners, designed to remove trash from lint after it had been removed from the seed, were added to modem gins in the late 1940s and 1950s.
Improvement in grade, which resulted in a higher price for the lint, was, in some cases, offset by the loss in weight.
Gin installations include presses for baling the lint and equipment for moving the seed away from the gin stands.
While some of the seed is saved for planting purposes, most of it moves directly to an oil mill for processing"(1).
In our opinion, the appellants are right in their contention that the ginning process is a manufacturing process.
But the question presented for determination in the present case is somewhat different viz., whether the respondent is entitled to the exemption under section 5 (2) (a) (vi) of the Act in the context and setting of the language of sections 14 and 15 of the . "Declared goods" in section 14 of the are individually specified under separate items.
"Cotton ginned or unginned" is treated as a single commodity under one item of declared goods.
It is evident that cotton ginned or un ginned being treated as a single commodity and as a single species of declared goods cannot be subject under section 15 (a) of the to a tax exceeding two per cent of the sale or purchase price thereof or at more than one stage.
But so far as cotton seeds are concerned, it is difficult to accept the contention that the sale of cotton seeds must be treated as a sale of declared goods for the purpose of section 15 (a) or (b) of the .
It is true that cotton in its unginned state contains cotton seeds.
But it is by a manufacturing process that the cotton and the seed are separated and it is not correct to say that the seeds so separated is cotton itself or part of the cotton.
They are two distinct commercial goods though before the manufacturing process the seeds might have been a part of the cotton itself.
There is hence no wan ant for the contention that cotton seed is not different from cotton.
It follows that the respondent is not entitled to deduct the sale price of the cotton seeds from the purchase turnover under section 5 (2) (a) (vi) of the Act.
In our opinion, the assessing authority was right in holding that the respondent was not entitled to deduction in respect of cotton seeds sold by it to registered dealers.
It is conceded that the assessing authority had (1) Encyclopaedia Britannica, Vol. 6, page 614. 854 already granted deduction under section 5 (2) (a) (vi) so far as ginned cotton is concerned.
For these reasons we hold that the judgment of the Punjab High Court dated 31st March, 1965 in Letters Patent Appeal No. 100 of 1965 should be set aside and the writ petition No. 1917 of 1963 filed by the respondent should be dismissed.
The appeal is accordingly allowed with costs.
Civil Appeals Nos. 2516 2517 & 2519 of 1966 and Civil Appeals Nos. 806 and 807 of 1967 The question of law arising in these appeals has been the subject matter of consideration in Civil Appeal No. 2518 of 1966.
For the reasons given in that judgment we hold that these appeals also should be allowed and the judgments of the Punjab High Court should be set aside and the writ petitions filed by the respondents in each case should be dismissed.
These appeals are accordingly allowed with costs.
There will be one hearing fee for these appeals and for Civil Appeal No. 2518 of 1966.
Y.P. Appeals allowed. | The respondent a dealer purchased unginned cotton and after ginning the cotton and removing the seeds sold the ginned cotton to customers outside the State.
The respondent paid parchase tax on the purchase turnover.
In respect of cotton seeds sold by it to registered dealers,the respondent claimed deduction from the parchase turnover under section 5 (2) (a) (vi) of the Punjab Sales Tax Act, 1948.
But the assessing authority did not allow the deduction holding that the goods sold viz., cottonseeds were not the goods in respect of which purchase taxhad been levied as the unginned cotton underwent a manufacturing process and the goods.
produced were different from those purchased.
The respondent filed a writ petition in the High Court, which was allowed and the State 's Letters.
Patent Appeal was dismissed.
Allowing the State 's appeal, this Court; HELD : The respondent was not entitled to deduction under section 5(2) (a) (vi) of the Act in respect of cotton seeds sold by it to registered dealers.
"Declared goods" in section 14 of the are individually specified under separate items.
"Cotton ginned ' or unginned" is, treated as a single commodity under one item of declared goods.
It is.
evident that cotton ginned or unginned being.
treated as a single commodity and as a single species of declared goods cannot be subject unders.
15(a) of the to a tax exceeding two per cent of the sale or purchase price thereof or at more than one state.
But so far as cotton seeds are concerned it cannot be held that the sale of cotton seeds must be treated as a sale of 'declared goods for the purpose of is.
15(a) or (b) of the .
Cotton in its unginned state contains cotton seeds, but it is by a manufacturing process that the cotton and the seed are separated and it is not correct to say that the seed so separated is cotton itself or part of the cotton.
They are two.
distinct commercial goods though before the manufacturing process the seeds might have been a part of the cotton itself.
[853 E] Patel Cotton Company Private Ltd. vs State of Punjab & Ors., 15 S.T.C. 865, disapproved. |
Appeal No. 368 of 1966.
Appeal by special leave from the judgment and order dated February 3, 1964 of the Patna High Court in, Appeal from Appellate Order No. 99 of 1963.
Sarjoo Prasad and R. C. Prasad, for the appellants.
K. K. Sinha and section K. Bisaria, for the respondents.
The Judgment of the Court was delivered by Hegde, J.
This appeal against the judgment of the Patna High Court dated the 3rd February, 1964 in its Appellate Order No. 99 of 1963 was filed obtaining special leave from this Court.
It arises from a proceeding under section 47, Civil Procedure Code.
In execution of a mortgage decree, the decree holders sought to proceed against 910 Bakasht lands of the judgment debtors.
The judgment debtors objected to the same on the ground that the execution was barred under section 4(d) of the Bihar Land Reforms Act, 1950 (to be herein,after referred to as the Act).
But that objection was overruled by the executing court on two different grounds namely (1) that the objection in question is barred by the principles of res judicata and (2) the bar of section 4(d) pleaded is not tenable.
The decision of the execution court was affirmed appeal but reversed in second appeal by the High Court.
The two questions that arise for decision in this appeal are (1) whether the objection as regards the executability of the decree pleaded by the judgment debtors is barred by the principles of res judicata and (2) whether the mortgage decree has become unexecutable in view of the provisions of the Act.
We shall now briefly set out the material facts of the case.
The mortgages, the appellants in this appeal obtained a preliminary decree on June 26, 1947 on the basis of a mortgage.
The property mortgaged was an Estate within the meaning of the Act.
That property included both Bakasht lands as well as other lands.
The Act came into force after the passing of the aforementioned preliminary decree.
The decree holders filed petition for passing a final decree on September 19, 1955.
The Estate mortgaged vested in the State of Bihar on January 1, 1956 as a result of a notification issued under section 3 (1) of the Act.
A final decree was passed in the mortgage suit on October 1, 1956.
Thereafter the mortgagees applied under section 14 of the Act and got determined the compensation to which they were entitled under the Act.
It is said that they did not proceed, any further in that proceeding but on the other hand filed on June 18, 1958 an execution petition to execute the mortgage decree against the, Bakasht lands.
The judgment debtors resisted that execution by filing an application under section 47, Civil Procedure Code (Misc.
Case No. 94 of 1959) on the ground that the decree cannot be executed in view of the provisions of the Act.
That application was dismissed for the default of the judgment debtors on September 12, 1959.
A second application raising the same ground (Misc.
Case No. 110 of 1959) was filed by the judgment debtors is barred on the principles of res judicata and further on July 23, 1960 for default of the judgment debtors.
A third application raising the same ground of objection (Misc.
Case No. 91 of 1960) was filed by the judgment debtors on September 12, 1960.
That application was dismissed on January 4, '1962 after examining the contentions of the parties.
Therein the execution court came to the conclusion that the objection raised by the judgment debtors is barred on the principles of res judicata and further that the same has no merits.
This decision as mentioned earlier was affirmed by the appellate court but reversed by the High Court.
We shall first take up the contention that the objection taken 911 by the judgment debtors ' is barried by principles of res judicata.
Though at one stage, learned Counsel for the appellants decree holders attempted to bring the case within Explanation 5, section 11, Civil Procedure Code, he did not pursue that line of argument but tried to support his contention on the broader principles of res judicata.
The real question for decision in this case is whether the dismissal of Misc.
cases Nos. 94 and 110 of 1959 for default of the judgment debtors can be said to be a final decision of the court after hearing the parties.
Before a plea can be held to be barred by the principles of res judicata, it must be shown that the plea in question had not only been pleaded but it had been heard and finally decided by the court.
A dismissal of a suit for default of the plaintiff, we think, would not operate as res judicata against a plaintiff in a subsequent suit on the same cause of action.
If it was otherwise there was no need for the legislature to enact rule 9, Order 9, Civil Procedure Code which in specific term say that where a suit is wholly or partly dismissed under rule 8, the plaintiff shall be precluded from bringing a fresh suit in respect of the same cause of action.
The contention that the dismissal of a previous suit for default of the plaintiffs operates as res judicata in a subsequent suit in respect of the same claim was repelled by the Judicial Committee, of the Privy Council in Maharaja Radha Parshad Singh vs Lal Sahab Rai and Ors.(1).
Therein the Judicial Committee observed thus : "None of the questions, either of fact or law, raised by the pleadings of the parties was heard or determined by the Judge of the Shahabad Court in 1881; and his decree dismissing the suit does not constitute res judicata within the meaning of the Civil Procedure Code.
It must fall within one or other of the sections of chapter VII of the Code; in the present case it is immaterial to consider which, the severest penalty, attached to such dismissal in any case being that the plaintiff cannot bring another suit for the same relief.
" From this decision it is clear that the Judicial Committee opined that before a plea can be held to be barred by res judicata that plea must have been heard and determined by the court.
Only a decision by a court could be res judicata, whether it be statutory under section 11, Civil Procedure Code or constructive as a matter of public policy on which the entire doctrine rests.
Before an earlier decision can be considered as res judicata the same must have been heard and finally decided see Pulvarthi Venkata Subba.
Rao vs Velluri Jagannadha Rao, and Ors.
The courts in India have generally taken the view that an execution petition which has been dismissed for the default of the (1) L.R. 17 I.A. 150.
(2) ; 912 decree holder though by the time that petition came to be dismissed, the judgment debtor had resisted the execution on one or more grounds, does not bar the further execution of the decree in pursuance of fresh execution petition filed in accordance with law see Lakshmibai Anant Kondkar vs Ravji Bhikaji Kondkar(1).
Even the dismissal for default of objections raised under section 47, Civil Procedure Code does not operate as res judicata when the same objections are raised again in the course of the executionsee Bahir Das Pal and Anr.
vs Girish Chandra Pal (1) Bhagawati Prasad Sah vs Radha Kishun Sah and OrS. (3); Jethmal and Ors.
vs Mst.
Sakina (4) ; Bishwanath Kundu vs Sm.
Subala Dassi (5).
We do not think that the decision in Ramnarain vs Basudeo(6) on which the learned Counsel for the appellant placed great deal of reliance is correctly decided.
Hence we agree with the High Court that the plea of res judicata advanced by the appellant is unsustainable.
The next question is whether the execution is barred under the provisions, of the Act.
The contention of the judgment debtors is that it is 'so barred whereas according to the appellants as the Bakasht lands which form part of the mortgaged property had, not vested in the State, the execution can proceed against those lands.
Therefore we have to see whether the entire mortgaged property had vested in the State in pursuance of the notification under section 3 or only the mortgaged property minus the Bakasht lands.
There is no dispute that the property mortgaged was an Estate within the meaning of section 2(1) and the notification issued under section 3 covered the entirety of the Estate.
But what was urged on behalf of the appellants is that what had vested in the State was the non bakasht lands as well as the proprietory interest in the Bakasht lands and hence the Bakasht lands do not have the protection of section 4(d); Consequently it is not necessary for them to exclusively proceed under section 14.
The consequences of the vesting of an Estate is set out in section 4.
Section 4(a) provides that once an Estate vests in the State the various rights in respect of that Estate enumerated therein shall also vest in the State, absolutely free from all encumbrances.
Among the rights enumerated therein undoubtedly includes the right of possession.
In view of section 4(a) there is hardly any doubt that the proprietor loses all his rights in the estate in question.
After setting out the various interests lost by the proprietor the section proceeds to say "such proprietoror tenure holder shall (1) XXXI, B.L.R. 400.
(2) A.I.R. (3) A I.R. 1950 Pat. 354.
(4) A. I. (5) A.I.R. 1962 Cal. 272.
(6) I.L.R. XXV pat.
913 cease to have any interests in such estate or tenure, other than the interests expressly saved by or under the provisions of this Act".
In order to find out the implication of the clause extracted above we have to go to section 6 which provides that on and from the date of vesting all lands used for agriculture or horticultural purposes which were in khas possession of an intermediary on the date a vesting (including certain classes of land specified in that section) shall subject to the provisions of sections 7A and B be deemed to be settled by the State with such intermediary and he shall be entitled to retain possession thereof and hold them as a raiyat under the State having occupancy rights in respect of such lands, subject to the payment of such fair and equitable rent as may be determined by the Collector in the prescribed manner.
Reading sections 3, 4 and 6 together, it follows that all Estates notified under section 3 vest in the State free of all encumbrances.
The quondum proprietors and tenure holders of those Estates lose all interests in those Estates.
As proprietors they retain no interest in respect of them whatsoever.
But in respect of the lands enumerated in section 6 the State settled on them the rights of raiyats.
Though in act the vesting of the Estates and the deemed settlement of raiyats rights in respect of certain classes of lands in cluded in the Estates took place simultaneously, in law the two must be treated as different transactions; first there was a vesting of the Estates in the State absolutely, and free of all encumbrances.
Then followed the deemed settlement by the State of raiyat 's rights on the quondum proprietors.
Therefore in law it would not be correct to say that what vested in the State are only those interests not coming within section 6.
Section 4(d) provides that "no suit shall lie in any Civil Court 'for the recovery of any money due from such proprietor (proprietor whose estate has vested in the State) or tenure holder the payment of which is secured by a mortgage of, or is a charge on, such estate or tenure and all suits and proceedings for the recovery of any such money which may be pending on the date of vesting shall be dropped".
Proceedings in this.
section undoubtedly include execution proceedings.
This is not a case where only a part of the mortgaged property has vested in the such the rule laid down by this Court in Raj Kishore Pratap(1) is not attracted.
As mentioned earlier the State and as vs Ram entire Estate mortgaged had vested though some interest in respect of a portion of the mortgaged property had been settled by the State on the mortgagors.
Under the circumstances the only remedy open to the decreeholders is that provided in Chap.
IV of the Act i.e. a claim under (1) ; ; 914 section 14 before the Claims Officer for "determining the amount of debt legally and justly payable to each creditor in respect of his claim '.
The procedure to be followed in such a proceeding is prescribed in sections 15 to 18. 'Provisions relating to the assessment and payment of compensation payable to the quondum proprietors and tenure holders are found in Chap.
V of the Act (sections 19 to 31.) Section 24(5) provides that "in the case where the interest of a proprietor or tenure holder is subject to a mortgage or charge, the compensation shall be first payable to the creditor holding such mortgage or charge and the balance, if any, shall be payable to the proprietor or tenure holder concerned:" That subsection further prescribes the maximum amount that can be paid to such a creditor.
In view of what has been stated above it follows that under the circumstances of this case it is not open to the appellants to proceed with the execution.
Their only remedy is to get compensation under the Act.
Our conclusion receives strong support from some of the decisions of this Court.
In Rana Sheo Ambar Singh vs Allhabad Bank Ltd., Allahabad(1), a question identical to the one before us, but arising under the U.P. Zamindari Abolition and Land Reforms Act, came up for consideration by this Court.
One of the questions that arose for decision in that case was whether the Bhumidari right settled by the State on a previous proprietor whose estate had vested in the State was liable to be proceeded against in execution of a mortgage decree against the Estate that had vested in the State.
This Court held that it was not liable to be proceeded against.
Therein it was ruled that the intention of the U.P. Zamindari.
Abolition and Land Reforms Act was to vest the proprietory rights in the Sir and Khudkasht land and grove land in the State and resettle on intermediary not as compensation but by virtue of his cultivatory possession of lands comprised therein and on a new tenure and confer upon the intermediary a new and special right of Bhumidari, which he never had before by section 18 of the Act.
The provisions in that Act relating to vesting and settlement of Bhumidari rights are in all essential particulars similar to those in the Act relating to vesting and settlement of Bakasht lands.
This Court further ruled in that case that the mortgagee could only enforce his rights against the mortgagor in the manner as provided in section 6 (h) of the U.P., Act read with section 73 of the Transfer of Property Act and follow the compensation money under the Act.
In Krishna Prasad and Ors.
vs Gauri Kumari Devi( 2) the question that arose for decision by the Court was whether, a mortgage decree holder could proceed against the properties of the mortga (1) ; (2) [1962] Supp.
3 S.C.R. 564.
915 gor other than those mortgaged in enforcement of the personal covenant when the property mortgaged had vested in the State under the provisions of the Act.
That question was answered in the negative.
In the course of the judgment Gajendragadkar, J. (as he then was) who spoke for the Court observed that there is no doubt "that the scheme of the Act postulates that where the provisions of the Act apply, claims, of the creditors have to be submitted before the Claim Officer, the claimants have to follow the procedure prescribed by the Act and cannot avail of any remedy outside the Act by instituting suit or any other proceeding in the court of ordinary civil jurisdiction.
" Proceeding further he observed "It is in the light of this scheme of the Act that we must revert to section 4(b) and determine what its true scope and effect are.
Mr. Jha contends that in construing the words of Section 4 (d) it would be necessary to bear in mind the object of the Act which was merely to provide for the transference to the State of the interests of the proprietors and tenure holders in land and of the mortgagees and lessees of such interests.
It was not the object of the Act, says Mr. Jha, to extinguish, debts due by the proprietors or tenure holders and so, it would be reasonable to confine the operation of section 4 (d) only to the claims made against the estates which have vested in the State and no others.
In our opinion, this argument proceeds on an imperfect view of the aim and object of the Act.
It is true that one of the objects of the Act was to provide for the transference to the State of the estates as specified.
But as we have already seen, the provisions contained in section 16 in regard to the scaling down of the debts due by the proprietors and tenure holders clearly indicate that another object which the Act wanted to achieve was to give some redress to the debtors whose estates have been taken away from them by the notifications issued under section 3.
Therefore, in construing section 4(d), it would not be right to assume that the interests of the debtors affected by the provisions of the Act do not fall within the protection of the Act" and again at page 578 "Having regard to the said scheme, it is difficult to confine the application of section 4(d) only to execution proceedings in which the decree holder seeks to proceed against the estate of the debtor.
In fact, an execution proceeding to recover the decretal amount from the estate which has already vested in the State, would be incompetent because the said estate no longer belong to the judgment debtor.
" Sup CI 69 9 916 Summarising the effect of the aforementioned decisions this is what this Court observed in Raj Kishore 's case(1) a case arising under the Act: From the principles laid down by this Court in the above two decisions, follows that where the whole of the property mortgaged is an estate, there can be no doubt that the procedure prescribed by Chapter IV has to be followed, in order that the amount due to the creditor should be determined by the claims officer and the decision of the claims officer or the Board has been made final by the Act.
" For the reasons mentioned earlier we are of the opinion that the decision of the majority of the judges in the Full Bench decision in Sidheshwar Prasad Singh vs Ram Saroop Singh(2) is not correct.
The true effect of the decisions of this Court in Rana Sheo Ambar Singh 's case(3) and Krishna Prasad 's case(4) is as explained by Kamla Sahai, J. in that case.
In the result this appeal fails and it is dismissed with costs.
Y.P. Appeal dismissed. | After a preliminary decree was obtained by the appellants (mortgagees of an Estate including both Bakasht lands and other lands), the Bihar Land Reforms Act, 1950 came into force.
The appellant filed petition for passing final decree.
The Estate mortgaged vested in the State as a result of a notification issued under section 3(1) of the Act, and later a final decree was passed in the mortgage suit.
Thereafter the appellants applied under section 14 of the Act and got determined the compensation to which they were entitled under the Act.
But yet they filed an execution petition to execute the mortgage decree against the Bakasht land.
The respondents resisted that execution by filing an application under section 47, Civil Procedure Code contending that the execution was barred under section 4(d) of the Act.
That application was dismissed for default of the respondents.
A second application raising, the same ground was filed by the respondents but this, too, was dismissed for their default.
A third application raising the same ground was filed by the respondents and in this, the execution court overruled the objection raised by the respondents on the grounds (i) that the objection was barred by the principles of res judicata and (ii) that the bar of section 4(d) pleaded was not tenable.
This decision was affirmed in appeal, but reversed in second appeal by the High Court.
Dismissing the appeal this Court; HELD : (i) The objection was not barred by the principles of res judicata.
Before a plea can be held to be barred by res judicata that plea must have been heard and determined by the court.
Only a decision by a court could be res judicata, whether it be statutory under section 11, Civil Procedure Code or constructive as a matter of public policy on which the entire doctrine rests.
An execution petition having been dismissed for the default of the decree holder through by the time petition came to be dismissed, the judgment debtor had resisted the execution on one or more grounds, does not bar the further execution of the decree in pursuance of fresh execution petitions filed in accordance with law.
Even the dismissal for default of objections raised under section 47, Civil Procedure Code does not operate as res judicata when the same objections are raised again in the course of the execution.
[911 B H] Maharaja Radha Parshad Singh vs Lal Sahab Rai & Ors.
L.R. 17 I.A. 150, Pulvarthi Venkata Subba Rao vs Velluri Jagannadha Rao & Ors.
; , Lakshmibai Anant Kondkar vs Ravi Bhikaji Kondkar, XXXI B.L.R. 400, Bahir Das Pal & Anr.
v, Girish Chandra Pal, A.I.R. 1923 Cal.
287, Bhagwati Prasad Sah vs Radha Kishun Sah & Ors.
A.I.R. 1950 Pat. 354, Jethmal & Ors.
vs Mst.
Sakina, A.I.R. 1961 Rai.
1959 Bishwanath Kundu vs Smt.
Subala Dassi, A.I.R. 1962 Cal. 272, referred to.
909 Ramnarain vs Basudeo, I.L.R. XXV Pat.
595, disapproved.
(ii)Proceedings under section 4(d).
of the Bihar Land Reforms Act, 1950 included execution proceedings and the execution could not be proceeded with.
The only remedy open to the appellants was to get compensation under Chapter IV of the Act.
[913 G, H] Reading sections 3, 4 and 6 together, it followed that all Estates notified under section 3 vested in the State free of all encumbrances.
The quondum proprietors and tenure holders of those Estates lost all interests in those Estates.
As proprietors they retained no interest in respect of them whatsoever.
But in respect of the lands enumerated in section 6 the State settled on them the rights of raiyats.
Though in fact the vesting of the Estates and the deemed settlements of raiyat rights in respect of certain classes of lands included in the Estates took place simultaneously, in law the two must be treated as different transactions; first there was a vesting of the Estates in the State absolutely, free of all encumbrances. 'Men followed the deemed settlement by the State of raiyat 's rights on the quondum proprietors.
Therefore in law it would not be correct to say that what vested in the State were only those interests not coming within section 6.
[913 C E] Section 4(d) provided that "no suit shall lie in any civil court for the recovery of any money due from such proprietor (proprietor whose estate has vested in the State) or tenure holder the payment of which is secured by a mortgage of, or is a charge on, such estate or tenure and all suits and proceedings for the recovery of any such money which may be pending on the date of vesting shall be dropped".
Proceedings in this section undoubtedly included execution proceedings.
[1913 F] Ramnarain vs Basudeo I.L.R. XXV Pat.
595, Raj Kishore vs Ram Pratap, ; ; , Rana Sheo Ambar Singh vs Allahabad Bank Ltd., Allahabad, ; and Krishna Prasad & Ors.
vs Gauri Kumari Devi, (1962] Supp.
3 S.C.R. 564, referred to.
Sidheshwar Prasad Singh vs Ram Saroop Singh, 1963 B.L.J.R. 802, majority view disapproved. |
Appeal Nos. 429 and 430 of 1966 Appeals by special leave from the judgments and orders dated January 22, 1964 of the Calcutta High Court in Appeals Nos. 199 and 200 of 1962 from Original Order.
B.Sen and section P. Nayar, for the appellants (in both the appeals).
A.N. Sinha and D. N. Gupta, for respondent No. 1 (in both the appeals).
The Judgment of the Court was delivered by Hidayatullah, C.J.
This is an appeal against the judgment and decree of the High Court of Calcutta refusing to enter satisfaction of two decrees under O. 21 r. 2 of the Code of Civil Procedure obtained by the respondents against the Union of India in the following circumstances.
The respondents M/s Soorajmull Nagarmull imported spindle oil from Philadelphia.
The firm was required to pay Customs Duty under Item 27(3) of the First Schedule to the Tariff Act, 1934 at 27% ad valorem.
The firm filed two suits asking for refund of excess duty claiming that the oil was dutiable only under Item 27(8) at /2/6 per imperial gallon.
The suits were filed against the Collector of Customs, the Assistant Collector of Customs for Appraisement and the Union of India.
The suits were successful and decrees were passed against the Union of India for refund of the amount charged in excess.
In one suit the decree was for payment of Rs. 43,723/ with interest at 6% per annum from 1st day of April, 1952 until realisation.
In the second suit the decree was for Rs. 75,925/ with similar interest.
Since the firm had not paid a sum of Rs. 18,08,667.72 as tax the Income Tax Officer, Circle 11, Calcutta issued a notice under section 46(5a) of the Indian Income Tax Act, 1922 calling upon the Collector of Customs to pay the amount of the decree to him and stating that his receipt would constitute a good and sufficient discharge of the liability for refund to the firm.
The Collector of Customs paid the amount into the Reserve Bank and the Reserve Bank issued receipts crediting the amount against Super 125 tax due from the firm.
The Collector of Customs then applied to the High Court of Calcutta under 0.
21 r. 2 of the Code of Civil Procedure for the adjustment of the decrees by this payment.
This was refused by a learned single Judge who gave no reasons while dismissing the petition.
On appeal to the Division Bench it was held by the Division Bench on January 22, 1964 that the adjustment of the decrees could not be granted.
It is against the last order that the present appeals have been filed by ,special leave of this Court.
The High Court in reaching the conclusion observed that the decrees were against the Union of India and not the Collector of Customs.
Further the sums were held by the Collector of Customs on behalf of the Union of India and not on behalf of the firm.
The High Court found the notice to be defective inasmuch as it asked for payment towards Income tax and towards penalty, while in the receipts which were granted to the firm, stated that the amount was for Super tax.
On these three grounds, the High Court held that the learned single Judge was right in dismissing the application of the Collector of Customs for the adjustment of the decrees.
Order 2 1, r. 2 of the Code of Civil Procedure takes note of payments out of court to decree holders and provides that where any money payable under a decree of any kind is paid out of Court, or the decree is otherwise adjusted in whole or in part to the satisfaction of the decree holder, the decree holder shall certify such payment or adjustment to the Court whose duty it is to execute the decree, and the Court shall record the same accordingly.
It is also provided that the judgment debtor also may inform the Court of such payment or adjustment, and apply to the Court to issue a notice to the decree holder to show cause why such payment or adjustment should not be recorded as certified.
The contention of the respondents in these appeals is that the decrees were not passed against the Collector of Customs but against the Union of India and that payment by the, Collector of Customs was not a payment by the judgment debtor.
In our judgment this plea is highly technical.
The amount was recoved by the Collector of Customs from the firm and was being held by the Union of India through the Collector of Customs.
The Collector of Customs paid the money not on behalf of himself but on behalf of the Union of India and it must be treated as a proper payment of the amount to the firm.
The objection of the respondent that it amounts to a payment by one Department of the Government to another does not, in our opinion, hold much substance.
It is also extremely technical.
The Union of India 126 operates through different Departments and a notice to the Collector of Customs in the circumstances was a proper notice to issue because it was the Collector of Customs who had in the first instance recovered this money and held it from the firm.
It is next contended that the notice is defective inasmuch as it shows that the money was lying with the Collector of Customs whereas it was, in fact, lying with the Union of India and that it was not money held by the Collector of Customs on behalf of the firm.
Section 46(5A) of the Income tax Act reads as follows : "46.
Mode and time of recovery.
(5A) The Income tax Officer may at any time or from time to time, by notice in writing (a copy of which shall be forwarded to the asessee at his last address known to the Income tax Officer) require any person from whom money is due or may become due to the assessee or any person who holds or may subsequently hold money for or on account of the assessee to pay to the Income tax Officer, either forthwith upon the money becoming due or being held or at or within the time specified in the notice (riot being before the money becomes due or is held) so much of the money as is sufficient to pay the amount due by the tax payer in respect of arrears of income tax and penalty or the whole of the money when it is equall to or less than that amount.
Any person making any payment in compliance with a notice under this I sub section shall be deemed to have made the payment under the authority of the assessee and the receipt of the income tax Officer shall constitute a good and sufficient discharge of the liability of such person to the assessee to the extent of the amount referred to in the receipt.
Any person discharging any liability to the assessee after receipt of the notice referred to in this sub section shall be personally liable to the Income tax Officer to the extent of the liability discharged or to the extent of the liability of the assessee for tax and penalties, whichever is less.
127 If the person to whom a notice under this sub section is sent fails to make payment in pursuance thereof to the Income tax Officer, further proceedings may be taken by and before the Collector on the footing that the Income tax Officer 's notice has the same effect as an attachment by the Collector in exercise of his powers under the proviso to sub section (2) of section 46.
Such notices of the Income tax Officer are no more than a kind of a garnishee order issued to the person holding money which money is due to an assessee.
The Collector of Customs had recovered this money and under the decrees of the Court the Union of India was liable to refund it to the firm.
A garnishee order is issued to a debtor not to pay to his own creditor but to some third party who has obtained a final judgment against the creditor.
By a parity of reasoning this amount, which was with the Collector of Customs, could be asked to be deposited with the Income tax Authorities under section 46(5A).
The argument is extremely technical for that the firm is entitled to get a double benefit of the decree, first by having the decretal amount paid to the benefit of the firm and then to recover it again from the Union of India.
It is contended lastly that the notice of the Income tax Officer spoke of Income tax and/or penalty whereas the amount was taken towards payment of Super tax due from the firm It is, however, conceded in the face of authorities cited at the Bar that the Super tax is also a kind of Income tax and, therefore, the notice could issue in the form it did.
The leading case on the subject is In re Beckitt(1) and learned counsel for the respondents did not controvert the proposition laid down there.
It is, however argued on the authority of Bidhoo Beebee vs Keshub Chunder Baboo and Ors., (2) Mahiganj Loan Office, Ltd. vs Behari Lal Chaki,(3) A. P. Bagchi vs Mrs. F. Morgan(4 ) and Thomas Skinder vs Ram Rachpal(5), that the payment which can be adjusted under O. 21, r. 2 is a voluntary payment by the judgment debtor to the decree holder and that this iS not a case of voluntary payment, at, all.
The rulings which have 'been cited do not, in our opinion, apply here.
This point was not considered in the High Court and seems to have been thought of here.
Order 21, r. 2 merely contemplates payment out of court and says nothing about voluntary payment.
A garnishee order can never by its nature (1) ; (2) (3) 1.
L. R. (4) A. 1.
R. 1935 All. 513.
(5) 1.
L. R. 1938 All.
128 lead to a voluntary payment and it is not to be thought that a garnishee, order does not lead to the adjustment of the decree sufficient for being certified by the Court.
Payment by virtue of section 46(5A), as we have stated before, is in the nature of a garnishee payment and must, therefore, be subject to the same rule.
The rulings themselves do not control the present matter.
In the payment was not under a garnishee order but under the process of the court issued in execution by arrest of the judgment debtor.
Contrasting what had happened in the case with the words of the second rule of 0. 21 (then section 206 of the Code of 1859) the learned Judges observed that section 206 covers cases of voluntary payment.
The debtor was protected by treating the payment as being made through the court.
The exact point we are dealing with was not before the Court.
In I.L.R. there was a scheme framed by the depositors of a banking Company for return of their deposits in spite of opposition from decree holders depositor of the Company.
The scheme was sanctioned by the Court.
The scheme was binding on the decree holder but it was not treated as an adjustment within O. 21, r. 2 of the Code of Civil Procedure.
The reason given was that the adjustment must be to the satisfaction of the decree holder and must be with the consent of both the decree holder and the judgment debtor and not one which is made binding by operation of law.
It is to be noticed that that was a payment to which the judgment debtor had objected although it was binding on him.
We see no reason for making a distinction between a voluntary payment out of court and a payment out of court which the law regards as valid.
No reasons are given in the judgment why such a distinction should be made.
In I.L.R. [1938] An. 294 the payment was made in court and not outside court.
This ' is the nearest case to the present one and but for this difference, it is reasonable to think that the learned Judges would have taken the same view of the matter as we have taken.
The reason given by the learned judges brings out the real object of the rule : "where a judgment debtor makes payment outside the Court, the Court knows nothing about the payment ' and therefore r. 2, 0.
21 ordains that the parties should inform the Court about the payment.
" This object in our opinion is fully achieved when there is payment under a garnishee order outside the Court.
In the case cited the Court knew of the payment and could give protection in other ways.
In A.I.R. 1935 All.
513 the payment was again without the consent of the Judgment debtor either in fact or in law.
Too much emphasis appears to have been placed upon mutual understanding and too little on payment out of court which is the essence 129 of the rule.
The case turned on whether there was any understanding and too little on payment out of court which is the essence debtor on repairs would be set off against the decretal amount and therefore O. 21, r. 2 of the Code of Civil Procedure was held inapplicable.
In none of the cases the point of a garnishee order was considered.
In our opinion, a case of a garnishee payment or one made under section 46(5A) of the Income tax Act of 1922 stands on a different footing and if the payment has been legally made out of Court in full and final discharge of the liability under a decree, there is no reason why the judgment debtor cannot move the Court for getting the adjustment or payment certified, The payment was required to be certified under O. 21, r. 2 of the Code of Civil Procedure and we order that it be so certified.
The appeals are accordingly allowed with costs here and in the High Court.
R.K.P.S. Appeals allowed. | The respondent filed suits against the Collector of Customs and the Union of India claiming refund of excess customs duty levied on spindle oil imported into India.
The trial court granted decrees against the Union of India for the amounts charged in excess.
As the respondent had large outstandings of tax, the Income Tax Officer issued a notice under section 46(5A) of the Income Tax Act, 1922 calling upon the Collector of Customs to pay the amount of the decree to him.
The Collector paid the amount into the Reserve Bank, who issued receipts crediting the amount against super tax due from the respondent.
He then applied to the High Court under O. 21 r. 2 C.P.C. for the adjustment of the decree by this amount.
This was refused by a single Judge as well as in appeal by a division bench.
It was held that the decrees were against the Union of India and not the Collector of Customs and that payment by the Collector was not a payment by the judgment debtor.
Furthermore the amounts were held by the Collector on behalf of the Union of India and not on behalf of the Firm.
The High Court also found the notice to be defective inasmuch as it asked for payment towards income tax and penalty, while the receipts which were granted to the Firm stated that the amount paid was against super tax due.
On appeal to this Court, HELD : The Union of India operates through different Departments and a notice to the Collector of Customs in the circumstances was a proper notice to issue because it was the Collector of Customs who had in the first instance recovered the amount and held it from the respondent.
Collector paid the amount on behalf of the Union of India.
[126 A] A notice under section 46(5A) is no more than a kind of garnishee order issued to the person holding money and the money is due to an assessee.
The amount which was held.
by the Collector of Customs could properly be asked to be deposited with the income tax authorities under section 46(5A).
[127 B D] Super tax is also a kind of income tax and therefore, the notice could issue in the form it did.
There was no force in the contention that the amount, which could be adjusted under O. 21, r. 2, is a voluntary payment by the judgment debtor to the decree holder and the present case was not one of voluntary payment at all.
Order No. 21, r. 2 merely contemplates payment out of court and says nothing about voluntary payment.
A garnishee order can never by its nature lead to a voluntary payment and it is not to be thought that a garnishee order does not lead to the adjustment of the decree 124 sufficient for being certified by the Court.
Payment by virtue of section 46(5A) is in the nature of a garnishee payment and must, therefore, be subject to the same rule.
[127 G 128 B] In re Beckitt, [1933].T.R. 1, Bidhoo Beebee vs Keshub Chunder Baboo & Ors. , Mahiganj Loan Office Ltd. vs Behari Lal Chaki, I.L.R. , A. P. Bagchi vs Mrs. F. Morgan A.I.R. 1935, AU 513, Thomas Skinner vs Ram Rachpal I.L.R. [1938] All 294, distinguished. |
Appeal Nos. 735 and 736 of 1966.
Appeals by special leave from the judgment and decree dated March 26, 1965 of the Allahabad High Court, Lucknow Bench in Second Execution Decree Appeals Nos. 3 and 4 of 1961.
J. P. Goyal and section P, Singh, for the appellant (in both the, appeals).
233 C. B. Agarwala and K. B. Gupta, for the respondent (in both the appeals).
The Judgment of the Court was delivered by Bachawat, J.
The appellant filed suit nos.
87 of 1948 and 2/12 of 1948 in the court of the Assistant Collector, 1st Class, Pratapgarh, (a revenue court) against the respondent and 8 others persons under sections 60, 61 and 180 of the U.P. Tenancy Act (U.P. Act XVII of 1939) claiming a declaration that the defendants had no right to the suit lands and a decree for possession in case the defendants were found to be in possession thereof.
The suits were decreed in 1948.
The appellant took symbolical possession of the lands in execution of the decrees.
Appeals against the decrees filed by the respondent and other defendants were dismissed by the Additional Commissioner, Faizabad.
The defendants filed second appeals against the decrees.
During the pendency of the appeals rules 4 and 5 of the Uttar Pradesh Zamindari Abolition and Land Reforms Rules 1952 came into force.
The Board of Revenue held that in view of rules 4 and 5 the pending appeals as also the suits had abated.
In 1955 the respondent filed applications for restitution of the lands under section 144 of the Code of Civil Procedure in court of the Assistant Collector, 1st Class, Pratapgarh.
The appellant con.
tested the application.
One of the issues arising on the application was whether the appellant had acquired Bhumidari rights.
The Assistant Collector referred this issue to the Civil Court for decision.
He refused to recall the order of reference in spite of the respondent 's plea that he had no power to pass the order as no question of proprietary title had arisen.
On May 7, 1958 the civil court answered the issue in the negative.
On February 18, 1958 the Assistant Collector allowed the application for restitution and directed that the respondent be put in possession of the lands.
The appellant filed appeals against the orders dated February 18, 1958 As he was not certain about the proper forum of the appeals he took the precaution of filing the appeals in the revenue court as also in the civil court.
On October 23, 1959 the Additional Commissioner, Faizabad Division, held that the Revenue Court had no jurisdiction to entertain the appeals and that the appeals lay to the civil court under sections 286(4) and 265(3) of U.P. Tenancy Act.
Accordingly he returned the memoranda of appeals for presentation to the proper court.
The appellant filed revision petitions against the orders before the Board of Revenue, In the meantime the appeals filed before the civil court came up for hearing.
The respondent submitted to the jurisdiction of the civil court.
He did not raise the contention that the, civil court had no jurisdiction to entertain the, appeals.
On 234 November 12, 1960 the Additional Civil Judge,, Pratapgarh, allowed the appeals and dismissed the applications for restitution.
He held that (1) the appellant was in possession of the lands on the dates of the institution of the suits; (2) the board of revenue had no power to abate the suits or to set aside the decree passed therein, and (3) the application for restitution was not maintainable as the appellant had not obtained possession of the lands in execution of any decree which had been reversed or set aside.
In view of this decision, the appellant did not proceed with the pending revision petitions before the board of revenue and on November 18, 1960 the revision petitions were dismissed.
On February 1, 1961 the respondent filed second appeals in the High Court against the appellate orders of the civil court dated November 12, 1960.
In the original memorandum of appeal, he did not take the plea that the civil court had no jurisdiction to entertain the appeals.
For the first time on January 24, 1964, he took this plea by adding a new ground in his memorandum of appeal.
The High Court held that (1) the appellant was in possession of the lands before the passing of the decree; (2) the suits had not abated and the Board of Revenue had no jurisdiction to set aside the proceedings, in the suits ' and (3) the applications for restitution were not maintainable.
The High Court, however, held that (1) appeals against the orders for restitution lay to the revenue court, (2) the civil court had no jurisdiction to entertain the appeals and (3) the respondent was not estopped from raising the contention.
Accordingly on March 26, 1965 the High Court allowed the second appeals, set aside the order of the Additional Civil Judge and returned the memoranda of appeals for presentation to the proper court.
The appellant has filed the present appeals after obtaining special leave.
On behalf of the appellant it is argued that (1) the appeal from the order of the Assistant Collector dated February 18, 1959 lay to the civil court and not to the revenue court (2) in the circumstances of the case, and in view of section 289(2) of the U.P. Tenancy Act, the respondent was precluded from raising the objection that the appeals did not lie to the civil court.
It is common case that suits nos.
87 of 1948 and 2/12 of 1948 Were of the nature specified in Group B of the fourth schedule to the U.P. Tenency Act.
In view of section 265(2) read with section 271(2) appeals from orders in proceedings under section 14 4 of the Code of Civil Procedure arising out of, the two suits lay to the revenue court.
The appeals did not lie to the civil court under sections 265(3) and 286(4) read with section 271(2) as no question of jurisdiction was decided by the Assistant Collector nor was any question of proprietary title referred to or decided by the civil court.
But the more important question is whether having regard to the 235 scheme of the U.P. Tenancy Act and the circumstances of the case, the objection as to the lack of competence of the civil court to entertain the appeals could be raised in the High Court.
The U.P. Tenancy Act 1939 consolidates and amends the law relating to agricultural tenancies and other matters connected therewith in Agra and Oudh.
It repealed the Agra Tenancy Act, 1926 and the Oudh Rent Act 1886.
Chapter XIV of the Act deals with the procedure and jurisdiction of courts.
Section 242 provides that certain suits and applications are cognizable by the revenue courts only.
The chapter provides for appeals and revisions.
No appeal lies from any decree or order passed by any court under the Act except as provided in the Act (section 263).
In some cases an appeal lies to a revenue court; in other cases the appeal lies to the civil court.
The High Court has no revisional power under section 276 in a case in which no appeal lies to the civil court.
It is often a question of extreme nicety whether a suit, application or appeal is cognizable by the revenue court or by the civil court.
Sections 289, 290 and 291 deal with objections regarding the proper forum.
Section 290 provides that where in a suit instituted in a civil or revenue court, an appeal lies to the district judge or to the High Court, an objection that the suit was instituted in the wrong court shall not be entertained by the appellate court unless such objection was taken in the court of the first instance; and the appellate court shall dispose of the appeal as if the suit has been instituted in the right court.
The section closely resembles section 21 of the Code of Civil Procedure and is a recognition of the princi ple that an objection as to the proper forum for the trial of a suit may be waived.
Section 291 treats the objection as technical and provides that even where the objection was taken in the court of the first instance, the appellate court may dispose of the appeal as if the suit had been instituted in the right court.
It may declare any court to be competent to try the suit and may remand the suit for fresh trial, and the competence of the trial cannot be ques tioned later.
With a view to avoid conflicts of jurisdiction section 289 provides for reference to the High Court.
Section 289 is as follows : "289(1) Where either a civil or revenue court is in doubt whether it is competent to entertain any suit, application or appeal, or whether it should direct the plaintiff, applicant or appellant to file the same in a court of the other description, the court may submit the record with a statement of the reasons for its doubt to the High Court; (2) Where any suit, application or appeal, having been rejected either by a civil court or by a revenue 236 court on the ground of want of jurisdiction, is subsequently filed in a court of the other description, the latter court, if it disagrees with the finding of the former, shall submit the record, with a statement of the reasons for its disagreement to the High Court; (3) In cases falling under subsection (1) or subsection (2) if the court is a revenue court subordinate to the collector, no reference shall be made under the foregoing provisions of this section except with the previous sanction of the collector; (4) On any such reference being made , the High Court may order the court either to proceed with the case, or to return the plaint, ' application or appeal for presentation of such other court as it may declare to be competent to try the same; (5) The order of the High Court shall be final and binding on all courts, subordinate to it or the Board.
" Section 289 vests in the High Court a special jurisdiction.
The decision of the High Court given ' on a reference to it under section 289 is binding on all courts.
A reference can be made under section 289(1)if any court doubts its own competence to entertain any proceeding.
The reference under section 289(1) is optional.
Without making any reference the court may refuse to entertain the proceeding on the ground of want of jurisdiction.
But the court of the other description in which the proceeding is subsequently instituted is not bound by this finding, see Nathan vs Harbans Singh(1).
Before the enactment of section 289(2) if it disagreed with the finding, it could reject the proceeding on the ground that the matter was cognizable by the other court, As neither court was bound by the finding of the other, the litigant could not get relief in any forum.
Section 289(2) has been specially enacted to avoid such a deadlock.
In such a situation, section 289(2) compels the court to refer the matter to the High Court and to obtain a Provisions corresponding to sections 290, 291 and 289(1) were contained in sections 124 A, 124B, 124C and 124D of the Oudh Rent Act 1886 and sections 268, 269 and 267(1) of the Agra Tenancy Act, 1926.
It seems that Oudh Rent Act, 1886 did not contain any provision corresponding to section 289(2).
The absence of such a provision seriously hampered the administration of justice.
In numerous cases under the Oudh Rent Act, after a suit, application or appeal was rejected by a civil court or revenue court on the ground of want of jurisdiction, the court of the other descrip (1) A.I.R. 1930 All. 264, decision which will bind all the courts.
237 tion where the proceeding was subsequently filed came to the opposite conclusion and held that the matter was within the cognizance of the former court.
The decision of the court of one description including the decision of the High Court exercising appellate or revisional power over that Court was not binding upon the court of the other description.
Such a situation led to great injustice.
The litigant was bandied about from court to court and he could not get any relief anywhere.
The Oudh Chief Court mitigated the evil by applying the doctrine that a party litigant could not approbate and reprobate in respect of tile same matter.
A party litigant may not be allowed to take inconsistent positions in court to the detriment of his opponent at successive stages of the same proceeding or in a subsequent litigation growing out of the judgment in the former proceeding, see Bigelow on Estoppel, 6th Ed.
783, 789, Mohammad Mehdi Khan V Mussammat Sharatunnissa(1).
On this principle it was held in Mahadeo Singh vs Pudai Singh(2) that where a revenue court upheld the plea that it had no jurisdiction to entertain a suit, the party putting forward the plea would be precluded from contending that the civil court could not entertain the suit.
Likewise in Saira Bibi vs Chandrapal Singh (8) it was held that when an appeal was originally instituted properly in the revenue court but on objection being raised by a party was dismissed on the ground that the appeal did not lie to that court, it was not open to the party to raise the objection that the appeal could not be entertained by the civil court.
This form of estoppel arises when the litigant takes in consistent pleas as to jurisdiction in different courts.
It cannot be pressed into service, where, as in the present case, the court in which the proceeding was originally filed suo motu raised the objection as to jurisdiction.
In the present case it does not appear that the respondent raised before the revenue court the objection that it was not competent to entertain the appeals.
The doctrine of approbate and reprobate cannot be invoked to, preclude the respondent, from raising the objection that the appeals did not lie to the civil court.
But the effect of upholding his objection is that the appellant is deprived of his right of appeal altogether.
His appeals cannot be entertained either by the civil court or by the revenue court.
Section 289(2) is intended to prevent such grave miscarriage of justice.
Section 289(2) reenacts the provision of section 267(2) of the Agra Tenancy Act 1926.
The object of section 289(2) is to avoid a deadlock between the civil and the revenue courts on the question of jurisdiction, and its provisions should receive a liberal construction.
Section 289(2) applies whenever any suit, application or appeal having been rejected either by the civil court or revenue (1) 3 Oudh Cases, 32, Luck, 159,166.
(3) A.I.R. 1931 Oudh 123.
238 court on account of want of jurisdiction is subsequently filed in the court of the other description and the latter court disagrees with the finding of the former.
In such a case, a reference to the High Court is compulsory and the conflict of opinion is resolved by a decision of the High Court which is binding on all courts.
A court subordinate to the collector cannot make the reference without the previous sanction of the collector under section 289(3).
It is implicit in section 289(3) that if the collector refuses to give the sanction, the case will proceed as if there is no dis agreement with the finding of the former court.
In a case falling within section 289(2), only the court in which the proceeding is subsequently instituted can disagree with the finding of the former court on the question of jurisdiction.
If it so disagrees, it must refer the matter to the High Court; and only the High Court on such a reference can override the finding.
No other court can disagree with the finding and make the reference.
In our opinion, if no such reference is made, the finding of the former court on the question of jurisdiction becomes final and conclusive; and the objection that it is erroneous cannot be entertained by the appellate or revisional court or any other court.
In the present case the respondent did not raise any objection before the Additional Civil Judge that the civil court was not competent to entertain the appeals.
The Additional Civil Judge did not make any reference to the High Court under section 289(2).
He decided the appeal on the merits and did not disagree with the finding of the revenue court on the question of jurisdiction.
Having regard to this decision the appellant did not proceed with the revision petitions filed by him against the orders of the revenue court on the question of jurisdiction In these circumstances, it was not open to the respondent to raise the objection in the High Court that the civil court was not competent to hear the appeals.
In view of the fact that no reference.
under section 289(2) was made, the finding of the revenue court that the civil court was competent, to entertain the appeals could not be challenged in the High Court.
The case must be decided on the footing that the Additional Civil Judge, Pratapgarh, was competent to enter tain the appeals.
On the merits the respondent has no case.
The Additional Civil Judge found that the appellant was in possession of the lands on the dates of the institution of the suits.
The High Court agreed with this finding.
We see no reason for setting aside this concurrent finding of fact.
The appellant did not obtain possession of the lands by executing the decrees passed in the two suits.
Even assuming that the suits had abated and the decrees 239 ed therein had been set aside or reversed, no case for restitution.
of the lands under section 144 of the Code of Civil Procedure is made out.
The Additional Civil Judge rightly dismissed the applications under, section 144.
In the result, the appeals are allowed with costs, the orders of the High Court are set aside and the orders passed by the: Additional Civil Judge, Pratapgarh, are restored. | The appellant instituted two suits in the Court of Assistant Collector (a Revenue, Court) against the respondent under sections 60, 61 and 180 of the U.P. Tenancy Act, 1939.
The suits were decreed, and the appellant took symbolical possession of the lands.
The Assistant Commissioner.
affirmed the decrees, and during the pendency of the respondent 's second appeals in the High Court, the Uttar Pradesh Zamindari Abolition & Land Reforms Rules, 1952 came into force.
The Board of Revenue held that in view of the Rules.
the pending appeals as also the suits had a ate.
The respondent filed applications for 'restitution of the lands under section 114 C.P.C. in the Court of Assistant Collector.
The Assistant Collector referred the issue whether the appellant had acquired Bhumidari rights to the civil court.
He refused to recall the 'reference in spite of the respondent 's Plea that he had no power to pass the order as no question of pro prietary title bad arisen.
The civil court answered the issue in the negative, and the Asstt.
Collector allowed the applications for restitution.
As the appellant was not certain about the proper forum of appeals against these orders of the Assistant Collector, he filed anneals in the revenue court as also in the civil court.
The Assistant Commissioner held that the revenue court had no Jurisdiction to entertain appeals and the appeals lay to the civil court under sections 286(4) and 265(3) off the U.P. Tenancy Act.
The appellant filed revision petitions against the orders before the Board of Revenue.
In the meantime the appeals filed before the civil court came up for hearing:.
The respondent submitted to the jurisdiction of the civil court, and did not contend that the civil court had no Jurisdiction to entertain the appeals.
The Civil Judge allowed the anneals and dismissed the application for restitution.
Because of this decision.
the appellant did not proceed with the pending revision petitions 'before the Board of Revenue and there the petitions were dismissed.
The respondent filed second appeals in the High Court against the appellate orders of the civil court, without taking the plea that the civil court 'had no Jurisdiction to entertain the anneals.
but later on he took the plea by adding a new ground.
The High Court held that the appeals lay to the revenue court and the respondent was not estopped from raising the contention.
In appeals to this Court the appellant contended that the anneals lay to the civil court and not for the revenue court and in the circumstances of this case, and in view of section 289(2) of the U.P. Tenancy Act.
the respondent was precluded from raising the objection that the appeals did not lie to the civil court.
Allowing the appeals this Court.
HELD : In this case the doctrine of approbate and reprobate could not be pressed into service to preclude the respondent from raising the objection that the appeals did not lie to the civil court as the court in which the proceeding were originally filed suo motu raised the objection.
232 But the effect of upholding his objection would be that the, appellant would be deprived of his right of appeal altogether, and section 289(2) of the U.P, Tenancy Act is intended to prevent such grave miscarriage of justice.
[237 F] Section 289(2) applies whenever any suit, application or appeal having been rejected either by the civil court or revenue court on account of want of jurisdiction is subsequently filed in the court of the other description and the latter court disagrees with the finding of the former.
In such a case,, a reference to the High Court is compulsory and the conflict of opinion is resolved by a decision of the High Court which is binding on all courts.
A court subordinate to the Collector cannot make the reference without the previous sanction of the Collector under section 289(3).
It is implicit in section 289(3) that if the Collector refuses to give the sanction, the case will proceed as if there is no disagreement with the finding of the former court.
[237 H] In a case falling within section 289(2), only the court in which the proceeding is subsequently instituted can disagree with the finding of the former court on the question of jurisdiction.
If it so disagrees, it must refer the matter to the High Court; and only the High Court on such a reference can override the finding.
No other court can disagree with the finding and make the reference.
If no such reference is made, the finding of the former court on the question of jurisdiction becomes final and conclusive; and the objection that it is erroneous cannot be entertained by the appellate or revisional court or any other court.
[238 D] Having regard to the circumstances of this case, it was not open to the respondent to raise the objection in the High Court that the civil court was not competent to hear the appeals.
In view of the fact that no reference under section 289(2) was made, the finding of the revenue court that the civil court was competent to entertain the appeals could not be challenged in the High Court.
The case must be decided on the footing that the Civil Judge was competent to entertain the appeals.
[238 F] On the merits the respondent had no case.
The Civil Judge found that the appellant was in possession of the lands on the dates of the institution of the suits.
The High Court agreed with this finding.
No ground has been made for setting aside this concurrent finding of fact.
The appel lant did not obtain possession of the lands by executing the decrees passed in the two suits.
Even assuming that the suits had abated and the decrees passed therein had been set aside or reversed, no case for restitution of the lands under section 144 of the Code of Civil Procedure was made out.
The applications under section 144 C.P.C., were rightly rejected.
Nathan vs Harbans Singh, A.I.R. 1930 All. 264, Mohammad Mehdi Khan vs Mussammat Sharatunnissa, 3 Oudh Cases 32, 35 37, Mahadeo Singh vs Pudal Singh, A.I.R. 1931 Oudh 123 and Saira Bibi vs Chandrapal Singh, I.L.R. 4 Luck.
150, 166, referred to. |
254 of 1954.
Under article 32 of the Constitution for the enforcement of fundamental rights.
The petitioner in Person.
M. C. Setalvad, Attorney General for India, (G. N. Joshi and P.G. Gokhale, with him) for the respondents.
The Judgment of the Court was delivered by BOSE J.
This is a petition under article 32 of Constitution and raises the same question on the merits as in the connected summons case in which we have just delivered judgment.
The facts will be found there.
In the present matter it is enough to say that no question arises about the breach of a fundamental right.
But as a matter touching the jurisdiction of the Bar Council Tribunal and that of the Bombay High Court was argued, we will deal with it shortly.
Mr. G 's first objection is that the proceedings before the Tribunal were ultra vires because there was no proper order.
of appointment.
At a very early stage he applied to the Registrar and also to the Prothonotary for a copy of the order of the Chief Justice constituting 502 the Tribunal.
He was told by the Prothonotary that the order was oral.
Mr. ' G ', put in two written statements before the Tribunal and did not challenge this statement of fact in either.
He contented himself with saying that the 'order was not "judicial" and so was not valid.
He took up the same attitude in the High Court.
The learned Judges said "The record clearly shows that when it came to, the notice of this Court it was decided to refer this case to the Bar Council under section 10(2) and accordingly a Tribunal was appointed under section 11(1) by the learned Chief justice of this Court.
" In his petition to this Court he did not challenge this statement of fact but again confined his attack to the question of the validity of the order.
It is evident from all this that the fact that an oral order was made was not challenged.
We cannot allow Mr. 'G ' to go behind that.
The next question is whether an oral order is enough: Bar Councils Act does not lay down any procedure.
All it says is Section 10(2): ". . . the High Court may of its own motion so refer any case in which it has otherwise reason to believe that any such advocate has been so guilty." and section 11 (2) says "The Tribunal shall consist of not less than three. . members of the Bar Council appointed for the purpose of the inquiry by the Chief Justice.
" We agree it is necessary that there should be some record of the order on the files but, in our opinion, the order itself need not be a written one; it can be an oral order given to a proper officer of the Court.
In the present case, the letter No. G 1003 dated 29th April, 1953, of the Prothonotary to the Registrar and the letter No. E. 41 09/53 dated the 1st May, 1953, of the Registrar to the Bar Council (office copies of which were retained on the files) are a sufficient record of the making of the order.
Mr. 'G ' was supplied with copies 503 of those letters and so was aware of the fact that orders had been issued.
As a matter of fact, we have seen the originals of the High Court 's office files and find that the names of the three members of the Tribunal are in the Chief Justice 's handwriting with his initials underneath.
That is an additional record of the making of the order.
We hold that an order recorded in the, manner set out above is sufficient for the purposes of sections 10(2) and 11(2) of the Bar Councils Act and hold that the Tribunal was validly appointed.
Mr. G 's next point is that there was no "complaint" to the High Court and so it had no jurisdiction to refer the matter to the Tribunal.
This ignores the fact that the High Court can refer a matter of this kind "of its own motion" under section 10(2) of the Bar Councils Act.
We have dealt with the merits in the connected case.
This petition is dismissed but, here again, we make no order about costs.
Petition dismissed. | The order under section 10(2) of the , given to a proper officer of the Court may be an oral order and need not be a written one.
The High Court can under section 10(2) refer a case on its own motion. |
Appeal No. 712 of 1966.
Appeal by special leave from the order dated July 27, 1964 of the Madhya Pradesh High Court in Misc.
Petition No. 272 of 1964.
section C .
Chaturvedi, K. Mehta and M. V. Goswami, for the appellant.
I. N. Shroff, for the respondent.
The Judgment of the Court was delivered by Bachawat, J.
The appellant was a temporary Civil Judge in Madhya Pradesh.
On March 14, 1961 an order was issued in the name of the Governor of Madhya Pradesh State that the appellant "is appointed temporarily, until further orders, as Civil Judge", Rule 12 of the Madhya Pradesh Government Servants (Temporary and Quasi permanent Service) Rules, 1960 provided: 12(a) Subject to any provision contained in the order of appointment or in any agreement between the gov 474 ernment and the temporary government servant, the service of a temporary government servant who is not in quasi permanent service shall be liable to termination at any time by notice in writing given either by the government servant to the appointing authority or by the ap pointing authority to the Government servant; Provided that the services of any such government servant may be terminated forthwith by payment to him of a sum equivalent to the amount of his pay plus allowances for the period of the notice, or as the case may be, for the period by which such notice falls short of one month or any agreed longer period Provided further that the payment of allowances shall be subject to the conditions under which such allowances are admissible.
(b) The periods of such notice shall be one month unless otherwise agreed between the Government and the Government servant.
" On March 25, 1964 an order was issued by and in the name of the Governor terminating the appellant 's services.
The order stated : "The service of Shri Ram Gopal Chaturvedi, temporary Civil Judge, Waidhan, are terminated with effect from the 1st June 1964, forenoon." The appellant filed a writ petition in the Madhya Pradesh High Court for quashing the order dated March 25, 1964.
The High Court summarily dismissed the petition.
It held that the impugned order was not by way of punishment and that the appellant 's services were liable to be terminated under the aforesaid rule 12 on one month 's notice.
The appellant has filed the present appeal after obtaining special leave.
The appellant was a temporary government servant and was not in quasi permanent service.
His services could be terminated on one month 's notice under r. 12.
There was no provision in the order of appointment or in any agreement that his services could not be so terminated.
Counsel for the appellant submitted that rule 12 was uncon stitutional as it was framed without consulting the State Public Service Commission and the High Court.
The contention raises mixed questions of law and fact.
It was not raised in the High 475 Court, and we indicated in the course of arguments that the appellant could not be allowed to raise it in this Court for the first time.
Counsel next submitted that rule 12 was violative of articles 14 and 16 of the Constitution.
There is no merit in this contention.
Rule 12 applies to all temporary government servants who are not in quasi permanent service. 'All such government servants are treated alike.
The argument that rule 12 confers an arbitrary and unguided discretion is devoid of any merit.
The services of a temporary government servant may be terminated on one month 's notice whenever the government thinks it necessary or expedient to do so for administrative reasons.
It is impossible to define before hand all the circumstances in which the discretion can be exercised.
The discretion was necessarily left to the gov ernment.
It was argued that the appellant 's services could not be terminated on one month 's notice as (a) his confirmation was recommended by the High Court after the expiry of the probationary period and (b) the advertisement dated September 9, 1960 inviting applications for the temporary posts (if civil judges did not specifically mentioned that their services could be so terminated.
The point that the High Court had recommended the appellant 's confirmation was not raised in the High Court and cannot be allowed to be, raised in this Court for the first time.
The appellant 's services were subject to the relevant rules and could be terminated on one month 's notice under rule 12.
It is immaterial that the advertisement did not specifically mentioned that his services could be so terminated.
It was argued that the impugned order was invalid as it was passed without consulting the State Public Service Commission under article 320(2)(c) of the Constitution.
There is no merit in this contention.
The case of State of U.P. vs M. L. Srivastava(1) decided that the provisions of article 320(3)(c) were not mandatory and did not confer any rights on the public servant and that the absence of consultation with the State Public Service Commission did not afford him a cause of action.
It was next argued that the impugned order was passed by way of punishment without giving the appellant an opportunity to show cause against the proposed action and was therefore violative of article 311 of the Constitution.
In this connection, counsel It for the appellant drew our attention to the statement of case filed on behalf of the respondent.
It appears that there were complaints (1) ; 476 that the appellant was associating with a young girl named Miss Laxmi Surve against the wishes of her father and other members of her family.
The Chief Justice of Madhya Pradesh made inquiries into the matter and on February 19, 1954 he admonished the appellant for this disreputable conduct.
On his return to Jabalpur on February 28, 1964 the Chief Justice dictated the following note: "During my recent visit to Gwalior, I probed into the matter of Shri R. G. Chaturvedi, Special Magistrate (Motor Venicles), Gwalior, giving shelter to a girl named Kumari Laxmi Surve, the daughter of a Chowkidar employed in the J. C. Mills Gwalior.
The enquiry made by me revealed that Shri Chaturvedi has been associating with this girl for over a year and his relations with her are not at all innocent.
He is sheltering and supporting Miss Surve against the wishes of her father and other members of her family.
This is evi dent from the fact that on 14th December 1963, when the girl was at the residence of Shri Chaturvedi and when her younger brother came to take her back, his house was stormed by a mob of 300 to 400 persons.
A report of this incident was also recorded in the Roz namcha Am of Lashkar Kotwali.
The statement published by Miss Surve in some newspapers published from Gwalior explaining his action and her relation with her parents is significant.
In that statement Miss Surve gave her address as 'C/o.
Shri Chaturvedi.
That the statement is one inspired by Shri Chaturvedi is obvious enough.
Shri Chaturvedi is still maintaining the girl.
Shri Chaturvedi did not enjoy good reputation at Morena and Kolaras where he was posted before his posting at Gwalior.
Shri Bajpai, District Judge, Gwalior, also informed me that Shri Chaturvedi was not honest and that in collaboration with the Traffic Inspector he has taken money from accused persons in many cases under the Motor Vehicles Act." No charge sheet was served on the appellant nor was any departmental inquiry held against him.
On March 1O, 1964 the Madhya Pradesh High Court passed a resolution that the State Government should terminate the appellant 's services.
Having regard to this resolution the State Government passed the impugned order dated March 25, 1964.
On the face of it, the order did not cast any stigma on the appellant 's character or integrity nor did it visit him with any evil consequences.
It was not passed by way of punishment and the provisions of article 311 were not attracted.
477 It was immaterial that the order was preceded by an informal inquiry into the appellant 's conduct with a view to ascertain whether he should be retained in service.
As was pointed out in The State of Punjab vs Sukh Raj Bahadur(1) : "An order of termination of service in unexceptionable form preceded by an enquiry launched by the superior authorities only to ascertain whether the public servant should be retained in service, does not attract the operation of Article 311 of the Constitution.
" It was next argued that the impugned order was in violation of the principles of natural justice and in this connection reliance was placed on the decision of this Court in State of Orissa vs Dr. (Miss) Binapani Dei & Ors.(2) and Ridge vs Baldwin(3).
In Binapani 's Case the appellant was an assistant surgeon in the Orissa medical service.
The State government accepted the date of birth given by her on joining the service.
Later the government refixed the date of her birth on ex parte inquiry and passed an order compulsorily retiring her.
The Court held that its order was invalid and was liable to be quashed.
The appellant as the holder of an office in the medical service had the right to continue in service.
According to the rules made under article 309 she could not be removed from the office before superannuation except for good and sufficient reasons.
The ex parte order was in derogation of her vested rights and could not be passed without giving her an opportunity of being heard.
In the present case, the impugned order did not deprive the appellant of any vested right.
The appellant was a temporary government servant and had no right to hold the office.
The State government had the right to terminate his services under rule 12 without issuing any notice to the appellant to show cause against the proposed action.
In Ridge vs Baldwin(3) the House of Lords by majority held that the order of dismissal of a chief constable on the ground of neglect of duty without informing him of the charge made against him and giving him an opportunity of being heard was in contravention of the principles of natural justice and was liable to be quashed.
Section 191 of the Municipal Corporations Act, 1882 provided that the watch committee might at any time suspend and dismiss any borough constable whom they thought negligent in the discharge of his duty or otherwise unfit for the same.
The chief constable had the right to hold his office and before depriving him of this right the watch committee was required to conform to the principles of natural justice.
The order of dismissal visited him with the loss of office and involved an element of punishment for the offences committed.
In the present case, the impugned order (1) ; (2) ; (3) ; 478 did not involve any element of punishment nor did it deprive the appellant of any vested right to any office.
It was next argued that the State Government blindly followed the recommendations of the High Court.
We find no merit in this argument.
The State government properly followed those recommendations.
The High Court is vested with the control over the subordinate judiciary, see The State of West Bengal vs N. N. Bagchi (1).If the High Court found that the appellant was not a fit person to be retained in service, it could properly ask the government to terminate his services.
Following the advice tendered by the High Court, the government rightly terminated his services under rule 12.
In the result, the appeal is dismissed.
There will be no order as to costs.
Y.P. Appeal dismissed.
(1)[1966] 1 S.C.R. 771.
LI 3Sup.
CI(NP)69 2,500 2 5 70 GIPF. | The appellant was appointed temporarily, to the judicial service in the respondent State.
On complaints, that the appellant was associating with a girl, and was taking bribes, the Chief Justice of the High Court enquired into, them and the High Court recommended to the State Government to terminate the appellant 's service.
The Government passed an order under r. 12 of the M. P. Government Servants (Temporary and Quasi permanent Service) Rules, 1960 stating only that the services of the appellant are terminated from a specified day.
The appellant filed a writ petition in the High Court against this order.
The High Court dismissed the petition.
in appeal, to this Court, the appellant contended that (i) r. 12 was violative of articles 14 and 16 of the Constitution as it conferred arbitrary and unguided discretion to the Government; (ii) the impugned order was as invalid as it was passed without consulting the State Public Service Commission under article 320(3)(c) of the Constitution; (iii) the order was passed by way of punishment without giving the appellant an opportunity to show cause against the proposed action and was therefore violative of article 311 of the Constitution; (iv) the order was in violation of the principles of natural justice, as no charge sheet was served nor any departmental inquiry held; and (v) the State Government erred in blindly following the recommendations of the High Court.
Repelling the contentions.
this Court, HELD : The appellant was a temporary government servant and was in not quasi permanent service.
His services could be terminated on one month 's notice under r. 12.
There was no provision in the order of appointment or in any agreement that his service could not be 'so terminated.
(i) Rule 12 applies to all temporary government servants who are not in quasi permanent service.
All such government servants are treated alike.
The agrument that r. 12 conferred an arbitrary and unguided discretion was devoid of any merit.
The services of a temporary government servant may be terminated on one month 's notice whenever the government thinks it necessary or expedient to do so for administrative reasons.
It was impossible to define before hand all the circumstances in which the discretion could be exercised.
The discretion was necessarily left to the government.
[475B] (ii) The provisions of article 320(3)(c) were not mandatory and did not confer any rights on the public servant and that the absence of consultation with the State Public Service Commission did not afford him a cause of action.
[475G] 473 State of U.P. vs M. L. Srivastava, ; , followed.
(iii) On the face of it, the order did not cast any stigma on the appellant 's character or integrity nor did it visit him with any evil consequences It was not passed by way of punishment and the provisions of article 311 were not attracted.
[476H] It was immaterial that the order was preceded by an informal inquiry into the appellant 's conduct with a view to ascertain whether he would be retained in service.
[477A] State of Punjab vs Sukh Rai Bahadur, ; , followed.
(iv) In the present case, the impugned order did not involve any element of punishment nor did it deprive the appellant of any vested right to any office.
The appellant was a temporary Government servant and had no Tight to hold the office.
The state government had the right to, terminate his servicess under r. 12 without issuing any notice to the appellant to, show cause against the proposed action.
[477H] (v) The government rightly terminated the services, following the advice tendered by the High Court.
The High Court is vested with the control over the subordinate judiciary.
If the High Court found that the appellant wits not a fit person to be retained in service, it could properly ask the government to terminate his services.
[478B] State of West Bengal vs N. N. Bagchi, [1966] 1 S.C.R. 771, followed.
State of Orissa vs Dr. (Miss) Binapani Dei & Ors. ; and Ridge vs Baldwsin, ; , referred to. |
ecial Leave Petition (Civil)No.6536 of 1988.
From the Judgment and Order dated 26.4.1988 of the Bombay High Court in Appeal No. 431 of 1988.
G. Ramaswami, Additional Solicitor General and Mukul Mudgal for the Petitioner.
Anil B. Diwan, D.N. Misra, M.P. Bharucha and S.J. Vajifdar for the Respondent.
The Judgment of the Court was delivered by SABYASACHI MUKHARJI,J.
This application for leave to appeal is from the decision of the Division Bench of the High Court of Bombay, dated 26th April, 1988.
By the said decision the Division Bench summarily dismissed the appeal thereby affirming the order of the learned Single Judge of the High Court.
On 12th January, 1980 the petitioner herein signed what has been treated as the first contract with the respondent for the supply of 5000 Mts. of Indian H.P.S. Groundnut Kernels Javas (hereinafter referred to as the said goods) for the year 1979 8O.
The second contract in respect of the same was signed for 4000 Mts.
on 3rd April, 1980.
On 18th August, 1980 since 3100 Mts.
of the remaining first contract and total of 4000 Mts. of the second contract had not been supplied, the contract was extended for the balance quantity for the next crop season 1980 81.
On 20th December.
1980 the petitioner informed the respondent not to nominate any vessels to load goods as they were unable to get necessary clearance from the Government.
PG NO 551 The petitioner on 27th January, 1981 sent a telex informing the respondent that the goods could not be exported on account of executive/legislative ban on such exports.
On 6th March, 1981 the Federation of Oil Seeds and Fats Association (FOSFA) informed the petitioner by its letter of the appointment of an arbitrator because of non shipment due to Government 's refusal.
Thus the respondent invoked the arbitration proceedings with FOSFA.
On 19th March, 1981 the petitioner filed a petition in the Delhi High Court challenging the arbitration proceedings by FOSFA.
The Delhi High Court on 23rd March, 1981 passed a stay order and restrained the arbitration proceedings by FOSFA.
On 11th December, 1981, the Delhi High Court held that no arbitration agreement existed with regard to the second contract dated 3rd April, 1980 and as such none was entitled to seek reference to arbitration.
It was further held that vis a vis the first contract dated 12th January, 1980 there was an arbitration clause existing.
The National Agricultural Cooperative Marketing Federation of India Ltd., filed a special leave petition in this Court on 1st April, 1982 challenging the decision of the Delhi High Court on the ground that there was no valid FOSFA arbitration clause incorporated in the first contract dated 12th January, 1980.
On 2nd December, 1983 this Court passed an interim order granting special permission to the respondent to file a money suit in any court against the petitioner since the claims were getting barred by time.
The said order stated as follows: "The order of this court dated 30.4.1982 is modified to the extent that Alimenta S.A. is at liberty to file suit against N.A.F.E.D. in respect of its claims/disputes under the two contracts dated 121.1980 and 3.4.1980.
It is directed that such suit shall not constitute abandonment of the pending arbitrations instituted/commenced by Alimenta S.A. against N.A.F.E.D. or in any manner prejudice the said arbitrations or any awards made therein or the enforcement thereof and shall not prejudice Alimenta 's contention in any of the cases.
" On 17th December, 1983 the respondent filed a regular money suit No. 488 of 1984 for an amount of US $1,70,39,544 (equivalent to Rs. 17,93,93,440) and interest On the sum of US $ 11,23,500 (equivalent to Rs.11,23,35,000).
Written statement was filed by the respondent raising several objections, inter alia, limitation, maintainability etc.
On or about 24th July, 1984, the respondent filed another identical suit in the Bombay High Court being Suit No. PG NO 552 2657/84 for recovering damages for which the written statement was filed on 20th March, 1984.
The respondent also filed another identical suit No. 1241 of 1981 in the High Court on 21st March, 1985 for which also the written statement was filed.
The Supreme Court on 9th January, 1987 held that there was a valid arbitration clause in the first contract dated 12.1.1980.
In January, 1987 the respondents started arbitration proceedings in respect of FOSFA contract dated 12.1.1980.
In 1987, the petitioner 's Solicitor in London issued summons to restrain the London arbitration.
The arbitrator thereafter affirmed that they would not proceed with the arbitration until the petitioner 's application for stay was finally disposed of.
The petitioner moved an application in suit No. 1241 of 1985 in the Bombay High Court stating that in the interests of justice pending disposal of the above three suits an injunction should be granted restraining the parties from proceeding with the arbitration and the arbitration be stayed under the principles of Section 35 of the Indian .
On 2nd January, 1988 the Bombay High Court granted an interim injunction restraining the parties from proceeding with the arbitration.
The learned Single Judge on 8th March, 1988 dismissed the notice of motion holding, inter alia, that this Court 's order dated 2nd December, 1983 set out hereinbefore was clear and, therefore, stay could not be granted.
There was an appeal to the Division Bench.
On 28th March, 1988 there was an interim order in appeal No. 431 of 1988 permitting the respondent to seek clarification from this Court regarding its order dated 2nd December, 1983.
This Court disposed of the said application by stating that the Bombay High Court might make its own order.
As mentioned hereinbefore the Division Bench of the High Court dismissed on 26th April, 1988 the appeal preferred from the decision of the learned Single Judge of that High Court.
Hence, the petitioner seeks have to appeal to this Court.
The question concerned here is, whether the High Court was right.
The High Court noted that it was an admitted position that under the first contract the defendant therein being the petitioner herein, has supplied 1900 Mts while under the second contract the defendant has not supplied anything.
The High Court noted that the petitioner has pleaded that the Government had not permitted supply of any further materials to the plaintiff being the respondent herein.
The respondent is a Swiss Company.
As per the contract the respondent had initiated arbitration proceedings against the petitioner with the Federation of Oil Seeds and Fat Association (for brief called FOSFA London PG NO 553 in 1981 and had informed the petitioner by their letter dated 10th March, 1981 for the appointment of an arbitrator on their behalf.
The defendant had contended that there could not be any such arbitration and, therefore, it filed a petition in the High Court challenging the arbitration proceedings.
The Delhi High Court on the 11th December, 1981 came to the conclusion that as regards the first contract there was a valid arbitration agreement and as regards the second contract, there was no such arbitration agreement.
In other words, as regards the first contract the respondent herein could have proceeded with the arbitration while with regard to the second contract there was no question of referring the dispute to the arbitrator as such.
Both the parties had filed special leave petitions to this Court, being 1755 of 1982 and 1756 of 1982 from the decision of the High Court of Delhi.
This Court admitted the petition but did not decide the matter immediately.
In the meanwhile, the claim of the plaintiffs was getting barred by law of limitation and, therefore, they moved this Court for an early hearing.
This Court instead of hearing the petition passed an order on 12th December, 1988 giving liberty to the respondent to file suit in respect of its claims.
It was further stated that filing of such a suit would not constitute abandonment of the pending arbitration proceedings instituted or commenced by the respondent against the petitioner.
It is pursuant to this liberty that the respondent had filed suit No. 488 of 1984.
Thereafter, without withdrawing the first suit but perhaps on the basis that there was some technical defect in the suit according to the Bombay High Court, the respondent had filed a second suit No. 2659/84 on 20th March, 1984.
It had filed another suit No. 1241 of 1985 on the very next date.
All these suits were pending in the High Court of Bombay.
The cause of action in respect of these suits is the same.
It has been stated that the present suit had been filed by way of an abundant caution and without prejudice to the rights and contentions including the arbitration proceedings.
As a result of this decision the respondent started their arbitration proceedings from the stage at which it had been stayed earlier but only in respect of the first contract.
The first notice of motion is for stay of these arbitration proceedings on the ground that the present suit as also the other two suits are pending and there cannot be any multiplicity of the proceedings in respect of the same cause of action.
The High Court noted further that in view of the decision of this Court giving it liberty to file the proceedings the respondent was at liberty to proceed with the arbitration proceedings in respect of the first contract and having regard to this position it stated at the time of hearing of this petition PG NO 554 before the High Court and also in its affidavit that it was giving up claim in respect of the first contract.
The learned Solicitor General who had appeared in the Bombay High Court on behalf of the petitioner, which was the defendant, contended that it was not open to the respondent to forego a part of its claim.
The learned Solicitor General had also argued that the cause of action was one and it was not open to the respondent to split up its cause of action.
The High Court, however, did not find any substance in that argument.
The High Court was of the view that there were two claims arising out of the two contracts and the claims could easily be segregated or separated and that was the reason that the High Court held that the respondent could give up part of its claims which related to the first contract.
In our opinion, the High Court was right.
Relying upon the decision of this Court in V/C Tractoroexport, Moscow vs M/s. Tarapore & Co. & Anr., ; , the learned Solicitor General had submitted before the Bombay High Court that though Section 35 of the does not apply, the principles underlying the same would apply and those principles were that arbitrators should not proceed with arbitration side by side and in rivalry or in competition with the Civil Court.
It Was further submitted before the High Court that it can exercise cognate or similar powers possessed by it under Section 151 of the Code of Civil Procedure and should avoid the possibility of conflict of decisions.
Reliance was placed on a decision of the Calcutta High Court in Serajuddin & Co. vs Michael Goldetz & Ors., AIR 1960 Cal.
In the said circumstance it was submitted that the proper course was to restrain the plaintiffs from getting the matter decided in London so long as the suit was pending and had not been disposed of.
In view of the fact that the subject matter of the reference was the same as in the plattings of the suit, the public tribunal should have precedence, it was submitted by the learned Solicitor General.
Reliance was also placed on the decision of India Groundnut Syndicate Ltd., Though there was no averment relating to inconvenience with regard to the contract or proceedings in a foreign Contract learned Solicitor had relied on the decision of this Court in Ramji Dayawala & Sons (P) Ltd. vs Invest Import, ; , and submitted that it was more convenient for adjudication in India then in London.
In addition to this the high costs of the arbitration and the restrictions on the availability of foreign exchange were also highlighted before the High Court of Bombay, and in as much as the defence in action in PG NO 555 India as also the arbitration in London was the same, and the evidence was the same and the entire contract had to be performed by shipping the goods from India.
Therefore, it was submitted that it was not necessary that the parties should be allowed to proceed with the arbitration in London.
It was also submitted that no prejudice would be caused to the respondent if they are required to proceed with the present suit and not with the arbitration proceedings.
On behalf of the petitioner, however, it had been contended that the respondent was interested in delaying the proceedings somehow or the other.
In support of this the petitioner brought to the notice of the High Court that in 1980 when the breach of contract took place, the plaintiff instituted arbitration proceedings and the respondent promptly filed petition in the Delhi High Court and got stay of the arbitration proceedings.
Thereafter, they lost interest in the matter and the matter came to be decided by this Court and this Court by its order dated 9.1.1987 expressed and directed that the first contract was subject to the arbitration agreement and there was no reason why the defendants could not have proceeded with such arbitration.
It further appears that sometime in October, 1987 the petitioner had taken out an originating summons in the High Court of Justice in London but the summons were not served on the respondent.
The arbitrators had given the directions that they would proceed and not wait any further.
And it was upon this that the respondent had brought the present proceedings in the Bombay High Court.
The High Court further felt that in view of the decision of this Court on 2nd December, 1983 there was no abandonment of the pending arbitration proceedings by the respondent.
It is well settled that in particular facts and circumstances it a party files a suit to save limitation the same would not Vitiate the award or make the award bad under Section 35 of the .
Reference in this connection may be made to the observations of the Punjab and Haryana High Court in Sujant Singh vs Seth Mohinder Paul, AIR 1964 Punj 395.
The High Court felt that in the facts and circumstances of this case Section 35 of the does not apply, which postulates that neither any reference nor any award shall be rendered invalid by reason only of the commencement of the legal proceedings upon the subject matter of the reference but when the legal proceedings upon the whole subject matter of the reference have been commenced between all the parties to the reference and notice has been given to the arbitrator or the umpire, all further proceedings in a pending reference shall unless a stay of proceedings is granted under Section 34, be invalid.
The High Court held, and in our opinion rightly, that PG NO 556 Section 35 does not apply.
The order of this Court set out hereinbefore clearly permits the continuation of legal proceedings in suit and cannot operate to nullify the arbitration proceedings in London.
The High Court, therefore, declined to grant stay of the arbitration proceedings.
Was the High Court right, is the question in this application.
Reliance was placed by the learned Additional Solicitor General Mr. G. Ramaswamy before us on a decision of this Court in Oil & Natural Gas Commn.
vs Western Co. of N. America, for the proposition that in a situation of the present type it would be improper to ask the petitioner to go on with the arbitration in London.
The facts there were entirely different from the facts before us.
Section 151 of the Code of Civil Procedure on the bais of which and on the principle of which stay of proceedings in London was sought, are well settled and these principles are whether in a particular case it would be just and equitable to the parties to direct them to proceed with the arbitration, must depend upon the facts and circumstances of a particular case having regard to the legal provisions applicable to a particular situation.
In the decision referred to hereinbefore this Court took into consideration the fact that there was an application under Sections 30 & 33 of the for setting aside the awards rendered by the umpire in that case and that there was a possibility of the award rendered by the Umpire being stayed by the Indian court.
This Court also took into consideration that in that event an extremely anomalous situation would arise inasmuch as the successful party the Western Company might well have recovered the amount awarded as per the award from the assets of the losing party in U.S.A. after procuring the judgment in terms of the award from the U.S.A. court.
Such possibility of damage and danger is absent in the present case.
In the said decision before this Court by the contract therein the Indian courts had exclusive Jurisdiction and it would, however, be improper to proceed on the basis that the Indian courts have exclusive jurisdiction to affirm or set aside the award in terms of the proper law of the contract, or in terms of the actual contrast between the parties.
Foreign awards automatically are not 'lifeless awards '.
They can be enforced in this country in accordance with law.
See in this connection the Foreign Awards (Recognition and Enforcement) Act, 1961.
Furthermore, unlike the case of Oil & Natural Gas Commission this is not a case of restraining the respondent from proceeding in a foreign court.
This is a case of binding the parties to their bargain for going to the arbitration.
The learned Single Judge of the High Court in PG NO 557 the instant case had taken into account all the relevant facts.
It had considered the contract of the parties, the arbitration agreement, the statement made on behalf of the respondent and had thereafter exercised its jurisdiction not to stay the proceedings of arbitration in relation to the first contract.
There is a valid arbitration agreement Between the parties.
In view of the direction of this Court, the continuation of the arbitration proceedings in respect of the filing of the suit would not be bad.
In those circumstances if the court declined to exercise its jurisdiction under Section 151 of the Code of Civil Procedure to grant stay of the proceedings of arbitration in London, the court, in our opinion, has not acted in excess of jurisdiction or has not exercised its jurisdiction improperly.
In such a situation the Appellate Court should not normally interfere.
In the premises, it would have been improper to exercise any jurisdiction to interfere.
See the observations of this Court in Ramji Dayawala & Sons (P) Ltd. (supra).
There will be no stay of the arbitration in relation to the first contract only.
In the Premises, it would not be proper for us to interfere with the judgment of the Division Bench of the High Court.
The application, therefore, fails and is accordingly dismissed. | The petitioner signed two contracts, one on the 12th January.
1980 and the other on 18th August, 1980 for the supply of Indian H.P.S. Groundnut Kernels Javas to a Swiss Company.
On 20th December, 1980 the petitioner informed the respondent not to nominate any vessels to load goods as it were unable to get necessary clearance from the Government, and by a telex message on 27th January.
1981 informed the respondent that the goods could not be exported on account of executive/legislative ban.
The respondent invoked the arbitration proceedings with the Federation of Oil Seeds and Fats Association who informed the petitioner on 6th March, 1981 by a letter of the appointment of an arbitrator.
The petitioner challenged the arbitration proceedings in the Delhi High Court.
On March 23rd.
1981 a stay order was passed restraining the arbitration proceedings, and on 11th December.
1981 the High Court held that no arbitration agreement existed with regard to the second contract and as such nobody was entitled to seek reference to arbitration.
The petitioner filed a special leave petition to this Court.
This Court passed an interim order granting special permission to the respondent to file a money suit in any court since the claims were getting barred by time.
Pursuant to this order the r respondent filed a regular money suit in a foreign court, and two identical suits in the Bombay High Court for recovering damages, for which the written statements were filed.
PG NO 548 PG NO 549 The petitioner moved an application in one of the suits in the High Court stating that in the interests of justice pending disposal of the three suits an injunction should be granted restraining the parties from proceeding with the arbitration, and that the arbitration be stayed under the principles of section 35 of the .
The High Court granted interim injunction restraining the parties from proceeding with arbitration.
On 8th March, 1985, the High Court dismissed the notice of motion and held that this Court 's order dated 2nd December, 1983 was clear, there was no abandonment of the pending arbitration proceedings by the respondent and therefore stay could not be granted.
This order was confirmed by the Division Bench in appeal.
In the S.L.P. to this Court the question was: whether the High Court was right in declining to grant stay of the arbitration proceedings.
Dismissing the application, HELD: 1.
The High Court rightly held that Section 35 does not apply.
[556A] Sujant Singh vs Seth Mohinder Paul, AIR1964 Punj 395 ref.
to. 2.
In particular facts and circumstances if a party filed a suit to save limitation the same would not vitiate the award or make the award bad under section 35 of the Arbitration Act.[555F] 3.
Foreign awards automatically are not `lifeless award ' They can be enforced in this Court in accordance with law.[556G] Oil & Natural Gas Common.
Western Co. of N. America, AIR 1987 SC 574 ref to. 4.
Whether in a particular case it would be just and equitable to the parties to direct them to proceed with the arbitration, must depend upon the facts and circumstances of a particular case having regard to the legal provisions applicable to a particular Situation.[556A D] In the instant case, there is a valid arbitration agreement between the parties.
In view of the direction of this Court.
the continuation of the arbitration proceedings in respect of the filing of the suit would not be bad.
In these circumstances if the court declined to exercise its jurisdiction under section 151 of the Code of Civil Procedure to grant stay of the proceedings of arbitration in PG NO 550 London, the court has not acted in excess of jurisdiction or has not exercised its jurisdiction improperly.
In such a situation the Appellate Court should not normally interfere.
In the premises, it would have been improper to exercise any jurisdiction to interfere.
[557B C] V/C Tractoroexport, Moscow vs M/s Tarapore & Co. & Anr., ; ; Serajuddin & Co. vs Michael Goldetz & Ors., AIR 1960 Cal.
47; In re All India Groundnut Syndicate Ltd., and Ramji Dayawala & Sons (P) Ltd. vs Invest Import; , referred to. |
Appeal No. 294 of 1955.
Appeal by special leave from the Judgment and Order dated the 7th September, 1955, of the Nagpur High Court, in Civil Revision No. 833 of 1954.
B.B. Tawakley, (K. P. Gupta, with him for the appellant.
R. section Dabir and R. A. Govind, for respondent No. 1. 1955.
December 2.
The Judgment of the Court was delivered by BOSE J.
The appellant was a candidate for the office of President of the Municipal Committee of Damoh.
The respondents (seven of them) were also candidates.
The nominations were made on forms supplied by the Municipal Committee but it turned out that the forms were old ones that had not been brought up to date.
Under the old rules candidates were required to give their caste, but on 23 7 1949 this was changed and instead of caste their occupation had to be entered.
The only person who kept himself abreast of the law was the first respondent.
He struck out the word "caste" in the printed form and wrote in "occupation" instead and then gave his occupation, as the new rule required, and not his 1031 caste.
All the other candidates, including the appellant, filled in their forms as they stood and entered their caste and not their occupation.
The first respondent raised an objection before the Supervising Officer and contended that all the other nominations were s; invalid and claimed that he should be elected as his was the only valid nomination paper.
The objection was overruled and the election proceeded.
The appellant secured the highest number of votes and was declared to be elected.
The first respondent thereupon filed the election petition out of which this appeal arises.
He failed in the trial Court.
The learned Judge held that the defect was not substantial and so held that it was curable.
This was reversed by the High Court on revision.
The learned High Court Judges referred to a decision of this Court in Rattan Anmol Singh vs Atma Ram(1) and held that any failure to comply with any of the provisions set out in the various rules is fatal and that in such cases the nomination paper must be rejected.
We do not think that is right and we deprecate this tendency towards technicality; it is the substance that counts and must take precedence over mere form.
Some rules are vital and go to the root of the matter: they cannot be broken; others are only directory and a breach of them can be overlooked provided there is substantial compliance with the rules read as whole and provided no prejudice ensues; and when the legislature does not itself state which is which judges must determine the matter and, exercising a nice discrimination, sort out one class from the other along broad based, commonsense lines.
This principle was enunciated by Viscount Maugham in Punjab Co operative Bank Ltd., Amritsar vs Incometax Officer, Lahore(2) and was quoted by the learned High Court judges ' "It is a well settled general rule that an absolute enactment must be obeyed or fulfilled exactly, but it is sufficient if a directory enactment be obeyed or fulfilled substantially".
(1) ; (2) [1940] L.R. 07 I.A. 464, 476, 1032 But apart from that, this is to be found in the Act itself.
The learned High Court Judges were of opinion that the directions here about the occupation were mandatory.
That, we think, is wrong.
The present matter is governed by section 18 of the Central Provinces and Berar Municipalities Act (II) of 1922.
Among other things, the section empowers the State Government to "make rules under this Act regulating the mode. . of election of presidents. ." and section 175(1) directs that "all rules for which provision is made in this Act shall be made by the State Government and shall be consistent with this Act", Now one of the provisions of the Act, the one that directly concerns us, is set out in section 23: "Anything done or any proceeding taken under this Act shall not be questioned on account of any defect or irregularity not affecting the merits of the case".
The rules have therefore to be construed in the light of that provision.
Rule 9 (1)(i) states that " each candidate shall. .deliver to the Supervising Officer a nomination paper completed in the form appended and subscribed by the candidate himself as assenting to the nomination and by two duly qualified electors as proposer and seconder".
The amended form requires the candidate to give, among other things, his name, father 's name, age, address and occupation; and rule 9(1)(iii) directs that the Supervising Officer "shall examine the nomination papers and shall decide all objections which may be made to any nomination and may either on such objection or on his own motion, after such summary enquiry, if any, as he thinks necessary, refuse any nomination on any of the following grounds: * * * * 1o33 (C) that there has been any failure to comply with any of the provisions of clause (i). . " It was contended that the word "may" which we have underlined above has the force of "shall" in that context because clause (a) of the rule reads "(a) that the candidate is ineligible for election under section 14 or section 15 of the Act".
It was argued that if the candidate 's ineligibility under those sections is established, then the Supervising Officer has no option but to refuse the nomination and it was said that if that is the force of the word "may" in a case under clause (a) it cannot be given a different meaning when clause (c) is attracted.
We need not stop to consider whether this argument would be valid if section 23 had not been there because the rules cannot travel beyond the Act and must be read subject to its provisions.
Reading rule 9(1) (iii) (c) in the light of section 23, all that we have to see is whether an omission to set out a candidate 's occupation can be said to affect "the merits of the case".
We are clear it does not.
Take the case of a man who has no occupation.
What difference would it make whether be entered the word "nil" there, or struck out the word "occupation" or placed a line against it, or just left it blank? How is the case any different, so far as the merits are concerned, when a man who has a occupation does not disclose it or misnames it, especially as a man 's occupation is not one of the qualifications for the office of President.
We are clear that this part of the form is only directory and is part of the description of the candidate;, it does not go to the root of the matter so long as there is enough material in the paper to enable him to be identified beyond doubt.
It was also argued that there was a reason for requiring the occupation to be stated, namely, because section 15(k) of the Act disqualified any person who "holds any office of profit" under the Committee.
But disclosure of a candidate 's occupation would not necessarily reveal this because the occupation need only be stated in general terms such as "service" or 1034 "agriculture" and need not be particularised; also, in any 'event, section 15 sets out other grounds of dis qualification which are not required to be shown in the form.
As regards our earlier decision.
That was a case in which the law required the satisfaction of a particular official at a particular time about the identity of an illiterate candidate.
That, we held, was the substance and said in effect that if the law states that A must be satisfied about a particular matter, A 's satisfaction cannot be replaced by that of B; still less can it be dispensed with altogether.
The law we were dealing with there also required that the satisfaction should be endorsed on the nomination paper.
That we indicated was mere form and said at page 488 "If the Returning Officer had omitted the attestation because of some slip on his part and it could be proved that he was satisfied at the proper time, the matter might be different because the element of his satisfaction at the proper time, which is of the substance, would be there, and the omission formally to record the satisfaction could probably, in a case like that, be regarded as an unsubstantial technicality".
A number of English cases were cited before us but it will be idle to examine them because we are concerned with the terms of section 23 of our Act and we can derive no assistance from decisions that deal with other laws made in other countries to deal with situations that do not necessarily arise in India.
The appeal succeeds and is allowed with costs here and in the High Court.
The order of the High Court is set aside and that of the Civil Judge restored. | The appellant was a candidate for the office of President of the Municipal Committee, Damoh.
The nomination was made in an old form under the old rules which required a candidate to enter his caste.
Under the new rules this was changed and occupation had to be stated instead, which none except the respondent No. I had done.
Objection to the validity of the appellant 's nomination paper was overruled by the Supervising Officer.
The appellant secured the highest number of votes and was declared elected.
The respondent No. 1, thereupon, filed the election petition.
He failed in the Election Tribunal which held that the defect was not substantial and was curable.
The High Court, however, reversed this decision in revision, holding that failure to comply 'with any of the provisions set out in the rules was fatal and in such cases the nomination paper should be rejected.
1030 Held, that the rule requiring the occupation of the candidate to be stated in the nomination form was directory and not mandatory In character and as the failure to comply with it did not affect the merits of the case as laid down in section 23 of the Act, the election could not be set aside on that ground.
Rattan Anmol Singh vs Atma Ram ([1955] 1 S.C.R. 481), dis tinguished.
Courts should not go by mere technicalities but look to the substance.
Some rules may be vital, while others are merely directory, and a breach of these may be overlooked, provided there is substantial compliance with the rules read as a whole and no prejudice ensues.
When the Act does not make a clear distinction, it is the duty of the court to sort out one class from the other along broad based commonsense lines.
Punjab Co operative Bank Ltd., Amritsar vs Income Tax Office? , Lahore ([1940] L.R. 67 I.A. 464), referred to. |
Appeal No. 1940 of 1967.
Appeal by special leave from the judgment and order dated April 17, 27, 1967 of the Gujarat High Court in Civil Revision Application 328 of 1967.
section T. Desai and I. N. Shroff for the appellants.
M. P. Amin, P. M. Amin, P. N. Dua and J. B. Dadachanji, for respondent No. 1.
R. P. Kapur, for respondents Nos. 2 and 3.
The Judgment of the Court was delivered by Shah, J.
By insistence upon procedural wrangling in a com paratively simple suit pending in the Court of Small Causes at Ahmedabad the parties have effectively prevented all progress in the suit during the last six years.
A building in the town of Ahmedabad used as a cinematograph theatre belonged originally to Messrs. Popatlal Punjabhai.
estate of the owners and on August 19, 1954, the receivers ,estate of the owners and on August 19, 1954, The receivers granted a lease of the theatre on certain terms and conditions to two persons, Raval and Faraqui.
By an agreement dated November 27, 1954, between Raval and Faraqui on the one hand and Messrs. Filmistan Distributors (India) Private Ltd. hereinafter called "Filmistan on the other hand, right to exhibit cinematograph films was granted to the latter on certain terms and conditions.
"Filmistan" instituted suit No. 149 of 1960 in the Court of the Civil Judge (Senior Division) at Ahmedabad against Raval and Faraqui and two other persons claiming a declaration that it 437 was entitled pursuant to the agreement dated November 27, 1954, to exhibit motion pictures in the theatre.
By an order dated December 1, 1960 the suit was disposed of as compromised.
It was inter alia agreed that Raval and Faraqui were bound and liable to allow Filmistan to exercise its "exhibition rights" in the theatre; that Raval and Faraqui, their servants and agents were not to have any right to exhibit any picture in contravention of the terms and conditions of the agreement dated November 27, 1954; and that Raval and Faraqui shall "execute and register" an agreement in writing incorporating the said agreement with the variation as to rental.
Pursuant to this agreement, a fresh agreement was executed on December 1, 1960.
On September 1, 1963, Filmistan filed suit No. 1465 of 1963 in the Court of Small Causes at Ahmedabad, inter alia, for a declaration that as sub lessee or as lessee under law it was entitled to obtain and remain in possession of the theatre and to exhibit cinematograph films and to hold "entertainment performances" etc.
in the theatre, and that one Shabeer Hussain Khan Tejabwala had no right, title or interest in the theatre, that the defendants in the suit be ordered to hand over vacant and peaceful possession of the theatre, and the defendants, their servants and agents be restrained by an injunction from interfering directly or indirectly with its rights to obtain and remain in possession of the theatre or any part thereof and to exercise its right of exhibiting "motion pictures" and entertainment performances etc.
This suit was filed against the receivers in insolvency of the owners of the theatre, against Raval and Faraqui, against Tejabwala and also against Baldevdas Shivlal who claimed to be the owner of the theatre.
The suit was based on the claim by Filmistan as lessees or sub lessees of the theatre and was exclusively triable by the Court of Small Causes by virtue of section 28 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947.
Three sets of written statements were filed against the claim made by Filmistan, but no reference need be made thereto, since at this stage in deciding appeal the merits of the pleas raised by the defendants are not relevant.
After issues were raised on June 20, 1966, the plaint was amended and additional written statements were filed by the Defendants.
The learned Judge was then requested to frame three additional issues in view of the amended pleadings : the issues were: 1.
Whether in view of the said consent decree in suit No. 149 of 1960 defendants Nos. 5 and 6 are debarred on principles of res judicata from agitating the question that the said document dated November 27, 1954 as confirmed by their letter dated January 31, L13 Sup.
CI/69 17 438 1955 and further confirmed by document dated December 1, 1960 is not a lease? 12.
Whether in view of the said consent decree, defendants 5 and 6 are estopped from contending and leading any evidence and putting questions in crossexamination of plaintiffs witnesses to show that the said document dated November 27, 1954 as confirmed by their letter dated January 31, 1955 and further confirmed by document dated December 1, 1960 is not a lease ? 13.
Whether in respect of the terms of the said consent decree as also of the said document dated November 27, 1954, as confirmed by their letter dated January 31, 1955 and further confirmed by document dated December 1, 1960 defendants Nos. 5 and 6 are debarred from leading any evidence of the, plaintiffs witnesses in view of section 92 of the Evidence Act ?" In drawing up the additional issues not much care was apparently exercised : whether a party is entitled to lead evidence or to put questions in cross examination of the plaintiff 's witnesses cannot form the subject matter of an issue.
Filmistan then applied to the Court of Small Causes for an order that issues Nos. 11, 12 & 13 be tried as preliminary issues.
The learned Judge observed that the issues were not purely of law, that in any event the case or any part thereof was not likely to be disposed of on these issues, and that ordinarily in "appealable cases" the Court should, as far as possible, decide all the issues together and that piecemeal trial might result in protracting the litigation.
He also observed that the issues were not of law going to the root of the case and were on that account not capable of being decided without recording evidence.
A revision application against that order was dismissed in limine by the High Court of Gujarat.
When the case reached hearing and the evidence of a representative of Filmistan was.
being recorded, counsel for the defendants asked in cross examination the question whether the "agreement between the plaintiff and defendant Nos. 5 and 6 was a commercial transaction and was not a lease ?" The question was objected to by counsel appearing for Filmistan.
Thereafter elaborate arguments were advanced and the Trial Judge passed an order disallowing the objection.
The objection to the question raised by Filmistan was not that it related to a matter to be decided by the Court and on which the opinion of witnesses was irrelevant.
The objection was raised as 439 an attempt to reopen the previous decision given by the Trial Judge refusing to try issues Nos. 11, 12 & 13 as preliminary issues.
Counsel for Filmistan contended that an enquiry into the nature of the legal relationship arising out of the agreement dated December 1, 1960 "was barred by the principle of res judicata and estoppel under the provisions of section 92 of the Evidence Act", since the question was already concluded by the consent decree in suit No. 149 of 1960.
The Trial Judge observed that he had carefully gone through the consent decree and the registered agreement dated December 1, 1960, and he found that the consent decree had not decided that the transaction between the parties of the year 1954 was in the nature of a lease; that in the plaint in the earlier suit it was not even averred that the rights granted were in the nature of leasehold rights; that suit No. 149 of 1960 was for declaration of the rights of Filmistan to exhibit motion pictures, in the theatre under the agreement dated November 27, 1954, and for an injunction restraining the defendants from violating the said rights of Filmistan under the agreement; and that the agreement dated December 1, 1960 was "not plain enough to exclude the oral evidence of the surrounding circumstances and conduct of the parties to explain its terms and language".
Accordingly he held that the question asked in cross examination of the witnesses for Filmistan intended to secure disclosure of the surrounding circumstances and conduct of the parties in order to show in what manner the language of the document was related to the existing facts, could not be excluded.
The Court also rejected the contention that there was any bar of estoppel, and held that evidence as to the true nature of the transaction was not inadmissible by virtue of section 92 of the Evidence Act.
Filmistan feeling dissatisfied with the order invoked the revisional jurisdiction of the High Court of Gujarat under section 115 of ' the Code of Civil Procedure.
The revision petition was entertained and elaborate arguments were advanced at the Bar.
The High Court referred to a number of authorities and observed that the correctness of the findings of the Trial Court on issues Nos. 12 and 13 may not be examined in exercise of the powers under section 115 of the Code of Civil Procedure.
The Court proceeded to, observe : "The question then arises for consideration whether in fact the subordinate Court has decided the question of res judicata", and that "it is true that the jurisdiction of the Court of mall Causes to decide disputes between a tenant and his landlord and falling within the purview of section 28 of the Bombay Rent Control Act is derived from section 28 of the said Act, but at the same time if an issue is in fact barred by res judicata, then the Court has no 440 jurisdiction on principles of res judicata to go into that question or to decide that question over again to the extent to which the Court, viz., the trial court in the instant case, proposed to go into that question and allow the whole question, that was closed once for all by consent decree of December 1, 1960, to be reopened, it is proposing to exercise the jurisdiction which is not vested in it by law.
It is not open to any Court of law to try an issue over again or reopen the same if an earlier decision operates as res judicata.
Once the jurisdiction of the Court has been taken away, any proposal to reopen the question closed by the earlier decision would be exercise of jurisdiction which is not vested in the Court by law and to that extent the decision would become revisable, even if it is the decision as to the res judicata of an issue", and concluded "It is not open to me in revision at this stage to express any opinion about the rights and contentions of the parties with reference to the agreement of December 1, 1960.
But the only thing that can be said is that so far as the agreement of November 27, 1954, is con cerned, it must be held, in view of the consent decree of December 1, 1960, that that document of November 27, 1954, created a lease. .
The consent decree must be held to create a bar of res judicata as far as the question of document of November 27, 1954, creatin g a lease is, concerned.
The learned Judge will not proceed with the trial".
By section 115 of the Code of Civil Procedure the High Court is invested with power to call for the record of any case decided by any Court subordinate to such High Court and in which no appeal lies thereo, if such subordinate court appears (a) to have exercised a jurisdiction not vested in it by law, or (b) to have failed to exercise a jurisdiction so vested, or (c) to have acted in the exercise of its jurisdiction illegally or with material irregularity, and to make such order in the case as it thinks fit.
Exercise of the power is broadly subject to three important conditions (1) that the decision is of a Court subordinate to the High Court; (2) that there is a case which has been decided by the subordinate Court; and (3) that the subordinate Court has exercised jurisdiction not vested in it by law or to have failed to exercise a jurisdiction so vested, or to have acted in the exercise of its jurisdiction illegally or with material irregularity.
441 In the present case the Court of Small Causes had only decided that a question seeking information about the true legal relationship arising out of the document could be permitted to 'be put to the witnesses for Filmistan.
The Court gave no finding expressly or by implication on the issue of res judicata or any other issue.
In the view of the Trial Court the question whether the legal relationship arising out of the agreement dated December 1, 1960 was in the nature of a lease or of other character had to be decided at the trial and the previous judgment being a judgment by consent , 'could not operate as res judicata", for, it was not a decision of the Court, and that the consent decree in suit No. 149 of 1960 had not decided that the agreement dated March 27, 1954, was of the nature of a lease, and that in the plaint in that suit it was not even averred that it was a lease.
The Trial Judge in overruling the objection did not decide any issues at the stage of recording evidence : he was not called upon to decide any issues at that stage.
The observations made by him obviously relate to the arguments advanced at the Bar and can in no sense be regarded even indirectly as a decision on any of the issues.
But the High Court has recorded a finding that the agreement dated November 27, 1954, created a lease and that the consent decree operated as res judicata.
A consent decree, accord ing to the decisions of this Court, does not operate as res judicata, because a consent decree is merely the record of a contract between the parties to a suit, to which is superadded the seal of the Court.
A matter in contest in a suit may operate as res judicata only if there is an adjudication by the Court : the terms of section II of the Code leave no scope for a contrary view.
Again it was for the Trial Court in the first instance to decide that question and there after the High Court could, if the matter were brought before it by way of appeal or in exercise of its revisional jurisdiction, have decided that question.
In our judgment, the High Court had no jurisdiction to record any finding on the issue of res judicata in a revision application filed against an order refusing to uphold an objection to certain question asked to a witness under examination.
The true nature of the order brought before the High Court and the dimensions of the dispute covered thereby apparently got blurred and the High Court proceeded to decide matters on which no decision was till then recorded by the Trial Court, and which could not be decided by the High Court until the parties had opportunity to lead evidence thereon.
It may also be observed that by ordering that a question may properly to put to a witness who was being examined, no case was decided by the Trial Court.
The expression "case" is not limited in its import to the entirety of the matter in dispute in an action.
442 This Court observed in Major section section Khanna vs Brig.
F. J. Dillon(1) that the expression "case" is a word of comprehensive import : it includes a civil proceeding and is not restricted by anything contained in section 115 of the Code to the entirety of the proceeding in a civil court.
To interpret the expression "case" as an entire proceeding only and not a part of the proceeding imposes an unwarranted restriction on the exercise of powers of superintendence and may result in certain cases in denying relief to the aggrieved litigant where it is most needed and may result in the perpetration of gross injustice.
But it was not decided in Major section section Khanna 's case(1) that every order of the Court in the course of a suit amounts to a case decided.
A case may be said to be decided, if the Court adjudicates for the purposes of the suit some right or obligation of the parties in controversy; every order in the suit cannot be regarded as a case decided within the meaning of section 115 of the Code of Civil Procedure.
The order passed by the High Court is set aside and the Trial Court is directed to proceed and dispose of the suit.
We trust that the suit will be taken up early for hearing and disposed of expeditiously.
We recommend that the form of the issues Nos. 11, 12 and 13 will be rectified by the learned Trial Judge.
Filmistan will pay the costs of the appeal in this Court and in the High Court.
G.C. Appeal allowed. | R and F who held a cinema building in Ahmedabad on lease entered on November 27, 1954 into an agreement with respondent No. 1 giving the latter a right to exhibit cinematograph films in the said building.
Later respondent No. 1 filed 'suit No. 149 of 1960 to assert his right to exhibit films in the building.
The suit resulted in a compromise decree.
In pursuance of the compromise a further agreement dated December 1, 1960 was executed between the parties.
However in 1963 respondent No. 1 again filed a suit claiming as a sub lessee or as lessee a right to exhibit films in the said building and praying that the defendants be restrained from interfering with that right.
The suit was filed under section 28 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 in the Court of Small Causes.
In this suit respondent No. 1 asked the court to try additional issues Nos. 11, 12 and 13 as preliminary issues.
In issue No. 11 the question raised was whether the consent decree in the earlier suit operated as res judicata so that R & F could not question that the agreements between them and respondent No. 1 constituted a lease.
Issue No. 12 raised the question whether in view of the consent decree R & F were estopped from leading evidence and asking questions in cross examination to show that the said agreements did not constitute a lease.
Issue No. 13 raised the question whether section 92 of the Indian Evidence Act debarred R & F from leading evidence to the effect that the documents in question did not constitute a lease.
The Trial Court refused to try these as preliminary issues and its order was upheld by the High Court.
At the hearing of the case when the counsel for the defendants sought to ask a witness for respondent No. 1 whether the agreement dated November 27, 1954 was a commercial transaction and not a lease respondent No. 1 objected to the question.
The objection was disallowed by the trial court.
In revision under section 115 of the Code of Civil Procedure the High Court did not interfere with the trial court 's order in respect of issues Nos. 12 and 13.
In respect of issue No. 11, the High Court held that the agreement dated November 27, 1954 must in view of the consent decree in suit No. 149 of 1960 be held to be a lease, and that the consent decree created a bar of res judicata in respect of the issue whether the said agreement created a lease.
The defendants appellants appealed to this Court.
HELD : (i) The High Court had no jurisdiction to record any finding on the issue of res judicata in a revision application filed against an order refusing to uphold an objection to certain question asked to a witness under examination.
The Court erred in proceeding to decide matters on which no decision was till then recorded by the trial court and which could not be decided by the High Court until the parties had opportunity of leading evidence thereon.
(ii) By ordering that a question may properly be put to a witness who was examined, no case was decided by the Trial Court within the meaning of section 115 of the Code of Civil Procedure.
The expression 'case ' is not limited in its import to the entirety of the matter in dispute in a proceeding.
Such an interpretation may result in certain cases in denying relief to the aggrieved litigant where it is most needed.
But equally, it is not every order of the court in the course of a suit that amounts to a case decided.
A case may be said to be decided only if the court adjudicates, for the purpose of the suit, some right or obligation of the parties in controversy.
[441H 442C] Major section section Khanna vs Brig.
F. J, Dillon, [1964] 4 S.C.R. 409, referred to.
(iii) A consent decree, according to the decisions of this Court, does not operate as res judicata, because a consent decree is merely the record of a contract between the parties to, a suit, to which is superadded the seal of the court.
A matter in contest in a suit may operate as res judicata only if there is an adjudication by the court : the terms of section 1 1 of the Code leave no scope for a contrary view.
[441E] |
l Appeals Nos.
1567 of 1968, 585 to 1026 and 1027 to 1082 of 1969.
Appeals by special leave from the orders dated March 28, 1968 and July 20, 1968 of the Labour Court (11), U.P., Lucknow in Misc.
Cases Nos. 102 of 1965 etc.
M. C. Chagla, Harish Chandra, H. K. Purl and Bishambar Lal for the appellant (in all the appeals).
J. P. Goyal and V. C. Prashar, for respondent No. 1 (in all the appeals).
section P. Nayar, for the Attorney General (in C.As.
585 to 1026 and 1027 to 1082 of 1969).
The Judgment of the, Court was delivered by Shah, J.
These three groups of appeals arise out of orders made by the Presiding Officer, Labour Court (11), U.P., Lucknow awarding retrenchment compensation to certain employees of the U.P. Electric Supply Company Ltd. (in liquidation).
In the last group of appeals orders of the Labour Court awarding in addition thereto compensation for earned leave not enjoyed by the employees are also challenged.
The U.P. Electric Supply Company Ltd. hereinafter called the Company ' held two licences issued in 1914 by the Government of U.P. for generating and distributing electricity within thetowns of Allahabad and Lucknow.
The periods of the licenses expired in 1964.
Pursuant to the provisions of paragraph 12(1) in each of the said licenses and in exercise of the power under section 6 of the , the State Electricity Board, U.P. hereinafter referred to as "the Board took over the undertaking of the Company at Allahabad and Lucknow from the mid night of September 16, 1964.
The Company accordingly 510 ceased to carry on the business of generation and distribution of electricity in the areas covered by the original licences.
All the workmen of the undertakings at Allahabad and Lucknow were taken over in the employment of the Board with effect from September 17, 1964, without any break in the continuity of employment.
On December 22, 1964, 443 workmen employed in the Allahabad undertaking filed before the Labour Court, applications under section 6 H(2) of the U.P. , for payment of retrenchment compensation and salary in lieu of notice.
The work men submitted that fresh letters of appointment were issued by the Board on September 16, 1964, taking them in the employment of the Board with effect from September 17, 1964 "in the posts and positions which they previously held", but without giving credit for their past services with the Company.
The workmen contended that they were entitled to retrenchment compensation and salary in lieu of notice, and prayed for computation of those benefits in terms of money and for directions to the Company to pay them the amount so computed.
A group of 56 workmen employed at the Company 's undertaking at Lucknow also submitted applications under section 6H(2) of the U.P. , for payment of retrenchment compensation and salary in lieu of notice and also for compensation for accumulated earned leave not enjoyed by them till September 16, 1964.
In the applications filed by the workmen of the Allahabad undertaking, the Labour Court awarded to each workman retrenchment compensation at the rates specified in the order and also one month 's salary and costs.
To each workman of the Lucknow undertaking the Labour Court awarded retrenchment compensation at the rate specified, salary in lieu of one month 's notice, and also, wages for 30 days for earned leave not enjoyed by the workman before the closure of the undertaking, and costs.
The Company has appealed to this Court against the orders with special leave.
The orders for payment of retrenchment compensation are resisted by the Company on two grounds (i) that the Labour Court was incompetent to entertain and decide the applications for awarding retrenchment compensation; and (ii) that the workmen were not in fact retrenched, and in any event since the workmen were admitted to the service of the Board without break in continuity, and on terms not less favourable than the terms enjoyed by them with the Com 511 pany, the Company was under no liability to pay retrenchment compensation.
Some argument was advanced before us that in determining matters relating to the award of retrenchment compensation, the provisions of the , and not the U.P. , apply.
The question is academic, because on the points in controversy between the parties, the statutory provisions of the , and the U.P. , are substantially the same.
We may, however, briefly refer to this argument since, relying upon a judgment of this Court to be presently noticed, counsel for the workmen insisted that section 33 C(2) of the alone may apply.
After the enactment of the , by the Dominion Parliament, the U.P. , was enacted by the Provincial Legislature.
The scheme of them two Acts is substantially the same.
Chapter V A relating to layoff and retrenchment was added in the by Act 43 of 1953 with effect from October 24, 1953.
From time to time amendments were made in the provisions of the Act.
By section 25 J (2) it was provided "For the removal of doubts, it is hereby declared that nothing contained in this Chapter shall be deemed to affect the provisions of any other law for the time being in force in any State in so far as that law provides for the settlement of industrial disputes, but the rights and liabilities of employers and workmen in so far as they relate to lay off and retrenchment shall be deter mined in accordance with the provisions of this Chapter.
" After this sub section was incorporated in the , a group of sections including section 6 R were incorporated in the U.P. by U.P. Act 1 of 1957.
Section 6 R(2) provided : "For the removal of doubts, it is hereby declared that nothing contained in Sections 6 H to 6 R shall 'be deemed to affect the provision of any other law for the time being in force so far as that law provides for the settlement of industrial disputes, but the rights and liabilities of employers and workmen in so far as they relate to lay off and retrenchment shall be determined in accordance with the provisions of Sections 6 H to 6 Q." By virtue of section 6 R(2) the provisions of the U.P. , prima facie, apply in the matters of lay off and retrenchment, because under the Seventh Schedule to the Constitution 512 legislation in respect of "Trade Unions, Industrial and Labour Disputes" falls within Entry 22 of the Concurrent List and both the State and the Union are competent to legislate in respect of that field of legislation.
Whereas by adding section 25 J(2) it was enacted that under the , the rights and liabilities of employers and workmen in so far as they relate to lay off and retrenchment shall be determined in accordance with the provisions of Ch.
V A of that Act, by the U.P. Act as amended by Act 1 of 1957, section 6 R(2) enacts that the rights and liabilities of employers and workmen relating to lay off and retrenchment shall be determined in accordance with the provisions of sections 6 J to 6 Q. Competence of the State Legislature to enact section 6 R(2) is not denied.
Act 1 of 1957 received the assent of the President and by virtue of article 254(2) of the Constitution section 6 R(2) of the U.P. Act prevails, notwithstanding any prior law made by the Parliament.
The provisions of the U.P. Act including section 6 R(2) therefore apply in determining the rights and obligations of the parties in respect of retrenchment compensation.
The observation to the contrary made by this Court in Rohtak & Hissar Districts Electric Supply Company vs State of U.P. (1) which primarily raised a dispute relating to the validity of certain model standing orders proceeded upon a concession made at the Bar, and cannot be regarded as decisive.
Since the relevant provisions of the two Acts on the matter in controversy in these groups of appeals are not materially different, we do not think it necessary in this case to refer the question to a larger Bench.
We, accordingly, propose to refer only to, the provisions of the U.P.
Section 4 A of the U.P. Act authorises the State Government to constitute one or more Labour Courts for the adjudication of industrial disputes relating to any matter specified in the First Schedule and for performing such other functions as may be assigned to them under the Act.
The items specified in the First Schedule are 1.
The propriety or legality of an order passed by an employer under the Standing Orders; 2 .
The application and interpretation of Standing Orders 3 .
Discharge or dismissal of workman including reinstatement of, or grant of relief to, workmen wrongfully dismissed; 4.
Withdrawal of any customary concession or privilege; (1) 513 5.
Illegality or otherwise of a strike or lock out; and 6.
All matters other than those, specified in the Second Schedule.
" Section 4 B authorises the State Government to constitute one or more Industrial Tribunals for the adjudication of industrial disputes relating to any matter whether specified in the First Schedule or the Second Schedule.
Item 10 of the Second Schedule relates to "Retrenchment of workmen and closure of establishment".
Prima facie, disputes relating to retrenchment of workmen and closure of establishment fall within the exclusive competence of the Industrial Tribunal, and not within the competence of the Labour Court constituted under section 4 A.
The Company had expressly raised a contention that they had not retrenched the workmen and that the workmen had voluntarily abandoned the Company 's service by seeking employment with the Board ' even before the Company closed its undertaking.
The workmen contended by their petitions filed before the Labour Courts that they were retrenched, the Company contended that the workmen had voluntarily abandoned the employment under the Company because they found it more profitable to take up employment under the Board without any break in the same post and on the same terms and conditions on which they were employed by the Company.
This clearly raises the question whether there was retrenchment of workmen, which gave rise to liability to pay retrenchment compensation.
A dispute relating to retrenchment is exclusively within the competence of the Industrial Tribunal by virtue of item 10 of the Second Schedule to the U.P. , and is not within the competence of the Labour Court.
Section 6 H of the U.P. Act provides : (1) Where any money is due to a workman from an employer under the provisions of Sections 6 J to 6 R or under a settlement or award, or under an award given by an adjudicator or the State Industrial Tribunal appointed or constituted under this Act, before the com mencement of the Uttar Pradesh Industrial Disputes (Amendment and Miscellaneous Provisions) Act, 1956, the workman may, without prejudice to any other mode of recovery, make an application to the State Government for the recovery of the money due to him, and if the State Government is satisfied that any amount is so due, it shall issue a certificate for that amount to the Collector who shall proceed to recover the same as if it were an arrear of land revenue.
(2) Where any workman is entitled to receive from the employer any benefit which is capable of being computed in terms of money, the amount at which such 514 benefit should be computed may, subject to any rules that may be made under this Act be determined by such Labour Court as may be specified in this behalf by the State Government, and the amount so determined may be recovered as provided for in sub section (1).
(3) Under section 6 H(2) the Labour Court was competent to determine what each workman was entitled to receive from the employer by way of retrenchment compensation payable in terms of money and the denial of liability by the Company did not affect the jurisdiction of the Labour Court.
In several decisions of this Court the inter relation between sub sections
(1) & (2) of section 33 C (which are substantially in the same terms as sub sections
(1) & (2) of section 6 H of the U.P. ) was examined.
It was held by this Court in The Central Bank of India Ltd. vs P. section Rajagopalan etc.(1) that the scope of section 33 C(2) is wider than that of section 33 C(1).
Claims made under section 33 C(1) can only be those which are referrable to settlement, award or the relevant provisions of Ch.
V A, but those limitations are not to be found in section 33 C(2).
The three categories of claims mentioned in section 33 C(1) fall under section 33 C(2) and in that sense section 33 C(2) can itself be deemed to be a kind of execution proceeding, but it is possible that claims not based on settlements, awards or made under the provisions of Ch.
V A may also be competent under section 33 C(2).
Elaborating this thesis Gajendragadkar, J., who delivered the judgment of the Court observed (pp. 155 156) "There is no doubt that the three, categories of claims mentioned in section 33C(1) fall under section 33C(2) and in that sense, section 33C(2) can itself be deemed to be a kind of execution proceeding; but it is possible that claims not based on settlements, awards or made under the provisions of Chapter V A, may also be competent under section 33C(2) and that may illustrate its wider scope.
We would, however, like to indicate some of the claims which would not fall under section 33C(2), because they formed the subject matter of the appeals which have been grouped together for our decision along with the appeals with which we are dealing at present.
If an employee is dismissed or demoted and it is his case that the dismissal or demotion is wrongful, it would not be open to him to make a claim for the recovery of his salary or wages under section 33C(2).
His demotion or dismissal may give rise to an industrial dispute which may (1) 515 be appropriately tried, but once it is shown that the employer has dismissed or demoted him, a claim that the dismissal or demotion is unlawful and, therefore, the employee continues to be the workman of the employer and is entitled to the benefits due to him under a pre existing contract, cannot be made under section 33C(2).
" The same view was reiterated in Bombay Gas Co. Ltd. vs Gopal Bhiva and Others(1).
Mr. Goyal on behalf of the workmen, however, contended that in a recent judgment of this Court a different view has been expressed.
He invited our attention to The Board of Directors of the South Arcot Electricity Distribution Co. Ltd. vs N. K. Mohammad Khan, etc.(2).
In that case the Electricity undertaking was taken over by the Government of Madras in exercise of the powers conferred by the Madras Electricity Supply Undertakings (Acquisition) Act, 1954, and the employees of the undertaking were taken over by the new employer.
The employees claimed retrenchment compensation from the old employer under section 25FF, of the .
It was urged before this Court that the Labour Court was incompetent to decide the claim for retrenchment compensation.
This Court observed that section 25FF(b) applied as the terms of service under the new employer were less favourable than those under the old employer, and under the terms of sections 15 (1 ) & (2) of the Acquisition Act and sections 9A and 10 of the , liability to pay retrenchment compensation rested upon the previous employer and on that account the Labour Court was competent to entertain the petitions under section 33C(2).
The language of section 25FF in the view of the Court made it perfectly clear that if the right to compensation accrued under the Act, the workmen became entitled to receive retrenchment compensation, when under the Madras Act the undertaking stood transferred to the State Government from the Company.
Referring to the contention that the Labour Court was not competent to determine the liability to Day retrenchment compensation, where the liability itself was denied, the Court referred to the judgments of this Court in Chief Mining Engineer, East India Coal Co. Ltd. vs Rameswar and Others(3); State Bank of Bikaner (4) ; and Jaipur vs R. L. Khandelwal Punjab National Bank Ltd. vs K. L. Kharbanda(5); Central Bank of India vs P. section Rajagopalan and Others(6); and Bombay Gas Company Ltd. vs Gopal Bhiva and Others(1), and proceeded to observe that the right (1) [1964] (2) (3) [1968] 1 S.C.R. 140.
(4) (5) [1962] Supp. 2 S.C.R. 977.
(6) ; 516 which has been claimed by the various workmen in their applications under section 33C(2) of the Act was a right which accrued to them under section 25FF of the Act and was an existing right at the time when those applications were made, and the Labour Court had jurisdiction to decide, in dealing with the applications under that provision, whether such a right did or did not exist.
The mere denial of that right by the Company, it was said, could not take away its jurisdiction and that the order of the Labour Court was competently made.
The decision in the Central Bank of India vs P. section Rajago palan and Others(1), to which we have already referred, makes it clear that all disputes relating to claims which may be computed in terms of money are not necessarily within the terms of section 33C(2).
Again in Chief Mining Engineer, East India Coal Co. Ltd. vs Rameswar and Others (2 ) Shelat, J., observed : ". . that the right to the benefit which is sought to be computed under section 33C(2) must be an existing one, that is to say, already adjudicated upon or provided for and must arise in the course of and in relation to the relationship between an industrial workman and his employer.
Since the scope of sub section
(2) is wider than that of sub section
(1) and the sub section is not confined to cases arising under an award, settlement or under the provisions of Ch.
V A, there is no reason to hold that a benefit provided for under a statute or a scheme made thereunder, without there being anything contrary under such statute or section 33C(2), cannot fall within sub section
Consequently, the benefit provided in the bonus scheme made under the Coal Mines Provi dent Fund and Bonus Schemes Act, 1948, which remains to be computed must fall under sub section
(2) and the Labour Court therefore had jurisdiction to entertain and try such a claim, it being a claim in respect of an existing right arising from the relationship of an industrial workman and his employer.
" That judgment clearly indicates that in order that a claim may be adjudicated upon under section 3 3C (2), there must be an existing right and the right must arise under an award, settlement or under the provisions of Ch.
V A, or it must be a benefit provided by a statute or a scheme made thereunder and there must be nothing .contrary under such statute or section 3 3C (2).
But the possibility of a mere claim arising under Ch.
V A is not envisaged by the Court in that case as conferring jurisdiction upon the Labour Court to decide matters which are essentially within the jurisdiction of the Industrial Tribunal.
(1) ; (2) [1968] 1 S.C.R. 140.
517 The legislative intention disclosed by sections 33 C ( 1 ) and 3 3 C (2) is fairly clear.
Under section 33 C(1) where any money is due to a workman from an employer under a settlement or an award or under the provisions of Ch.
V A, the workman himself, or any other person authorised by him in writing in that behalf, may make an application to the appropriate Government to recover of the money due to him.
Where the workman who is entitled to receive from the employer any money or any benefit which is capable of being computed in terms of money, applies in that behalf, the Labour Court may under section 33 C(2) decide the questions arising as to the amount of money due or as to the amount at which such benefit shall be computed.
Section 33 C(2) is wider than section 33C(1).
Matters which do not fall within the terms of section 33C(1) may, if the workman is shown to be entitled to receive the benefits, fall within the terms of section 33C(2).
If the liability arises from an award, settlement or under the provisions of Ch.
V A, or by virtue of a statute or a scheme made thereunder, mere denial by the employer may not be sufficient to negative the claim under section 33 C(2) before the Labour Court.
Where however the right to retrenchment compensation which is the foundation of the claim is itself a matter which is exclusively within the competence of the Industrial Tribunal to be adjudicated upon a reference, it would be straining the language of section 33C(2) to hold that the question whether there has been retrenchment may be decided by the, Labour Court.
The power of the Labour Court is to compute the compensation claimed to be payable to the workmen on the footing that there has been retrenchment of the workmen.
Where retrenchment is conceded, and the only matter in dispute is that by virtue of section 25FF no liability to pay compensation has arisen the Labour Court will be competent to decide the question.
In such a case the question is one of computation and not of determination, of the conditions precedent to the accrual of liability.
Where, however, the dispute is whether workmen have been retrenched and computation of the amount is subsidiary or incidental, in our judgment, the Labour Court will have no authority to trespass upon the powers of the Tribunal with which it is statutorily invested.
In the unreported judgment of this Court in The Board of Directors of the South Arcot Electricity Distribution Co. Ltd. vs N. K. Mohammed Khan, etc.(1) apparently the only argument advanced before this Court was that section 25FF applied to that case having regard to the fact that the terms of employment under the new employer were not less favourable than those immediately applicable to them before the transfer, and the Court proceeded to hold that the Labour Court was competent to determine the compensation.
(1) 518 The finding that the Labour Court was incompetent to decide .the applications of the workmen would be sufficient to dispose of the appeals before us.
But other arguments were advanced before us, and which have an important bearing on the claims made : we propose briefly to deal with these arguments.
Assuming that the Labour Court had jurisdiction to determine the liability of the Company to pay retrenchment compensation no order awarding retrenchment compensation could still be made without recording a finding that there was retrenchment of the workmen and compensation was payable for retrenchment.
Section 6 0 of the U.P. (which in its phraseology is somewhat different from section 25FF of the Industrial Disputes Act) provides : "Notwithstanding anything contained in Section 6 N no workman shall be entitled to compensation under that section by reason merely of the fact that there has been a change of employers in any case where the ownership or management of the undertaking in which he is employed is transferred, whether by agreement or by operation of law, from one employer to another Provided that (a) the service of the workman has not been interrupted by reason of the transfer; (b) the terms and conditions of service applicable to the workman after such transfer are not in any way less favourable than those applicable to him immediately before the transfer; and (c) the employer to whom the ownership or management of the undertaking is so transferred is, under the terms of the transfer or otherwise, legally liable to pay to the workman, in the event of his retrenchment, compensation on the basis that his service has been continuous and has not been interrupted by the transfer." In the present groups of appeals it is common ground that there was no interruption resulting from the undertaking being taken over by the Board.
The agreements between the Board and the workmen to admit the workmen into employment of the Board were reached before the undertakings of the Company were taken over.
The Company contended that the terms and conditions of service applicable to workmen after the transfer were not in any way less favourable to the workmen than those applicable to them immediately before the undertakings were taken ,over, and that the employer to whom the ownership or manage 519 ment of the undertakings were so transferred was, under the terms of the transfer or otherwise, legally liable to pay to the workmen, in the event of their retrenchment, compensation on the basis that their services had been continuous and had not been interrupted by the taking over.
The workmen denied that claim.
The Labour Court could award compensation only if it determined the matter in controversy in favour of the workmen it could not assume that the conditions of the proviso to section 6 0 were fulfilled.
Section 6 0 is in terms negative.
It deprives the workmen of the right to retrenchment compensation in the conditions mentioned therein.
The Company asserted that the conditions precedent to the exercise of jurisdiction did not exist.
The workmen asserted the existence of the conditions.
Without deciding the issue, the Labour Court could not compute the amount of compensation payable to the workmen.
On the assumption that the workmen had been retrenched and their claim fell within the proviso to section 6 0.
It was urged by Mr. Goyal on behalf of the workmen that this plea was not raised or argued before the Labour Court, and it cannot be permitted to be raised in this Court.
But this contention was raised in the reply filed by the Company, and the judgment of the Labour Court does indicate that its authority to decide that question was disputed.
We are unable to hold that the objection though raised was not urged before the Labour Court, and on that account to confirm the decision of the Labour Court which until the matter in controversy was decided could not be rendered.
Even if, therefore, the Labour Court was competent to entertain the dispute relating to award of retrenchment com pensation, the order made by the Labour Court must be set aside.
One more contention raised at the Bar by Mr. Chagla for the Company may be considered.
It was urged that the obligation to pay retrenchment compensation in the event of liability arising must in law be deemed to be taken over by the Board.
In The Board of Directors of the South Arcot Electricity Distribution Company Ltd. vs N. K. Mohammad Khan, etc.(1), to which we have already made a reference, it was contended on behalf of the Electricity Company that the liability to pay retrenchment cornpensation did not fall on the licensee, but on the Madras Government.
This Court held, having regard to the scheme of the Act that if retrenchment compensation is payable, it is the original undertaking which remains liable, and not the undertaking which takes over the business.
Counsel however relied upon sections 6 and 7 of the , in support of his plea that the liability to pay retrenchment compensation rests upon the (1) 14Sup.
Cl/69 4 520 undertaking which takes over the undertaking.
Section 6 of the , provides : "(1) Where a license has been granted to pay person, not being a local authority, the State Electricity Board shall (a) in the case of a license granted before the commencement of the Indian Electricity (Amendment) Act, 1959, on the expiration of each such period as is specified in the license; and (b) have the option of purchasing the undertaking and such option shall be exercised by the State Electricity Board serving upon the licensee a notice in writing of not less than one year requiring the licensee to sell the 'Undertaking to it at the expiry of the relevant period referred to in this sub section.
ln the present case notice was given of termination of the license after the expiry of the period of the original license and the Board took over the undertaking of the Company.
Section 7 of the provides : "Where an undertaking is sold under section . 6 then upon the completion of the sale or on the date on which the undertaking is delivered to the intending purchaser under sub section (6) of section 6 (i) the undertaking shall vest in the purchaser . . free from any debt, mortgage or similar obligation of the licensee or attaching to the undertaking : Provided that any such debt, mortgage or similar obligation shall attach to the purchase money in substitution for the undertaking; (ii) the rights, powers, authorities, duties and obligations of the licensee under his license shall stand transferred to the purchaser and such purchaser shall be deemed to be the licensee : Provided that where the undertaking is sold or delivered to a State Electricity Board or the State Government, the license shall cease to have further operation.
" 521 It is clear that when the undertaking vests in the purchaser, any debt mortgage or similar obligation attaches to the purchase money in substitution of the undertaking.
The liability to pay retrenchment compensation is a debt : if it arises on transfer it will attach to the purchase money payable to the Company in substitution for the undertaking.
Sections 6 and 7 of the do not support the case of the Company that the liability is enforceable against the Board after it takes over the undertakings.
The provisions of sections 57 and 57A of the Indian , also do not assist the case of the, Company.
Sections 57 & 57A of the , deal with the licensee 's charges to consumers and the Rating Committees.
By the Sixth Schedule dealing with financial principles and their application, it is provided by cl.
TV that certain amount shall be appropriated towards Contingencies Reserve from the revenues of each year of account.
By cl.
V of the Sixth Schedule it is provided : "(1) The Contingencies Reserve shall not be drawn upon during the currency of the licence except to meet such charges as the State Government may approve as being (a) expenses or loss of profits arising out of accidents, strikes or circumstances which the management could not have prevented; (b) expenses on replacement or removal of plant or works other than expenses requisite for normal maintenance or renewal; (c) compensation payable under any law for the time being in force and for which no other provision is made.
(2) On the purchase of the undertaking, the Contingencies Reserve, after deduction of the amounts drawn under sub paragraph (1), shall be handed over to the purchaser and maintained as such Contingencies Reserve : Provided that where the undertaking is purchased by the Board or the State Government, the amount of the Reserve computed as above shall, after further deduction of the amount of compensation, if any, payable to the employees of the outgoing licensee under any law for the time being in force, be handed over to the Board or the State Government, as the case may be." 522 Clause V only provides for the appropriation of the Contingencies Reserve : it requires an undertaking to hand over the Contingencies Reserve to the purchaser.
If any amount of compensation is payable to the employees of the outgoing licensee under any law for the time being in force, it is chargeable to the Contingencies Reserve.
If the retrenchment compensation becomes properly due to the employees of the Company, it would, by virtue of cl.
V sub cl.
(2) proviso, be charged upon the Contingencies Reserve and the balance alone would be handed over to the purchaser.
It was urged that the Contingencies Reserve has been paid over to the purchaser.
There is, however, no finding by the Labour Court in that behalf.
If it be found in appropriate proceedings that retrenchment compensation is payable to the workmen and the Contingencies Reserve out of which it is payable has been handed over to the Board, the charge for payment of that amount may attach to that amount.
On that matter we need express no opinion at this stage.
Finally it was contended and that contention relates only to the cases of 56 workmen in the Lucknow undertaking that the workmen who had not availed themselves of earned leave were ,entitled to compensation equal to thirty days wages.
But we do not think that any such compensation is statutorily payable.
So long as the Company was carrying on its business, it was obliged to give facility for enjoying earned leave to its workmen.
But after the Company closed its business, it could not obviously give any earned leave to those workmen, nor could the workmen claim any compensation for not availing themselves of the leave.
In the absence of any provision in the statute governing the right to compensation for earned leave not availed of by the workmen before closure, or transfer of an undertaking, we do not think that any such compensation is payable.
On the view taken by us that the Labour Court was incom petent to determine the question as to liability to pay retrenchment compensation, these appeals must be allowed and the petitions under section 6 H(2) filed by the respondents must be dismissed.
There will be no order as to costs throughout.
G.C. Appeals allowed. | In exercise of the power under section 6 of the the undertakings of the appellant company at Allahabad and Lucknow were taken over by the State Electricity Board, U.P. with effect from September 17, 1964.
The workmen of the company were taken into the employment of the Board without any break in continuity of employment.
Certain workmen of the Allahabad undertaking filed before the Labour Court applications under section 6 H(2) of the U.P. , for payment of retrenchment compensation and salary in lieu of notice.
A group of workmen 'from the Lucknow undertaking also sub mitted applications under section 6 H(2) with the same prayers; in addition they claimed compensation for accumulated earned leave not enjoyed by them till September 16, 1964.
The Labour Court allowed the applications.
The Company appealed to this Court by special leave.
According to the company there was no retrenchment of the workmen because they had voluntarily left the service of the company to join the service of the Board with no break in their service.
The questions that fell for consideration wer (i) Whether the matter was to be decided under the provisions of the or those of the U.P. ; (ii) Whether the Labour Court had jurisdiction under section 6 H(2) of the U.P. Act to decide the applications or because of there being dispute as to the liability to pay retrenchment compensation the matter was in view of item 10 of the second schedule to the U.P. Act within the exclusive jurisdiction of the Industrial Tribunal; (iii) Whether section 6 0 of the U.P. Act also necessitated that the question of liability to pay retrenchment compensation be first determined; (iv) Whether in view of sections 6 & 7 of the and sections 57 & 57A of the Indian read with Cl.
V of the sixth schedule thereto, the liability to pay retrenchment compensation was that of the Board and not that of the company; (v) Whether the claim of the Lucknow workmen for compensation for earned leave not enjoyed by them was allowable.
Held : (i) Under the Seventh Schedule to the constitution legislation in respect of 'Trade Union Industrial and Labour Disputes ' falls within Entry 22 of the Concurrent List and both the State and the Union are competent to legislate in respect of that field of legislation.
Act 1 of 1957 added to the U.P. , section 6 R(2) which enacts that the rights and liabilities of employers and workmen relating to lay off and retrenchment shall be determined in accordance with the provisions of 508 sections 6 J to of 1957 received the assent of the President and by virtue of article 254(2) of the Constitution section 6 R(2) of the U.P. Act prevails notwithstanding any prior law made by the Parliament.
The rights and obligations of the parties had therefore to be decided under the U.P. Act including section 6 R(2).
[511 H 512 D] Rohtak & Hissar Districts Electric Supply Company vs State of U.P., , distinguished.
(ii) Section 6 H(1) and (2) of the U.P. Act were substantially the same as sub sections
(1) and (2) of section 33 C of the Central Act and cases decided by this Court under the latter provisions were applicable in the interpretation of the former.
According to the rule laid down in section 6 H(2) the Labour Court was competent to determine what each workman was entitled to receive from the employer by way of retrenchment compensation payable in terms of money and the denial of liability of the company did not affect the jurisdiction of the Labour Court.
Where, however, as in the present case, the dispute was whether the workmen had been retrenched and computation of the amount of compensation was subsidiary or incidental, the, Labour Court had no authority to trespass upon the powers of the industrial Tribunal which had exclusive jurisdiction under item 10 of the second schedule of the U.P. Act to decide disputes relating to retrenchment.
[514 B D 517 F] The Central Bank of India, Ltd. vs P. section Rajagopalan etc. ; and Bombay Gas Co. Ltd. vs Gopal Bhiva and Others, ; , applied.
The Board of Directors of the South Arcot Electricity Distribution Co. Ltd. vs N. K. Mohammad Khan etc., , explained.
Chief Mining Engineer, East India Coal Co. Ltd. vs Rameswar and Others, [1968] 1 S.C.R. 140, State Bank of Bikaner and Jaipur vs R. L. Khandelwal, and Punjab National Bank Ltd. vs K. L. Kharbanda, [1962] Supp.
2 S.C.R. 977, referred to.
(iii) Assuming that the Labour Court had jurisdiction to determine the liability of the company to pay retrenchment compensation no order awarding retrenchment compensation could still be made without recording a finding that workmen were retrenched and compensation was payable for the retrenchment.
For section 6 0 of the U.P. Act deprives the workmen of the right to retrenchment compensation in the conditions mentioned therein.
The company asserted , that the conditions precedent to the exercise of the jurisdiction did not exist while the workmen asserted the existence of the conditions.
Without deciding the, issue the Labour Court could not compute the amount of compensation payable to the workmen on the assumption that the workmen had been retrenched and their claim fell within section 6 0.
[518 B; 519 B C] (iv) Sections 6 and 7 of the did not support the case of the Company that the liability was enforceable against the Board after it took over the undertaking.
Under these sections when the undertaking vests in the purchaser, any debt, mortgage or similar obligation attaches to the purchase money in substitution of the undertaking.
The liability to pay retrenchment compensation is a debt : if it arises on transfer it will attach to the purchase money payable to the Company in substitution of the undertaking.
[521 A B] 509 (v) The provisions of sections 57 and 57A of the Indian , also did not assist the case of the Company.
These sections deal with the licencee 's charges to consumers and the Rating Committees.
In the Sixth Schedule to the Act (incorporated into every license by section 57 'aforesaid) it is provided by cl.
IV that certain amount shall be appropriated towards Contingencies Reserve from the revenues of each year of account.
Clause V then provides for the appropriation of the Contingencies Reserve :it requires the undertaking to hand over the Contingencies Reserve to the purchaser.
If the retrenchment compensation becomes properly due to the employees of the Company, it would, by virtue of cl.
V sub cl.
(2) proviso, be charged upon the Contingencies Reserve and the balance alone would be handed over to the purchaser.
In the present case however there was no finding by the Labour Court that the Contingencies Reserve had been paid over to the purchaser.
521 C 522 Cl (vi) The claim of the Lucknow workmen to compensation in lieu of earned leave not enjoyed by them could not be allowed.
After the company closed its business it could obviously not give any earned leave to these workmen 'and the latter could not claim it.
In the absence of a statutory provision to that effect no such compensation was payable.
[522 E] |
iminal Appeal No. 6 of 1969.
Appeal from the judgment and order dated May 2, 1968 of the Delhi High Court in Criminal Revision Nos.
339 D of 1965 and 185 D of 1968.
Sardar Bahadur Saharya and Yougindra Khushalani, for the appellant.
section C. Mazumdar and Yogeshwar Dayal, for the respondents.
The Judgment of the Court was delivered by Sikri, J.
This appeal by certificate of fitness granted by the High Court of Delhi arises out of an application under section 488, Cr.
P.C. filed on September 4, 1963, in the Court of Magistrate, 1st Class, Delhi, by four children of the respondent, Nanak Chand.
The first applicant, Chandra Kishore, was born on January 23, 1942, the second, Ravindra Kishore, was born on September 23, 1943, the third Shashi Prabha, was born on February 23, 1947, and the fourth, Rakesh Kumar, was, born on September 21, 1948.
The first two applicants were thus majors at the time of the appli cation, the third though a minor at the time of the application was a major on the date of the order passed by the Magistrate, i.e., on March 26, 1965.
The learned Magistrate allowed the application and ordered the, respondent, Nanak Chand, to pay Rs. 35 p.m. to Chandra Kishore for four months only, Rs. 36 p.m. to Ravindra Kishore for 3 years only in case he continued his medicine studies, Rs. 45 p.m. to Shashi Prabha as her maintenance allowance and education expenses and Rs. 45 p.m. to Rakesh Kumar as his maintenance allowance and education expenses, from March 26, 1965.
Both the applicants and the respondent, Nanak Chand, filed revisions against the order of the Magistrate, to the Additional Sessions Judge, who dismissed the revision petition filed by the respondent, Nanak Chand, and accepted the revision petition of the 567 applicants.
The Additional Sessions Judge submitted the case to the High Court with the recommendation to enhance the maintenance allowance of the applicants in terms of the proposals made by him.
The Additional Sessions Judge observed that the maintenance under section 488 did not include the costs of college education, and therefore he did not propose to allow Chandra Kishore and Ravindra Kishore the expenses of their college education.
But taking into consideration the income of the respondent and the status of the family, the Additional Sessions Judge proposed to allow Chandra Kishore and Ravindra Kishore Rs. 100 p.m. each as maintenance allowance until they finished their courses of M.Com.
and M.B.B.S., respectively.
He further proposed to allow to Rakesh Kumar and Shashi Prabha each a monthly maintenance allowance of Rs. 50 until Shashi Prabha was able to earn or was married, whichever was earlier, and until Rakesh Kumar was able to maintain himself. 'The High Court accepted the reference made by the learned Additional Sessions Judge, and dismissed the criminal revision filed by the respondent.
The High Court granted the certificate under article 134(1) (c) of the Constitution because there is conflict of opinion on the question of the interpretation to be given to the word 'child ' in section 489, Cr.
The learned counsel for Nanak Chand has raised three points before us : first, that section 488, Cr.
P.C. stands impliedly repealed by section 4 of the (78 of 1956) hereinafter referred to as the Maintenance Act insofar as it is applicable to Hindus; secondly, that the word 'child ' in section 488 means a minor; and thirdly, that the maintenance fixed for Chandra Kishore and Ravindra Kishore was based on wrong principles and was excessive inasmuch as expenses for education have been taken into consideration.
Section 4 of the Maintenance Act reads "4.
Save as otherwise expressly provided in this Act, (a). . (b) any other law in force immediately before the commencement of this Act shall cease to apply to Hindus insofar as it is inconsistent with any of the provisions contained in this Act.
" The learned counsel says that section 488 Cr. P.C., insofar as it provides for the grant of maintenance to a Hindu, is inconsistent with Chapter III of the Maintenance Act, and in particular, section 20, which provides for maintenance to children.
We are unable to Sup.
Cl/69 7 568 see any inconsistency between the Maintenance Act and section 488, Cr.
P.C. Both can stand together.
The Maintenance Act is an act to amend and codify the law relating to adoptions and maintenance among Hindus.
The law was substantially similar before and nobody ever suggested that Hindu Law, as in force immediately before the commencement of this Act, insofar as it dealt with the maintenance of children, was in any way inconsistent with section 488, Cr.
The scope of the two laws is different.
Section 488 provides a summary remedy and is applicable to all persons belonging to all religions and has no relationship with the personal law of the parties.
Recently the question came before the Allahabad High Court in Ram Singh vs State(1), before the Calcutta High Court in Mahabir Agarwalla vs Gitia Roy (2) and before the Patna High Court in Nalini Ranjan vs Kiran Ran(3).
The three High Courts have, in our view, correctly come to the conclusion that section 4(b) of the Maintenance Act does not repeal or affect in any manner the provisions contained in section 488, Cr.
On the second point there is sharp conflict of opinion amongst the High Court and indeed amongst the Judges of the same High Court.
In view of this sharp conflict of opinion we must examine the terms of section 488 ourselves.
Section 488(1) reads as follows "488(1).
If any person having sufficient means neglects or refuses to maintain his wife or his legitimate or illegitimate child unable to maintain itself, the District Magistrate, a Presidency Magistrate, a Sub divisional Magistrate or a Magistrate of the first class may, upon proof of such neglect or refusal, order such person +to make a monthly allowance for the maintenance of his wife or such child, at such manthly rate, not exceeding five hundred rupees in the whole, as such Magistrate thinks fit, and to pay the same to such person as the Magistrate from time to time directs.
" We may also set out sub section
(8) of section 488 because some courts have placed reliance on it : "488(8).
Proceedings under this section may be taken against any person in any district where he resides or is, or where he last resided with his wife, or, as the case may be, the mother of the illegitimate child.
" The word 'Child ' is not defined in the Code itself.
This word has different meanings in different contexts.
When it is used in (1) A.I.R. [1963] All. 355.
(2) [1962] 2Cr.
L.J.528.
(3) A.I.R. [1965] Pat.
569 correlation with father or parents, according to Shorter Oxford Dictionary it means : "As correlative to parent.
The offspring, male or female, of human parents.
" Beaumont, C.J., in Shaikh.
Ahmed Shaikh Mahomed vs Fatma(1) observed : "The word "child" according: to its use in the English language has different meanings according to the context.
If used without reference to parentage, it is generally synonymous with the word 'infant ' and means a person who has not attained the age of majority. where the word 'child ' is used with reference to parentage, it means a descendant of the first degree, a son or a daughter and has no reference to age.
In certain contexts it may include descendants of more remote degree, and be equivalent to "issue".
But, at any rate, where the word "child" is used in conjunction with parentage it is not concerned with age.
No one would suggest that gift "to all my children" or "to all the children of A" should be confined to minor children.
In section 488 of the Criminal Procedure Code the word is used with reference to the father.
There is no qualification of age; the only qualification is that the child must be unable to maintain itself.
In my opinion, there is no justification for saying that this section is confined lo children who are under the age of majority.
" We agree with these observations and it seems to us that there is no reason to depart from the dictionary meaning of the word.
As observed by Subba Rao, J., as he then was, speaking for the Court in Jagir Kaur vs Jaswant Singh (2) "Chapter XXXVI of the Code of Criminal Procedure providing for maintenance of wives and children intends to serve a social purpose.
" If the concept of majority is imported into the section a major child who is an imbecile or otherwise handicapped will fall outside the purview of this section.
If this concept is not imported, no harm is done for the section itself provides a limitation by saying that the child must be unable to maintain itself.
The older a person becomes the more difficult it would be to prove that he is unable to maintain himself.
It is true that a son aged 77 may claim maintenance under the section from a father who is 97.
It is very unlikely to happen but if it does happen and the father is (1) T.L.R. , 40.
(2) ; , 84.
570 able to maintain while the son is unable to maintain himself no harm would be done by passing an appropriate order under section 488.
We cannot view with equanimity the lot of helpless children who though major are unable to support themselves because of their imbecility or deformity or other handicaps, and it is not as if such cases have not arisen.
As long ago as 1873, Pearson, J.
In the matter of the Petition of W. B. Todd(1) had to deal with a major son who was deaf and dumb, and he had no hesitation in granting an order of maintenance.
The same conclusion was arrived at by Chevis, J., in 1910 in Bhagat Singh vs Emperor(2) and he allowed maintenance to a young man of about 20 who was very lame having a deformed foot.
We have seen no case in which a man of 77 has claimed maintenance and we think, with respect, that unnecessary emphasis has been laid on the fact that it might be possible for a man of 77 to claim maintenance.
It is not necessary to review all the case law.
The latest judgment which was brought to our notice is that of the Madras High Court in Amirithammal vs Marimuthu(3) in which Natesan, J. has written a very elaborate judgment.
He has referred to all the Indian cases and a number of English cases and statutory provisions both in England and in India.
We are unable to derive any assistance from the statutory provisions referred to by him or from the English Law on the point.
He relied on the use of the word "itself" in section 488 as showing that what was meant was a minor child.
We are unable to attach so much significance to this word.
It may well be that it is simpler or more correct to use the word "itself" rather than use the words "himself or herself.
" We may mention that Das Gupta, J., in Smt.
Purnasashi Devi vs Nagendra Nath (4) and Mudholkar, J., in State vs Ishwarlal(5) came to the same conclusion as we have done.
In view of the reasons given above we must hold that the word "child" in section 488 does not mean a minor son or daughter and the real limitation is contained in the expression "unable to maintain itself." Coming to the third point raised by the learned counsel we are of the view that the learned Additional Sessions Judge and the High Court were right in taking into consideration the existing situation ' the situation being that at the time the order was passe Chandra Kishore was a student of M.Com.
and Ravindra Kishore was a student of M.B.B.S. course.
We need not decide in this (1) [1873] 5 N.W.P. High Court Reports 237.
(2) (3) A.I.R. [1967] Mad. 77.
(4) A.T.R. (5) T.L.R. 571 case whether expenses for education can be given under section 488 because no such expenses have been taken into consideration in fixing the maintenance in this case.
It has not been shown to us that the amount fixed by the learned Additional Sessions Judge and confirmed by the High Court is in any way excessive or exorbitant.
In the result the appeal fails and is dismissed.
R.K.P.S. Appeal dismissed. | The appellant 's four children, the respondents in the appeal, two of whom were majors and two were minors, filed an application under section 488 of the Criminal Procedure Code in September, 1963 for an order requiring the appellant to pay them maintenance.
The Trial Court allowed the application and fixed the monthly amounts to be paid as maintenance to each of the children.
The appellant 's revision application was dismissed but one filed by the respondents was allowed whereby the Additional Sessions Judge submitted the case to the High Court with recommendations to enhance the maintenance allowance.
The High Court accepted, the reference and thereafter, on an application by the appellant granted a certificate under article 134(1)(c) for an appeal to this Court.
It was contended on behalf of the appellant that (i) section 488 Cr.
P.C. was impliedly repealed by section 4 of the Hindu Adoptions and Maintenance Act 78 1956 insofar as it applied to Hindus; (ii) that the word "child" in section 488 means a minor; and (iii) that the maintenance fixed for two of the major children was based on wrong principles and was excessive inasmuch as expenses for education had been taken into consideration.
HELD : Dismissing the appeal : (i)There was no inconsistency between Act 78 of 1956 and section 488 Cr.
P.C. Both could stand together.
The Act of 1956 is an Act to amend and codify the law relating to adoptions and maintenance among Hindus.
The law was substantially similar before when it was never suggested that there was any inconsistency with section 488 Cr.
The scope of the two laws is different.
Section 488 provides a summary remedy and is applicable to all persons belonging to all religions and has no relationship with the personal law of the parties.
[568 A B] Ram Singh vs State, A.I.R. 1963 All. 355; Mahabir Agarwalla vs Gita Roy, ; and Nalini Ranjan vs Kiran Rani, A.T.R. 1965 Pat. 442; approved.
(ii)The word "child" in section 488 does not mean a minor son or daughter and the deal limitation is contained in the expression "unable to maintain itself".
If the concept of majority is imported into the section, a major child who is an imbecile or otherwise handicapped will fall outside the purview of this section.
If this concept is not imported, no harm is done for the section itself provides a limitation by saying that the child must be unable to maintain itself.
The older a person becomes the more difficult it would, be to prove that he is unable to maintain himself.
[569 F H] 566 Shaikh Ahmad Shaikh Mahommad vs Ba Fatma, I.L.R. [1943] Bom.
38, 40; Jagir Kaur vs Jaswant Sinqh ; , 84; in the matter of the Petition of W.B. Todd, (1873) 5 N.W.P. High Court Reports 237; and Bhagat Singh vs Emperor, 6 I.C. 960; referred to.
Purnasashi Devi vs Nagendra Nath, A.I.R. 1950 Cal. 465; and State vs Ishwarlal, I.L.R. ; approved.
Amiritliammal vs Marimuthu, A.I.R. 1967 Mad. 77; disapproved.
(iii)While it was not necessary to decide whether expenses for education can be given under section 488, in the present case, the Court below were right in taking into consideration the situation at the time of passing the order i.e. that the two major children were college students.
[570 G H] |
Criminal Appeal No. 82 of 1967.
Appeal by special leave from the judgment and order dated March 15.
1967 of the Rajasthan High Court in Criminal Appeal No. 219 of 1965.
Sobhag Mal Jain and V.S. Dave, for the appellant.
K.B. Mehta, for the respondent.
The Judgment of the Court was delivered by Hegde, J.
The appellant 's conviction by the learned Additional Sessions Judge, Jodhpur under section 314 read with section 109, Indian Penal Code, having been affirmed by the High Court of Rajasthan, he appeals to this Court after obtaining special leave.
The charge on the basis of which he was tried was that some 689 days prior to May 1, 1963, he abetted one Mst.
Radha at Jodhpur to cause the miscarriage of one Miss Atoshi Dass alias Amola, who as a result of administration of tablets and introduction of "laminaria dento" by the said Mst.
Radha, died on May 1, 1963.
The case for the prosecution is that in about the years 1962 63, the appellant was the 13resident of Gramotthan Pratishthan at Jalore.
Miss Atoshi Dass was a teacher working in Indra Bal Mandir, Tikhi, an institution under the management of the appellant.
She was young and unmarried.
Illicit relationship developed between the aforementioned Atoshi Dass and the appellant as a result of which Miss Atoshi Dass became pregnant.
With a view to cause abortion of the child in her womb, the appellant took Miss Dass to Jodhpur and there attempted to cause the miscarriage mentioned above through one Mst.
Radha.
The attempt was not successful.
The insertion of "laminaria dento" in the private pacts of Miss Dass caused septicaem as a result of which she died in the hospital on May 1, 1963.
The appellant 's case is that he had no illicit relation with Miss Atoshi Dass nor did he abet the alleged abortion.
He denies that Miss Atoshi Dass died as a result of any attempt at abortion.
As seen earlier the appellant was charged and tried for the offence of abetting Mst.
Radha to cause the miscarriage in question but he was ultimately convicted of the offence of abetting Miss Dass in the commission of the said offence.
It may be stated at this stage that one Mst.
Radha was tried along with the appellant in the trial court but she was acquitted on the ground that there was no evidence to show that she had anything to do with the abortion complained of.
Despite the contentions of the appellant to the contrary, we think there is satisfactory evidence to show that the death of Miss. Dass was due to septicaem resulting from the introduction of "laminaria dento" into her private parts.
On this point we have the unimpeachable evidence of Dr. A.J. Abraham.
P.W. 4.
There is also satisfactory evidence to show that the appellant was in terms of illicit intimacy with Miss Dass.
It is true that the principal witness on this point is Miss Chhayadass, P.W. 6, the sister of the deceased, a witness who has given false evidence in several respects.
But as regards the illicit relationship between the appellant and Miss Atoshi Dass, her evidence receives material corroboration from the evidence of P.W. 7, M.B. Sen and P.W. 5.
Misri Lal.
Further it also accords with the probabilities.
of the case.
It is not necessary to go into that question at length as we have come to the conclusion that the appellant is entitled to an acquittal for the reasons to be stated presently.
690 While we are of opinion that there was illicit intimacy between the appellant and the deceased, we are unable to accept the assertion of Miss Chhayadass that the appellant was her only paramour.
D. 3 conclusively proves that the deceased had illicit relationship with one Sood at Delhi.
In the committal court Miss Chhayadass admitted that the address on Exh.
D 3 is in the handwriting of the deceased.
In that court she was positive about it; but in the trial court she went back on that admission.
In many other respects also she had deviated from the evidence given by her in the committal court.
Hence we are unable to.
accept her statement in the trial court that the address found on Exh.
D 3, an inland letter is not in the handwriting of the deceased.
D 3, appears to be a self addressed letter sent by the deceased to one Sood.
The fact that the deceased had more than one paramour is not a material circumstance though it may indicate that the appellant could not have had any compelling motive to abet the abortion complained of.
The .fact that the appellant was on terms of illicit intimacy with the deceased, an unmarried girl and that she later became pregnant through him is without more, not sufficient to connect the appellant with the crime.
From the evidence of Misrilal and Sengupta, it is clear that the appellant and the deceased had gone together to Jodhpur on April 24, 1963.
But from the evidence of Sengupta, it is also clear that the deceased had some work to attend to at Jodhpur.
It is also clear from the evidence of Miss Chhayadass that the deceased and the appellant were going together to Jodhpur and other places off and on.
It may be noted that while returning from Jodhpur to his native place, the appellant left the deceased with Mr. and Mrs. Sengupta.
Hence the circumstance that the appellant and the deceased went together to Jodhpur on April 24, 1963.
cannot be held to be an incriminating circumstance.
This leaves us with the evidence relating to the actual abetment.
On this aspect of the case the only evidence brought to our notice is the evidence of Miss Chhayadass and the letter exhibit P.4.
Miss Chhayadass deposed in the trial court that when the pregnancy of the deceased became noticeable, the appellant told the deceased in the presence of that witness; that he would get the the child aborted through Mst.
Radha.
As mentioned earlier Miss Chhayadass is a highly unreliable witness.
She had admitted in the committal court that she had been tutored by the police to give evidence.
In fact she pointed out a police officer who was in the court as the person who had tutored her.
In the trial court she denied that fact.
There is no gainsaying the fact that she was completely under the thumb of the police.
She deviated from most of the important admissions made by her during her cross examination in the committal court.
Coming to the question of the abetment referred to earlier, this is what she stated during her cross examination in the committing court: 691 "My sister did not tell Madan Raj about her illness (arising from her pregnancy) in my presence.
On being enquired by me about my sister at Jalore I was informed that my sister had gone to Mst.
Radha Nayan in the hospital for treatment.
No talks about it were held before me prior to my talk at Jalore (talks between Madanraj and my sister about treatment).
" According to the admissions made by her in the committal court she came to know for the first time about her sister 's intention to cause miscarriage only after her death.
No reliance can be placed on the evidence of such a witness.
Now coming to Exh.
P.4, this is a letter said to have been written by the deceased sometime before her death intending to send the same to the appellant which in fact was not sent.
It was found in her personal belongings after her death.
There was some controversy before the courts below whether the same is admissible under section 32 (1 ) of the Evidence Act and whether it could be brought within the rule laid down by the Judicial Committee in Pakala Narayana Swami vs Emperor(1).
We have not thought it necessary to go into that question as in our opinion the contents of the said letter do not in any manner support the prosecution case that the appellant instigated the deceased to cause miscarriage.
The letter in question reads thus: "Santi Bhawan 28 4 63.
I went with your letter to.
the father.
Since I could not get money from him, I dropped you a letter.
I went to Mst.
Radha and asked her to give me medicine.
I further said that the money would be received.
She gave me a tablet and told me that injection would be given on receipt of full payment.
This tablet is causing unbearable pain and bleeding but the main trouble will not be removed without the injection.
How can I explain but the pain is untolerable.
I have left Sen 's residence.
He and particularly neighbouring doctor would have come to know everything by my condition, which is too serious.
(Meri is halat se unaki vishesker pas me Daktarji ko sub kuch pata chal jati powon tak ulati ho jati).
Firstly I intended to proceed to Jalore but on reaching the Station I could not dare to proceed.
I feel that you are experiencing uneasiness and trouble for me.
I am causing monetary as well as mental worries to you.
I have been feeling.
this for a considerable longer period.
Please do not be annoyed.
It has become very difficult for me to stay alone for the last several days.
(1) A.I.R. [1939] P.C. 47.
692 Had you accepted me as your better half you would have not left me alone in my such serious condition.
You cannot know what sort of trouble I am experiencing.
Had you been with me I would not have felt it so such.
Please do not be annoyed.
Perhaps no one has given you so much trouble.
I will write all these facts to my mother I will also write about our marriage.
28 4 63 Today is Sunday.
I cannot book a trunk call you the court.
Today I tried on the Phone number of Hazarimal but it was engaged, and latter on it cancelled.
My Pranam.
Yours Ritu.
Today I have taken injection and have come from Shanti Bhawan.
" portion of that letter indicates that the appellant was in any manner responsible for the steps taken by the deceased for causing miscarriage.
No other evidence has been relied upon either by the trial court or by the High Court in support of the finding that the appellant was guilty of the offence of abetting the deceased to cause miscarriage.
For the reasons mentioned above we are of the opinion that there is no legal basis for the conviction of the appellant.
The learned Counsel for the appellant challenged the conviction of the appellant on yet another ground.
As mentioned earlier he 'was charged and tried for the offence of abetting Mst.
Radha to cause abortion of the child in the womb of the deceased but curiously enough he was convicted for abetting the deceased to cause miscarriage.
Abetment as defined in section 107 of the I.P.C., can be by instigation, conspiracy or intentional aid.
If the abetment was that of Mst.
Radha, it could have been only by instigation or conspiracy but if it was an abetment of the deceased, it could either be by instigation or by conspiracy or by intentional aid Throughout the trial the accused was asked to defend himself against the charge on which he was tried.
At no stage he was.
notified that he would be tried for the offence of having abetted the deceased to cause miscarriage.
It is now well settled that the absence of charge or an error or omission in it is not fatal to a trial unless prejudice is caused see Willie (William) Slaney vs The State of Madhya Pradesh(1).
Therefore the essential question is whether there is any reasonable likelihood 693 of the accused having been prejudiced in view of the charge flamed against him.
From what has been stated above one can reasonably come to the conclusion that the accused was likely to have been prejudiced by the charge on the basis of which he was tried.
From the cross examination of the prosecution witnesses, it is seen that the principal attempt made on behalf of the appellant was to show that he had nothing to do with the co accused, Mst.
Radha.
He could not have been aware of the fact that he would be required to show that he did not in any manner abet the deceased to cause miscarriage.
The facts of this case come within the rule laid down by this Court in Faguna Kanta Nath vs The State of Assam(1).
The case of Gallu Sah vs The State of Bihar(2) relied by the High Court is distinguishable.
Therein Gallu Sah was a member of an unlawful assembly.
He was said to have abetted Budi to set fire to a house.
One of the members of the unlawful assembly had set fire to the house in question though it was not proved that Budi had set fire to the house.
Under those circumstances this Court held that the offence with which Gallu Sah was charged was made out.
As observed by Calcutta High Court in Umadasi Dasi vs Emperor(a) that as a general rule, a charge of abetment fails when the substantive offence is not established against the principal but there may be exceptions.
Gallu 's case was one such exception.
For the reasons mentioned above we allow the appeal and acquit the appellant.
He is on bail.
His bail bonds stand cancelled.
V.P.S. Appeal allowed.
(1) [1959] 2 Supp. | The appellant was charged with having abetted one R in causing miscarriage to a woman who died in the. attempt.
R was acquitted but the appellant was convicted of the offence of abetting the deceased woman in the commission of the offence.
The High Court confirmed the conviction.
In appeal to this Court, HELD: The facts of the present case fell within the rule that a charge of abetment fails ordinarily when the substantive offence is not established against the principal offender.
The High Court erred in holding that the rule laid down in Gallu Sah vs The State of Bihar, [1959] S.C.R. 861, applied to the facts of the case.
That was an exceptional case; [693 B D] Faguna Kanta Nath vs State of Assam, [1959] Supp. 2 S.C.R. 1, followed.
Umadasi Dasi vs Emperor, I.L.R. approved.
Further, the appellant cross examined ' the prosecution witnesses only 10 show that he had nothing to do with his co accused R, as he was not aware of .the fact that he would be required to show that he did not in any manner abet the deceased.
Therefore, he was prejudiced by the absence of the charge of abetting the deceased woman and hence, was entitled to an acquittal.
[693 A B] Willie Slaney vs The State of M.P., [1955] 2 S.C.R. 1140, referred to. |
ivil Appeal No. 574 of 1966.
Appeal by special leave from the judgment and order dated September 22, 1964 of the Allahabad High Court in First Appeal No. 39 of 1952.
J.P. Goyal and Sobhag Mal Jain, for the appellants.
K.B.Mehta, for respondent No. 2.
C.J. Suit No. 41 of 1947 was filed in the Court of the Civil Judge, Mathura by the deity Thakur Janki Ballabhji Maharaj, acting through its manager L. Tulsiram, authorised agent of the Bharatpur State, for a decree for possession of the temple of the deity at Brindaban in U.P. and of the temple properties and for an order calling upon the defendant, Ramchand, to account for the realisations of the estate of the deity.
The case of the plaintiffs was that the Ruler of the State of Bharatpur built the temple at Brindaban and installed the idol.
of Thakur Janki Ballabhji Maharaj and dedicated the temple to the deity; that the shebait of the deity who was a paid employee of the State was appointed by the Ruler of the State of Bharatpur; that one Chhotelal was appointed a priest to perform the Worship in the temple under a written agreement dated April 8, 1936; that after the death of Chhotelal on May 13, 1912 Ramchand was appointed the priest of the temple on condition that he shall execute the usual agreement in favour of the State; that Ramchand entered upon the duties as pujari but failed to execute the agreement, and in course of time raised various constructions of his own on the premises in dispute and converted them into private residential buildings, and illegaily used the temple as a lodging house for pilgrims "to the utter detriment, loss and desecration of the deity" and thereby acquired "illegal benefit to himself out of the temple properties"; and that Ramchand was not performing the seva puja of the deity.
The suit was resisted by Ramchand.
He denied that the temple, was built at the expense of the Ruler of the State of Bharatpur or that he Ramchand was appointed to be a priest of the temple by the Ruler of Bharatpur.
He contended that one Ram Narain 636 Kedar Nath had taken a piece of land at Bindraban on rent from the temple of Govindji and after constructing a temple thereon and installing the Thakurji had given it as an offering to Sitaram, ancestor of Ramchand, and had appointed Sitaram as the Manager of the temple; that the temple had since then remained in the management of the descendants of Sitaram, and that he (Ramchand) was in possession of the temple and its properties as "Manager and proprietor".
The trial court dismissed the suit holding that the Ruler of Bharatpur was never the owner of the temple or of the articles mentioned in Sobs.
A and B of the plaint, that the Ruler was also not the founder of the temple nor its shebait; and that the Ruler had never appointed any pujari of this temple and was not authorised to appoint or dismiss such a pujari.
In appeal against the decree passed by the Court of First instance it was urged before the High Court of Allahabad that the trial court erred in dismissing the suit merely on the finding that the Ruler of the State of Bharatpur "had no concern with the construction of the temple or with the installation of the idol in the temple", and that in the suit filed by the deity, having regard to the acts of mismanagement and misappropriation committed by the defendant Ramchand, a decree should have been made in favour of the deity.
Counsel for Ramchand contended that the suit being of the nature of a suit under section 92 of the Code of Civil Procedure could not be instituted without obtaining the sanction.
in writing of the Advocate General and that in any event the second plaintiff, the State of Bharatpur, could not file the suit, since it was not a shebait or the settlor of the temple.
It was common ground before the High Court that the property of the temple was not property of a public trust of a religious or charitable nature.
From the averments made in the plaint it is clear that the suit was filed by the deity against the person in management and it was not a suit filed by the relators.
Section 92 of the Code of Civil Procedure had no application to the suit and the sanction of the Advocate General was not a condition of the initiation of the suit.
The High Court therefore rightly rejected the contention that the suit was not maintainable without the sanction of the Advocate General.
The High Court held that it was open, even to a worshipper, if he possesses sufficient qualifying interest, to start a suit to protect the property of the deity.
Observing that the defendant Ramchand had raised residential buildings of his own in the temple premises and that he was lodging pilgrims in a part of those buildings and was asserting a proprietary title to them and was on that account guilty of conduct detrimental to the interest of the deity 637 and had rendered himself liable to be ejected from the temple and its properties, and that he was unfit to act as pujari, the High Court reversed the decree passed by the trial court and decreed the plaintiffs ' suit for possession of the temple and its properties and restrained the defendant Ramchand by an injunction from interfering with the management of the temple and, performance of worship of the deity.
With special leave, Ramchand has appealed to this Court.
Ramchand has committed several acts of mismanagement and misappropriation of the temple and its properties.
He has set up a personal title to the temple properties and has converted the properties to his own use.
Ramchand is therefore not fit to remain in possession as pujari or as manager of the temple.
The suit is filed by the deity acting through the Manager.
Granting that it is not proved that the Ruler 'of Bharatpur established the temple and installed the deity, there is abundant evidence that the State of Bharatpur had made from time to time large donations for the maintenance of the temple.
The Ruler of Bharatpur had therefore clearly a substantial interest to maintain the suit on behalf of the deity to protect the property.
There is no merit in the appeal and therefore it must fail.
It is, however, necessary to make an effective decree in this appeal.
It may be noticed that even though the suit has been filed and prosecuted on behalf of the State of Bharatpur and later by the State of Rajasthan through its District Magistrate, the temple is situate within the State of U.P. and it would be difficult for the District Magistrate or any other authority acting on behalf of the State of Rajasthan to look after the administration of the temple and to protect its properties from misappropriation.
This is undoubtedly a private trust but the civil courts have jurisdiction to frame a scheme for the management of the temple which is not a public trust.
The Judicial Committee of the Privy Council in Pramatha Nath Mullick vs Pradyumna Kumar Mullick(1) directed that a scheme be framed for the regulation of the worship of the idol even though there was no public trust.
In Asha Bibi and Others vs Nabissa Sahib and Others(2) the Madras High Court held that a suit for removing the trustees of a private trust and for framing a scheme was maintainable.
A similar view was also.
taken by the Calcutta High Court in Shri Mahadeo Jew and Another vs Balkrishna Vyas & Another(3).
The civil court has therefore jurisdiction to frame a scheme for management of the temple and its properties.
The present is, in our judgment, a case in which in exercise of the powers under order 41 rule 33 of the Code of Civil Procedure we should direct (1) 52 I.A. 245.
(2) A.I.R. 1957 Mad.
(3) A.I.R.1952 Cal. 763. 638 that the court of first instance to frame a scheme of management of the temple collections and the income and disbursement of expenses, application of the surplus if any and for that purpose to appoint a manager of the property of the deity and its properties, with authority to take possession of the temple and the properties from the defendant Ramchand and, to administer the property and its income under the directions of the court.
We direct accordingly.
The Court will also take an account of his dealings with the property of the deity from Ramchand and determine his liability and recover the amount found due from him on taking accounts.
The Court will pass appropriate orders with regard to the constructions made by Ramchand and will prevent the property being used for the private benefit of Ramchand or any other person.
The scheme to be framed will be consistent with the law relating to private religious endowments, if any, in force in the State of Uttar Pradesh.
Subject to this modification, the appeal is dismissed with costs.
G.C Appeal dismissed. | The deity Thakur Janki Ballabhji Maharaj installed in a temple at Brindaban brought in the court of Civil Judge Mathura a suit through its manager an authorised agent of the erstwhile Bharatpur State for a decree for possession of the temple and its properties as well as for accounts to be rendered by R the pujari of the temple.
It was alleged in the plaint that the temple had been built by the Ruler of Bharatpur who had dedicated it to the deity.
It was further alleged that R, the defendant who had succeeded the priest originally appointed by the Ruler of Bharatpur had mismanaged and misappropriated the temple properties and had failed to perform the seva puja of the deity.
R in his written statement denied these allegations and contested the suit.
After the merger of Bharatpur State in the State of Rajasthan the suit was prosecuted by the District Magistrate of Bharatpur.
The trial court dismissed the suit but the High Court decreed it.
By special leave the defendant came to this Court.
HELD: (i) The High Court rightly rejected the defendant 's plea based on section 92 of the Code of Civil Procedure.
It was common ground before the High Court that the property of the temple was not property of a public trust of a religious or charitable nature.
From the averments in the plaint it was clear that the suit was flied by the deity against the person in management and it was not a suit filed by the relators.
Section 92 of the Code of Civil Procedure had no application to.
the suit and the sanction of the Advocate General was not a condition of the initiation of the suit.
[636 F G] (ii) The evidence established that the defendant had committed several acts of mismanagement and misappropriation of the temple and its properties He had set up.
a personal title to the temple properties and had converted the properties to his own use.
He was therefore unfit to remain the pujari of the temple.
[637 B C] Granting that it was not proved that the Ruler of Bharatpur established the temple and installed the deity, there was abundant evidence that the State of Bharatpur had made from time to.
time large donations for the maintenance of the temple.
The Ruler of Bharatpur had therefore clearly a substantial interest 'to maintain the suit on behalf of the deity to protect the property.
There was No. merit in the defendant 's appeal and it must fall.
[637 C D] (iii) Since it would be difficult for the District Magistrate of Bharatpur or any.
other authority acting on behalf of the State of Rajasthan to look after the administration of the temple which was situate in the State of 635 U.P. it was an appropriate case for the exercise of the Court 's powers under O. 41 R. 33 of the Code of .Civil Procedure.
The Civil Courts have jurisdiction to frame a scheme for the management of a temple even though it is not a public trust.
[637 H 638 B] Pramatha Nath Mullick vs Pradyumna Kumar Mullick 52 I.A. 245, Asha Bibi & Ors.
vs Nabissa Sahib & Ors.
A.I.R. 1957 Mad.
583 and Shri Mahadeo Jew & Ant.
vs Balkrishna Vyas & Ant.
A.I.R. 1952 Cal. 763, relied on. |
Appeal No. 1733 of 1967.
Appeal by special leave from the Award dated April 10, 1967 of the Industrial Tribunal, Delhi in Reference I.D. No. 241 of 1961.
M.K. Ramamurti, Shyatnala Pappu, Vineet Kumar and Madan Mohan, for the appellants.
S.V. Gupte, Lalit Bhasin, S.K. Mehta and K.L. Mehta, for the respondent.
The Judgment of the Court was delivered by Shelat, J.
Two workmen, Gulab Singh and Satya Pal, were appointed by the respondent company in December 1956 and February 1955 respectively under the designation of copy holders.
It was alleged that they were entrusted with the duties of proofreaders and therefore they claimed that they should be treated as such.
In July 1959 the management issued an order in which the two workmen were described as copy holders.
It was alleged that in spite of this order the management continued to give the workmen the work of proof readers.
A dispute whether the two workmen should be treated as proof readers having arisen and having been espoused by the Delhi Union of Journalists, the Delhi Administration, by a notification dated AUgust 2, 1961 referred it to the Industrial Tribunal, Delhi.
The management contended that the said dispute was an individual dispute and not an industrial dispute and that that being so it was wrongly referred to the Tribunal and the Tribunal had no jurisdiction to adjudicate it.
The Tribunal raised the preliminary issue, namely, whether the dispute relating to the said two workmen was an industrial dispute.
The Tribunal held that 915 it was not an industrial dispute but was only an individual dispute of the two workmen and therefore it had no jurisdiction to adjudicate the said reference.
The workmen obtained special leave from this Court and that is how this apppeal has come up before us for disposal.
Apart from the oral evidence, the appellants relied on two documents, exhibit WWI/A, which purported to be the minutes of a meeting held on November 15, 1960 of 17 working journalists and exhibit WB/1 purporting to be the minutes of a meeting of the executive committee of the Delhi Union of Journalists held on December 1, 1960.
The union maintained that these two resolutions were proof of espousal of the dispute, the first by an appreciable number of the co workers of the two aggrieved workmen and the second by the union and therefore the dispute though originally an individual dispute was converted into an industrial dispute.
The Tribunal rejected exhibit WW1/A, namely, the minutes of the alleged meeting of the 17 working journalists in the employ of the respondent company as unreliable.
The Tribunal next considered whether, even assuming that the said 17 working journalists espoused the cause of the two workmen that espousal transformed the dispute in question into an industrial dispute, in other words, whether they constituted an appreciable number sufficient to change the dispute into an industrial dispute.
At the material time the Branch office of the respondent company at Delhi consisted in all of 388 employees, out of whom 140 were working in the Press.
The working journalists numbered 131, out of whom 63 were outstation correspondents and the remaining 68 were working journalists performing their duties in Delhi and New Delhi.
The Tribunal held that though the said 63 working journalists were outstation journalists they nevertheless belonged to the staff of the respondent company 's Delhi Branch, and therefore, could not be excluded from consideration.
The question which the Tribunal posed to itself was whether 17 out of the said 131 working journalists could be said to be an appreciable number.
According to the Tribunal, even if those 63 outstation correspondents were excluded and only 68 working journalists were considered, 17 of them would not constitute an appreciable number sufficient to convert the said dispute into an industrial dispute.
It also held that mere passing of a resolution without anything done to follow it up was not sufficient to constitute espousal.
There was no evidence that after passing the said alleged resolution on November 15, 1960 anything further was done.
On these facts the Tribunal did not consider the aforesaid resolution, assuming that it was passed, as constituting espousal.
As regards the resolution dated December 1, 1960 the minutes of the meeting of the executive committee of the Delhi Union of Journalists were produced before the Tribunal.
The minutes 916 stated that the meeting after considering the representation made to it by the employees of the Indian Express decided to take up the case of the two workmen and authorised the office bearers of the union to initiate the necessary proceedings.
The Tribunal found that the union initiated a fresh dispute before the Conciliation Officer and that there was no pending case initiated earlier, i.e., before December 1, 1960 by another union as alleged by the appellants which could have been continued by the union.
A copy of the statement of claim filed by the union before the Conciliation Officer was also produced before the Tribunal.
There was evidence that 31 working journalists employed in the respondent company had become the members of the Delhi Union of Journalists.
But they had joined the union after the said order of July 1959.
The Tribunals ' view was that the said 31 working journalists having joined the Delhi Union of Journalists after the cause of action had arisen in July 1959, the said resolution of the union 's executive committee would not constitute espousal as there would be no nexus between the dispute and the union, and therefore, the resolution dated December 1, 1960 did not have the effect of converting the said dispute into an industrial dispute.
Mr. Ramamurti, for the appellants, contended that the resolution dated December 1, 1960 coupled with the fact that the union initiated conciliation proceedings in respect of the demand of the said two workmen was sufficient to transform the dispute into an industrial dispute.
On the other hand, Mr. Gupte, appearing for the company, contended that a dispute which is prima facie an individual dispute may assume the character of an industrial dispute if it is taken up or espoused by an appreciable body of the workmen of the establishment.
Espousal by a union is regarded as sufficient, for, that means that it is an espousal by an appreciable number of workmen in that establishment.
If such a dispute is espoused by an outside union, the workmen of the establishment, appreciable in number, must be members of such a union.
On these contention, the question for our determination is whether the Delhi Union of Journalists can be said to have espoused the dispute of the two.
workmen; if so, whether it did in time, and whether the union not being exclusively a union of the workmen employed in the* respondent company, could espouse the said cause.
The resolution dated December 1, 1960 passed by the executive committee of the union was not disbelieved by the Tribunal.
That, coupled with the fact that the union authorities initiated the conciliation proceeding, must mean that the union had espoused the cause of the two workmen.
The dispute arose in July 1959 when the management refused to treat the two work 917 men as proof readers.
Thereafter the executive committee, after considering a representation made to it by the employees of the respondent company, as the resolution reads, passed the said resolution authorising the office bearers of the union to initiate proceedings in the matter of the said dispute and the secretary accordingly initiated proceedings before the conciliation officer.
In these circumstances, it is not possible to appreciate how the espousal by the union can be said to be beyond time as such espousal can only take place after and not before the dispute arose, or as counsel put it, the cause of action arose.
In The Bombay Union of Journalists vs The Hindu, Bombay(x) this Court in clear terms laid down that the test of an industrial dispute is whether at the date of the reference the dispute was taken up and supported by a union, or by an appreciable number of workmen.
There being no doubt of the union having taken up the cause of the two workmen before the reference the first two parts of the question must be answered in the affirmative.
The next question is whether the cause of a workman in a particular establishment in an industry can be sponsored by a union which is not of workmen of that establishment but is one of which membership is open to workmen of other establishments in that industry.
In Central Provinces Transport Services Ltd. vs Raghunath Gopal Patwardhan(2) this Court noted that decided cases in India disclosed three views as to the meaning of an industrial dispute: (1) a dispute between an employer and a single workman cannot be an industrial dispute, (2) it can be an industrial dispute and (3 ) it cannot per se be an industrial dispute but may become one if taken up by a trade union or a number of workmen.
After discussing the scope of industrial dispute as defined in sec.
2(k) of the Act it observed that the preponderance of judicial opinion was clearly in favour of the last of the three views and that there was considerable reason behind it.
In the Newspapers Ltd. vs The State Industrial Tribunal, U.P.(3) the third respondent was employed as a lino typist by the appellant company.
On an allegation of incompetence he was dismissed from service.
His case was not taken up by any union of workers of the appellant company, nor by any of the unions of workmen employed in similar or allied trades.
But the U.P. Working Journalists Union, Lucknow, with which the third respondent had no concern, took the matter to the Conciliation Board.
On a reference being made to the Industrial Tribunal by the Government the legality of that reference was challenged by the appellant company on the ground that the said dispute could not be treated as an industrial dispute under the U.P. ' which defined by sec. 2 an industrial dispute as having the same (1) ; (2) ; (3) ; 918 meaning assigned to it in sec.
2(k) of the Central Act.
This Court upheld the contention observing that the notification referring the said dispute proceeded on an assumption that a dispute existed between the employer and "his workmen", that Tajammul Hussain, the workman concerned, could not be described as "workmen", nor could the U.P. Working Journalists Union be called "his workmen" nor was there any evidence to show that a dispute had got transformed into an industrial dispute.
The question whether the union sponsoring a dispute must be the union of workmen in the establishment in which the workman concerned is employed or not had not so far arisen.
It seems.
such a question arose for the first time in the case of Bombay Union of Journalists vs The Hindu, Bombay(1).
The decision in that case laid down (1) that the excluded its application to an individual dispute as distinguished from a dispute involving a group of workmen unless such a dispute is made a common cause by a body or a considerable section of workmen and (2) the members of a union who are not workmen of the employer against whom the dispute is sought to be raised cannot by their support convert an individual dispute into an industrial dispute.
Persons who seek to support the cause must themselves be directly and substantially interested in the dispute and persons who are not the employees of the same employer cannot be regarded as so interested.
The Court held that the dispute there being prima facie an individual dispute it was necessary in order to convert it into an industrial dispute that it should be taken up by a union of the employees or by an appreciable number of employees of Hindu, Bombay.
The Bombay Union of Journalists not being a union of the employees of the Hindu, Bombay, but a union of all employees in the industry of journalism in Bombay, its support of the cause of the workman concerned would not convert the individual dispute into an industrial dispute.
The members of such a union cannot be said to be persons substantially and directly interested in the dispute between the workman concerned and his employer, the Hindu Bombay.
But in Workmen v, M/s. Dharampal Premchand(2) this Court, after reviewing the previous decisions, distinguished the case of Hindu, Bombay and held that notwithstanding the width of the words used in sec.
2(k) of the Act a dispute raised by an individual workman cannot become an industrial dispute unless it is supported either by his union or in the absence of a union by a number of workmen, that a union may validly raise a dispute though it may be a minority union of the workmen employed in an establishment that if there was no union of workmen in an establishment a group of employees can raise the dispute which becomes an industrial dispute even though it is a dispute relating to an individual (1) [19623] S.C.R. 893.
(1) [1965] 3 S.C.R. 394.
919 workman, and lastly, that where the workmen of an establishment have no union of their own and some or all of them have joined a union of another establishment belonging to the same, industry, if such a union takes up the cause of the workman working in an establishment which has no union of its own, the dispute would become an industrial dispute if such a union can claim a representative character in a way that its support would make the dispute an industrial dispute.
The evidence of the union secretary was that in 1959 60, 31 working journalists of the respondent company were members of the Delhi Union of Journalists.
It was nobody 's case that these 31 members did not continue to be the members of that union in 1960 61 also.
If the number of working journalists in the respondent company were to be taken as 68 membership of the union by as many as 31 working journalists would certainly confer on the union a representative character.
Even if the number of working journalists were to be taken as 131, it woUld not be unreasonable to say that 31, i.e., about 25 % of them would, by becoming the members of the union, give a representative character to the union.
It is clear from the evidence that at the material time there was no union of working journalists employed by the respondent company.
Therefore, in accordance with the decision in the Workmen vs M/s. Dharampal Premchand(1) the union can be said to have a representative character qua the working journalists employed in the respondent company.
There can be no doubt that the union had taken up the cause of the two workmen by its executive committee passing the said resolution and its office bearers having followed up that resolution by taking the matter before the conciliation officer.
Though the grievance of the two workmen arose in July 1959 when the management declined to accept them as proof readers the union had sponsored their cause before the date of reference as laid down in the case of Hindu, Bombay. 'That being the position it cannot be gainsaid that the dispute was transformed into an industrial dispute as it was sponsored by a union which possessed a representative character vis a vis the working journalists in the employ of the respondent company.
We must, therefore, hold that the Tribunal 's view that the dispute was not an industrial dispute was incorrect.
The award, therefore, will have to be set aside and the appeal of the workmen allowed.
There will be no order as to costs.
R.K.P.S. Appeal allowed. | The workmen were appointed by the respondent company under the designation of copy holders and an order in July 1959, issued by the management, expressly described them as such.
It was alleged however, that despite this order, the management, both before and after the date of the order, had always given to the workmen the work of proofreaders.
A dispute arose whether the two workmen should be treated as proof readers and the executive committee of the Delhi Union of Journalists, at a meeting on December 1, 1966, after considering the representation made to it by the two employees, decided to take up their case and thereafter initiated conciliation proceedings.
Eventually, the Delhi Administration referred the dispute.
to the Industrial Tribunal.
It was contended by the management before the Tribunal that the dispute was an individual dispute and not an industrial dispute so that the Tribunal had no jurisdiction to adjudicate it.
The Tribunal accepted this contention.
Evidence was led before the Tribunal to show that the working Journalists employed by the respondent company numbered 131 out of whom 68 were employed in Delhi.
Out of these, 31 were members of the Delhi Union of Journalists which was an outside union and which they had joined after July 1959.
The Tribunal 's view was that the 31 working journalists having joined the Union *after the cause of action had arisen in July 1959, the resolution of the union 's executive committee would not constitute espousal of the workmen 's dispute as there would be no nexus between the dispute and the Union, and therefore, the resolution dated December 1, 1960 did not have the effect of convening the dispute into an industrial dispute.
In appeal to this Court by special leave, HELD: The Tribunal 's view that the dispute was not an industrial dispute, was incorrect.
Bombay Union of Journalists vs The Hindu, Bombay, ; , Central Provinces Transport Services Ltd. vs Raghunath Gopal Patwardhan; , , Newspapers Ltd. vs State Industrial Tribunal U.P., ; and Workmen vs M/s. Dharampal Premchand, [1965] 3 S.C.R. 394, referred to.
The espousal by the union could not be said to be beyond time as such espousal could only take place after and not before the dispute arose or the cause of action arose.
The test of an industrial dispute is whether at the date of the reference the dispute was taken up and supported by a union, or by an appreciable, number of workmen.
In the present case this test was clearly satisfied.
[917 C] If the number of working journalists in the respondent company were to be taken as 68, membership of the union by as many as 31 working journalists would certainly confer on the union a representative character.
Even if the number of working journalists were to be taken as 131, it 914 would not be unreasonable to say that 31, i.e. about 25% of them would, by becoming the members of the union, give a representative character to the union.
At the material time there was no union of working journalists employed by the respondent company.
Therefore, in accordance with the decision in the Workmen vs M/s. Dharampal Premchand the union could be said to have a representative character qua the working journalists employed in the respondent company.
The union had taken up the cause of the two workmen by its executive committee passing a resolution and its office bearers having followed up that resolution by taking the matter before the conciliation officer.
Though the grievance of the two workmen arose in July 1959, when the management declined to accept them as proof readers the union had sponsored their cause before the date of reference as laid down in the case of The Hindu, Bombay. 'That being the position it could not be gain said that the dispute was transformed into an industrial dispute as it was sponsored by a union which possessed a representative character vis a vis the working journalists in the employ of the respondent company.
[919 C G] |
ivil Appeal No. 850 of 1966.
870 Appeal by special leave from the judgment and decree dated March 5, 1965 of the Bombay High Court in First Appeal No. of 1963.
section Sorabli, Bhuvanesh Kumari and J.B. Dadachanji, for the appellant.
The respondent did not appear.
The Judgment of the Court was delivered by Ramaswami, J.
This appeal is brought by special leave fro.m the judgment of the.
Bombay High Court dated March 5, 1965 in Appeal No. 415 of 1963.
Shalkh Hassan Ibrahim (hereinafter referred to as the missing seaman) was employed as a deck hand, a seaman of category II on the ship sections "Dwarka" which is owned by the British India Steam Navigation Company Limited of which the appellant is the Agent.
The Medical Log Book of the shop shows that on December 13, 1961 the missing seaman complained of pain in the chest and was, therefore, examined, but nothing abnormal was detected clinically.
The Medical Officer on board the ship prescribed some tablets for the missing seaman and he reported fit for work on the next day.
On December 15, 1961, however, he complained of insomnia and pain in the chest for which the Medical Officer prescribed sedative tablets.
The official Log Book of the ship shows that on December 16, 1961 when the ship was in the Persian Gulf the missing seaman was seen near the bridge of the ship at about 2.30 a.m.
He was sent back but at 3 a.m. he was seen on the Tween Deck when he told a seaman on duty that he was going to bed.
At 6.15 a.m. he was found missing and a search was undertaken.
At 7.35 a.m. a radio message was sent by the Master of the ship.
saying: "One seaman missing between Khoramshahr and Ashar STOP May be in river STOP All ships please keep look out".
The ship arrived alongside Ashar Jetty at 8 a.m. when a representative of Messrs Gray, Mackenzie & Co. Ltd., who are the agents for the British India Steanm Navigation Co. Ltd., in the Persian Gulf was informed that the said seaman was missing.
The representative in turn passed on the information to the local police and the Port authorities.
The last entry in the log book shows that at 4 p.m. an inquiry was held on board the ship by the local police and the British Consul General.
On a suggestion made by the latter, the personal effects of the missing seaman were checked and sealed by the Consulate authorities for being deposited with the Shipping Master, Bombay.
On February 20, 1962 the respondent filed an application under section 3 of the Workmen 's Compensation Act (Central Act 18 of 1923) (hereinafter referred to as the Act) claiming compensation of Rs. 4,810/ for the death of his son, the missing seaman, which 871 according to him, occurred on account of a personal injury caused by an accident arising out of and in the course of his employment.
The appellant put in a written statement on April 26, 1962 and disputed the respondent 's claim on the ground that there was nothing to show that the seaman was in fact dead, that the death, if any, was not caused in the course of the employment, that in any event the death could not be said to have been caused by an accident which arose out of employment and that the probabilities were more consistent with a suicidal death than with an accidental death.
But the appellant did not lead oral evidence at the trial of the claim.
The Additional Commissioner, however, inspected the ship on January 23, 1963.
By his judgment dated February 6, 1963 held that there was no evidence to show that the seaman was dead and there was in any event no evidence to justify the inference that the death of the missing seaman was caused by an accident which arose out of employment.
In the course of his judgment the Additional Commissioner observed as follows: "Now in the present case what is the evidence before me ? It is argued on behalf of applicant that I must presume that the man fell down accidentally.
From which place did he fall down ? How did he fall down ? At what time he fell down ? Why was he at the time at the place from which he fell down ? All these questions, it is impossible to answer.
Am I to decide them in favour of the applicant simply because his 'missing ' occurs in the course of his employment ? In my opinion there is absolutely no material before me to come to a conclusion and connect the man 's disappearance with an accident.
There are too many missing links.
Evidence does not show that it was a stormy night.
I had visited the ship, seen the position of the Bridge and deck and there was a bulwark more than 31/2 feet.
The man was not on duty.
Nobody saw him at the so called place of accident.
In these circumstances I am unable to draw any presumption or conclusion that the man is dead or that his death was due to an accident 'arising out of his employment.
Such a conclusion, presumption or inference would be only speculative and unwarranted by any principle of judicial assessment of evidence or permissible presumptions.
" The Additional Commissioner, however, negatived the contention of appellant that the death, if any, was caused by the seaman 's voluntary act.
The respondent preferred an appeal on April 17, 1963 to the High Court from the judgment of the Additional Commissioner dated February 6, 1963.
At the hearing of the appeal it was agreed that the appellant would pay to the 872 respondent a sum of Rs. 2,000/ as and by way of compensation in any event and irrespective of the result of the appeal.
The respondent agreed to accept the sum of Rs. 2,000/ .
But in view of the serious and important nature of the issues.
the High Court proceeded to decide the questions of law arising in the appeal.
By his judgment dated March 5, 1965 Chandrachud J., allowed the appeal and reversed the judgment of the Additional Commissioner and granted the application for compensation.
The view taken by Chandrachud J., was that the death of the seaman in this case must be held to have occurred on account of an accident which arose out of his employment.
The principal question that arises in this appeal is whether the accident arose in the course of employment and whether it arose out of employment within the meaning of 'section 3 of the Act which states: "(1) If personal injury is caused to a workman by accident arising out of and in the course of his employment, his employer shall be liable to pay compensation in accordance with the provisions of this Chapter: Provided that the employer shall not be so liable (a) in respect of any injury which does not result in the total or partial disablement of the workman for a period exceeding three days; (b) in respect of any injury, not resulting in death, caused by an accident which is directly attributable (i) the workman having been at the time thereof under the.
influence of drink or drugs, or (ii) the willful disobedience of the workman to an order expressly given, or to a rule expressly framed, for the purpose of securing the safety of workmen, or (iii) the willful removal or disregard by the workman of any safety guard or other device which he knew to have been provided for the purpose of securing the safety of workmen.
To come within the Act the injury by accident must arise both out of and in the course.
of employment.
The words "in the course of the employment" mean "in the course of the work which the workman is employed to do and which is incidental to it.
" The words "arising out of employment" are understood to mean that "during the course.
of the employment, injury has resulted from some risk incidental to the duties of the service, which unless engaged in the duty owing to the master, it is reasonable 873 to believe the workman would not otherwise have suffered." In other words there must be a causal relationship between the accident and the employment.
The expression "arising out of employment" is again not confined to the mere nature of the employment.
The expression applies to employment as such to its nature, its conditions, its obligations and its incidents.
If by reason of any of these factors the workman is brought within the scene of special danger the injury would be one which arises 'out of employment '.
To put it differently if the accident had occurred on account of a risk which is an incident of the employment, the claim for compensation must succeed, unless of course the workman has exposed himself to an added peril by his own imprudent act.
In Lancashire and Yorkshire Railway Co. vs Highley(1) Lord Sumner laid down the following test for determining whether an accident "arose out of the employment": "There is, however, in my opinion, one test which is always at any rate applicable, because it arises upon the very words of the statute, and it is generally of some real assistance.
It is this: Was it part of the injured person 's employment to hazard, to suffer, or to do that which caused his injury ? If yea, the accident arose out of his employment.
If nay, it did not, because, what it was not part of the employment to hazard, to suffer, or to do, cannot well be the cause of an accident arising out of the employment.
To ask if the cause of the was within the sphere of the employment, or was one of the ordinary risks of the employment, or reasonably incidental to the employment, or conversely, was an added peril and outside the sphere of the employment, are all different ways of asking whether it was a part of his.
employment, that the workman should have acted as he was.
acting or should have been in the position in which he was, whereby in the course of that employment he sustained injury.
" In the case of death caused by accident the burden of proof rests upon the workman to prove that the accident arose out of employment as well as in the course of employment.
But this does not mean that a workman who comes to court for relief must necessarily prove: it by direct evidence.
Although the onus of proving that the injury by accident arose both out of and in the course of employment rests upon the applicant these essentials may be inferred when the facts proved justify the inference.
On the one hand the Commissioner must not surmise, conjecture or guess; on the other hand, he may draw an inference from the proved facts so long as it is a legitimate inference.
It is of course impossible to.
lay down any rule as to the degree of (1) 874 proof which is sufficient to justify an inference being drawn, but ' the evidence must be such as would induce a reasonable man to draw it.
Lord Birkenhead L.C. in Lancaster vs Blackwell Colliery Co. Ltd., ( 1 ) observed: "If the facts which are proved give rise to conflicting inferences of equal degrees of probability so that the choice between them is a mere matter of conjecture, then, of course, the applicant fails to prove his case because it is plain that the onus in these matters is upon the applicant.
But where the known facts are not equally consistent, where there is ground for comparing and balancing probabilities as to their respective value, and where a reasonable man might hold that the more probable conclusion is that for which the applicant contends, then the Arbitrator is justified in drawing an inference in his favour." In cases of the unexplained drowning of seamen, the question has often arisen as to whether or not there was evidence to justify the inference drawn by the Arbitrator that the seaman met his death through accident arising out of and in the course of his employment.
The question was considered by the House of Lords in Kerr or Lendrum vs Ayr Steam Shipping Co. Ltd.(a) in which the steward of a ship, which was in harbour, was lying in his bunk, when he was told by the captain to prepare tea for the crew.
He was shortly afterwards missing, and the next day his dead body, dressed ' in his underclothes only, was found in the sea near the ship.
The bulwarks were 3 feet 5 inches above the deck.
The steward was a sober man, but was subject to nausea.
Murder and suicide were negatived by the Arbitrator, who drew the inference that the deceased left his bunk, went on deck, and accidentally fell overboard and was drowned.
He accordingly held that the accident arose out of and in the course of his employment as steward.
The Court of Sessions reversed his decision on the ground that there was no evidence to support it.
The House of Lords (Earl Lorebum, Lord Shaw of Dunfermline and Lord Parmoor, Lord Dunedin and Lord Atkinson dissenting), however, upheld the decision of the Arbitrator on the ground that, although upon the evidence it was open to him to have taken a different view, his conclusion was such as a reasonable man could reach.
"I should state my main proposition thus," said Lord Shaw of Dunfermline, "that we in this House are not considering whether we would have come to the same conclusion upon the facts stated as that at which the (1) 1918 W.C. Rep. 345.
(2) [1195] A.C. 217.
875 learned Arbitrator has arrived.
Our duty is a very different, a strikingly different one.
It is to consider whether the Arbitrator appointed to be the judge of the facts, and having the advantage of hearing and seeing the witnesses, has come to a conclusion which could not have been reached by a reasonable man." Lord Parmoor said: I wish to express no opinion either way on the reasonableness of the finding in itself as long as it is possible finding for a reasonable man," whilst Earl Loreburn observed that they should regard these awards in a very broad way and constantly remember that they were not the tribunal to decide." In the case of unexplained drowning of seamen, the English Court of Appeal have drawn some very fine distinctions.
In Bender vs Owners of S.S. "Zent"(1) the chief cook on board a steamship fell overboard and was drowned while the ship was on the high seas.
He was seen at 5.25 a.m. looking over the side; 5.30 a.m. was his usual time for turning out; and he was last seen at 5.35 a.m. going aft.
The weather was line at the time, it was daylight, the ship was steady, and there was no suggestion that the duties of the deceased would lead him into any danger.
There was a 4 ft. rail and bulwark all round the ship and there was no evidence to show how the deceased had fallen overboard.
The County Court Judge drew the inference that his death was caused by an accident arising out of and in the course of his employment, but the Court of Appeal held that there was no evidence to warrant such inference, Cozens Hardy, M.R. pointing out that, although it was conceivable that he might have been engaged on some ship 's work, it was equally conceivable that he had been larking or had committed suicide.
Bender 's case(1) was followed in Marshall vs Owners of S.S. "Wild Rose(2) where an engineer came on board his vessel, which was laying in a harbour basin, shortly after 10 p.m. Steam had to be got up by midnight.
He went below and took off his clothes, except his trousers, shirt and socks.
It was a very hot night, and he subsequently came out of his berth, saying that he was going on deck for a breath of fresh air.
Next morning his dead body was found at the side of the vessel, just under the place where the men usually sat.
It was held by the Court of Appeal, reversing the County Court Judge, that there was no legitimate ground for drawing the inference that the engineer died from an accident ,arising out of his employment.
Farwell, L.J. said: "If an ordinary sailor is a member of the watch and is on duty during the night and disappears, the in ference might fairly be drawn that he died from an acci (1) (2) [1909] 2 K.B. 46.
876 dent arising out of his employment.
But if, on the other hand, he was not a member of the watch, and was down below and came up on deck when he was not required for the purpose of any duty to be performed on deck, and disappeared without our knowing anything else, it seems to me that there is absolutely nothing from which any Court could draw the inference that he died from an accident arising out of his employment." This decision was upheld by the House of Lords by a majority of one (Lord Loreburn, L.C. and Lord James of Hereford dissenting) Lord Shaw of Dunfermline saying: "The facts in every case may leave here and there a hiatus which only inference can fill.
But in the present case, my Lords., the name of inference may be apt to be given to what is pure conjecture.
What did the sailor Marshall do when he left his berth and went on deck ? Nobody knows.
All is conjecture.
Did he jump overboard, walk overboard, or fall overboard ? One can infer nothing, all is conjecture.
Was there an accident at all, or how and why did the deceased unhappily meet his fate ?.
There can be, in my view, nothing dignified with the name of an inference on this subject, but again only conjecture.
" But in Rice vs Owner of Ship "Swansea Vale" (1) where the deceased was a "seaman" in the strict sense of the term that is to say, one whose duty it was to work on deck and not a ship is cook, 'as in Bender 's case, nor an engineer as in Marshall 's case, a different conclusion was arrived at.
In that case the chief officer of a vessel, who was on duty on deck, disappeared from the ship in broad daylight.
No. one saw him fall overboard, but there was evidence that not long before he had complained of headache and giddiness.
It was held, (Buckley, L.J. dissenting) that there was evidence from which the Court might infer that he fell overboard from an accident arising out of and in the course of his employment.
The cases of Bender and Marshall were distinguished, as in those cases the men 's duties were below deck and at the time they lost their lives they had certainly no duties which called them on the deck.
In the House of Lords, Lord Lorebum, L.C. having discussed the various things that might have happened, said: "The other alternatives were suicide or murder.
If you weigh the probabilities one way or the other, the probabilities are distinctly greater that this man perished through an accident arising out of and in the course of his employment.
" (1) 877 In Gatton vs Limerick Steamship Co.(1) a night watchman on board a vessel, whose hours of duty were from 7 p.m. to 7 a.m. when he awoke the crew, was last seen on board at 6 a.m. but on that morning he did not awake the crew.
His cap was.
found on the deck, and his body was found in the harbour some months afterwards.
The County Judge held that it was not proved that the accident arose "out of ' his employment and the Court of Appeal on the ground that this was a finding of fact with evidence to support it, refused to interfere.
Holmes, L.J., however, stated that the County Court Judge might have arrived at a different conclusion of fact, whilst Cherry, L.J., said that, if he had been the Arbitrator, he would have found that the deceased had met with his death by accident arising out of and in the course ' of his employment.
In another similar case Rourke vs Mold & Co. (2) a seaman disappeared during his spell of duty at the wheel in the wheel house in the centre of the flying deck and was not afterwards seen.
The night was rough, the sea choppy but the vessel was steady.
The flying deck was.
protected by a rail.
There was no evidence as to how the man met his death and in spite of the presumption against suicide the County Court Judge was unable to draw the inference that the death was due to accident.
It was held by the Court of Appeal that in the circumstances the conclusion of the County Court Judge was right.
At p. 321 of the Report O 'Brien, L.C. said: "In this case we cannot interfere with the finding of the County Court Judge.
The post of duty of the deceased was at the wheel and to steer a certain course until ordered to change it, but nobody knows how the man disappeared, or how he came to leave his post.
It is conceivable that he may have fallen overboard in such circumstances as to entitle his widow to claim compensation on the ground that his death was due to an accident arising out of and in the course of the employment; but the onus of proof is on the applicant.
That onus is not discharged by asserting that we must assume that the deceased was at his allotted employment when he fell overboard, although the natural inference would be that he was not, and that we should then draw the conclusion that the accident arose out of and in the course of the employment.
" In Simpson V.L.M. & section Railway Co.(3) Lord Tomlin reviewed all the previous authorities and stated the principle as follows: " . from these passages to which I have referred I think this rule may be deduced for application to (1) (2) [1917] 2 It.
Rep. 318 at 321.
(3) 878 that class of case which may be called unexplained accident cases namely, that where me evidence establishes that in the course of his employment the workman properly in a place to which some risk particular thereto attaches and an accident occurs capable of explanation solely by reference to that risk, it is legitimate, notwithstanding the absence of evidence as to the immediate circumstances of the accident, to attribute the accident to that risk, and to hold that the accident arose out of the employment; but the inference as to the origin of the accident may be displaced by evidence tending to show that the accident was due to some action of the workman outside the scope of the employment.
Such a rule so stated seems to me to be consistent with all the previous decisions of your Lordships ' House including Marshall vs Owners of S.S. Wild Rose(1) where there was some evidence from Which it could be inferred that the seaman who fell overboard had by action of his own outside his employment added a peril to his position.
" In the same case Lord Thankerton expressed the principle in similar language.
Lord Thankerton said at p. 371 of the Report: " . the principle to be applied in such cases is that if the accident is shown to have happened while the deceased was in the course of his employment and at a place where he was discharging the duties of his employment, and the accident is capable of being attributed to a risk which is ordinarily inherent in the discharge of such duties, the arbitrator is entitled to infer, in the absence of any evidence tending to an opposite conclusion, that the accident arose out of the employment." In a later case in the House of Lords, Rosen vs
S.S. "Querous" :(Owners) Lord Buckmaster explained that in that passage in Lord Thankerton 's speech in Simpson 's case(2) the place referred to was not the exact spot at which the accident may have occurred, but meant, in that case the train on which the workman was traveling and in the later case in the House of Lords the ship on which the workman was employed.
The same principle applies in Indian law as the language of section 3 of the Indian Act is identical with section 1 of the English Workmen 's Compensation Act of 1925.
What are the facts found in the present case ? Shaikh Hassan Ibrahim was employed as a deck hand, a seaman of category II on the ship.
The medical log book of the ship showed that on (1) (2) 879 December 13, 1961 Shaikh Hassan complained of pain in the chest and was, therefore, examined, but nothing abnormal was detected clinically.
The Medical Officer on board the ship prescribed some tablets for Shaikh Hassan and he reported fit for work on the next day.
On the 15th, however, he complained of insomnia and pain in the chest for which the Medical Officer prescribed sedative tablets.
The official log book of the ship shows that on the 16th when the ship was in the Persian Gulf, Shaikh Hassan was seen near the bridge of the ship at about 2.30 a.m.
He was sent back but at 3 a.m. he was seen on the Tween Deck when he told a seaman on duty that he was going to bed.
At 6.15 a.m. he was found missing and a search was undertaken.
The dead body, however, was not found either on that day or later on.
The evidence does not show that it was a stormy night.
The Commissioner made a local inspection of the ship and saw the position of the bridge and deck and found that there was a bulwark more than 31/2 feet.
Nobody saw the missing seaman at the 'so called place of accident.
The Additional Commissioner held that there was no material for holding that the death of the seaman took place on account of an accident which arose out of his.
employment.
In our opinion the Additional Commissioner did not commit any error of law in reaching his finding and the High Court was not justified in reversing it.
For these reasons we hold that this appeal must be allowed and the judgment of the Bombay High Court dated March 5, 1965 must set be aside.
R.K.P.S. Appeal allowed. | S who was employed as a deck hand on a ship was found missing on board.
The respondent filed an application under section 3 of the Workmen 's Compensation Act claiming compensation for the death of S which according to him occurred on account of a personal injury caused by an accident arising out of and in the course of employment.
The Additional Commissioner held that there was no evidence to show that the seaman was dead and there was in any event no evidence to justify the inference that the death of the seaman was caused by an accident which arose out of employment.
The High Court reversed the judgment of the Additional Commissioner.
In appeal to this Court, HELD: The Additional Commissioner did not commit any error of law in reaching his findings and the High Court was not justified in reversing them.
To come within the Act the injury by accident must arise both out of and in the course of employment.
The words "in the course of employment" mean in the course of work which the workman is employed to do and which is incidental to it.
The words "arising out of the employment" are understood to mean that during the course of the employment, injury has resulted from some risk incidental to the duties of the service, which, unless engaged in the duty owing to the master, it is reasonable to believe the workman would not otherwise have suffered.
The expression is not confined to the mere nature of the employment but applies to the employment as such to its nature, its conditions, its obligations and its incidents.
[872 H] Although the onus of proving that the injury by accident arose both out of and in the course of employment rests upon the applicant these essentials may be inferred when the facts proved justify the inference.
On the one hand the Commissioner must not surmise, conjecture or guess; on the other hand he may draw an inference from the proved facts so long as it is a legitimate inference.
The evidence must be such as would induce a reasonable man to draw the inference.
[873 H] Lancashire and Yorkshire Railway Co. vs Highley, , Lancaster vs Blackwell Colliery Co. Ltd. 1918 W.C. Rep. 345, Kerr or Lendrum vs Ayr Steam Shipping Ca.
Ltd. , Bender vs Owners of S.S. "Zeni" [1909] '2 K.B. 41, Marshall vs Owners of S.S. "Wild Rose", , Rice vs Owners of Ship "Swansea Vale", [1912] A.C. 238, Gatton vs Limerick Steamship Co. , Rourke vs Hold & Co. [1917] 2 Ir.
Rep. 318 at 321 and Simpson vs L.M. & section Railway Co. , referred |
Appeals Nos. 448 and 449 of 1959.
Appeals by special leave from the judgment and order dated February 12, 1958, of the Patna High Court in Misc.
Judicial Cases Nos. 679 and 680 of 1955.
A. V. Viswanatha Sastri and Naunit Lal, for the appellant (In both the appeals).
A. N. Kripal and D. Gupta, for the Respondent (In both the appeals).
January 5.
The Judgment of the Court was delivered by KAPUR, J.
These appeals by the assessee are brought against two judgments and orders of the High Court of Judicature at Patna in Income tax references under section 66(2) of the Income Tax Act answering the questions in the negative and against the assessees.
The questions were: (1). "Whether on the facts and circumstances of this case Rs. 72,963 12 0 was a revenue expenditure deductible under section 10(2)(iii) or under section 10(2)(xv) of the Indian Income Tax Act?" (2). "Whether on the facts and circumstances of this case Rs. 76,526 1 3 was a revenue expenditure deductible under section 10(2)(iii) or under section 10(2)(xv) of the Indian Income tax Act?" The facts of the appeals are these: The appellant was an employee of M/s. Karam Chand Thapar & Bros. and for each of the accounting years relating to the assessment years 1947 48 and 1948 49 his salary was Rs. 10,572.
He also had an income of Rs. 500 from shares in certain joint stock companies.
On December 20, 1945, he entered into a contract with 361 Bengal Nagpur Coal Company Ltd., for raising coal from Bhaggatdih Colliery, Jharia and actually started his business from January 1, 1946.
Evidently he did not have the requisite funds for his business and therefore in order to finance it, he entered into an agreement with the Mohini Thapar Charitable Trust on February 25, 1946.
The trust is a public charitable trust, which was created by Lala Karam Chand Thapar, who constituted himself as the Managing Trustee.
The relevant terms of this agreement between the appellant and the trust were that the trust was to advance a sum upto Rs. 11 lacs, the contract was to be "carried in accordance of the policy" settled between the appellant and the trust; the trust could withdraw its money at any time and to stop further advances; the trust was not to be liable for any losses; the appellant was to send monthly returns to the trust and the seventh clause was "that in consideration of the trust having agreed to finance my said contract business up to Rs. 11/2 lacs I have agreed to pay to the trust interest on the amount from time to time owing to the trust in respect of the monies to be advanced as above at the rate of 6 p.c. per annum in addition to a sum equivalent to 11/16th of the net profits of this business of mine.
" In pursuance of this agreement the appellant, besides interest, paid to the trust the sum of Rs. 72,963 for the first accounting year and Rs. 76,526 1 3 for the second accounting year corresponding to years of assessment 1947 48,1948 49 and claimed these amounts as allowable deductions under section 10(2)(iii) or under section 10(2)(xv) of the Income tax Act.
The amount of interest has been allowed but the claim in regard to the other sums paid was disallowed by the Income tax Officer on the ground that the agreement was not genuine and bona fide and that it was not prompted by ordinary business considerations.
The matter was taken in appeal to the Appellate Assistant Commissioner who upheld the order of the Income tax Officer.
An appeal to the Income tax Appellate Tribunal was also dismissed and so was an application 46 362 for reference under section 66(1), but the High Court directed the Tribunal to state the case on the questions set out above.
For the two assessment years the question was the same excepting for the amounts claimed as allowable deductions.
In its order dated April 4, 1955, the Appellate Tribunal had found that the payments were not for the purpose of the business and that taking into account the nature of the accounts, the nature of the payments and the relationship between the parties, it could not be said that the amounts were wholly and exclusively laid out for the purpose of the business and therefore rejected the claim.
In the statement of the case the Tribunal has said that the average amount which had been advanced by the trust to the appellant in the first year was Rs. 18,100 and the payments made to the trust in the two years were therefore a share of profits and not expenditure laid out wholly and exclusively for the purposes of the business.
The High Court approached the question from the same angle.
It was of the opinion that the question should be determined on principles of ordinary commercial trading and because the Managing Trustee was in a dominating position and only a small sum of money i.e., Rs. 18,100 on an average had been advanced, the payment of Rs. 72,963 in addition to interest was an absurdly large sum which with the interest paid work ed) out at about 400% interest.
The High Court also took into consideration the fact that the appellant was an employee of Lala Karam Chand or his company.
Put in their own words the High Court observed "having regard to the relationship between the parties and having examined the clauses of the agreement of the 25th February, 1946, between the assessee and the board of trustees I am of the opinion that the real legal position in this case is that there is a joint adventure between the parties, a quasi partnership which falls something short of partnership and that the arrangement between the parties was that the amount of profits should be ascertained and then they shall divide it up in certain specified proportions".
363 The payments, therefore, did not fall within section 10(2) (xv).
The question was therefore answered in the negative and against the assessee.
The appellant has come in appeal to this Court by special leave.
As far as the record goes at the relevant time the appellant was a person of comparatively small means.
No doubt he was getting a salary of Rs. 10,572 a year and had about Rs. 500 from his share holdings but beyond that he does not seem to have had any other means.
There is nothing to show on the record that he had any security to offer or did offer for the money that he was borrowing.
Thus the trust was lending monies to the extent of Rs. 11/2 lakhs without security and upon a venture which might or might not have been successful.
The Tribunal and the High Court seem to have fallen into an error by taking a mean of the advances made by the Trust to the appellant during the first accounting year.
The record shows that the advances were very considerable in the first year ranging from Rs. 12,000 in January 1946 to Rs. 1,86,000 in July of that year and in the following months of that year they ranged from Rs. 59,000 to Rs. 7,000.
In the following years beginning from the end of 1946 to 1953 considerable sums of money had been advanced which ranged on an average from Rs. 1,97,000 in 1947 to Rs. 3,17,000 in 1953.
In regard to 1947, the Tribunal has found that the average amount of loan was Rs. 1,20,317 but according to the figures supplied by the appellant in his petition for special leave to appeal to this Court, the average comes to Rs. 1,97,919.
In any case very considerable sums of money had been advanced by the Trust and as we have said above to a person who was not a businessman, who neither gave nor is shown to have been able to give any security.
The agreement between the appellant and the trust has to be considered in the context of those circumstances and if taking all the surrounding circumstances into consideration the trust found it necessary to have control over the working and over the finances and had offered stringent conditions it is not a matter which can be considered to be abnormal.
364 Another matter which was taken into consideration by the Tribunal was that the amounts claimed as deductible items were shown as a share of profits of the trust which had been debited in the appellant 's profit and loss appropriation account or in other words the appellant as per his accounts admitted that it was an appropriation of the profits to the trust.
The Tribunal thus was of the opinion that the interest to be received by the Trust was 11/16 part of the profits of the appellant 's business and that the method of accounting clearly showed that the appellant was only parting with the share of profits.
This, in our opinion, is an erroneous approach to the question.
The case has to be decided according to the tenor of the document as it stands and the circumstances of the case.
The genuineness of the document has not been challenged though an effort was made by the Revenue to so construe the document and so read the facts as to make both the amounts liable to tax in the hands of the appellant.
As to what is a deductible expense has to be viewed in the circumstances of each case.
In Commissioner of Income tax vs Chandulal Keshavlal (1) this Court observed that in deciding whether a payment of money is a deductible expenditure, one has to take into consideration the question of commercial expediency and the principles of ordinary commercial trading.
If the payment or expenditure is incurred for the purpose of the trade of the assessee it does not matter that the payment may enure for the benefit of a third party.
Another test laid down in that case was whether the transaction is properly entered into as a part of the assessee 's legitimate commercial undertaking in order to facilitate the carrying out of its business and it is immaterial that a third party also benefits thereby.
Thus in cases like the present one, in order to justify the deduction the sum given up must be for reasons of commercial expediency.
It may be voluntary but so long as it is incurred for the assessee 's benefit e.g. the carrying on of his business, the deduction would be claimable.
In Commissioner of Income tax, (1) 365 Bombay vs Jaggannath Kissonlal (1) the assessee executed a promissory note jointly with another person in order to raise the money for himself and for the other.
The other person became insolvent and the assessee had to.
pay the whole amount and claimed that amount as an allowable deduction under section 10(2)(xv) and it was found that it was a practice in the Bombay market to borrow money on such promissory notes and there was an element of mutuality in the transaction.
The loss sustained by the assessee was allowed as a deductible item on the basis that a commercial practice of financing the business by borrowing money on joint and several liability was established.
In another case decided by this Court M/s. Haji Aziz & Abdul Shakoor Bros. vs The Commissioner of Income tax (2) it was held that the expenses which are permitted as deductible are such as are made for the purpose of carrying on the business i.e. to enable a person to carry on business and earn profits in that business and the disbursements must be such which are for the purpose of earning the profits of the business.
See also Strong and Company of Romsey Ltd. vs Woodifield (3).
These cases therefore show that if any amount is expended which is commercially expedient and is expended for the purpose of earning profits it is a deductible expenditure.
In support of their opinion the High Court relied upon the cases hereinafter mentioned but in our opinion they do not apply to the facts and circumstances of this case.
The first case referred to is Pondicherry Railway Company vs Commissioner of Income Tax, Madras (4).
In that case the assessee company, incorporated in the United Kingdom, obtained a concession of constructing a railway in the territories of Pondicherry.
The assessee company was to pay to the French Government 1/2 of its net profits.
The French Government on its part gave land on which the railway was to be built free of charge and also agreed to pay a subsidy.
The question for decision in that case was whether the monies paid by the (1) ; (3) ; (2) ; (4) [1931] L.R. 58 I.A. 239.
366 assessee company to the French Government i.e., of its net profits were allowable as a deduction under the provisions corresponding to section 10(2)(xv).
Lord Macmillan observed at p. 251: "A payment out of profits and conditions on profits being earned cannot accurately be described as a payment made to earn profits.
It assumes that profits have first come into existence.
But profits on their coming into existence attract tax at that point, and the revenue is not concerned with the subsequent application of the profits.
" But these observations have been later on explained in other cases to which reference will be made presently.
In Union Cold Storage Co. Ltd. vs Adamson (1) the assessee leased lands and premises abroad reserving a rent of pound 9,60,000.
It was also provided in the deed that if at the end of the financial year it was found that after providing for this rent the result of the company 's operations was insufficient to pay interest on charger, and debentures etc., the rent for the year was to be abated to the extent of the deficiency.
In computing its profits the assessee company claimed the sums of rent paid in two respective years.
They were held not payable out of the profits or.
gains and were allowable deductions.
At page 318 Rowlatt J. said that the sum which was to be paid by the company was a recompense in respect of possession and use of the premises abroad and the company had entered into some liabilities by way of payment for their premises and that payment was an outgoing of the business which was to be provided for and allowed before profits of the business could be ascertained.
In the House of Lords Lord Macmillan distinguished the Pondicherry case,(1) by saying that in that case the ascertainment of profits preceded the coming into operation of the obligation to pay and when profits had been ascertained the obligation was to make over thereof to the French Government.
Dealing with the passage above referred to Lord Macmillan said at p. 331: "I was dealing with a case in which the obligation was, first of all, to ascertain the profits in a (1) (2) (1931) L.R. 8 I.A. 239.
367 prescribed manner, after providing for all outlays incurred in earning them, and then to divide them.
Here the question is whether or not a deduction for rent has to be made in ascertaining the profits, and, the question is not one of the distribution of profits at all." In Tata Hydro Electric Agencies Limited, Bombay vs The Commissioner of Income tax, Bombay Presidency (1) the Tata Power Co. entered into an agency agreement with Tatasons Ltd. agreeing to pay to Tatasons Ltd. a commission of 10% on the annual net profits of Tata Power Co., subject to a minimum whether any profits were made or not.
Later on two persons D and S advanced funds to Tata Power Company on the condition that in addition to the interest payable to them by Tata Power Company they should each receive from Tatasons Ltd., 12 1.2% of the commission earned by Tatasons Ltd. Tatasons Ltd. assigned their entire right to the assessee company and the Tata Power Company entered into a new agency agreement with the assessee company and the assessee company received a commission and out of that paid 1/4 to D and section Relying on Pondicherry Railway case (2) the Bombay High Court held that that was not an allowable deduction as expenditure incurred solely for earning profits.
On appeal the Privy Council held that Pondicherry case did not govern the case.
The nature of the transaction was held to be this that the obligation to make the payments was undertaken by the assessee company in consideration of its acquisition of the right to property to earn profits i.e. of the right to conduct the business and not for the purpose of producing profits in the conduct of the business.
Dealing with Pondicherry Railway case (2) Lord Macmillan said: "In the Pondicherry case the assessees were under obligation to make over a share of their profits to the French Government.
Profits had first to be earned and ascertained before any sharing took place.
Here the obligation of the appellants to pay (1) [1937] L. R. 64 I.A. 215.
(2) (1931) L.R. 58 I.A. 239.
368 a quarter of the commission which they receive from the Tata Power Co. Ltd. to F. E. Dinshaw Ltd., and Richard.
Tilden Smith 's administrators is quite independent of whether the appellants make any profits or not." and at page 225 Lord Macmillan said: "In short, the obligation to make these payments was undertaken by the appellants in consideration of their acquisition of the right and opportunity to earn profits, that is, of the right to conduct the business, and not for the purpose of producing profits in the conduct of the business.
" At page 226 the Privy Council accepted the following test laid down by Lord President in Robert Addie & Sons ' Collieries, Ltd. vs Commissioners of Inland Revenue (1) where it is observed: "What is 'money wholly and exclusively laid out for the purposes of the trade ' is a question which must be determined upon the principles of ordinary commercial trading.
It is necessary, accordingly, to attend to the true nature of the expenditure, and to ask oneself the question, Is it a part of the Com pany 's working expenses; is it expenditure laid out as part of the process of profit earning".
In Commissioner of Income tax, Bombay Presidency vs Tata Sons Ltd. (2) the company received a commission on the basis of profits.
The managed company was in urgent need of money and the assessee company found a financier a Mr. Dinshaw and an agreement was entered into with the managed company and Mr. Dinshaw by which the latter agreed to lend a crore of rupees on the condition that the assessee company assigned to him a share in the commission which the assessee company might receive from the managed company.
That was held to be an agreement on the part of the assessee company to share their commission with Mr. Dinshaw and it was a part of the arrangement on which the assessee company obtained finance and therefore the payment to Mr. Dinshaw was an expenditure solely for the purpose of earning profits or gains and it was not of a capital nature.
At (1) (2) 369 page 203 Beaumont C.J. said that the question whether the payment of a part of the commission to a third person can be regarded as expenditure incurred solely for the purpose of earning that commission is a question which must be answered on the facts of each case on a commercial basis.
In The Indian Radio and Cable Communications Company Ltd. vs The Commissioner of Income tax, Bombay (1) it was observed that it was not universally true to say that a payment the making of which is conditional on profits being earned cannot properly be described as an expenditure incurred for the purpose of earning such profits.
Lord Maugham in explaining the judgment in the Pondicherry Railway case (2) said at page 278: " To avoid misconception it is proper to say that in coming to this conclusion they have not taken the view that the case is governed by the decision in Pondicherry Railway Co. Ltd. vs Commissioner of Income tax, Madras, though that case no doubt shows light on the nature of the problem which has to be solved in the present case.
It should perhaps be added that a sentence in the judgment in that case has been explained, if explanation was necessary, by Lord Macmillan in the subsequent case of W. H. E. Adamson vs Union Cold Storage Company.
" As to when a deduction is claimable and when it is not, it was said at page 277 that if a company had made an apparent net profit and then had to pay to a director as a contractual recompense, the net profit would be the difference between the two but if there was a contract to pay a commission on the net profits of the year it must necessarily be held to mean as net profits before the deduction of the commission.
In British Sugar Manufacturers Ltd. vs Harris (3) the assessee company agreed to pay two other companies a certain percentage of its annual profits after deduction of expenses and debenture interest in consideration of their giving to the assessee company the full benefit of their technical and financial knowledge (1) (2) [1931] L.R. 58 I.A. 239.
(3) 47 370 and experience.
Certain payments were made in pursuance of that agreement and it was held that payments under the agreement were permissible deductions in computing the assessee company 's profits.
Dealing with the Pondicherry Railway case, (1) at page 548, the learned Master of the Rolls said: " It is to be observed that Lord Macmillan in that paragraph was quite clearly using the word I profit ' in one sense and one sense only; he was using it ' in the sense of the I real net profit ' to which Lord Maugham referred.
That he was doing that is, I think, abundantly clear when the nature of the contract there in question is considered, which was merely a contract under which a percentage of profits was payable by the railway company to the French Government.
There was no question of services or anything of that kind in the case; it was merely a sum payable out of profits.
I do not find myself constrained by that expression of opinion, because it must be read; as Lord Macmillan has said in a subsequent case Union Cold Storage Co. Ltd. vs Adamson (2 ) at pp.
331 2, in relation to the particular subject matter with which he was dealing.
" As has been said above the question to be considered in this case is governed by the observations of this Court in Commissioner of Income tax vs Chandulal Keshavlal & Co. (3) and the circumstances under which the trust agreed to lend the appellant such a large sum of money shows the true nature of the transaction.
On the facts proved in the present case the Trust agreed to finance the business of the appellant on the terms set out in the agreement and there is nothing to show that he could have made any better arrangements or would not have lost the contract if he had failed to enter into the agreement i.e. the agreement to pay the amounts in dispute.
Therefore in a commercial sense the payments were an expenditure wholly and exclusively laid out for the purpose of the business.
In our opinion, therefore, the High Court was in error and the question referred should have been (1) [1931] L.R. 58 I.A. 239.
(2) , 331 32.
(3) 371 answered in the affirmative in favour of the appellant.
The appeals are, therefore, allowed and the judgments, and orders of the High Court are set aside.
The appellant will have his costs in this Court and in the High Court.
One hearing fee.
Appeals allowed. | The assessee entered into a contract for working certain collieries.
As he did not have the requisite funds, he entered into an agreement with M whereunder M was to advance a sum upto Rs. 11/2 lacs, but could withdraw the money at any time and stop further advances and was not liable for any losses; the assessee was to pay interest on the advances at 6% per annum in addition to a sum equivalent to 11/16th of the net profits of the business.
In pursuance of the agreement M made advances to the assessee and the assessee paid interest and 11/16th of his net profits to M.
The assessee claimed these amounts paid to M as allowable deductions under section 10(2)(iii) or under section 10(2)(xv) of the Income tax Act.
The amount paid as interest was allowed but the other sums paid were not allowed on the ground that these sums were not wholly and exclusively laid out for the purpose of the business.
Held, that the assessee was entitled to the deductions claimed.
The case had to be decided according to the tenor of the agreement and the circumstances of the case.
In order to justify the deduction of the sum given up had to be for reasons of commercial expediency; it may be voluntary but so long as it was incurred for the assessee 's benefit, e.g., the carrying on of his business, the deduction was claimable.
In the present case there was nothing to show that the assessee could have made any better arrangements or would not have lost the contract had he not entered into the agreement with M. Therefore in a commercial sense the payments were an expenditure wholly and exclusively laid out for the purpose of the business.
Commissioner of Income tax vs Chandulal Keshavlal, , followed.
Commissioner of Income tax, Bombay vs M/s. jaggannath Kissonlal; , , M/s. Haji Aziz & Abdul Shakoor Bros. vs The Commissioner of Income tax, ; , and Strong vs Woodifield, ; , relied on.
Pondicherry Railway Company vs Commissioner of Income tax, Madras, (1931) L.R. 58 I.A. 239, distinguished.
Union Cold Storage Co. Ltd. vs Adamson, , 360 Tata Hydro Electric Agencies Ltd., Bombay vs The Commissioner of Income tax, Bombay Presidency.
(1937) L.R. 64 I.A. 215, Robert Addie & Sons ' Colleries, Ltd, vs Commissioners of Inland Revenue, , Commissioner of Income tax, Bombay Presidency vs Tata Sons Ltd. , The Indian Radio and Cable Communications Company Ltd. vs The Commissioner of Income tax, Bombay, , British Sugar Manufacturers Ltd. vs Harris, , referred to. |
Appeals Nos. 1235 to 1237 of 1966:.
Appeals from the judgment and decree dated September 20, 1963 of the Kerala High Court in Appeal Suit No. 304 of 1962.
Rameshwar Nath, Mahinder Narain and Swaranjit Sodhi, for ' the appellants (in C.A. No. 1235 of 1966) and respondent No, 11 (in C.As.
Nos. 1236 and 1237 of 1966).
K. Javaram and R. Thiagarajan, for the appellants (in C.As.
Nos. 1236 and 1237 of 1966) and respondents Nos. 1 to 7 (in C.A. No. 1235 of 1966).
M.R.K. Pillai, for respondent No. 3 (.in C.As.
1236and 1237 of 1966) and respondent No. 9 (in C.A. No. 1235 of 1966).
The Judgment of the Court was delivered by Ramaswami, J.
KavaIappara estate is an impartible estate.
Succession thereto is governed by the Marumakkathayam law, that is to say, the eldest member of the family by female descent will succeed to the Gaddi and hold the estate.
The parties to the suit are members of the Kavalappara Swaroopam, the 1st defendant being the Sthanee.
The 7th defendant is the mother and the 9th defendant the elder brother of the plaintiffs.
The plaintiffs claimed maintenance based on family custom entitling the members ' to maintenance out of the entire income of the Sthanam.
Past maintenance was claimed for each of the plaintiffs 1 to 4 for 12 years at Rs. 500/ per mensem; for plaintiff No. 5 at the above rate and for plaintiffs 6 to 8 at Rs. 400/ per mensem from their respective dates of birth.
Future maintenance from date of suit was also claimed at the aforesaid rates.
The suit was contested by the 1st defendant on the ground that the plaintiffs had no enforceable legal right to maintenance from the Sthanam estate; that from olden times two kalams, Palachithara and Velliyad of the Sthanam estate had been set apart for the maintenance of the 38 junior members of the Swaroopam that the plaintiffs have to look to those two kalams only for their maintenance "as deposed by him in the former suit" in O.S. No. 46 of 1934; that even after the Privy Council had decided O.S. No. 46 of 1934 declaring him to be absolute owner of the Sthanam properties, he had been paying maintenance out of affection; that though there was no recognised custom binding on him, he had been adopting the generosity of the predecessor Sthanees and paying to the junior members of the Swaroopam Rs. 17,000/ annually and that the plaintiffs had no right to claim income from the Sthanam estate.
The trial court granted maintenance for the period claimed until the date of decree at the rate of Rs. 250/ per mensem for each of the plaintiffs charged on the corpus and income of the Sthanam estate.
The first defendant appealed to the Kerala High Court in A.S. No. 304 of 1962.
The plaintiffs preferred cross objections.
The High Court partly allowed the appeal negativing the plaintiffs ' claim for arrears of maintenance and modified the trial court 's decree.
The High Court dismissed the cross object.ions of the plaintiffs.
C.A. No. 1235 of 1966 is brought to this Court by certificate on behalf of defendant No. 1 and C.As. 1236 and 1237 of 1966 are brought to this Court by certificate on behalf of plaintiffs.
The first question to be considered is whether the plaintiffs are entitled to maintenance out of the Sthanam properties as a matter of family custom.
It is argued on behalf of the 1st defendant that the maintenance allowance was previously given by the Sthanee only as an act of generosity and not in recognition of any legal claim of junior members of the Swaroopam.
In any case it was contended that the practice prevailing in the past was that the income from two kalams "Pilachithara" and "Velliyad" was given to the Amma Nethiar for the benefit of the members of the Swaroopam and that the members of the Swaroopam could not insist on anything more than the same as a matter of right.
In our opinion there is no justification for this argument.
There is sufficient evidence on the record of the case to support the finding of the Subordinate Judge and the High Court that the plaintiffs have established a customary right of maintenance from the Sthanam properties.
In the first place there are two decisions O.S. 991 and 992 of the year 1817 granting a decree for maintenance to two members of the Kavalppara Sthanam (Exhibits A 57 and A 58).
It was contended for the Sthanee in those suits that separate properties had been allotted to Amma Nethiar to maintain all the females and minors in the Swaroopam, that only major males in the Swaroopam can claim separate maintenance from him and that those members who chose to live away from the palace had no right to claim maintenance.
These contentions were not accepted by the Court which gave each of the plaintiffs a money 39 decree for maintenance both past and future.
The material portions of the two decisions are quoted below: "On a careful consideration of all the particulars referred to and in view of the circumstances that the Plaintiff went separate from the tarwad members in disregard of the orders of Defendant who is the present Moopil Nair of Kavalppara and in opposition to the status, ranks and dignities (Sthanamanams) and propriety of Sthanam and merely for their own pleasure and that, even after the Moopu had caused negotiations to be made through Brahmins and other respectable persons under his (Moopu 's) written authority with a view to avoid the Moopu (Sthanam) falling into disgrace (as a result of family) dissension and in view of the fact that, in spite of the efforts of the said persons, the plaintiff did not return and live together (have common residence and mess), it is only proper, as the Defendant contends in his written statement, that it is the Amma Nethiar who should provide for the maintenance of the plaintiff along with that of the lady members.
The plaintiff 's witnesses Cherumpatte Manakkal Vasudevan Bhattathiripad and Pannasseri Adisseripad state on solemn affirmation that, since it is the Moopu that manages the properties forming the assets of the Swaroopam (esstate) and received 16,000 and old fanams being 2 per 10 from the Government if the next nephew as well as the heir and next of kin of the Moopil Nair were to live separate from the Moopil Nair and demand maintenance for whatever reasons it might be, such person ought to be paid maintenance expenses and supported as befitting the Sthanamanam (rank and dignity) of such person and not necessary (sic).
The plaintiff and his mother Valiakava Nethiar left Kavalappara on the 16th Medom 992 (26th April 1817) and went to and stayed at Mangalathu, Panambala Kode and Melarkode for reasons not apparent.
Under the orders of the Defendant maintenance had been paid to plaintiff, the said Nethiar and 20 persons from that date, 16th of Medom (26th of April) to the month of Edavam (May June).
Thereafter the defendant ordered payment of maintenance to 16 persons from 1st Mithunam (13th June) and to 12 persons thereafter.
Subsequently the Moopu ordered that maintenance need be paid for 8 persons only including (the plaintiff).
The written statement (deposition) does not make any mention as to nor have the plaintiff 's witnesses proved as to what expenses the sum of claimed in the plaint relate to.
It is therefore 40 decreed that the Defendant do pay plaintiff 450 fanams being the maintenance expenses for 3 months as evidenced by the plaintiff 's witnesses after deducting 25 (? ) fanams from the amount claimed in the plaint, that the Defendant do also pay the plaintiff 's future maintenance at the rate of 150 fanams a month as mentioned above and that the plaintiff and Defendant do pay and receive proportionate costs.
" Ext.
A 58: "On looking into the matters mentioned above, there is nothing to show on what ground the plaintiff had gone and lived separate from the tarwad members of her own accord in disregard of the order of the present Kavalappara Moopil Nair and without considering the status, dignity and propriety (of the Sthanam).
Even though the Defendant 's contention in his written statement that it is the Amma Nethiar who should look after the maintenance of the plaintiff in as much as the plaintiff did not return to and stay in the Kavalppara in spite of the attempts made through the Brahmins and other respectable persons to avoid the Moopu getting a bad name owing to a rumour getting afloat that there is dissension among the members as a result of the plaintiffs action, is a proper only, the court is of the opinion that, if the members who are related to the Moopil Nair as his direct sister and direct nephew like the 3rd Nair and who are closely related together as heirs to the properties live separate for any reason whatsoever and ask for their maintenance, the Moopil Nair ought to have ordered payment of their maintenance, amounts and maintained them in accordance with their status in the Sthanam.
Instead of doing this, the Moopil Nair cannot stop the maintenance paid to the Anandaravas who may be of bad temperament.
The plaintiff 's and defendant 's witnesses prove that the plaintiff had been paid for the maintenance from the Medom 992 (April May, 1817) when she went separate until the 30th of Karkitakam (about the 16th of August) and that the Moopil Nair had stopped paying for the maintenance thereafter.
From the evidence of the plaintiff 's witnesses it has been proved that the plaintiff and the persons staying with her would all together require 3 fanams for maintenance expenses and 1 fanam for extra expenses for a day.
It, therefore, does not appear from the oral and documentary evidence that they would require anything more than fanams for the maintenance for the 3 months from 41 the 1st of Chingam (14th August) to the 1st of Vrichigam (14th November) the date of the suit, calculating at 120 fanams a month.
It is not clear from the plaint as to what expenses the sum of Rs. 150 claimed in the plaint relates.
I therefore direct the defendant to pay to plaintiff a sum of Rs. 360 fanams after deducting 165 fanams from the amount claimed by the plaintiff and I also direct that the Defendant do pay to the plaintiff the future maintenance at the rate of 120 fanams a month and that the plaintiff and Defendant do pay and receive proportionate costs.
" Exhibit B 1 is a deposition given in O.S. 2 of 1859 by the then Sthanee of the Kavalappara Swaroopam.
The deposition is marked as exhibit 67(b) in O.S. 46 of 1934 and reads as follows: "The properties belong to the Sthanam only.
Two Kalams (lands attached to two granaries) have been set apart for the maintenance of the members of the tarwad.
And it has been the practice that the rest of the members maintain themselves therefrom.
It has been so separately allotted from ancient times.
When precisely, is not known.
It could be seen from the accounts that It has been so set apart.
It is only if I think it necessary to take back what has been so set apart, that I should give them their maintenance expenses .
I have not enquired whether there were any other places where the entire properties and the Malikhan belonged to the Sthanam only and the tarwad has no separate property of its own." [The High Court has observed that this translation is not correct and that 'kalam ' denotes a division of the estate for purposes of collecting rents from the tenants.
Again a true translation of the first sentence in the above quotation would be 'only the Sthanam has properties and no.t the properties belong to the Sthanam only".] This deposition shows clearly that the Sthanee in office admitted over a century ago his obligation to maintain junior members of the Swaroopam.
The next piece of evidence is the deposition of the Sthanee in O.S. No. 46 of 1934.
In the present case the 1st defendant did not give evidence.
He admitted that his deposition in the previous suit O.S. No. 46 of 1934 contained a true statement of facts.
The previous deposit;on of the 1st defendant in exhibit B 13 and reads as follows: "4.
The eldest lady in the Swaroopam is called Aroma Nethiyar.
Some properties had been allotted for the L 1 Sup CI/70 4 42 maintenance of the members in the name of Amma Nethiar . .
Those properties had been allotted in ancient times in her name from the properties of the Moopil Nair.
The Moopil Nair was originally a ruling chief.
The grant of properties in the name of Amma Nethiyar should have been made when the Moopil Nair was a ruling chief.
The present Amma Nethiyar has even now the right to manage the properties which had been so allotted.
It was in ignorance of such allotment that my eider brother and after him, myself managed those properties along with the stanam properties.
I am willing to hand back the management of those properties to Amma Nethiyar.
If those properties are handed back, I shall no more be liable to pay the maintenance of the members.
" In his written statement defendant No. 1 made the following admission in para 6: " . .
The defendant does not deny that the members of the Swaroopam are entitled to be maintained by the Moopil Nayar by virtue of custom.
But that does not make him any the less a Stani nor detract from the Stanom character of the properties.
" In our opinion the evidence adduced in the case sufficiently proves a custom in Kavalappara Estate by which the Sthanee was legally obliged to give maintenance to junior members of the family.
It is possible that the practice of paying maintenance to junior members originated as an act of generosity of the previous Sthanee.
But it has continued without interruption for such a length of time that it has acquired the character of a legal right.
On behalf of defendant No. 1 it was contended that the Judicial Committee had said that the payment for maintenance was an act of generosity on the part of the Sthanee and was not a legal right of the junior members.
Reference was made to the following passage in the judgment in Kochunni vs Kuttanunni(1): "The maintenance claimed was a customary one originating in ancient times when admittedly the Muppil Nair was a Sthani in possession of Sthanam rights.
There is no evidence as to how the maintenance allowance arose, whether it was given in recognition of a legal claim or was only a generous provision made for the benefit of the women and younger members, which the Raja was perfectly competent to do out of property (1) A.I.R. 1948(P.C.).47at p. 52. 43 which he regarded exclusively as his own.
The claims of generosity often prevail over a sense of ownership, especially when the recipient of the bounty is a near relative in a dependent position.
" In our opinion this argument proceeds on a misreading of the judgment of the Judicial Committee.
The Judicial Committee has observed that the claim for maintenance was based on customary rights and was not ex gratia payment.
In the course of the judgment Mr. M.R. Jayakar states: "The documents material in this connection are Exs. 'O ' and 'P ' being the decree and judgment respectively in two suits for maintenance brought in the year 1817 against the then Muppil Nair, the first by the then third Nair, a minor, and the second by his mother.
It is material to note what the issue was and what was decreed in these suits.
In the pleadings of both the parties the claim for maintenance was stated to be based on customary rights.
The plaintiff alleged it is 'the usual custom ' that Nair should pay the maintenance.
The defendant admitted 'the custom ' but denied his liability to pay the maintenance on the ground that his ancestors in ancient times had already settled in accordance with the 'usual practice ' certain lands on a lady called Amma Nethiar for the maintenance of herself and the junior members, and that the maintenance claimed in the suit, even if it was due, which he denied, should primarily come out of the lands so set aside in previous times.
He also denied his liability on the ground that the minor and his mother, contrary to his advice and that of the well wishers of the family had gone away to live elsewhere.
The defendant denied his liability also on other grounds which it is unnecessary to consider in tiffs case.
He, however, expressed his willingness to supplement the maintenance, if the Court thought proper, on particular occasions.
The Judge, while admitting that it was the responsibility of Amma Nethiar to maintain the plaintiffs, held that as the plaintiffs stood in the very near relationship of sister and nephew to the defendant and were his next heirs it was 'only proper ' that the defendant should grant them a periodical allowance for past and future maintenance.
In the light of the pleadings set out above, the admissions made therein by bolt sides about the customary nature of the maintenance and the words it was 'only proper ' in the judgment, their Lordships cannot accept this as a decision contra 44 dicting the incidents of the property in the hands of the Muppil Nair.
" In any event the question as to whether the right of maintenance was given by the Sthanee in recognition of the legal claim or whether it was an ex gratia payment was not directly in issue in the previous suit.
The question for determination was whether the existence of maintenance allowance was inconsistent with the Sthanam character of the properties in possession of the then Moopil Nair.
On this point it was held by the Judicial Committee that the payment of the maintenance allowance for junior members was not inconsistent with the Sthanam character of the property on which it was grounded.
At p. 53 of the Report Mr. Jayakar has observed; "Their Lordships think that in the proceedings of these two cases there is hardly anything to support the view of the High Court that the decrees in these two suits are inconsistent with the Sthanam character of the properties in the possession of the then Muppil Nair or that he did anything which could be regarded as an admission that the properties in his hands were not Sthanam properties.
On the question whether and how far the existence of a maintenance allowance is inconsistent with the Sthanam character of the property, on which it is grounded, the following passage in Sundata Aiyar 's book (p. 255, bottom) may be noted: "The point of view suggested in some cases in which the question has arisen is that the members of the family have rights of maintenance in the property of the Sthanam itself: that is practically assimilating these properties to impartible zemindaries before the recent cases. ' Besides, the Sthanam in dispute in this case belonged, as stated above, to the second category, and in such a case the existence of maintenance allowance would be perhaps not so inconsistent as in the case of a Sthanam of the third class, carved out of the family property for the support and dignity of its senior member.
" The question at issue before the Judicial Committee was whether the Kavalppara Estate was a Tarawad or joint family property belonging to the joint family or whether the properties appertained to the Sthanam and belonged to defendant No. 1 as a Sthanee exclusively.
The question as to the right of maintenance of the plaintiffs was incidentally gone into and it was ultimately held that the existence of such maintenance fight of junior members of 45 the family was not inconsistent with the Sthanam character of the properties.
In our opinion the High Court.
was right in its finding that the plaintiffs have established their right to maintenance from the Sthanam properties as a matter of custom.
Counsel on behalf of defendant No. 1 has been unable to make good his argument on this aspect of the case.
An alleged custom, in order to be.
valid, must be proved by testimony to have been obeyed from consciousness of its obligatory character.
A mere convention between family members or an arrangement by mutual consent for peace and convenience cannot be recognised as custom.
In Ramroa vs Yeshwantrao(1) it was proved that it had been the practice in a Deshpande Vatandar 's family for over a hundred and fifty years, without interruption or dispute of any kind whatever, to leave the performance of the services of the vatan and the bulk of the property in the hands of the eider branch and to provide the younger branches with maintenance only.
It was held that such practice was due in its origin to a local or family usage and not to a mere arrangement and that it was therefore to be recognized and acted upon as a legal and valid custom.
In order, therefore, that a custom should acquire the character of law the custom must be accompanied by the intellectual element, the opinion necessitatis "the conviction on the part of those who use a custom that it is obligatory and not merely optional".
In other words the mark which distinguishes custom in the legal sense from mere convention is the opinion necessitatis, the recognition that there is authority behind it. "In the modern state the custom, if legally recognized has behind it the court and an apparatus of coercion.
In primitive communities we do not find authority necessarily organized in the institutional sense.
We must ask, 'what is the ultimate power in the group to settle conflicts or to prescribe rules ? ' It may be the old men, the military group, the priests, or merely a general consensus of opinion.
But the opinion necessitatis can come into existence only when the community in some way throws its force behind the particular rules.
" (See G.W. Paton Jurisprudence 3rd edn.
p. 164) We have shown in the present case that the plaintiffs have established their right to maintenance from the Sthanam properties not merely as an act of generosity on the part of the Sthanee but the (1) I.L.R. 10 Bombay 327.
payment of maintenance has been made by the Sthanee as a matter of legal obligation.
The next question is whether the plaintiffs are entitled to arrears of maintenance.
It appears that after the decision of the Privy Council declaring the ist defendant as exclusive owner of properties he has paid Rs. 17,000 annually to the Amma Nethiar for the maintenance of the junior members of the Swaroopam.
It is not disputed by the plaintiffs that such payments were made before the institution of the present suit.
Even after the institution of the suit the 1st defendant had been depositing annually Rs. 25,000 in court for the maintenance of the plaintiffs and other members of the Swaroopam as ordered by the trial court.
It was alleged by the plaintiffs that they have not been paid any maintenance.
But the High Court found that maintenance had been given to the plaintiffs ' mother with whom plaintiffs had been living.
For these reasons the High Court held that there was no ground for awarding arrears to maintenance before the date of suit.
We see no reason for taking a view different from that of the High Court in the matter.
As regards the rate of maintenance the trial court granted decree at the rate of Rs. 250/ p.m. for every one of the plaintiffs irrespective of age.
It has been found by the trial court that the net income of the Swaroopam was about Rs. 2 lakhs per annum.
It is admitted that the income of the Swaroopam consists mostly of rents from cultivating tenants.
With the abolition of perquisites and the fixation of fair rents by recent tenancy legislation there appears to have been a reduction of the net income of the Sthanam in recent years.
It also appears that the plaintiffs are the only minor members in the family and excepting the 7th defendant who is their mother the defendants are males whose children would not be members of the Swaroopam.
In the Madras Estates (Abolition and Conversion into Ryotwari) Act 26 of 1948 compensation to members of the family entitled to maintenance out of an impartible estate is fixed at 1/5 of what is paid for the estate in view of these considerations the High Court held that the provision of Rs. 250/ p.m. to each of the plaintiffs was adequate.
The High Court, however, directed that it is open to the parties after two years to move the trial court for variation in the rate of maintenance fixed on the ground of altered circumstances of the Estate.
Having heard the parties we see no reason for interfering with the judgment of the High Court in this matter.
In the result we dismiss all the three appeals (Civil Appeals Nos. 1235, 1236 and 1237 of 1966).
There will be no order as to costs with regard to any of the appeals.
G.C. Appeals dismissed. | Defendant No. 1 was the Sthanee of Kavalappara estate which was an impartible estate governed by Marumakkathayam law.
The plaintiffs claimed maintenance based on a family custom entitling the members to maintenance out of the entire income of the Sthanam.
Past maintenance was claimed as also future maintenance from the date of the suit.
Defendant No. 1 denied that the plaintiffs had any right based on custom as claimed by them; according to him from older times two kalams of the Sthanam had been set apart for their maintenance.
He claimed that the Privy Council in suit No. 46 of 1934 had declared him absolute owner of the Sthanam properties but despite that, out of generosity only he had been paying to the junior members of the Swaroopam Rs. 17.000/ annually.
The trial court granted maintenance to the plaintiffs for the period claimed at the rate of Rs. 250/ per mensem for each of the plaintiffs.
Defendant No. 1 appealed to the High Court and the plaintiffs filed cross objections as the rate of maintenance allowed to them was lower than they had claimed.
The High Court partly allowed the appeal negativing the plaintiffs ' claim for arrears of maintenance, and dismissed the cross objections of the plaintiffs.
Both the parties appealed to this Court.
The questions that fell for consideration were: (i) whether the right to maintenance as claimed by the plaintiffs was based on custom; (ii) whether the High Court was right in disallowing the claim of the plaintiffs to arrears of maintenance; (iii) whether the rate of maintenance as ordered by the trial court and ' confirmed by the High Court was justified.
HELD: (i) An alleged custom, in order to be valid, must be proved by testimony to have been obeyed from consciousness of its obligatory character.
A mere convention between family members or an arrangement by mutual consent for peace and convenience cannot be recognised as custom.
In order that a custom should acquire the character of law the custom must be accompanied by the intellectual element, the opinion necessitatis.
the recognition that there is authority behind it.
[45 B C; D E] Rarnrao vs Yeshwantrao, I.L.R. , applied.
In the present case the evidence sufficiently proved a custom in Kavalappara estate by which the Sthanee was legally obliged to give maintenance to junior members of the family.
It was possible that the practice of paying maintenance to junior members originated as an act of generosity of the previous Sthanee.
But it had continued without interruption for such a length of time that it had acquired the character of a legal right.
[42] Kochuni vs Kuttanunnt, A.I.R. 1948 (P.C.) 47, 52, explained.
37 (ii) Although it had been alleged by the plaintiffs that they had not been paid any maintenance, the High Court had ' found that maintenance had been given to the plaintiffs ' mother with whom the plaintiffs had been living.
The High Court 's refusal to grant to the plaintiffs arrears of maintenance before the date of the, suit must, in the circumstances, be upheld.
[46 C] (iii) The High Court in fixing the amount of maintenance for each of the plaintiffs at Rs. 250./ per month had taken into account all the relevant factors.
It had further directed that it was open to the parties after two years to move the trial court for variation in the rate of maintenance fixed on the ground of altered circumstances of the Estate.
There was no reason for interfering with the judgment of the High Court in this matter.
[46. G] |
ivil Appeal No. 2678 of 1985.
From the Judgment and order dated 30.4.1985 of the Delhi High Court in F.A.O. No. 270 of 1982.
M.C. Bhandare, Sandeep Narain and Shri Narain for the Appellants.
Dr. Shankar Ghosh and N.R. Choudhary for the Respondent.
The Judgment of the Court was delivered by KANIA,J.
The hearing before us now relates to certain objections filed to the Award made by Shri A.C. Gupta a former Judge of this Court who was appointed the sole arbitrator to adjudicate upon the dispute between the parties pursuant to the Order of this Court dated 18th November, 1987 in the circumstances as set out hereinafter.
In order to appreciate the objections, it is necessary to refer to certain facts.
The Settlement Commissioner, Government of India allotted Plot No. 631 at Chitranjan Park, New Delhi measuring 160 sq.
yds to the Respondent under the Settlement Scheme for the refugees from Pakistan for a total price of Rs.4,800.
This allotment was made by the Settlement Commissioner on behalf of the Rehabilitation Department of the Government of India.
The Respondent applied for a loan from the Ministry of Defence for construction of the house on the said plot and a loan of Rs.15,000 was sanctioned in his favour.
Under the House Construction Rules of the Government, the plans and estimates had to be submitted along with the application and a sanctioned amount was paid in four instalments at different stages of construction.
The Respondent started the construction of a building on the said land.
By the end of 1973, the Respondent had constructed a house on the said plot upto the roof level.
By that time he had obtained and used up a sum of Rs.12,000 out of the loan sanctioned to him and only a balance of Rs.3,000 PG NO 517 remained to be paid to him under the said loan.
According to the Respondent, this amount was not sufficient for the final completion of the house and he, therefore, sought the help of Appellant No. I who advanced a sum of Rs.5,000 to him.
In September, 1973 the Respondent entered into an agreement dated September 6, 1973 to sell the house and the said plot to the Appellant No. 1.
The aforesaid amount of Rs.5,000 given by way of loan was shown in that agreement as an advance paid towards the sale price.
The Respondent also executed a General Power of Attorney in favour of Appellant No. 1 inter alia enabling him to carry on construction work on the said land on behalf of the Respondent.
According to the Respondent, the house was not complete but the Appellants who are husband and wife were occupying the same.
Under circumstances, we need not discuss here, on January 29, 1974 another agreement was entered into between Appellant No. 1 and the Respondent which has been described as an agreement for construction.
Under that agreement, Rs.80,000 was to be paid by the Respondent as the price of the construction to be put up by Appellant No. I on the said plot and he was to charge Rs.20,000 as the profits and labour charges.
He was to deposit Rs.15,000 with the Respondent, this transaction was sham and bogus.
Disputes arose Respondent was to return the amount of Rs.1,15,000 within three years in a lump sum and on such payment, Appellant No. I was to hand over the possession of the building and the plot to the Respondent.
Till that amount was paid, Appellant No. 1 was entitled to possess and occupy and enjoy the same and to receive rents thereof.
According to the Respondent, this transaction was sham and bogus.
Disputes arose between the parties and the Respondent filed a suit in August 1977 claiming for the return of the possession of the said plot and the house.
A notice of motion under section 34 of the for stay taken out by the Appellants was dismissed.
An appeal was preferred against the said decision.
In the appeal, which came up for hearing before the Additional District Judge, Delhi.
with the consent of the parties, Shri Bakshi Man Singh was appointed as the sole arbitrator to adjudicate upon the disputes in the suit.
The said Shri Bakshi Man Singh died in July 1979 without making any award.
On an application by the Respondent, the learned Additional District Judge filled up the vacancy by appointing Shri Hari Shanker, Advocate, as the sole rbitrator.
Shri Hari Shanker made and published his award which went against the Appellants.
According to the Appellants, the said award was made ex parte.
The appellants challenged the award by filing objections under sections 30 and 33 of the before the learned Additional District Judge and applied for setting aside the said award.
This application was dismissed by the learned Additional District Judge.
The Appellants PG NO 518 filed an appeal against this decision on October 14,1982 before the Delhi High Court but the said appeal was dismissed by the learned Single Judge of that High Court on April 30, 1985.
This decision of the learned Single Judge was challenged before this Court by way of Special Leave Petition under Article 136 of the Constitution.
Leave was granted and the present Appeal came to be numbered as aforesaid.
This Appeal came up for hearing before a Division Bench of this Court on November 18,1987.
After hearing Counsel for the parties.
in order to ensure fairplay in the action, this Court set aside the award of the Arbitrator and also the judgment of the Delhi High Court and appointed Shri A.C. Gupta, a former Judge of this Court, as the sole arbitrator to adjudicate upon the disputes between the parties.
The arbitrator was directed to make his award with short reasons within four months from the receipt of the the order.
Certain other conditions like payment of compensation and additional expense were imposed on the Appellants.
Pursuant to the said order of this Court, the said Shri A.C. Gupta entered upon the reference and made and made and published his award on March 18,1988.
Under the said award, it was held that the Respondent was entitled to a sum of Rs.58,498.60p and interest on this amount at the rate of 18 per annum from the date of the reference to the date of the award which worked out to a sum of Rs.3,510.
Taking into account the amount paid by the Respondent initially towards the arbitrator 's remuneration and others costs and after setting off the dues of Appellants against the Respondent, it was held that the Respondent claimant was entitled to recover possession of the disputed building from the Appellants and that a sum of Rs.57,753 was payable by the Appellants to the Respondent.
It is this award which is challenged before us now.
The sole submission made by Mr. Bhandare, learned Counsel for the Appellants is that the award is bad in law and liable to be set aside as there is an error of law disclosed on the face of the award.
In this connection, Mr. Bhandare drew our attention to clause 2(b) of the agreement to sell dated September 6, 1973 referred to earlier.
Ten earlier part of the agreement set out that the purchaser (Appellant No. 1) had paid to the seller (Respondent) a sum of Rs.5,000, the receipt of which was acknowledged by the Respondent and the balance amount payable was to be paid in the manner set out in the said clause 2(b) which runs as follows: "The purchaser shall pay to the seller Rs.105 each month against the .sanctioned loan of Rs.15,000 by the fifth day of every English Calendar month till such time the full PG NO 519 amount of loan is recovered from the seller by the Government of lndia.
The first instalment shall commence with effect from 5th October, 1973 The purchaser, if he desires, can also deposit the actual remaining amount towards this loan at any time in lump sum to the Government of India on behalf of the seller.
" It is a common ground that the sum of Rs. 105 per month referred to clause 2(b) of the said agreement was paid by the Respondent only upto January 1976 and that this payment covered upto 23 instalments more than 100 instalments were remaining unpaid.
Mr. Bhandare pointed out that it was contended by the Appellants before the arbitrator that, although the agreement for sale between the parties was not registered and might not convey and interest to Appellant No. 1 in the property, the Appellants had been put in possession of the said land and construction pursuant to the said agreement since September 1973, as appears from the agreement of sale.
and, in view of this, Appellants were entitled to retain possession under the protection afforded by Section 53A of the Transfer of Act.
He drew our attention to the following statements contained in the award of the learned Arbitrator: "The Respondent who has been in possession of the property since September 1973 as would appear from the agreement for sale, claimed that his possession was protected Under Section 53A of the .
Section 53A affords protection to a transferee on certain condition, One of which is that `the transferee has performed or is willing to perform his part of contract '.
Under the agreement for sale, the respondent was required to pay the claimant a monthly sum of Rs. 105 to enable the latter to pay the instalments in discharge of the house building loan.
From the receipts filed it appears that the respondent paid only upto January 1976 which covered 23 instalments only and more than 100 instalments remained to be paid.
There is no valid reason why he should have failed t to carry out his obligation under the contract.
Thus it cannot be said that the respondent had performed or was willing to perform his part of the contract.
Therefore, the respondent was not entitled to retain possession of the disputed property beyond January 1976.
" PG NO 520 It was submitted by Mr. Bhandare that these statements clearly disclose close an error apparent on the face of the award.
It is pointed out by him that, prior to February 1976, the Respondent by his Advocate 's notice dated 16.1.1976 had repudiated the said agreement for sale by contending in his notice that it had been procured by fraud, undue influence and coercion practised by Appellant No. I and it was submitted that the said repudiation was wrongful and in view thereof Appellant No. 1 was absolved from his obligation to make any further payment of Rs.105 per month or to continue to be ready and willing to perform the agreement.
It was submitted by him that the aforestated statements contained in the award ran counter to the settled position in law and disclosed a clear error of law on the face of the award.
He drew our attention to the decision of this Court in International Contractors Ltd. vs Prasanta Kumar Sur, In that case the appellant had purchased the property in dispute from the respondent but soon thereafter there was an agreement for reconveyance of the property to the respondent within a period of two years for almost the same value for which it was sold.
Before the expiry of the stipulated period, the respondent entered into correspondence with the appellant, asking for the completion of the agreed reconveyance and intimating that the purchase money was ready to be paid, but after some further correspondence, the appellant 's solicitors, on his behalf, repudiated the agreement for reconveyance.
The respondent then did not tender the price agreed to be paid and filed a suit for specific performance.
The suit was dismissed by the trial court on the ground that the respondent had not paid the money.
The High Court reversed the decision and decreed the suit.
On an appeal to this Court, it was held that as the appellant had totally repudiated the contract for reconveyance and had tailed lo perform his part of the contract, it was open to the respondent to sue for its enforcement and the High Court was right in holding that respondent was entitled to a decree for specific performance.
In our view, Mr. Bhandare may be right in contending that this decision does show that it has been held by this Court that in certain circumstances once a party to a contract has repudiated a contract, it is not necessary for the other party to tender the amount payable under the contract in the manner provided in the contract in order to successfully claim the specific performance of the contract.
The decision, however, nowhere lays down that where one party to a contract repudiates the contract, the other party to the contract who claims specific performance of the contract is absolved from his obligation to show that he was ready and willing to perform the contract.
Mr. Bhandare 's argument really is to the effect that the Respondent wrongly repudiated the contract by his said letter dated 16th January, 1976, before all the mutual PG NO 521 obligations under the contract had been carried out, that is to say, he committed an anticipatory breach of the contract and in view of this, Appellant No. 1 was absolved from carrying out his remaining obligations under the contract and could claim specific performance of the same even though he failed to carry out his remaining obligations under the contract and might have failed to show his readiness and willingness to perform the contract.
In our view, this argument cannot be accepted.
It is settled in law that where a party to a contract commits an anticipatory breach of the contract, the other party to the contract may treat the breach as putting an end to the contract and sue for damages, but in that event he cannot ask for specific performance.
The other option open to the other party, namely, the aggrieved party, is that he may choose to keep the contract alive till the time for performance and claim specific performance but, in that event.
he cannot claim specific performance of the contract unless he shows his readiness and willingness to perform the contract.
The decision of this Court in International Contractors Limited vs Prasanta Kumar Sur, (supra), properly analysed, only lays down that in certain circumstances it is not necessary for the party complaining of an anticipatory breach of contract by the other party to offer to perform his remaining obligations under the contract in order to show his readiness and willingness to perform the contract and claim specific performance of the said contract.
Mr. Bhandare also referred to the decision of the Andhra Pradesh High Court in Makineni Nagayya and Others v Makineni Bapamma., AIR (45) We do not consider it necessary to refer this decision as it does not carry the case of the Appellants any further.
The ratio of the said decision in no way runs counter to the said position in law set out above.
In the case before us, what the arbitrator has done is to set out in his award the relevant portion of Section 53A of the in terms of the said section.
There can be no dispute that these provisions have been correctly set out.
There is thus no error in the proposition of law set out by the learned Arbitrator in the award.
It may be that there is an error, although that is by no means certain.
in the application of these principles in coming to the conclusion that, notwithstanding the repudiation of the said contract by the respondent, Appellant No. I was not absolved from his obligation to pay the remaining instalments of Rs.105 per month as provided under the contract.
In Coimbatore District Podu Thozillar Samgam vs Balasubramania Foundary and others; , it has been held by this Court that it is an error of law and PG NO 522 not a mistake of fact committed by the Arbitrator which is justiciable in the application before the Court.
If there is no legal proposition either in the award or in any document annexed to the award which is erroneous and constitutes the basis of the award and the alleged mistakes or alleged errors, are only mistakes of fact the award is not amenable to corrections by the Court.
In its judgment, the Court referred to the decision of this Court in Union of India vs A. L. Rallia Ram; , ; and, after referring to certain factors pertaining to awards in arbitration proceedings and the machinery devised by the , pointed out that the award was the decision of a domestic tribunal chosen by the parties and the civil courts which were entrusted with the power to facilitate arbitration and to effectuate the awards, could not exercise appellate powers over the decisions.
This Court reiterated that it was now firmly established that an award was bad on the ground of error of law on the face of it only when in the award itself or in a document actually incorporated in it, there was found some legal proposition which was the basis of the award and which was erroneous.
This view was enunciated by the Judicial Committee in Champsey Bhara and Co. vs Jivraj Balloo Spinning and Weaving Co. Ltd., [1922 23] LR 5O IA 324; This view was again reiterated and emphasised by this Court in Kanpur Nagar Mahapalika v M/s Narain Das Haribansh, 11970] 2 S.C.R. 28; where Ray, J., as the learned Chief Justice then was, observed at page 30 of the Report relying on Champsey Bhara case: "An error of law on the face of the award meant that one could find in the award, or in a document actually incorporated thereto, as, for instance.
a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which was the basis of the award and which one can say is erroneous.
" In State of Orissa & Ors v M/s Lall Brothers, [1988] Judgment Today S.C. 552 it was held by a Bench of this Court that it is not open to the Court to speculate, where no reasons are given by the arbitrator, as to what impelled him to arrive at his conclusions.
Reference was made in this connection (see paragraph 8) to the observations of the Judicial Committee in Champsey Bhara & Co. vs Jivraj Balloo Spinning & Weaving Co. ltd. and of this Court in Jivarajbhai Ujamshi Sheth & Ors.
vs Chintamanrao Balaji and Ors, ; PG NO 523 It was next contended by Mr. Bhandare that the award disclosed an error in law as certain important documents relied on by the Appellants were not referred to or discussed in the award at all.
In support of this contention Mr. Bhandare referred to the decision in K.P. Poulose vs State of Kerala and Another, ; In that case the arbitrator failed to take into account material documents, which were necessary to arrive at for a just and fair decision to resolve the controversy between the parties and it was held that this amounted to legal misconduct on the part of the arbitrator and his award liable to be set aside.
This decision is not of much assistance in the case before us as it is not the contention of Mr. Bhandare that the award is bad on the ground of any misconduct of the arbitrator but on the ground that it discloses an error of law on the face of the record.
Moreover, our attention has not been drawn to any particular document which was essential to resolve the controversy between the parties nor has it been demonstrated that any such document was not taken into account by the arbitrator.
In view of this, there is no basis to support the contention of Mr. Bhandare which must be rejected.
It cannot be even said in this case that the arbitrator was guilty of any legal misconduct or otherwise .
The objections to the Award of Shri A.C. Gupta, therefore, fail and are dismissed.
There will be a judgment in terms of the Award.
Let the decree be drawn up accordingly.
In the facts and circumstances of the case, there will be no order as to costs to the hearing before us. | The respondent had taken a loan of Rs.15,000 from the Ministry of Defence for construction of a house on a plot allotted to him.
As the amount of loan was insufficient to complete the construction, he took a loan of Rs.5,000 from Appellant No. 1 and on 6th September, 1973 he entered into an agreement to sell the house and the plot to Appellant No. 1.
The aforesaid amount of Rs.5,000 was shown as advance of sale price.
Clause 2(b) of the Agreement provided that the appellant purchaser shall pay to the seller!respondent a sum of Rs.105 every month against the sanctioned loan of Rs. 15,000 till the full amount is recovered from the respondent.
I he payment of Rs. 105 per month was made by the appellant only up to .January 1976 and this payment covered upto 23 instalments, and more than l00 instalments remained unpaid.
On January 29, 1974 another agreement, for construction. was entered into between Appellant No. 1 and the respondent.
Under this agreement, Appellant No. 1 was to complete construction of the house and alter the completion of the house the respondent was to return the cost of construction amounting to Ks.1,15,000 including appellant 's profit of Rs.20,000 and security amount of Rs. 15,000 deposited by the Appellant No. 1 with the respondent, within three years in a lump sum and on payment the Appellant No.
I was to hand over the possession of the building and the plot to the respondent.
Till that amount was paid.
Appellant No 1 was entitled to possess and occupy and enjoy the building PG NO 513 PG NO 514 The house was not completed but the appellants who are husband and wife were occupying the same.
According to the respondent this transaction was sham and bogus and he repudiated the same.
Disputes arose between the parties.
The respondent filed a suit claiming for the return of possession of the said plot of land and house.
The application ot ' the appellant under section 34 of the Arbitration Act was dismissed.
In the appeals preferred by the appellant the Additional District Judge, appointed a sole arbitrator with the consent of the parties.
The arbitrator made and published his award which went against the appellants.
The High Court dismissed the appeal filed by the appellants against the order of the District Judge dismissing their application challenging The Award.
This Court.
in appeal, set aside the award of the Arbitrator and also the judgment of the High Court and appointed Shri A.C. Gupta, a former Judge of this Court as the sole arbitrator.
It was contended before the said Arbitrator that the agreement for sale was not registered and might not convey any interest to appellant No. 1 in the property, but the appellants, who had been put in possession of the said land and construction.
were entitled to retain possession under th4 ' protection affOrded by section 53A of the .
The arbitrator made and published his award which went against the appellants.
The arbitrator held from the receipts filed, that the respondent paid only rent up to than 100 instalments remained to be paid, and that there was no valid reason why the respondent should have failed to carry out his obligation under The contract.
The arbitrator further held that the respondent could not, therefore, claim that his possession was protected, under section 53A of the and was, therefore.
not entitled to retain possession of the disputed property beyond January 1976.
In the objection filed by the appellants challenging the award before this Court it was contended that the award is bad in law and liable to be set aside as there is an error of law disclosed on the face of the award as the statements contained in the award ran counter to the settled position in law that wrongful repudiation by the respondent of the contract by his letter dated 16 January, 1976, before mutual obligation under the contract were carried out, amounted to PG NO 515 an anticipatory breach of contract by him and therefore the Appellant No. 1 is absolved from carrying out his remaining obligation under the contract, and could claim specific performance of the same even though he failed to carry out his remaining obligations under the contract.
Dismissing the objections and upholding the award, the Court, HELD: l.
It is settled in law that where a party to a contract commits an anticipatory breach of the contract, the other party to the contract may treat the breach as putting an end to the contract and sue for damages, but in that event he cannot ask for specific performance.
The other option open to the other party, namely, the aggrieved party, is that he may choose to keep the contract alive till the time for performance and claim specific performance but, in that event, he cannot claim specific performance of the contract unless he shows his readiness and willingness to perform the contract.
[521B C] International Contractors Ltd. vs Prasanta Kumar Sur, [1961]3 SCR 579, distinguished.
It is an error of law and not a mistake of fact committed by the Arbitrator which is justiciable in the application before the Court.
[521A] If there is no legal proposition either in the award or in any document annexed to the award which is erroneous and constitutes the basis of the award and the alleged mistakes or alleged errors are only mistakes of fact the award is not amenable to correction by the Court.
[522A B] Coimbatore District Podu Thozillar Sangam vs Balasubramania Faundary and Others, ; ; Champsey Bhara and Co. vs Jivraj Balloo Spinning Weaving Co. Ltd., [1922 23] LR 50 IA 324, ; Kanpur Nagar Mahapalika vs M/s Narain Das Haribansh, , and State of Orissa & Ors.v.
M/s Lall Brothers, [1988] Judgment Today S.C. 552, referred to.
In this case, what the arbitrator has done is to set out in his award the relevant portion of section 53A of the , in terms of the said section.
There can be no dispute that these provisions have been correctly set out.
There is thus no error in the proposition of law set out by the learned Arbitrator in the award.
It may be that there is an error, although that is by no means certain, in PG NO 516 the application of these principles in coming to the conclusion that, notwithstanding the repudiation of the said contract by the respondent, Appellant No. 1 was not absolved in the facts and circumstances of the case from his obligation to pay the remaining instalments of Rs.105 per month as provided under the contract.
[521F G] |
Appeal Nos. 2410 and 2411 of 1966.
91 Appeal from the judgment ,and order dated March 20, 1963 of the Punjab High Court, Circuit Bench at Delhi in R.F.A. No. 122 D of 1962.
Bishan Narain, K. K. Raizada and A.G. Ratnaparkhi, for the appellant (in both the appeals).
A.S. Nambiar, K.R. Nambiar and Lily Thomas, for the respondent (in both the appeals).
The Judgment of the Court was delivered by Hidayatullah, C.J.
This is an appeal against the judgment, dated March 20, 1963, of a Division Bench of the Punjab High Court dismissing an appeal and a revision filed by the present appellant.
The appeal arises under the following circumstances: A suit was filed by the appellant in the Court of the Senior Sub Judge, Delhi for three reliefs in respect of a business in which the respondent was stated to be the manager and also for ejectment of the respondent from the premises in which the business was being carried on The same valuation was adopted for purposes of court fee and jurisdiction.
The valuation was divided into three parts: Rs. 4,000/ were taken as the valuation for rendition of accounts or arrears of rent, Rs. 130/ for injunction and Rs. 710/ for ejectment Total Rs. 4,840/ .
During the hearing of the suit and on objection by the defendant, the= valuation for ejectment was raised to Rs. 1,800/ .
It appears that the appellant paid the additional court fee but did not amend the plant.
The suit was decreed in part on May 11, 1961.
The appellant obtained a decree for Rs. 600/ as arrears of rent for 3/4 portion off the shop and Rs. 463.33 P. as damages for 1/4 portion of the shop ejectment from which portion was also decreed in his favour.
But the suit was dismissed as to the remaining arrears of rent or for accounts and ejectments from 3/4 of the premises.
The plaintiff (appellant) thereupon filed an appeal in the District Court of Delhi.
In stating the valuation for appeal, he correctly described the: three fold valuation in the suit as Rs. 4,000/ , Rs. 130/ and Rs. 1,800/ (total Rs. 5,930/ ).
He however valued the appeal as follows: Rs. 3,400/ as the valuation for arrears of rent or for rendition of accounts, Rs. 130/ for injunction and Rs. 1,350/ for ejectment (Total Rs. 4,880/ ).
Now it is obvious that if the valuation was Rs. 4,880/ appeal would have lain in the District Court, but if the appeal had to be valued at Rs. 5,930/ it had to go before the High Court.
When the notice of the appeal was served on the defendent (respondent) he flied a cross objection in the same court 92 but did not take any exception to the valuation of the appeal in the District Court on its presentation in that Court.
On July 25, 1962, the District Judge made an order upholding a preliminary objection taken before him at the hearing that the memorandum of appeal was liable to be returned for presentation to the proper court, and he ordered the memorandum of appeal to be so returned.
It appears that it was filed in the High Court the same day and, therefore, there was no loss of time after the return of the memorandum.
The appeal was delayed by nearly one year.
It may, however, be mentioned that the plaintiff (appellant) did not submit to the decision of the District Court but took the matter in revision before the High Court.
The appeal as represented and the application for revision were disposed of by the common judgment under appeal before us.
The High Court held that there was no ground for extending time under section 5 of the Limitation Act for which purpose an application had been sub joined to the appeal filed in the High Court.
The question in this case is whether the High Court was fight in dealing with this problem as it did.
The High Court seemed to be of the opinion that an Advocate (Mr. K.K. Raizada) of 34 years ' standing could not possibly make the mistake in view of the clear provisions on the subject of appeals existing in section 39(1) of the Punjab Courts Act.
That sub section at that time clearly showed that appeals of the value of Rs. 5,000/ must be filed before the District Court but appeals above Rs. 5 '000/must be filed before the High Court.
The High Court also felt that the learned counsel persisted in pursuing his own theory by willing a revision.
It is on this account that time was denied to the present appellant in the appeal.
The only question is whether the decision of the High Court can be accepted.
The law is settled that mistake of counsel may in certain circumstances be taken into account in condoning delay although there is no general proposition that mistake of counsel by itself is always a sufficient ground.
It is always a question whether the mistake was bona fide or was merely device to cover an ulterior purpose such as laches on the part of the litigant or an attempt to save limitation in an underhand way.
The High Court unfortunately never considered the matter from this angle.
If it had, it would have seen quite clearly that there was no attempt to avoid the Limitation Act but rather to follow it albeit on a wrong reading of the situation.
It is quite clear that the limitation for the appeal to the High Court was three times as much as it was for the District Court.
When the appeal was filed, litigant had as much as two months 93 in hand to file the same in the High Court.
Further he did not attempt to save court fee on the appeal but paid the same courtfee which would have been payable in the High Court.
It does not appear that he had an underhand motive for filing the appeal in the District Court.
Therefore, the filing of the appeal must be attributed entirely to the advice of the counsel.
Here again, the counsel did not suppress anything.
As has been stated earlier, he put down both the valuations in the forefront of his memorandum of appeal, that is to say, the valuation of the suit in the original court and the valuation of the appeal.
No doubt the counsel was one with some experience and ought to have known that an appeal above Rs. 5,000/ must be filed in the High Court and not the District Court and therefore, we have to see whether he was genuinely under a mistake or not.
Here there is proof that he adhered to this view, because not only he filed the appeal but also took a revision from the order of the District Court to the High Court, still labouring under the same mistaken view.
Further he, seems to have been misled by a rule, i.e.r. 4 in Ch.
3B of Vol. 1 of the rules and orders of the High Court which read as follows: "In a suit for the amount found to be due after taking into accounts, it is not the tentative valuation of the plaintiff, but the amount found to be due and decreed by the court that determines the forum of appeal.
" This rule is applicable in a case in which the amount decreed is larger than the amount for which the original suit was brought.
Now it is well known that in a suit for accounts, the plaintiff is not obliged to state the exact amount which would result after the taking of accounts.
He may do so if he is able to; but if he is not, he can put a tentative valuation upon his suit for accounts taking care that the valuation is adequate and reasonable in all the circumstances of the case.
But the rule also obtains that if the amount which is found is larger than the amount at which he stated his tentative valuation, he must file the appeal against the larger amount and in the forum before which an appeal of that valuation can go.
This rule does not apply where the amount decreed is below the valuation in the original court.
Here the original valuation holds good both to find the forum and to put a valuation.
After the amendment of the valuation on account of ejectment the total claim was Rs. 5,930/ and that determined the court of lowest denomination before which the appeal from the suit had to go.
That according to the other rule which we have cited was the High Court.
The second rule, which we have later cited, does not cut across the first rule.
This appears to be the error which was committed by Mr. Raizada and we do not 94 find anything in the case to show that this error was tainted by any mala fide motive on the part of the counsel for the litigant.
In the circumstances we think that the High Court would have been justified in extending time under section 5 of the Limitation Act and the reasoning of the High Court unfortunately started from a wrong angle.
We accordingly set aside the order of the High Court and remit the appeal for hearing and disposal according to law.
The appellant will however pay all the costs of the respondent which have been incurred till today irrespective of the result.
We may mention that there are two appeals pending before us.
The other appeal is from the revisional order of the High Court and we think that there is no need to pronounce any decision in that appeal, because it becomes infructuous by reason of our decision in this appeal.
As the appeal before.
the High Court is an old one, we hope that the High Court will be able to give it priority.
Appeal remitted. | The appellant 's suit against the respondent for rendition of account and other reliefs was valued at Rs. 5,930/ for purposes of court fee and jurisdiction.
The suit was decreed in part and the amount decreed was less.
than the amount at which he stated his tentative valuation.
He filed an appeal to the District Court stating the valuation for purposes of appeal at Rs. 4,880 '/ .
The memorandum of appeal showed the valuation in the original suit and the court fee paid was the same amount as in the trial court.
The District Court returned the memorandum of appeal for presentation to the proper court because, under section 39 '(1) of the Punjab Courts Act appeals above the value of Rs. 5,000/ had to filed before the High Court.
The appeal was filed in the High Court the same day, but it was out of time.
The appellant also filed a revision against the order of the District Court.
His counsel placed reliance on r. 4 in Ch.
3 B of Vol.
1 of the Rules of the High Court which states that "in a suit for the amount found due after taking accounts it is not the tentative valuation of the plaintiff but the amount found to be due and decreed by the court that determines the forum of appeal.
" The High .Court held that there was no ground for extending time under section 5 of the Limitation Act and dismissed the appeal and also the revision.
In appeal to this Court, HELD: The High Court should have extended time under section 5 of the Limitation Act.
[9 '4 A B] (i) The appellant did not have any underhand motive in filing the appeal before the District Court, the filing had to be attributed entirely to the advice of his counsel.
[93 A B] There is no general proposition that mistake of counsel by itself is always a sufficient ground for condoning delay.
It is always a question whether the mistake was bona fide or was merely a device to cover an ulterior purpose.
[92 F G] In the present case the original valuation determined the court of lowest denomination before which the appeal from the suit had to go and that forum was the High Court.
The counsel seems to have been misled by r. 4 in Ch.
3 B of Vol. 1 of the Rules and Orders of the High Court.
This rule is applicable in a case where the amount decreed is larger than the amount for which the original suit was brought.
It does not apply where the amount decreed is below the valuation in the original court.
There is nothing in the case to show that the error committed by the counsel was tainted by any mala fide motive.
[93 C F; 94 A] |
il Appeal No. 1655 of 1968.
Appeal by special leave from the judgment and order dated December 20, 1967 of the Mysore High Court in Regular Second Appeal No. 811 of 1965.
A. K. Sen, Shyamala Pappu and Vineet Kumar, for the appellant.
S.V. Gupte, Janendra Lal, B.R. Agarwala and Kumar M. Mehta, for the respondent.
The Judgment of the Court was delivered by Grover, J.
This is an appeal by special leave from a judgment of the Mysore High Court in which the question involved is whether an option given to a lessee to get the lease,, which is initially for a period of 10 years, renewed after every 10 years is hit by the rule of perpetuity and is void.
The respondent entered into a deed of lease on October 26, 1951 with the appellant in respect of premises Nos. 8 & 9, Mahatma Gandhi Road, (South Parade), Civil Station, Bangalore.
It was stipulated that the lease would be for a period of 10 years in the first instance with effect from November 1, 1961 "with ,an option to the lessee to renew the same as long as desired as provided".
Clauses 9 and 10 which are material may be reproduced: "9.
The lessee shall have the right to renew the lease of the scheduled premises at the end of the present period of ten years herein secured on the same rental of Rs. 450/ per month, for a similar period and for further similar periods thereafter on the same terms and conditions as are set forth herein; and the Lessee shall be permitted and shall have the right to remain in occupation of the premises on the same terms and conditions for any further periods of ten years as long as they desire to do so.
The Lessor shall not raise any objection whatsoever to the Lessee exercising his option to renew the lease for any further periods of ten years on the same terms and conditions as long as they desire to be in 142 occupation, provided that the Lessee shah not have the right to transfer the lease or alienate any right thereunder. ' ' It appears that before the expiry of the period of ten years from the date of the commencement of the lease the lessee wrote to the lessor informing him of the intention to exercise the option given to the lessee under the deed of lease to get the same renewed on the same terms and conditions as before for a period of ten years from November 1, 1961.
The lessor did not comply with the request.
After serving a notice the lessee filed a suit for specific performance of the covenant in the lease for renewal.
It was prayed that the lessor be directed to execute a registered deed to lease in favour of the lessee and if he failed to do so the court should execute a deed in his favour.
The lessor pleaded, inter alia, that the condition relating to renewal was hit the rule against perpetuity.
Certain other pleas were taken with which we are not concerned.
The trial court decreed the suit.
The first appellate court and the High Court affirmed the decree.
The rule against perpetuity is embodied in section 14 of the Transfer of Property Act, hereinafter called the Act.
According to it no transfer of property can operate to create an interest which is to take effect after the lifetime of one or more persons living at the date of such transfer and the minority of some person who shall be in existence at the expiration of that period and to whom, if he attains full age, the interest created is to belong.
It is well known that the rule against perpetuity is rounded on the principle that the liberty of alienation "shall not be exercised to its own destruction and that all contrivances shall be void which tend to create a perpetuity or place property for ever out of the reach of the exercise of the power of alienation".
The words "transfer of property" have been defined by section 5 of the Act to mean an act by which a living person conveys property in present or in future to one or more other living persons etc.
The words "living persons" include a Company or association or body of individuals.
Section 105 of the Act defines "lease".
A lease of immovable property is a transfer of a right to enjoy such property made for a certain time express or implied or in perpetuity in consideration of a price paid or promised or of money, a share of crops, service or any other thing of value.
A lease is not a mere contract but it is a transfer of an interest in land and creates a right in rem.
Owing to the provisions of section 105 a lease in perpetuity can be created but even then an interest still remains in the lessor which is called a reversion.
It is not disputed on behalf of the appellant that a lease in perpetuity could have been created but the lease in the present case 143 was not of that kind and was for a period of ten years only in the first instance.
It is said that the mischief is created by the clauses relating to renewal which are covenants that run with the land.
It is pointed out that on a correct construction of the renewal clauses the rule of perpetuity contained in section 14 would be immediately attracted.
We are unable to agree.
Section 14 is applicable only where there is transfer of property.
Even if creation of a lease hold interest is a transfer of a right in property and would fall within the expression "transfer of property" the transfer was for a period of ten years only by means of the indenture Exh.
The stipulation relating to the renewal could not be regarded as transferring property or any rights therein.
In Ganesh Sonar vs Purnendu Narayan Singha & Ors.(1) in the case of lease of land an option had been given to the lessor determine the lease and take possession of the lease hold land under specified conditions.
The question was whether such a covenant would fall within the rule laid down in the English case Woodall vs Clifton(2) in which it was held that a proviso in a lease giving an option to the lessor to purchase the fee simple of the land at a certain rate was invalid as infringing the rule against perpetuity.
The Patna High Court distinguished the English decision quite rightly on the ground that after the counting into force of the Act a contract for the sale of immovable property did not itself create an interest in such property as was the case under the English law.
According to the Patna decision the option given by the lessee to the lessor to resume the lease hold land was merely a personal covenant and was not a covenant which created an interest in land and so.
the rule against perpetuity contained in section 14 of the Act was not applicable.
The same principle would govern the present case.
The clauses containing the option to get the lease renewed on the expiry of each term of ten years can by no means be regarded as creating an interest in property of the nature that would fall within the ambit of section 14.
Even under the English law the court would give effect to a covenant for perpetual renewal so long as the invention is clear and it will not be open to objection on the ground of perpetuity; see Halsbury 's Laws of England, 3rd Edn.
23, p 627.
In Muller vs Traf Jword(3) it was held that the covenant in a lease for renewal was not strictly a covenant for renewal.
But Farwell, J., proceeded to observe that a covenant to renew had been held for at.
least two centuries to be a covenant running with the land.
If so, then no question of perpetuity would arise.
It appears that in England whatever might have been the reason, the objection of perpetuity had never been taken to cases (1) (1962) Patna 201.
(2) (3)(1901) 1 Ch.
54. of covenants for renewal.
The following observations of Farwell, J., which were quoted with approval by Lord Evershed, M.R. in Weg Motors Ltd. vs Hales & Others(1) are note worthy: "But now I will assume that this is a covenant for renewal running with the land; it is then in my opinion free from any taint of perpetuity because it is annexed to the land.
See Rogers vs Hosegood, The equitable rule that the burden of a covenant runs with the land is to be found in section 40 of the Act.
This section reads: 40.
"Where for the more beneficial enjoyment of his own immoveable property, a third person, has, independently of any interest in the immoveable property of another or of any easement thereon, a right to restrain the enjoyment in a particular manner of the latter property, or where a third person is entitled to the benefit of an obligation arising out of contract, and annexed to the ownership of immoveable property, but not amounting to an interest therein or easement thereon, such right or obligation may be enforced against a transferee with notice thereof or a gratuitous transferee of the property affected thereby, but not against a transferee for consideration and without notice of the right or obligation nor against such property in his hands." As pointed out in Mulla 's Transfer of Property Act, 5th Edn.
at page 194, section 40 expressly says that the right of the covenantee not an interest in the land bound by the covenant nor an easement.
It is not an interest because the Act does not recognise equitable estates and it cannot be said as Sir George Jessal said in London & South Western Rly.
vs Gomm(2) that if a covenant "binds the land it creates an equitable interest in the land.
" The expression "covenant runs with the land" has been taken from the English law of real property.
It is an exception to the general rule that all covenants are personal.
Even on the footing that the clauses relating to renewal in the lease, in the present case, contain covenants running with the land the rule against perpetuity contained in section 14 of the Act would not be applicable as no interest in property has been created of the nature contemplated by that provision.
For the above reasons the appeal fails and it is dismissed with costs.
G.C. Appeal dismissed.
(1) ,188.
(2) , 580. | The respondent by a deed executed in 1951 took on lease from the appellant certain premises in Bangalore.
It was stipulated in the deed that the lease would be for a period of 10 years in the first instance with an option to the lessee to renew the, same every ten years so long as desired.
When in 1961 the first period of ten years was about to expire the respondent asked for a renewal of the lease.
On the appellant refusing to do so, the respondent filed a suit for specific performance, The suit was decreed by the trial court, the first appellate court and the High Court.
Appeal in this Court was filed by special leave.
The contention of the 'appellant was that the lease in question being in the first instance for ten years only was not a lease in perpetuity as contemplated by section 105 of the Transfer of Property Act; however the clauses relating to renewal which were covenants that ran with the land offended the rule against perpetuity in section 14 of the Act.
HELD: The 'appeal must be dismissed.
(a) Section 14 of the Act is applicable only where there is transfer of property.
Even if creation of a lease hold interest is a transfer of a right in property and would fall within the expression 'transfer of property ' the transfer was for a period of ten years only by means of the indenture in the present case.
The stipulation relating to renewal could not be regarded as transferring property or any rights therein.
[143 B] (b) The option of renewal given to the lessee did not contain a covenant which created an interest in the property of the nature that would fail within the ambit of section 14.
[143 F] Ganesh Sonar vs Purnendu Narayan Singha & Ors.
(1962) Pat.
201, applied.
Woodall vs Clifton, [1905]2 Ch.
257, referred to.
(c) In English law the, court would give effect to a covenant for perpetual renewal so long as the intention is clear and it will not be open to objection on the ground of perpetuity.
In India the equitable rule that the burden of a covenant runs with the land is to be found in section 40 of the Transfer of Property Act, but that section its.elf expressly says that the right of the covenanted is not an interest in the land bound by the covenant nor an easement.
It is not 'an interest because the Act does not recognise equitable estate.
[143 G; 144 F] Thus even on the footing that the clauses relating to renewal in the lease, in the present case, contained covenants running with the land the 141 rule against perpetuity contained in section 14 of the Act would not be applicable as no interest in property had been created of the nature contemplated in the provision.
[144 G] Muller vs Trafford, [1901]1 Ch. 54, Weg Motors Ltd. vs Hales & Ors. , 188 and London & South Western Rly.
vs Goreto, , 580, referred to. |
Appeal No. 2532 of 1966.
Appeal by special leave from the judgment and order dated August 8, 1963 of the Punjab High Court, Circuit Bench at Delhi in Civil Revision No. 330 D of 1954.
B.P. Maheshwari and S.M. Jain, for the appellant.
V.A. Seyid Muhammad and S.P. Nayar, for the respondent.
The Judgment of the Court was delivered by Hidayatullah, C.J.
This is an appeal against a judgment and order of the Circuit Bench of the Punjab High Court at Delhi 137 (Single Judge) in a matter arising under the .
By ,m agreement dated April 28, 1948 the appellant company entered into a contract with the Chief Director of Purchase (Food) acting on behalf of the Government of India.
It is not necessary to give the details of this contract, because the matter was referred to arbitration under an arbitration clause included in the agreement between the parties.
The award was made and signed on April 26, 1950.
The Arbitrator awarded Rs. 17,080 2 9 with costs in favour of the company.
The Arbitrator, however, did not send a notice as such of the making and signing of the award but sent a copy of the award signed by him to the company.
The company acknowledged the receipt of this copy by two letters which are dated May 5 and May 16, 1950.
It appears that in the original which was retained in the office of the Arbitrator, it was stated that there was a covering letter giving notice of the making of the award, but the company denied that any such letter had been sent.
However, nothing much turns on it as we shall show presently.
After the copy of the award was received by the company, it filed an application under section 14(1) of the in the Court of the Subordinate Judge, Delhi on March 30, 1951 for making the award ruIe of the court.
It may be mentioned that on July 3, 1951, the Arbitrator sent the original award to the court also.
Before the Subordinate Judge objection was taken by the Union of India that the application of the company to the court was delayed since such an application under section 14(1) of the under article 178 of the Indian Limitation Act had to be made within 90 days of the receipt of the notice intimating that the award had been made and signed.
This objection prevailed with the Subordinate Judge who rejected the application.
A revision application was unsuccessfully made before the High Court and it is the order on the revision application which is the subject of appeal before us.
Originally the revision application went before a learned Single Judge of the High Court.
He referred the matter to a Division Bench which in its turn referred the case for decision to a Full ' Bench.
The Full Bench gave its opinion on November 17, 1961.
Although the Full Bench discussed the matter it did not reach any conclusion in the case, because it felt that whether the application under section 14(1) of the had been made within 90 days or not, was a question of fact which has to be decided by the learned Single Judge, and as the learned Single Judge had not gone into that question, the matter had to go back to him.
When the case came before the learned Single Judge, he took some evidence and examined the question in detail.
We upheld the Sup CI /70 1o 138 decision of the Subordinate Judge and dismissed the revision application.
It has been argued before us by Mr. B.P. Maheshwari that the judgment under appeal is erroneous, because section 14(1) of the requires that there should be a notice in writing and that notice had to be something besides the award of which a copy had been sent.
He has cited a number of rulings in support of his contention that a notice in writing is incumbent before limitation under article 178 of the Limitation Act which applies to article 14(1) petitions can start.
In chief, he relies upon Ratnawa vs Gurishiddappa Gurushantappa Magavi & Ors.
( 1 ), Puppalla Ramulu vs Nagidi Appelaslwami & Ors.(2), Jagdish vs Sunder(3), Ganga Ram vs Radha Kishan(4), Badaria Ramakrishnarnma & Ors.
vs Vattikonda Lakshmibayamma & Ors.(5).
It is not necessary to go into the reasoning which made the learned Judges in these cases to lay down that there must be a proper notice in writing of the making of the award.
That follows in fact from the words of section 14(1) of the .
That section says that when the arbitrators or umpire have given their award, they shall sign it and shall give notice in writing to the parties of the making and signing thereof and of the amount of fees and charges payable in respect of the arbitration and award.
What will be considered a sufficient notice in writing of the making and signing of the award is a question of fact.
In the cited cases emphasis sometimes has been laid upon the latter part of the sub section which speaks of the amount of fees and charges payable in respect of the arbitration and award.
Sometimes emphasis has been placed upon the opening words namely that there should be a notice in writing.
Reading the word 'notice ' as we generally do, it denotes merely an intimation to the party concerned of a particular fact.
It seems to us that we cannot limit the words "notice in writing" to only a letter.
Notice may take several forms.
It must, to be sufficient, be in writing and must intimate quite clearly that the award has been made and signed.
In the present case, a copy of the award signed by the arbitrator was sent to the company.
It appears to us that the company had sufficient notice that the award had been made and signed.
In fact the two letters of May 5 and May 16 to which we have referred quite clearly show that the company knew full well that the arbitrator had given the award, made it and signed it.
In these circumstances to insist upon a letter which perhaps was also cent (though there is some doubt about it) is to refine the law (1) A.I.R. (2) A.I.R. 1957 A.P. 11.
(3) I.L.R. 27 Pat. 86.
(4) I.L.R. [1955] Punj.
(5) I.L.R. 139 beyond the legitimate requirements.
The only omission was that there was no notice of the amount of the fees and charges payable in respect of arbitration and award.
But that was not an essential part of the notice for the purpose of limitation.
To emphasise the latter part as being the essential part of the notice is to make the first part depend upon the determination of the fees and charges and their inclusion in the notice.
A written notice clearly intimating the parties concerned that the award had been made and signed, in our opinion certainly starts limitation.
In this view of the matter we are in agreement with the decision of the learned Single Judge who has endorsed the opinion of the Subordinate Judge that limitation began to run from the receipt of the copy of the award which was signed by the Arbitrator and which gave due notice to the party concerned that the award had been made and signed.
That is how the party itself understood when it acknowledged the copy sent to it.
Therefore, the application must be treated as being out of time and the decision of the High Court to so treat it was correct in all the circumstances of the case.
We, therefore, do not see any reason to interfere in this appeal and it is dismissed.
But we make it clear that the other part of the case, namely what is to happen to the award sent by the Arbitrator himself to the court has yet to be determined and what we say here will not affect the determination of that question.
Obviously enough that matter arises under the second subsection of section 14 and will have to be considered quite apart from the application made by the company to have the award made into rule of Court.
It was represented to us by Dr. Syed Mohammad that objections had been taken to the validity of the award and they remain still for decision.
Those of course must fall to the ground with the application which we have found to be out of time.
As to whether similar objections can be raised in answer to the award filed at the instance of the arbitrator is a question which we cannot go into in the present appeal and no expression of opinion must be attributed to us on that point.
In the circumstances of the case we leave the parties to bear their own costs.
V.P.S. Appeal dismissed. | The disputes between the appellant and the respondent, arising out of a contract between them, were referred to.
arbitration under the arbitration clause in the contract.
The award was made and signed on April 26, 1950.
The arbitrator did not send any notice of the making and signing of the award but sent a copy of the signed award to the appellant.
The appellant acknowledged receipt of the copy by two letters dated May 5, 1950 May 16, 1950.
On March 30, 1951, the appellant filed an application in the Subordinate Judge 's Court for passing a decree in terms of the award.
On the question whether the application was out of time, because, under article 178 of the Indian Limitation Act, 1908, the application had to be filed within 90 days of the date.
of service of the notice of the making of the award, HELD: Under section 14(1) of the , when the arbitrators have given their award, they shall sign it and shall give notice in writing to the.
parties of the making and signing thereof and of the amount of fees and charges payable in respect of the arbirtation and the award.
The notice need not be in the form of a separate letter.
It is sufficient, if it is in writing and intimates clearly that the award has been made and signed.
The non mention of the amount of the fees and charges payable in respect of the arbitration and award will not affect the notice as it is not an essential part of it for the purpose of limitation.
In the present case, since the appellant had sufficient notice that the award had been made and signed when a copy of the award signed by the arbitrator was sent to the appellant, the application for passing a decree in terms of the award was out of time.
[138 B, F G; 139 ' A, C D] |
Appeals Nos. 481 and 482 of 1966.
Appeals by special leave from the judgment and order, dated April 15, 1963 of the Patna High Court in Misc.
Judicial Cases Nos. 342 and 346 of 1954.
165 S.T. Desai and D.N. Mukherjee, for the appellant (in both the appeals).
Jagadish Swarup, Solicitor General, S.K. Aiyar, R.N. Sachthey and B.D. Sharma, for the respondent (in both the appeals).
The Judgment of the Court was delivered by Shelat, J.
These two appeals, under special leave, arise from two References to the High Court of Patna under section 66(2) of the Income Tax Act, 1922 and relate to the assessment years 1.945 46 and 1947.
In the first appeal, the question arising for determination is whether, on the facts and circumstances of the case, the surplus receipt of Rs. 13,43,469/ , realised as a result of the side of gold, is assessable as income, or profits or gains for the assessment year 1945 46 under section 4(3) (vii) of the Act.
In the 2nd appeal, two questions arise for determination; one relates to the surplus receipt of Rs. 33,481/ arising out of the sale of some more gold, and the second relates to the receipt of Rs. 88,522/ realised by the assessee as a receipt as a result of sale of certain shares.
All the three questions raise the common problem whether the said transactions in gold and shares were by way of realisation of investment or were adventures in the nature of trade or business.
The assessee was at all material times a landholder deriving large income from agriculture, royalties of minerals and income from forests forming part of his estate.
Prior to 1937, when he was a minor, his estate was under the management of a Court of Wards.
On attaining majority, the estate, which included Government securities of the value of about Rs. 40 lacs, was handed over to him on August 19, 1937.
During the account year 1938 39 he sold the whole.
lot of these securities and realised Rs. 44,25,088/ , the sale thus resulting in an excess of Rs. 4,55,305/ .
This excess amount was assessed as profit by the income tax officer for the assessment year 1939 40.
But on appeal against the assessment order, the Appellate Tribunal set side that order on a finding that the said sale was by way of a change in investment, and therefore, was not a transaction in the nature of trade or business.
On March 23, 1939, the assessee opened an account in the Imperial Bank of India initially with Rs. 46 lacs, which included the said sale proceeds of Rs. 44 lacs 'and odd and to which on March 27, 1939 he added Rs. 2.60 lacs.
The account was opened in the name of his wife and was called "Account of Rs. 48 lacs floating in the share market ' ' ' In September 1939, the assessee purchased shares and debentures of the value of Rs. 34.14 lacs from out of the funds in the said account.
He, however, sold certain shares for Rs. 5,75,723/ in October 1939, and then the rest of them in 1940 and 1941 realising Rs. 29,58,677/ and 166 Rs. 64,201/ respectively.
The first sale fetched a proFit of Rs. 1,17,064/ the second a profit of Rs. 25,133 and the third a loss of Rs. 1,642/ .
The income tax officer brought to tax the two surpluses in the assessments for the assessment years 1940 41 and 1941 42.
But the department was again unsuccessful as the Tribunal once again held, on the strength of the correspondence which had passed between the assessee, his bankers axed his brokers in Calcutta, that the only possible conclusion emerging from that correspondence was that the assessee 's intention was not to deal in shares and debentures, and that the said transactions were a mere change in investment carried out of a single scheme of earning a better yield from investments.
The Tribunal 's orders in respect of these assessments for the assessment years 1939 40 to 1941 42 were made part of the Statement of Case filed by the Tribunal be,fore the High Court in the present References.
Between June 28, 1940 and November 9, 1940 the assessee purchased 68,109 tolas of gold for Rs. 28,47,380/ from out of the sale proceeds of the said shares.
The gold so purchased was kept in his family vaults at Padma, the seat of his estate, for nearly 4 years.
Between October 9, 1944 and October 20, 1944, he disposed of the bulk of the gold, i.e. 55,494 tolas, for Rs. 36,80,174/ , the sale resulting in a surplus of Rs. 13,43,469/ , which is the subject matter of the first appeal.
The remaining quantity of gold was sold of October 19, 1945, and that sale brought_ him an excess of Rs. 33,481/ , which is part of the subject matter of the second appeal.
In respect of these two surplus amounts, the assessee contended that they were the result of a change in investment and could not be said to be transactions in the nature of trade or business.
His case was that neither the Government securities, nor the shares and debentures purchased out of their sale proceeds, nor the gold were sold and purchased by way of dealing in them, that at no time they became his stock in trade for any business or adventures in the nature of trade or business therein, that the transactions were mere conversions from one investment to another, depending upon the circumstances which prevailed during the respective periods and that the sale of gold in 1944 and 1945 was occasioned partly due to the tide in the second world war turning in favour of the ,allies and partly due (a) to his having to pay Rs. 7 lacs by way of income tax, (b) expenses for the marriage of his younger brother, (c) for payment of Rs. 6 lacs debt to one Gupta and (d) for purchase of Victory Bonds worth Rs. 14 lacs and odd 'at the instance of the Government authorities as contribution of his estate to the war effort.
The Tribunal rejected the case that gold had been sold for the reasons given by the assessee or as a change in investment and 167 held that: (1 ) conversion of shares into gold was not due to any panic resulting from the war, (2) that there was no pressing necessity for the sale of gold as alleged by him, (3) that Victory Bonds were not by way of any war effort since the assessee sold them away within a short time after their purchase, and (4) that he sale proceeds of gold were utilised in purchasing shares for which he borrowed an additional amount of Rs. 5.10 lacs in 1945 46 against gold.
in this view the Tribunal confirmed the I.T.O. 's decision that the two excess amounts were liable to income tax in the two assessment years.
The sale proceeds of gold sold as aforesaid were utilised by the assessee in purchasing 7(325 shares of Karanpura Development Co. Ltd. for Rs. 2,37,267/ during the period from December 8, 1944 to April 20, 1945 and shares of Bokaro Ramgur Co. for Rs. 39,81,663/ purchased in 1945 46.
Part of the sale proceeds were 'also.
utilised in purchasing the said Victory Bonds.
between November 8, 1945 and February 21, 1946, he sold 6950 of the Karanpura shares realising a net surplus of Rs. 88,522/ , which the Income Tax Officer treated as business profit and brought to tax for the assessment year 1946 47.
As the Statement of Case by the Tribunal shows, the Tribunal examined the assessee 's dealings since the time he took over the said estate.
The Tribunal noted that the said shares were purchased from the said Rs. 48 lacs in the Bank reserved ,for that purpose and that they were sold and purchased at very short intervals.
From these facts it held that he must be considered to have launched a scheme in dealing in shares, which conclusion, it thought, was strengthened by the fact of the assessee having borrowed Rs. 5.10 lacs for the said purpose.
The Tribunal further held that the complete picture of the said transactions over a length of time had not 'been before the preceding Tribunal when it passed the earlier orders for the assessment years 1939 40 to 1941 42, and therefore, its conclusions were not applicable to the transactions in question.
It consequently held the assessee to be a dealer in shares.
As regards the gold ,also, the Tribunal confirmed the orders of the I.T.O. rejecting the assessee 's case that the gold was purchased by him owing to the war crisis and sold by him on account of the pressing necessities alleged by him and the change in the war situation then.
By an order dated April 2, 1959, the High Court referred that statement of Case back to the Tribunal under section 66(4) directing it to consider further all the materials before it and file a supplementary Statement of Case as the High Court found the Statement factually incorrect in certain respects.
The Tribunal accordingly sent a supplementary Statement of Case on April 23, 1960.
After setting out the assessees transactions of the sale of Government securities in 1938 39, the purchase of shares from 168 their sale proceeds, their sale in 1939 40 and 1940 41, the purchase of gold 'and its sale, the Tribunal once again rejected the assessee 's claim that those transactions were conversions of one investment to another made for a better return or that the gold was sold in October 1944 for pressing necessities alleged by the assessee.
Regarding the purchase and sale of shares, the Tribunal stated that the assessee purchased shares of the value of Rs. 37 lacs and odd in1945 46, that those were shares of two, concerns only, Bokaro, and Ramgur Co. Ltd. and Karanpura Development Co. Ltd. and that as the latter company 's shares were of the value of Rs. 2,37,267/ only, the 'bulk of the amount of Rs. 37 lacs and odd went into the purchase of the shares of Bokaro: and Ramgur Co. Ltd. The Tribunal noted that the sale of Karanpura shares resulted in a net profit of Rs. 88,522/ , that in respect of the Karanpura shares there was correspondence showing that his brokers had advised him to acquire 51% of the company 's share holding as he desired to obtain control over its management, that for doing so he wanted to obtain founders ' shares (each of which shares carried 3 votes per share), that a compromise was proposed in a suit he had filed as the lessor of the mines leased out to the company, that M/s. Bird & Co., the managing agents of that company, were not willing to.
sell him shares representing the unissued capital of the company on terms proposed by the assessee and that ultimately he failed to obtain majority of shares which only could have enabled him to obtain control over the company 's management.
But the Tribunal found that "the assessee was attempting to obtain control of the company not by purchasing of shares in the market, but by issue of shares by the company in order to settle the dispute between the company and the assesses These negotiations finally failed.
" It finally held that having perused the correspondence and having regard to the circumstances, the purchase of Karanpura shares was not in pursuance of a scheme to obtain control over the company by acquiring 51% of the votes therein.
The High Court, after hearing the: References, held that though the Tribunal had in the earlier assessments held that the assessee 's transactions in shares, securities and gold did not amount to transactions in the nature of trade or business, and therefore, the assessee could not be treated as a dealer in those articles.
There was no bar to the revenue coming to a different conclusion, though to do so it must have some new materials and facts before it.
It further held that the present Tribunal could a/so arrive at such a conclusion having regard to: (a) the frequency of transactions of purchase and sale of shares, (b) the short interval between purchase and sale of shares, (c) the fact of Rs. 48 lacs in the assessee 's wife 's account having been ear marked for shares transactions, (d) his borrowing Rs. 5.10 lacs 'against gold for purchase 169 of shares, and lastly, the fact that the Tribunal this time had before it a more complete picture of the assessee 's transactions over a length of period which its predecessor had not when it dealt with the assessments for the assessment years 1939 40 to 1941 42.
The High Court further held that there was fresh material, namely, that when the gold was sold, its sale proceeds were again invested in shares and the fact that though Victory Bonds were purchased in January 1945 they were sold after an interval of two months only.
The High Court, in this view, concluded that "the Appellate.
Tribunal, therefore had before it fresh materials for coming to a conclusion contrary to the one come by its predecessors in the previous orders.
" It rejected the assessee 's case: (a) that he had converted one investment into another, i.e. from shares and securities to gold, because of the worsening of the war situation after the fall of France in 1940, (b) that when the war situation improved in 1944 and with that the price of gold began to fail he once again converted his investment from gold to shares, i.e., from an unproductive investment into one which could give him an adequate yield, and (c) that he had sold gold because of pressing necessities.
The first contention was held unsustainable because even after purchasing gold the assessee had retained considerable cash; the second was rejected on the ground that the assessee had sold gold not because of the allied victory in sight but because he found the gold unprofitabIe by reason of the fall in its price and the third was rejected as the assessee had failed to make_good the pressing necessities alleged ' by him.
The High Court further held that the findings given by the Appellate Tribunal were all findings of fact and as they could not be said to have been arrived at without any evidence they could not be interfered with in a Reference under section 66(2), and answered the questions as to the two surplus amounts of Rs. 13 lacs and odd and Rs. 33 thousand 'and odd as liable to assessment.
In regard to the excess of Rs. 88,522/_ resulting from the sale of ' Karanpura shares, the High Court agreed with the Tribunal that that amount also was rightly brought to tax.
It held that the finding of the Tribunal that the purchase of these shares was not in pursuance of a scheme to obtain control in the company and that the assessee 's scheme for that purpose was to acquire shares representing the unissued capital of the company was one of fact with which also it had no jurisdiction to interfere.
Counsel for the appellant disputed the correctness of the High Court 's judgment and contended: (1 ) that it was in error in declining to go into the correctness of the findings of the Tribunal by merely stating that they were findings of fact, (2) that the question whether a particular item was a trading profit or capital accretion depended on the intention on the part of the assessee at the time of the transaction in question and which had Sup CI/70 12 170 to be arrived at by an inference from established facts and was, therefore, a mixed question of fact and law, (3) that on the facts and circumstances, the Tribunal, and following it the High Court, was in error in treating the gold and the Karanpura shares as the stock in trade of the assessee for his alleged trading activities, (4) that the onus of proving that the activities of the assessee amounted to activities in the nature of trade or business was on the department and particularly so,, as the Tribunal in the earlier assessments had come to a contrary conclusion, and (5) that the facts and circumstances as accepted by the Tribunal in its Statement of Case showed that the purchases of gold and share were made without any intention at that time to resell them at profit, and that therefore, the subsequent sales thereof would not stamp those transactions with the character of trade or business in them.
Since these appeals arise out of References under section 66(2), we cannot exercise any wider power of interference than that permitted to the High Court under the Act.
That was not disputed by Mr. Desai.
But in support of his contention that this was a case ' where the High Court could and should have interfered with the Tribunal 's findings he cited a number of decisions.
It is not necessary to go into all these decisions as the principles on which such interference can be made and the scope of power under section 66 to do so are by now well established.
That the question, whether an assessee carries on business or whether certain transactions are in the course of business or whether they amount to adventures in the nature of trade or business, is a mixed question of fact and law is well settled.
The decision in Venkataswami Naidu & Co. vs
T.(1) is an instance in point where this Court observed that the expression 'adventure in the nature of trade ' appearing in the definition of 'business ' implies the existence of certain elements in the .adventure which in law would invest it with the character of trade and that renders the question whether a transaction 'is in the nature of trade a mixed question of law and fact and the High Court in such a case would interfere if the Tribunal had misdirected itself in law of 'also Liquidators of Pursa Ltd. rs.
C.I.T.)(2).
But to distinguish a question of fact and a question of law is not always easy, for, sometimes there is a common area between the two and though a mere question of fact can be turned into one of law, care should be taken against a finding of a mixed question of fact and law being given the unassailability which the Act confers on a pure finding of fact.
The case of Sree Menakshi Mills Ltd. vs
T.(3) holds that where an ultimate finding on an issue is an inference to be drawn from facts found, on application of a principle of law, there is a mixed question of law and fact and such an inference in such a (1) at 603 to 604.
(2) (3) 171 case is a question of law open to review by the court.
On the other hand, when the final determination of the issue does not involve any application of a principle of law, an inference is a pure inference of fact drawn from the other basic facts.
Such an inference can be attacked only if there is no evidence to support it, or, if it is perverse.
Since the expression 'adventure in the nature of trade ' implies the existence of certain elements in the transactions which in law would invest them with the character of trade or business and the question on that account becomes a mixed question of law and fact, the Court can review the Tribunal 's finding if it has misdirected itself in law.
It is fairly clear that where a person in selling his investment realises an enhanced price, the excess over his purchase price is not profit assessable to tax But it would be so, if what is done is not a mere realisation of the investment but an act done for making profits.
The distinction between the two types of transactions is not always easy to make The distinction whether the transaction is of one kind or the other depends on the question whether the excess was an enhancement of the value by realising a security or a gain in an operation of profit making.
If the transaction is in the ordinary line of the 'assessee 's business there would hardly be any difficulty in concluding that it was a trading transaction, but where it is not, the facts must be properly assessed to discover whether it was in the nature of trade.
The surplus realised on the sale of shares, for instance, would be capital if the assessee is an ordinary investor realising his holding; but it would be revenue, if he deals with them as an adventure in the nature of trade.
The fact that the original purchase was made with the intention to resell if an enhanced price could be obtained is by itself not enough but in conjunction with the conduct of the assessee and other circumstances it may point to the trading character of the transaction.
For instance, an 'assessee may invest his capital in shares with the intention to resell them if in future their sale may bring in higher price.
Such an investment, though motivated by a possibilty of enhanced value, does not render the investment a transaction in the nature of trade.
The test often applied is, has the assessee made his shares and securities the stock in trade of a business.
Though the assessee was at the material time a landholder of a large estate, that fact by itself would not mean that his transactions in shares, securities and bullion cannot be transactions in the nature of trade.
They had, therefore, to be examined in the light of all the facts and circumstances to ascertain whether they had been entered into in pursuit of a trading activity.
The first relevant ,fact iS that the assessees occupation was that of a landholder, having, on attaining majority, a considerable amount of money available for raising income therefrom.
The transactions 172 in question were obviously not in the line of any business or trade carried on by him.
Since the Tribunal came to a conclusion as regards the nature of the assessee 's transactions different from that arrived at earlier, it would be useful to tabulate them at one place.
So tabulated, they are as follows: (1) Sale of Government securities in 1938 39 which realised Rs. 44.25 lacs; (2) Opening of an account with this and certain other amounts totaling Rs. 48 lacs in the Imperial Bank; (3) Purchase out of these funds, shares and debentures of the value of Rs. 34.14 lacs in September 1939; (4) Sale in October 1939, i.e., within a month, of some of these shares bringing him Rs. 5.75 lacs; (5) Sale of the bulk of the shares in 1940 bringing in Rs. 29.58 lacs; (6) Sale of the remaining shares in 1941 resulting in a small deficit; (7) Purchase of 68,109 tolas of gold in June 1940 for Rs. 28.47 lacs; (8) Sale of the bulk of the gold, i.e., 55,495 tolas in October 1944 resulting in a surplus of Rs. 13 lacs and odd; (9) Sale of the remaining gold in October 1945 resulting in a surplus cf Rs. 33,481/ ; (10) Purchase of Karanpura shares between December 1944 and April 1945 of the value of Rs. 2,37,267/ ; (11 ) Purchase of Victory Bonds in January 1945 of Rs. 14 lacs, and sale thereof in March 1945; (12) Borrowing Rs. 5.10 lacs against gold in 1945 46; (13) Purchase of Bokaro Ramgur shares in 1945 46 for Rs. 39.81 lacs and (14) Sale of Karanpura shares in 1945 46 bringing in a surplus of Rs. 88,000 and odd.
As already stated, though these transactions were not in the line of any trade of business carried on by the assessee, nonetheless, if they possess the characteristics of adventures in the nature of trade, the profits resulting therefrom would be liable to tax.
But in an enquiry on the question whether these transactions were in the nature of trade or business, it would not be altogether irrelevant 173 to notice that in 1938 39, when the assessee sold the Government securities, he sold the entire lot and invested the bulk of their sale proceeds in shares and debentures, i.e., as much as Rs. 34 lacs.
The same features is present also in his purchase of gold in 1940 and its disposal in 1944 and 1945 using its sale proceeds in buying shares, which, it must be remembered, were of two companies only.
The transactions thus are not diversified nor are gradual according to the opportunities offered by fluctuating market prices, but are in bulk and almost at a time, which ordinarily are not the characteristics of the dealings of a person carrying on trade or business in them.
Thus, in 1938 39 all Government securities were sold and the bulk of their sale proceeds, i.e. Rs. 34 lacs and odd, used in the purchase of shares.
The same was the case when gold was bought 'and sold.
Furthermore, when a person trades in shares and debentures, he does not ordinarily buy shares of two companies only, except when a particular script has the possibility of giving an unusual or a certain profit.
There was nothing on record to show, nor did the Tribunal find, that that was the case with the shares of either of the two companies whose shares the assessee purchased in such large quantity.
Prima facie these transactions would appear in the nature of investments and their conversion into what the assessee believed to be better investments as the circumstances changed from time to time.
In support of his contention that these transactions were not in the nature of trade or business, the assessee had relied on the correspondence between him on the one hand and his bankers and brokers on the other, which had satisfied the Tribunal previously with reference to the assessment years 1939 40 to 1941 42.
That correspondence lends support to the assessee 's case inasmuch as he had there in clearly instructed his brokers to invest the sale proceeds of the said Government securities in such a way as to give him an annual yield of net 7%.
There can be no doubt that Government securities were sold accordingly and shares of certain companies were purchased from their sale proceeds in accordance with the advice of his brokers and bankers.
When it was found that certain shares so purchased were not Likely to yield the percentage he desired, they were sold within hardly a month from their purchase.
The circumstances in which these transactions were brought 'about, would disclose, as was held by the previous Tribunal in the case of the earlier assessments, that the assessee 's intention then was to change his investments from Government securities into shares and debentures which, he was advised, would procure him a better yield.
This conclusion is consistent with his sale of the entire lot of Government securities 'at 'a time, his going in for shares with their sale proceeds and the sale in October 1939 of certain shares which were found incapable of giving the return he desired.
174 Since the present Tribunal had the advantage of examining the assessee 's transactions during the whole of the period, i.e., right from 1938 39 to 1944 45 and thus have a more comprehensive picture of all the transactions, there would be no bar to its coming to a conclusion different from that arrived at in the earlier years, if the acts and conduct of the assessee taken as a whole throughout the period pointed to ,a different conclusion as both the Tribunal and the High Court have said.
But the only new materials pointed out by the Tribunal from which a different conclusion could be arrived at were (1) the sale of gold in 1944 and 1945, (2) the purchase of the said shares from its sale proceeds, and (3) the sale of Karanpura shares.
The question, therefore, the Tribunal had before it was, whether when the assessee purchased the gold he did so with the intention to deal in it.
The Tribunal held, and the High Court concurred with it, that the assessee 's transactions showed that they were in the nature of trading transactions.
Two facts, however, throw considerable doubt on the validity of that conclusion and neither the Tribunal nor the High Court seems to have weighed them with the consideration which they demand.
The first fact is that in 1940 he converted his entire share holding into gold, a fact consistent with his case that he did so because of the nervousness engendered by the breaking out of the Second World War, the initial German victories and the fall of France.
The Tribunal did not countenance this case for it thought that if that was so, the assessee would have invested the other cash lying with him also in gold, and secondly because according to it the war panic started in 1942 and not in 1940.
We do not think that this was an accurate 'approach.
The fact that the assessee did not invest all his cash cannot mean, as the Tribunal thought, that his case about the purchase of gold was not correct.
The war had commenced in 1939 and it is a notorious fact that in 1940 the fortunes of the allies were none too bright.
The fact was that the assessee sold his entire share holding and applied their sale proceeds and also a further amount of Rs. 13 lacs and odd obtained ,from his lessees, M/s Anderson Wright & Co., into.
The second fact, whose significance does not also seem to have been adequately apprehended, was that the assessee, who started with the plan of getting at least net 7% yield, put a very Large part of his funds into gold, an altogether sterile security, and retained that gold in his family vaults ,for nearly 4 years.
The Tribunal had before it the gold prices current during the years 1940 to 1944.
These indicate that the gold price remain steady at Rs. 42 per tola all throughout 1940.
There was, however, an upward trend noticeable from about the end of 1941 which went up to Rs. 65 towards the end of 1942.
By the middle of 1943 the gold price had risen to Rs. 90 and even more.
In October 1944, when the assessee sold 175 a large bulk of his gold holding the price was at Rs. 68 per tolaIf the idea of the assessee in purchasing the gold was to trade in it, he would not have waited for 4 years without disposing of a particle of it.
The price was on the upward trend in 1941 and reached the climax in 1943 when he could have sold the gold and made considerable gain.
The fact that he did not do so and waited until October 1944 the war fortunes were turning in favour of ' the allies, that confidence had gradually been regained by trading circles and that that was why he thought that it was no longer necessary for him to retain the ,gold any further and could safely invest his money in income bearing securties.
The further fact that he sold practically the whole of his stock of gold in October 1944 instead of selling it bit by bit when the price was rising since about the end of 1942 is inconsistent with the hypothesis that the object with which the gold was purchased was to trade in it.
Regarding share transactions, we think that the Tribunal placed undue emphasis on the fact that when he opened the bank account in March 1939 with the sale proceeds of Government securities, he did so, firstly, in the name of his wife 'and, secondly, called that account as one of "Rs. 48 lacs floating in the share ' market".
The first had no particular significance and the second properly viewed only meant that he wanted to set apart this fund for transactions in shares and securities and not mix up his other capital and the income arising from his estate.
The name he gave ' to this account cannot for that reason only render his dealing with that account into trading transactions if otherwise, they were not.
Similarly, the Tribunal was unduly impressed by the fact that he sold away the Victory Bonds within about two months from their purchase.
The correspondence produced by the assessee clearly shows that he had bought those Bonds at the pressure of the then Commissioner.
The Bonds were not likely to fetch him the yield he desired.
His purchase of them had thus served the purpose, viz., his showing to the authorities that his estate had made a war contribution.
The sale by him of those Bonds would not affect the Government or its war effort.
The fact that he sold ' them soon after the purchase would not invest it with the stamp of ' trade or business in Victory Bonds.
As regards the Karanpura shares, the correspondence between him and the company and the advice he had from his brokers referred to in the Statement of Case show that the assessee did at one time entertain the idea of obtaining control over the company 's management by procuring 51% of its total shares.
He could do so by purchasing shares in the open market and also, by other means.
He purchased 7,025 shares in the market but that ,was clearly not enough.
There was at that time litigation going on_ 176 between him and the company and he seems to have hit upon the idea that he would compromise his suit if the managing agents of the company were to sell him shares representing its unissued capital at prices offered by him.
The object of his offer was that he would not have to pay the market price of the shares which was 3 times more than the one offered 'by him.
The company did not agree and his move for compromise ,failed.
According to him, there was, therefore, no useful purpose for retaining those shares and he sold 6,950 shares leaving only 75 shares with him.
On these facts the Tribunal was not right in concluding that the shares which the assessee purchased from the market were not for the purpose of acquiring the major share holding in the company and that the control over the company was to be obtained only by purchasing shares representing the unissued capital.
Both the purchase of shares and the move to obtain shares representing the unissued capital were part of the same design and if the latter 'failed, his purchase of 7,025 shares would obviously not bring him nearer his object.
Furthermore, the bulk of the sale proceeds of gold went into the purchase of Bokaro.
Ramgur shares which remained with him till the assessment years in question.
The profits made on the sale of shares, acquired with the intention of obtaining control over the company 's management and not for dealing in them, would be on the capital and not revenue account.
(see Kishan Prasad & Co. Ltd.
C.I.T.(1) and C.I.T. vs National Finance Ltd. (2).
The Statement of Case itself set out facts which were consistent with the assessee 's case.
In our view the Tribunal misdirected itself in applying the law to the facts ,found by it both in the matter of gold and shares, and the High Court would have been entitled to interfere with its findings instead of holding that it could not do so as the findings were findings of fact.
The questions involved being mixed questions of fact and law, the hypothesis on which the High Court acted that the findings were purely findings of fact and therefore 'were unassailable was in our view not correct.
The appeals, therefore, will have to be allowed and the answers given by the High Court set aside.
We hold that the two questions referred to the High Court should have been answered in assessee 's favour and we do s0 accordingly.
The respondent will pay to the appellant costs of these appeals but only one hearing fee.
(3.C. Appeal allowed. | The assessee inherited a vast estate consisting of agricultural and other land as also Government securities worth Rs. 40 lacs.
In 1937 he attained majority and control of the estate from the Court of Wards.
In the accounting year 1938 39 he sold some of these securities at a profit.
Thereafter he opened an account in the Imperial Bank of India in the name of his wife and called it "account of 48 lacs floating in the share market.
" In September 1939 he purchased shares worth Rs. 34.14 lacs out of the said fund but sold them, again at a profit in the Years 1939 ', 1940 ' and 1941.
The profits on the said sales of shares were subjected to tax by the Income tax Officer in the years 1939 40, 1940 41 and 1941 42.
The Tribunal however held that the asessee was not a dealer in shares anti ' held the profits not to be taxable.
Between June.
and November 1940 the assessee purchased gold for Rs. 28.47,380/ from out of the sale proceeds of the aforesaid shares.
This gold was sold 'at a profit in the accounting periods relevant t0 the 1945 46 and 1946 47 assessment years.
With the sale proceeds certain shares including 7,025 shares of Karanpura Development Co. Ltd. were purchased, most of which were sold at a profit.
Certain Victory Bonds were purchased and resold within two months.
The Income tax Officer subjected the profits from the sales of gold and Karanpur shares to tax in the assessment years 1945 46 and 1946 47.
The Tribunal on ,considering the whole pattern of transactions from 1938 onwards came to the conclusion that the said ' profits were rightly taxed.
The High Court upheld the view of the Tribunal holding inter alia, that the findings were of fact and not arrived at without evidence so that no interference was warranted in reference proceedings.
The assessee appealed.
HELD: (1) When a transaction is not in the ordinary lines of an assessee 's business the facts must be properly assessed to discover whether it was in the nature of trade.
The test often applied ' is has the assessee made his shares and securities the stock in trade of a business ? [171 G; 172 H] (ii) Since in the present case the Tribunal had the advantage of examining the assessee 's transactions during the whole period i.e. right from 1938 39 to 1944 45 and thus had more comprehensive picture of all the transactions, there would be no bar to its coming to a conclusion different from that arrived at in the earlier years.
if the acts and conduct of the assessee taken as a whole throughout the period pointed to a different conclusion.
[174 A B] (iii) On the facts and circumstances of the case, however the finding of the Tribunal, concurred in by the High Court, that the transactions in question were in the nature of trading transactions, was not justified.
[174 C D] 164 (a) It is a notorious fact that in 1940 the fortunes of the allies were none too bright.
The conversion by the assessee of his entire share holding into gold in that year was consistent with his case that he did so because of the nervousness engendered by the breaking out of the war, the initial German victories, and the fall of France.
The fact that the assessee did not invest all his cash would not mean, 'as the Tribunal thought, that his case about the purchases of go1d was not correct.
[174 D F] The Tribunal also failed to give due significance.
to the fact that the assessee who started with the plan of getting 'at least net 7% yield, put a very large part of his funds into gold, an altogether sterile security, and retained it for 4 years.
The price of gold began to rise in 1941 and was at its peak in 1943.
The fact that the assessee did not sell his gold then but only in October 1944 when the price had fallen showed that it was only after the: fortunes of war had turned in favour of the allies and confidence restored that he felt it safe to invest his money in income beating securities.
The further fact that he sold practically the whole of his stock of gold in October 1944 instead of reselling it bit by bit after the price was rising since 1942 was inconsistent with the hypothesis that the object with which the go1d was purchased was to trade in it.
[174 G H; 175 A D] (b) The fact that the account in the Imperial Bank opened in 1939 was called "Rs. 48 lacs floating in the share market" was given undue significance by the Tribunal.
Properly viewed it only meant that the assessee wanted to set apart this fund for transactions in shares and securities and not mix up his other capital and the income arising from his estate.
[175 D E] (c) The sale of the.
Victory Bonds within two months of their purchase would not invest the transaction with the stamp of trade or business they were only purchased to show to the authorities that his estate had made a contribution to the war effort.
[175] (d) The Karanpur shares were purchased by the assessee with a view to getting control over the company 's management by procuring 51% of its total shares.
When that plan failed he sold these shares.
In these circumstances the transaction could not be considered to be on revenue account.
[175 G H; 176 D] Kishan Prasad & Co. Ltd.
C.I.T., and C.I.T.v.
National Finance Ltd. , 'applied.
(e) The expression 'adventure in the nature of trade ' implies the existence of certain elements in the transactions which in law would invest them with the character of trade or business.
The question therefore whether a particular transaction is an adventure.
in the nature of trade is a mixed question of law and fact and the court can review the Tribunal 's finding thereon.
Therefore in the present case the High Court was wrong in treating the Tribunal 's decision as a finding of fact and refusing to interfere on that ground.
[171 A C] Venkataswami Naidu & Co.
C.I.T., , 603, 604 and Liquidators of Pursa Ltd. vs
C.I.T., , referred to. |
Appeal No. 1851 of 1968.
Appeal from the judgment and decree dated June 19, 1963 of the Mysore High Court in Regular Appeal No. 231 of 1960.
Shyamala Pappu and Vineet Kumar, for the appellant.
K. R. Chaudhuri and K. Rajendra Chaudhuri, for respondent No. 1.
section V. Gupte, G, R. Ethirajulu Naidu, B. N. Sen, 0.
P. Khaitan, A. N. Parikh, K. R. Chaudhuri and K. Rajendra Chaudhuri, for respondent to. 2 The Judgment of the Court was delivered by Bachawat J.
The plaintiffs instituted a suit (O.s. No. 515 of 1957 against the defendant alleging that by a contract dated September 2, 1957 the defendant had agreed to assign to the plaintiffs his leasehold interest under a, mining lease in respect of 184 acres of land in Kudrekanave Kaval, Hosadurga Taluk, and claiming specific performance of the contract.
The Trial Court decreed the suit.
The defendant filed an appeal against the decree.
The High Court allowed the appeal and dismissed the suit.
The present appeal has been filed by the plaintiffs after obtaining a certificate under article 133 of the Constitution.
The main question arising in this appeal is whether there.
was a contract as alleged in the plaint.
Under a contract dated August 3, 1957, the defendant agreed to sell to the plaintiffs 40000 tons of float iron lying in the aforesaid mining area and gave them the right to win and remove the iron ore.
We are not directly concerned with this contract in this appeal.
On September 2, 1957 the defendant wrote the following letter to the plaintiffs: 583 "Further to our agreement dated 3rd August 1957 I hereby agree, to assign the sad lone area of 184 acres for iron and manngase ores, in your favour, subject to your paving me one lakh and eighty thousand rupees at your option to be decided by you within three months from this date.
" This document though worded as an agreement was in point of law an offer only.
As a matter of fact,.
on September 2, 1957 the plaintiffs had not agreed to purchase the mining lease.
Until both parties were bound there could be no con cluded contract.
The promise to keep the offer open for three months was not supported by any consideration.
The defendant was at liberty to revoke the offer at any tune before,its acceptance by the plaintiffs.
on October 31, 1957, the defendant posted a letter to the 'Plaintiffs revoking the offer.
This letter reached the plaintiffs on November 6, '1957.
Before that date the,plaintiffs did not accept the offer either orally or by any letter sent to the defendant.
On November 1, 1957, the plaintiffs filed suit (O.S. No. 46 of 1957) against the defendant claiming a declaration that they were entitled to remain in possession of the mining area.
The primary object of the suit was to enforce the plaintiffs ' right under the contract dated August 3, 1957.
The defendant filed his written statement in that suit on November 5, 1957.
The High Court held that the plaintiffs accepted the offer of September 2, 1957 by their plaint in O.S. No. 46 of 1957 and that this acceptance was communicated to, the defendant before November6, 1957.
We are unable to agree with this finding.
The pleadings and issues raised the question whether a con tract was made on September 2, 1957.
If the plaintiffs desired to set up a new case that the contract was concluded in November 1957 they should have amended their pleadings accordingly.
We need not say anything more on this point because we find that the plaintiffs have failed to establish the new case.
In paragraphs 14 and 19 of the plaint in O.S. No. 46 of 1957 the plaintiffs alleged that by the letter dated September 2, 1957 the defendant agreed to assign the mining lease, that they ,were ready and willing to perform the contract and that they reserved their right to file a suit for specific performance.
The suggestion was that the contract was concluded on September 2, 1957 and that in breach of the contract the defendant failed to apply for and obtain the necessary consent of the central government to the assignment of the mining lease.
Paragraph 17 and the prayer portion of the plaint suggested that by virtue of this contract and the earlier contract dated August 3, 1957 they were entitled to remain in possession of the mining area.
584 The Suggestion was an atempt to add to the terms of the offer of September 2 1957.
On acceptance of the offer according to its terms the plaintiffs could not get a possessory right before execution of a conveyance of the mining lease.
In point of law, the Plaint was not an acceptance of the offer, not was it intended to be an acceptance.
It is not usual to accept a business offer by a plaint; nor is it usual to communicate an acceptance by serving a copy of the plaint through the medium of the Court.
We shall be straining the language of sections 2(6), 3 & 7 the Contract Act if we were to hold that the Plaint was an acceptance and that the service of a copy of the plaint along with the writ of summons was a communication of the acceptance.
Under the old chancery practice the mere filing of a bill in a suit to enforce specific performance was regarded as sufficient acceptance of the defendant 's offer unless the offer had been withdrawn before, the filing of the suit, see Boys vs Ayerst(1), Agar vs Biden(2), Fry on Specific Performance, 8th ed., article 306, page 142, Pomeroy on Specific Performance, 3rd ed., article It may well be doubted whether this rule can apply under our present practice and procedure.
A plaint in a suit for specific performance should allege a concluded contract, see the Code of Civil Procedure 1st Schedule Appendix A, Form No. 48.
The offer as well as the acceptance should Pr=& the institution of the suit.
However, the precise point does not arise in this case.
O.S. No. 46 of 1957 was not a suit for specific performance of the contract.
Before the present suit for specific performance of the contract was instituted, the offer had been withdrawn.
Counsel for the appellant relying on Bloxam 's Case(3) sub mitted that the communication of an acceptance was not necessary.
The argument is misconceived.
We have held that the plaint in O.S. No. 46 of 1957 was not an acceptance.
There was no other acceptance either oral or in writing.
Mere mental assent of the plaintiffs to the defendants proposal is not sufficient.
In the peculiar facts of Bloxam 's case a contract to take shares was concluded by an oral application for shares followed by allotment though no notice of allotment was given to the applicant.
, Ordinarily ' there is no contract unless there is an acceptance of the application for shares and the acceptance is communicated to the applicant, see In re: Pellatt 's Case(4) .
In the last case Lord Cairns, L.J. pointed out that Bloxam 's case turned on its own special facts.
Bloxam was orally in formed that if he did not receive an answer within a certain time he was to consider his application granted.
In the peculiar cir (1) 1822 .6 Madd. 316, 326= 1 2, 1115.
(3) ; (2) (4) 5 85 cumstances, Bloxam could be regarded as having dispensed with the necessity of the communication of the acceptance.
In the present case we are not concerned with a contract to take shares.
The defendant made an offer to assign a mining lease.
No acceptance was made or communicated to the defendant before hi withdrew the offer.
There was no concluded, contract and the appeal must fail on this ground.
The High Court held that the assignment of the mining lease could not be lawfully made without the sanction of the State Government and the approval of the Central Government and that as the governments concerned could not be compelled to accord the necessary sanction and approval, the contract to assign the mining lease could not be specifically performed and on this ground the High Court dismissed the suit.
We do not think it necessary to express any opinion on this question. 'Me appeal is liable to be dismissed in view of our conclusion.
that there was no concluded contract between the parties.
In the result, the appeal is dismissed.
The appellant will pay one set of costs to the respondents.
G.C. Appeal dismissed. | Under a contract dated August 3, 1957 the defendant agreed to sell to the plaintiffs 40,000 tons of float iron lying in a mining area in the Hosadurgo Taluka in Mysore State, and gave, them a right to win and remove iron ore.
On September 2, 1957, the defendant wrote to the plaintiffs that further to the agreement dated August 3, 1957, he agreed to assign the said lease area of 184 acres for iron and manganese ores to the plaintiffs subject to their paying one lakh and eighty thousand rupees within three months.
The three months expired on November 6, 1957 without the offer being accepted by the plaintiffs orally or by letter.
On October 31, 1957 the defendant posted a letter to the plaintiffs revoking the offer, which reached them on November 6, 1957.
The plaintiffs instituted a suit (O.S. No. 55 of 1957) against the defendant alleging that by contract dated September 2, 1957 the defendant had agreed to assign to the plaintiffs his leasehold interest in the aforesaid 184 acres of land and claiming specific performance of the contract.
The trial court decreed the suit.
The defendant appealed to the High Court.
On the question whether the offer made in the defendant 's letter of September 2, 1957 had been accepted by the plaintiffs the High Court held that the plaintiffs had accepted the said offer in their plaint in another suit relating to the possession of the same land (O.S. No. 46 of 1957) a copy of which was served on the defendant on November 5, 1957 a day earlier than the defendant ' s letter revoking the offer reached the plaintiffs.
Despite this finding, on another ground, the High Court allowed the defendant appeal and dismissed the suit, namely, O.S. No. 55 of 1957.
The plaintiff appealed with certificate to this Court.
HELD : The appeal must be dismissed on the ground that there was no concluded contract between the parties.
[585 C D] The letter dated September 2, 1957 sent by the defendant to the plaintiffs, though worded as an agreement was in point of law an offer only.
The defendant was at liberty to revoke the offer at any time before its acceptance by the plaintiffs.
The defendant 's letter revoking the offer reached the plaintiffs on November 6. 1957.
Before that date the plaintiffs did not accept the offer either orally or by letter.
The High Court was wrong in holding that the plaintiffs accepted the offer by their plaint in O.S. No. 46 of 1957 and that this acceptance was communicated to the defendant before November 6, 1957.
[583 B B] Considering the contents of its relevant paragraphs the plaint in question was not in point of law an acceptance of the offer, nor was it intended to be an acceptance.
It is not usual to accept a business offer by a plaint; nor is it usual to communicate an acceptance by serving a copy 592 of the plaint through the medium of the Court.
To hold thus would be straining the language of s section 2(6), 3 and 7 of the Contract Act.
[585 A B] The old chancery practice under which the mere filing of a bill in a suit to enforce specific performance was regarded as sufficient acceptance of the defendant 's offer unless the offer had been withdrawn before the filing of the suit, cannot be applicable under the present Indian practice and procedure.
[585 C E] The argument based on Bloxam 's case that the communication of an assent was not necessary and mere mental assent of the plaintiffs to the defendant 's proposal was sufficient.
was misconceived.
[585 F] Boys vs Ayerst, ; , 326=56 E.R. 11 12, 1115, Agar vs Biden, and Bloxam 's case; , , distinguished.
In re : Pellatt 's case, , applied. |
Appeals Nos.
1091 1103 of 1964.
Appeals from the judgment and decree dated April 17, 1957 of the Patna High Court In Second Appeals Nos.
1447 of 1950 etc.
C.B. Agarwala and D. Goburdhun, for the appellant (in all the appeals).
U.P. Singh and K.C. Dua, for respondents Nos. 3 and 4 (in C.A. No. 1091 of 1964) respondent No. 3 (in C.A. No. 1092 of 1964) respondent No. 4 (in C.A. No. 1093 of 1964), respondent No. 7 (in C.A. No. 1094 of 1964), respondent No. 3 (in C.A. No. 1096 of 1964) respondents Nos. 4 and 5 (in C.A. No. 1095 of 1964) and respondent No. 4 (in C.As.
1099, 1100 and 1101 of 1964).
The Judgment of the Court was delivered by Hidayatullah, C.J.
These are 13 appeals by certificate against the common judgment in second appeal, April 17, 1957, of the High Court of Patna.
The appellants are the original plaintiffs.
The appellants had filed 12 title suits for ejectment in the court of the Second Munsif at Buxar.
Eleven suits were dismissed.
It was held that the plaintiffs had no title to suit lands.
One suit was compromised and decreed in terms of the compromise.
Two other suits one by Kedar Nath (one of the plaintiffs in the 12 title suits) and the other by one Udholal were filed for rent for 1335 1337 Fasli in respect of some lands comprised in Survey No. 3385 of Mouza Buxar against the tenant Ram Chhabi Lal.
The two rent suits were heard together.
Kedar Nath was held to be the landlord and not Udholal.
The suit of the former was decreed and that of the latter dismissed.
On appeals filed by Udholal the decision was reversed.
Appeals by Kedar Nath to the High Court were dismissed on the ground that in the title suits from which eleven appeals were filed it was held by the High Court affirming the decision of the courts below that Kedar Nath had no title.
Since the success of the last two appeals depended on whether Kedar Nath had title or not it is not necessary to refer to them at this stage.
We shall deal with the other eleven appeals first.
in these appeals, plaintiffs and defendants 1 to 3 are common.
Plaintiffs are purchasers from the mortgagees of the suit 206 lands who had purchased the suit lands in an auction sale in execution of the mortgage decree.
Defendants 1 to 3 were the former owners of these suit lands and the other defendants were either purchasers at auction sales in execution of money decrees against the owners or transferees from the auction purchasers.
The suits concern plots formed out of two Survey Nos. 3384 and 3385.
It is thus that the other two suits get connected with the title suits because in those suits the rent of certain plots from Survey No. 3385 was involved.
The history of the plots is as follows : One Laxmi Narain was the previous owner of these 2 Survey Nos.
On his death his daughter 's sons Ram Narain Ram, Sheonarain Ram and Gopal Ram inherited these Survey Nos.
alongwith other properties.
The first two sons were defendants 1 to 2 in the suits and defendant 3 is the son of Sheonarain Ram.
In 1930 the other two brothers sued Gopal Ram for a partition.
Preliminary decree was passed on April 15, 1931 and the final decree on September 10, 1932.
Half share in the property went to Gopal Ram and the other half jointly to the other two brothers.
The suit Survey Nos.
came to the share of Ram Narain Ram and Sheonarain Ram.
On April 27, 1931 Ram Narain Ram executed a mortgage of a half share in 27 plots made in the two Survey Nos.
and some other property with Buxar Trading Co operative Society.
On April 20, 1933, the Society released Ram Narain Ram 'S share in the 27 plots from the mortgage by a registered release deed.
On September 20, 1932 Sheonarain Ram filed a suit for 'partition against Ram Narain Ram.
The preliminary decree was passed in May 1933, that is to say, after the release by the Society.
The two brothers divided the two Survey Nos.
half and half between them.
No final decree in this partition suit seems to have been passed.
Devendra Nath (one of the defendants) obtained settlement of 3 k 13 d of land out of Survey No. 3384 from Sheonarain Ram on June 10, 1933 and in execution of a money decree against Ram Narain Ram and Sheonarain Ram purchased on August 13, 1934 the remaining portion of Survey No. 3384 and Survey No. 3385.
He obtained possession on February 27, 1935.
He had obtained attachment of the two plots before judgment, on April 23, 1934.
Devendra Nath disposed of 3 k 13 d by settling them on his wife and she was one of the defendants in the suits.
Devendra Nath 's title depends on whet.her the release by the Society was valid and binding on the Society or not.
If the release was valid and binding on the Society, the Society could not obtain a decree in respect of these two Survey Nos.
and bring them to sale.
207 This is one of the points for consideration in these appeals.
The High Court and the court below have decided unanimously that the release was binding on the Society and Devendra Nath obtained no title.
On April 26, 1934, that is to say, before Devendra Nath 's purchase but after attachment by him, the Society applied to ,.he
Registrar, Co operative Societies for a mortgage award.
In that application the surety of Ram Narain Ram was also joined.
On August 16, 1934 a money award was given against Ram Narain Ram and his surety.
On September 20, 1934 the money award was cancelled and a preliminary mortgage award was passed.
Admittedly the mortgage award had the force of a mortgage decree.
The final mortgage award was made on May 28, 1935.
The award ordered sale of all .mortgage properties including the half share of Ram Narain Ram in survey Nos. 3384 and 3385.
No mention was made of the earlier release of the Survey Nos.
by the Society by a registered deed.
In execution of the decree the Society purchased the two Survey Nos.
on February 7, 1936 and obtained possession o.n July 20, 1937.
One Dwarikanath had a money decree against the Society and he attached the two disputed Survey Nos. and brought them to sale.
The Buxar Central Co operative Bank purchased the two Survey Nos.
in auction sale on February 8, 1940 obtaining possession on July 5, 1941.
On March 28, 1943 the Society and the Bank went into liquidation.
The right, title and interest of the Society and the Bank was sold by the common Liquidator to Kedar Nath including the 27 plots made in the two Survey Nos.
Kedar Nath 's purchase was on March 20, 1943 but he took the sale benami in the name of Dhanesar Pandey, who was plaint.
ill No. 2 in the title suits while Kedarnath was plaintiff No. 1.
The title of the plaintiffs Kedar Nath and Dhanesar Pandey is based on this purchase.
After the release of the two Survey Nos.
by the Society, Ram Narain Ram and Sheonarain Ram, and after his purchase, Devendra Nath, made settlement of the plots to various persons.
They are the remaining defendants in the suits and respondents in the various appeals before us.
The High Court has given a chart of these persons and the dates of pattas but as nothing turns upon these details it is not necessary to mention them here.
The plaintiffs (Kedar Nath and Dhanesar Pandey) in these title suits asked for declaration of title and possession.
Their case was that the release was void and inoperative and not binding on the Society.
Therefore, the mortgage award and the auction sale was binding on Ram Narain Ram and all those who derive title 208 from him.
Their next contention is that.
, in any event, the transfers to the defendants were effected during the pendency of the mortgage award proceedings and were affected by the doctrine of lis pendens.
These two grounds were not accepted by the High Court and the courts below and it is these two grounds which were urged before us in these appeals.
The other side seeks to avoid the effect of lis pendens by pleading that the mortgage award was claimed mala fide against the suit plots after their release and, in any event, there was attachment of these plots before the petition for the mortgage award was made.
Before we deal with these two points it may be mentioned at once that neither ground of appeal applies to the transfers by Sheonarain who was not a mortgagor and who was not affected by the release deed made by the Society.
Mr. C.B. Aggarwal frankly conceded that the transfer by him could not be assailed and must stand.
He, therefore, did not press Civil Appeals Nos.
1091, 1092, 1093 and 1094 of 1964.
These appeals are accordingly dismissed with costs.
We may first consider whether the release was binding on the Society or not.
When Ram Narain Ram mortgaged the property to raise a loan from the Society of which he was a member, half share in the plots belonged to him because these plots had fallen in the preliminary decree to.
the share of his brother Sheonarain Ram and himself.
That preliminary decree was passed on April 15, 193 1.
The Society had fixed a ceiling on the amount which could be borrowed, at Rs. 3000/ .
The mortgage deed recited that the amount borrowed was Rs. 3000/ with interest at Actually Rs. 1890/ were given as a loan.
The release deed, releasing the suit plots was executed in pursuance of a resolution of the Society (Res.
No. 4 dated April 4, 1933).
The release stated thus: " . relinquished and released the properties, specified below, from the debt due to the said Ram Narain Ram, to the said society, entered in the said mortgage bond, in favour of Ram Narain Ram .
The said property shall not be made liable for any debt of the said society nor shall any incumbrance be recovered from the said property.
The said property shall come in possession of Ram Narain Ram.
The said Ram Narain Ram shall have right to sell the property to keep the same in whatever ways he likes.
The said society neither has nor shall have any objection thereto.
" 209 Why the release was granted by the Society was stated in the following words: " .
A petition was filed on behalf of the said Ram Narain Ram in the meeting of the members in the presence of all the members of the society for releasing some land from the said mortgage in order to repay the debt.
of Rs. 500/ forming part of the debt due by the said Ram Narain Ram to the said co operative society which was put up before all the members and accepted by them . ".
It appears that Ram Narain Ram did not pay the amount of Rs. 500/ to the Society and the Society considered itself free to include these two plots, notwithstanding the release, in their application for an award decree.
In our opinion the release was binding on the Society.
The argument.
in opposition to the binding nature of the release is that it was conditional on payment of Rs. 500/ .
This is no true.
No. doubt the motive for the release was the payment of Rs. 500/ to the Society promised by Ram Narain Ram, but the payment was not made a condition of the release.
There was no attempt to release this amount from Ram Narain Ram.
Therefore, the release being absolute and unconditional and by a registered deed must be treated as binding.
It is open to the promisee to waive the performance of any part of the contract or to release any property from the operation of a 'mortgage or charge.
If he wishes his rights to continue in the.
event of some condition simultaneously imposed on the promisor, he must see that the release is made dependent on the performance by the promisor of his part of the agreement.
Here the Society merely released the two plots without making the payment a condition precedent, and the release operated.
That, however, is not the end of the matter.
The Society filed on April 5, 1934 a petit.ion for a mortgage award before the Assistant Registrar, Co operative Societies.
The petition is headed 'Petition for mortgage decree '.
The petition mentioned that the mortgage was made on April 27, 1931 and that the amount secured was Rs. 3,000/ with interest at 121/2% per annum.
The petition then described the property mortgaged and it included plots Nos.
3385 and 3384.
The amount due on December 31, 1933 was said to be Rs. 2440/3.
The relief asked for was: "We the punches therefore pray that a decree may be passed by your honour against the said member and he may be directed under the decree to pay the debt, principal and interest, amounting to Rs. 2440/3/ within 3 months, that in case of non payment this order may be passed that the entire amount may be realized by 210 auction sale of the mortgaged property and that if the mortgaged property would not be sufficient for the satisfaction of the entire amount of the decree the punches of the committee be allowed to pray for passing a personal decree against the said member.
" When the Registrar made his order he overlooked that a mortgage award had to be pass.ed.
On August 16, 1934 he ordered that an award jointly with sureties be issued.
However, on September 2, 1934, .he corrected Iris earlier order thus: "S1. '6.
Read along with S1.
By mistake of the 2nd Asst.
simple award was issued instead of Mortgage award.
Issue mortgage award and ask the C.B. to return the simple award which will be cancelled here.
Syed Ozair.
D.F.A. Addl.
A.R. 2 9 34.
" After 'this mortgage award which had the force of a preliminary decree, the Society on December 16, 1934 resolved that a final mortgage decree be obtained from the Assistant Registrar, and a final decree was obtained and the property brought to sale on February 7, 1936 and purchased by the Society itself with the permission of the court executing the decree.
Possession was obtained on July 20, 1937.
Therefore, litigation in respect of this mortgage remained pending from April 5, 1934 to July 20, 1937.
Under Explanation to section 52 of the the whole of this period denoted pendency of the proceeding for purposes of application of the doctrine of lis pendens.
All the leases made by Devendranath were after the proceedings commenced.
Devendranath purchased the right title and interest of Ram Narain Ram on August 13, 1934.
His acquisition was prima facie hit by the doctrine of lis pendens.
Three arguments were advanced before us to meet this situation and we shall now deal with them seriatim.
The first argument is that there could be no lis pendens till August 16, when the money award was issued because a money suit for proceeding cannot lead to the application of the doctrine of lis pendens.
As a proposition of law the argument is sound but it is wrongly grounded on fact.
The proceeding was to get a mortgage award, the equivalent of a mortgage decree.
The Court made a mistake and treated it as a proceeding for a money decree.
When the court corrected its,order, the mortgage award related back to the petition as made and the whole of the proceeding must be treated as covered by the doctrine.
We cannot, therefore, accede to the suggestion that the doctrine did not apply; at any rate, on this suggested ground.
211 The second ground of attack is that before the proceedings commenced before the Registrar these fields had been attached and, therefore, the doctrine of lis pendens again cannot apply.
We are unable to accept this argument either.
If the property was acquired pendente lite, the acquirer is bound by the decree ultimately obtained in the proceedings pending at the time of acquisition.
This result is not avoided by reason of the earlier attachment.
Attachment of property is only effective in preventing alienation but it is not intended to create any title to the property.
On the other hand, section 52 places a complete embargo on the transfer of immovable property right to which is directly and specifically in question in a pending litigation.
Therefore the attachment was ineffective against the doctrine.
Authority for this clear position is hardly necessary but if one is desired it will be found in Moti Lal vs Karrab ul Din and others(1).
Lastly it was contended that the sale was by court auction and the doctrine of lis pendens would not apply to such a sale.
This point was considered in Samarendra Nath Sinha and Anr.
vs Krishna Kumar Nag(2) by one of us (Shelat, J.) and it was observed as follows : " .
The purchaser pendente lite under this doctrine is bound by the result of the litigation on the principle that since the result must bind the party to it so it must bind the person driving his right, title and interest from or through him.
This principle is well illustrated in Radhamadhub Holdar vs Monohar(3) where the facts were almost similar to those in the instant case.
It is true that section 52 strictly speaking does not apply to involuntary alienations such as court sales but it is well established that he principle of lis pendens applies to such alienations.
(See Nilkant vs Suresh Chandra(4) and Moti Lal vs Karrab ul Din(1). ' ' This ground also has no validity.
Lastly it was argued that if the fields were released from the operation of the mortgage they could not be made the, subject of a mortgage decree, and whatever was done in the mortgage proceedings was not of any consequence.
this there are two answers.
Firstly, the respondent before the Registrar (Ram Narain Ram) made no objection to ,the inclusion of the plots in the petition for a mortgage award.
Secondly, the doctrine of lis pendens applies irrespective of the strength or weakness of the case on one side or other.
See Gouri Dutt Maharaj vs Sukur Mohammed and Ors.(5).
There is, however, one condition that (1) 24 I.A. 170.
(3) 15 I.A. 97.
(2) ; (4) 12 I.A. 171.
(5) 75 i.
A. x65.
212 the proceedings must be bona fide.
Here no doubt the Society knew that the plots had been released from the mortgage, but it was also clear that the release was to enable Ram Narain Ram to dispose of some of the plots and pay Rs. 500/ to the Society.
This amount was never paid and the Society must have bona fide felt that the plots still remained encumbered.
In fact the attitude of Ram Narain Ram in not claiming that these plots be removed from the mortgage award shows that he too felt that this was the true position.
In Gouri Dutt Maharaj 's(1) case referred to by us, it was said that if the proceedings were bona fide, the applicability of section 52 was not avoided.
For the above reasons we are clear that the purchase by Kedarnath was protected by the doctrine of lis pendens, the prior transfer to the defendants notwithstanding.
In this view of the matter the judgment of the High Court cannot be sustained.
The appeals will, therefore, be allowed.
The judgment and decree of the High Court will be set aside and the suits of the appellant will be decreed with costs throughout.
In this Court the costs will be one set.
R.K.P.S. Appeals allowed.
(1) 75 X.A. 165 L 1 Sup./70 6 7 70 GIPF. | One R executed a mortgage of his share in two survey Nos.
to a Cooperative Society.
On his application and in order to enable him to repay a sum of Rs. 500/ , the Society released the property in 1933, but R never paid the amount to the Society.
The Society filed an application for a mortgage award on April 5, 1934 and the Assistant Registrar made an award in the nature of a preliminary decree, on December 16, 1934.
Thereafter a final mortgage decree was passed by the Assistant Registrar and the two survey nos.
were brought to sale and purchased by the.
Society and possession was obtained on July 20, 1937.
Meanwhile, one D obtained attachment before judgment of the two survey nos., as the property of R, in a suit for money against R, and, in execution of the money decree, purchased the two survey nos.
on August 13, 1934.
In 1943, the Society went into liquidation and the liquidator sold the properties of the Society and the appellant bought the two.
survey nos.
He filed a suit for a declaration of his title and possession of the properties in the two, survey nos.
from various persons who were in possession of the properties under R and D.
The High Court dismissed the .suit.
In appeal to this Court, HELD: (1) The motive of the release, in 1933, of the properties by the Society in favour of R was the payment of Rs. 500/ by R to the Society, but it was not a condition Of the release.
Therefore, the release was binding on the Society.
[209 D E] (2) But R did not object to the inclusion of the items in the mortgage award.
Therefore, the Society must have bona fide felt that the properties remained encumbered.
[211 G] (3) The proceedings in respect of the mortgage were pending from April 5, 1934 to July 20, 1937.
The proceedings were for obtaining a mortgage award equivalent to a mortgage decree and not for a money decree.
The fact that they were attached before judgment in D 's suit does not affect the application of the doctrine of lis pendens.
Attachment is only effective in preventing alienation and does not create title to property.
If in fact, the property was.
acquired pendente lite, the acquirer is bound by the decree ultimately obtained.
Therefore, D 's purchase on August 13, 1934, was hit by the. doctrine.
of lis pendens in section 52 of the .
Since D 's purchase was hit by the doctrine the properties continued to be those of the Society and hence, the appellant was entitled to them.
[210 E, G H; 211 A C] 205 Samarendra Nath Sinha & Anr.
vs Krishna Kumar Nag, ; , followed.
Moti Lal vs Karrab ul Din & Ors.
24 I.A. 170 and Gouri Dutt Maharaj vs Sukur Mohammed and Ors.
75 I.A. 165, applied. |
iminal Appeal No. 79 of 1969.
Appeal by special leave from the judgment and order dated November 21, 1968 of the Bombay High Court in Criminal Appeal No. 818 of 1967.
R.V. Pillai and Subodh Markandey, for the appellants.
H.R. Khanna, B.D. Sharma for S.P. Nayar, for the respondent dent.
229 The Judgment of the Court was delivered by Mitter, J.
The six appellants in this appeal were charge sheeted for having committed offences punishable under sections 147, 447 and 325 read with section 149 of the Indian Penal Code in the court of the Judicial Magistrate, First Class, Deglur, District Nanded.
Considering the evidence on record the Magistrate held that the accused were members of an unlawful assembly on September 27, 1965 at the village school Chotwadi with the common object of causing injuries to the complainant.
He also found that the accused had committed house trespass into the compound of the school and actually caused grievous hurt to the complainant, a school teacher, in pursuance of the common object of their unlawful assembly.
He convicted the 'accused for offences under sections 147, 447 and 325 read with section 149 I.P.C. and sentenced each of them to suffer rigorous imprisonment for 15 days and to pay a fine of Rs. 50/ and in default of payment of fine to suffer further rigorous imprisonment for 15 days on the first count under section 447 read with section 149 I.P.C. and sentenced each of them to suffer rigorous imprisonment for six months 'and to a fine of Rs. ' 200/or in default of payment of fine to suffer further rigorous imprisonment for one month on the second count under section 325 read with section 149 I.P.C. He did not pass any fresh sentence on the third count under section 147 I.P.C. He directed that the substantive sentences of imprisonment passed against accused on both counts should run concurrently.
He also directed that in case the amount of fine was recovered, Rs. 200/ should be paid to the complainant Murlidhar as compensation for the injury sustained by him under section 545(1)(b) of the Code of Criminal Procedure.
The accused went up in appeal which was heard by the Additional Sessions Judge at Nanded.
The Sessions Judge allowed the appeal and set aside the orders of conviction and directed the accused to be set at liberty.
The 'order for payment of fine also was set aside.
The State went up in appeal against the order of acquittal to the High Court.
The appeal was allowed by the High Court and the order of acquittal was set 'aside.
The High Court convicted all the six accused under sections 147, and 447 and 325 read with section 149 I.P.C. and taking the view that the assault on the village teacher was wanton and unprovoked proceeded to deal with the culprits more firmly that the trying Magistrate.
It passed sentence on the second accused holding him responsible for the blow which caused the fracture of the left ulna of the complainant, to one year 's rigorous imprisonment and a fine of Rs. 300/ and two months ' further rigorous imprisonment in default under section 325 read with section 149 of the Penal Code.
It also held that the remaining accused had played a comparatively minor part and injuries inflicted by them were simple.
The sentence passed on each of them was six months ' rigorous imprisonment and L2Sup.
CI/70 3 230 a fine of Rs. 100 and one month 's further imprisonment in default under section 325 read with section 149 I.P.C. A further sentence of three months ' imprisonment was passed on all the accused for the offence under section 447 read with section 149.
No separate sentence was passed under section 147.
This court granted special leave to appeal to the accused "limited to the question of legality of sentence passed by the High Court.
" Counsel on behalf of the appellants put forward his argument in a two fold manner.
His first contention was that it was not open to the High Court exercising appellate jurisdiction under section 423 (1)(a) of the Code of Criminal Procedure to enhance the sentence passed by the trial Magistrate.
The second branch of his argument was that even if the High Court was competent to do.
so, the appellants should have been asked to show cause why the sentence imposed on them by the Magistrate should not be enhanced and in the absence of such an opportunity, no enhancement of sentence was competent.
As the trial was by a Magistrate of the First Class the maximum sentence which could have been imposed on the accused was under section 32 of the Code limited to a term of imprisonment no.t exceeding two years and a fine not exceeding Rs. 2,000/ .
Under the Indian Penal Code the limit of punishment for an offence under section 447 is imprisonment for a term which may extend to three months or with fine which may extend to Rs. 500/ or with both, but an offence under section 325 Can be punished with imprisonment of either description for a term which may extend to seven years besides.
a fine.
Under section 417(1) of the Criminal Procedure Code an appeal against acquittal lies only to a High Court.
Under section 4 18 an appeal lies on 'a matter of fact as well as on a matter of law except in cases where the trial is by a jury.
Ss. 419 and 420 deal with the procedure for lodging an appeal and section 421 gives the appellate court the power to dismiss the appeal summarily on receiving the petition of appeal if it considers that there is no sufficient ground for interfering with the impugned order.
Under section 422 it is obligatory on the appellate court if it does not dismiss the appeal summarily to cause notice to be given to the appellant or to his pleader of the time and place at which the appeal will be heard and a like notice to be given to the accused.
The powers of the appellate court in disposing of the appeal are contained in section 423 of the Code.
The court after giving the notice of appeal under section 422 has to send for the record of the case and after perusing such record and hearing the appellant or his pleader if he appears and the Public Prosecutor if he appears and in case of appeal under section 417 the .accused if he appears, it may dismiss the appeal in case it is satisfied that there is no sufficient ground 231 for interfering.
Where the appeal is from an order of acquittal it may under section 423(1)(a) reverse such order and direct that further enquiry be made or that the accused be retried or committed for trial as the case may be and find him guilty and pass a sentence on him according to law.
No limits 'are here set to the sentence which may be passed by the appellate court except that it must be "according to law".
This power may be contrasted with the power under cl.
(b) of section 423(1 ) dealing with appeals from a conviction.
For such appeals the Legislature specified the powers of the appellate court with a good deal of precision.
Under sub clause (b) a court can "(1) reverse the finding and sentence and 'acquit or discharge the accused or order him to be tried by a court of competent jurisdiction subordinate to such appellate court or committed for trial, or (2) alter the finding, maintaining the sentences, or with or without altering the finding reduce the sentence, or (3 ) with or without such reduction and with or without altering the finding, alter the nature of the sentence but subject to the provisions of section 106 sub section
(3), not so as to enhance the sentence.
" It would appear from the above that wide though the powers of the appellate court be in dealing with an appeal from a conviction, it has no jurisdiction to enhance the sentence even if it alters the finding, or without altering the finding takes the view that greater punishment than what was meted is called for.
Sub cl.
(1 ) (b) however is not the last word for cl.
(iA) introduced in the section in the year 1955 expressly provides that a High Court exercising jurisdiction under cl. 1 (b) may enhance the sentence notwithstanding anything inconsistent therewith contained in the said clause provided the accused has had an opportunity of showing cause against such enhancement.
section 423 cl.
(1) (b) is based on the principle that where it is the convicted person who complains against the punishment given to him, he should not be put in peril of a greater punishment if the State takes no exception to the order impugned by the convicted person.
The insertion of cl.
(1A) makes it clear that although the powers of courts subordinate to the High Court are limited under cl.
(1)(b) the High Court may in a proper case enhance the sentence after giving an opportunity to the accused to show cause against the proposal.
232 Apart from the powers under Chapter XXXI of the Code (containing sections 404 to 431) which principally deals with appeals the High Court has powers infer alia of revision under Chapter XXXII of the Code.
Under section 435 not only the High Court but even courts subordinate to it may call for and examine the record of any proceeding before any inferior criminal court for the purpose of satisfying itself as "to the correctness legality or propriety of any finding, sentence or order recorded or passed and as to the regularity of any proceeding of such inferior court".
section 439 deals exclusively with the High Court 's powers of revision.
Under this section the High Court is empowered in the case of any proceeding the record o,f which has been called for by itself or which has been reported for orders or which otherwise comes to its knowledge, to exercise the powers conferred on a court of appeal by sections 423,426, 427 and 428 or on a court by section 338 (power to direct tender of pardon) and may enhance the sentence but sub section
(2) of the section lays down that such an order is not to be made to the prejudice of the accused unless he has 'an opportunity of being heard either personally or by a pleader in his own defence.
Further when an accused is called upon to show cause why his sentence should not be enhanced he has a right to challenge his conviction under sub section
( 6 ).
Referring to.
the above provisions of the Code counsel for the appellants argued that in 'all cases where it was, considered necessary the Legislature was careful to: provide that the accused should never be subjected to a greater punishment by a superior court unless he was asked to show cause against the proposed enhancement.
As there was no such provision in section 423 ( 1 ) (a) the Legislature must be taken to have contemplated that in any case of an appeal against acquittal the accused should not 'be subjected to a punishment greater than what had been meted out to him by the punishing court.
It was also argued that the words in section 423 ( 1 ) (a) empowered the appellate court (the High Court in this case) to pass sentence on the accused .according to law which is in contrast to the words used in section 31 (1 ) of the Code under which a High Court may pass "any sentence authorised by law".
It was argued that section 423 (1 ) ( 'a) thus cuts down the power which the High Court might otherwise have had under section 31 ( 1 ).
In our view the difference in the wording of section 31(1) and section 423(1) (a) is a matter of no moment.
The expression "authorised by law" means sanctioned by law while "according to law" means in conformity with law.
The question remains 'as to what would be a sentence according to law when a High Court sets aside an order of acquittal when the same is preceded by a sentence of an inferior court.
Is the High Court empowered to award any sentence which the law allows under the relevant section of the 233 Indian Penal Code, or is its jurisdiction limited to such a sentence as was within the competence of the court punishing the offenders or again, is it to restore the sentence originally passed ? Let us look at the question ,apart from the authorities.
An appeal is a creature of a statute and the powers and jurisdiction the appellate court must be circumscribed by the words of the statute.
At the same time a court of appeal is a "court of error" and its normal function is to correct the decision appealed from and its jurisdiction should be co extensive with that of the trial court.
It cannot and ought not to do something which the trial court was not competent to do.
There does not seem to be any fetter to its power to do what the trial court could do.
In this case the trial Magistrate was competent to pass a sentence of imprisonment up to two years and the High Court 's jurisdiction hearing an appeal would therefore be limited to a sentence up to that period and no more.
A special provision for asking the accused to show cause when the appeal is from an order of conviction or when the High Court exercises its revisional jurisdiction, is not in derogation of the above rule.
As already indicated, when the accused prefers an appeal and the State is satisfied with the punishment meted out it is only logical to hold that the appellant should not stand in peril of something to his further detriment unless he is put on notice that the power of enhancement may be exercised.
The same applies to the High Court 's power of revision under section 439.
The Legislature felt that when the High Court is exercising powers in this regard, it should be given all the powers of a court of appeal including the power to enhance the sentence.
Sub section
(2) of section 439 is only meant to give an opportunity to the accused so that he be not condemned unheard and sub section
(6) is.
only an amplification of that principle and gives him .a right to challenge his conviction if he is put in peril of enhancement of sentence.
Where however the appeal is from 'an order of acquittal the matter is at large.
There is no sentence which is binding on a person who was once an accused.
He comes before the court with the presumption of innocence.
If the court finds that the acquittal was not justified and that he was guilty of the offence with which he was charged, it is for the appeal court to order punishment to fit the crime.
If the appeal is from an order of acquittal with no prior order of sentence, the punishment must be commensurate with the gravity of the offence.
But if the order of 'acquittal is preceded by an order of conviction the court hearing the appeal from acquittal should not impose a sentence greater than what the court of first instance could have imposed inasmuch as if the trial court had given him the maximum sentence which it was competent to give and no appeal was preferred by the accused, the State could 234 not have approached the High Court under any provision of the Code for enhancement of the sentence.
The interposition of the order of an intermediate court of appeal and acquittal of the accused by it should not put the accused in a predicament worse than that before the trial court.
We may now proceed to examine the earlier authorities.
In re Ramaswami Chetty & Anr.
(1) the action of the appellate Magistrate enhancing a fine of Rs. 50/ to Rs. 65/ was held to be illegal by the Madras High Court.
In Muthiah vs Emperor(2) it was said that an appellate court has not an unlimited power but was only empowered to do which the lower court could and should have done.
In Sita Ram vs Emperor(3) which went up to the Nagpur Judicial Commissioner 's court by way of revision, the appellants had been convicted under section 324 I.P.C. and sentenced to rigorous imprisonment for a term of four months each by a Magistrate of the Second Class.
On appeal the District Magistrate maintained the convictions but altered the sentences on each of the accused to one of fine only; and in default rigorous imprisonment was ordered for four months.
Before the Judicial Commissioner it was contended that the sentence of fine imposed on the applicants was illegal so far as it exceeded the maximum fine which could have been inflicted by the Magistrate by whom they were tried.
The Court held that when the District Magistrate decided that the case was one punishable with fine only he should have inflicted a fine which was within the jurisdiction of the trying Magistrate.
The learned Judge relied on the decisions in Mahmudi Sheik vs Aji Sheik(4), Muthiah vs Emperor(5), Parameswara Pillay vs Emperor(6) and observed that alike in civil and in criminal cases the power of the appellate court was measured by the power of the court from whose judgment or order the appeal before it had been made.
The decisions in Maung E Maung vs The King(7), Emperor vs Md. Yakub Ali(8), Lakshminarayana vs Apparao(9) and Emperor vs Abbas Ali(10) are on the same lines.
A different note was however struck in Public Prosecutor vs Annamalai(1).
This was a case of an appeal preferred by the State against the acquittal of two 'accused by a Magistrate.
The High Court finding the accused guilty took the view that "passing sentence according to law" meant passing any sentence that could be given for the offence.
According to the learned single Judge the powers (1) [1902] 2 Weir487.
(2) 29 Madras 190 (3) 11 Indian Cases 788 (4) 21 Calcutta 48 (5) 29 Madras, 130 (6) 30 Madras 48 (7) A.I.R. 1940 Rangoon 118 (8) 45 Allahabad 594 (9) A.I.R. 1950 A.P. 530.
(10) A.I.R. 1935 Nagpur 139 (11) A.I.R. 1965 Madras 608 235 of an ,appellate court in hearing an appeal against acquittal were not in any way restricted or limited to the powers of the trial court.
He said: "Though there is no such limitation or restriction, still there is one circumstance which altogether cannot be ignored and which must indeed be considered before imposing the sentence and that is, what is it that the accused would have got if he was convicted by the Magistrate.
He would not have got more than six months, the maximum the Second Class Magistrate who tried him can give.
The fact that he has been acquitted should not place him in a more disadvantageous position than if he were convicted.
The sentence should not therefore be more severe than what he should have got in a case of conviction.
" Accordingly the accused were sentenced to six months ' rigorous imprisonment.
In an earlier decision of the same High Court In re Tirumal Raju (1) another learned single Judge though disposed to accept the contention that the appellate Magistrate had no jurisdiction to enhance the fine beyond the powers of the trial Magistrate, maintained the order sought to be revised by exercising powers under section 439(3) of the Code.
Running through the web of the.
above decisions the principle almost universally accepted is that in exercise of its appellate powers the High Court should not award a sentence which is beyond the jurisdiction the trial court and in our opinion this is the principle which should be adopted.
Our attention was however drawn to certain observations in Jagat Bahadur Singh vs State of Madhya Pradesh(2) where a good many of the above authorities were taken note of by this Court.
Referring inter alia to the cases of Emperor vs Abasali Yusufalli(3), Emperor vs Muhammad Yakub Ali(4) Maung E. Maung vs The King(5) and In re Tirumal Raju(6) it was said that these cases laid down the correct law.
The Court also added: " . both on principle and authority it is clear that the power of the appellate court to pass a sentence must be measured by the power of the court from whose judgment an appeal has been brought before it." The question is, can this observation be pressed into service by the appellants on the ground that as the Sessions Judge hearing (1) A.I.R. 1947 Madras 368.
(2) ; (3) 39 Calcutta/57 (4) 45 Allahabad 594.
(5) A.I.R. 1940 Rangoon 118 (6) A.I.R. 1947 Madras 368 236 the appeal from the order of the Magistrate could not have enhanced the sentence, it was not open to the High Court to do so when hearing an appeal from the order of acquittal by the Sessions Judge.
In other words, could the High Court have done what the Sessions Judge was not empowered to do. ? In our opinion, the .answer must be in the affirmative.
When the order of the Magistrate was set aside by the Sessions Judge the matter became one at large and the High Court hearing an appeal therefrom was empowered under section 423(1)(a) to pass a sentence ,according to law.
It could therefore pass any sentence which the Magistrate trying the case was empowered to pass.
and the High Court in this case did not exceed that limit.
A strange result would follow if we were to accept the contention.
If the accused had been acquitted by the Magistrate and the State had filed an appeal against the order of acquittal, the High Court would no doubt have had power to impose 'any sentence, which the Magistrate would have been entitled to impose.
But if the accused is acquitted on appeal by the Sessions Judge, the power of the High Court would be limited.
Surely the Code does not contemplate this difference in the appeals under section 417 Cr.
P.C. Further the Sessions Judge would have been entitled to recommend enhancement of sentence to the High Court if he had maintained the conviction.
And the High Court could sua motu have issued notice for enhancement.
If we were to accept the contention, finality is attached to.
the sentence given by the Magistrate.
We do.
not think this is the scheme of the Code.
On the other hand the scheme of the Code seems to be to confer final authority on the High Court.
The first contention therefore fails and we hold that in disposing of an appeal from an order of acquittal the High Court is competent to.
pass a sentence which the trial court was empowered to pass.
The second branch of the argument is.
without any merit.
Where the accused is given notice of appeal and actually takes part in the hearing before the High Court, it would be superfluous to give him notice to show cause why a sentence within the competence of the trial Magistrate should not be passed.
The accused knows or ought to know that the High Court was.
bound to form its own conclusions on the material before it and award a sentence which the merits of the case demanded within the limit of the trial court 's jurisdiction.
The absence of a show cause notice does not violate any known principle of natural justice.
On the facts of the case, we are of the view that the sentence imposed by the High Court should be reduced to that originally imposed by the trial Magistrate.
The ' appeal is allowed in part to this extent.
G.C. Appeal partly allowed. | The appellants were charged with offences punishable under section 147, 447 and 325 read with section 149 of the Indian Penal Code in connection with an incident in which they were alleged to have committed house trespass into the compound of a school and injured a teacher.
The Magistrate convicted them and sentenced them on various counts to imprisonment and fine.
The. sentences and fines were lower than the maximum that the Magistrate was empowered to impose under the Code of Criminal Procedure.
In appeal the Sessions Judge acquitted the appellants.
The State appealed to the High Court under section 417 Cr.
The High Court reversed the orders of the Sessions Judge and, considering the nature of the acts committed by the appellants imposed higher sentences and fines on them but they were still not higher than what the Magistrate could .himself have imposed.
In appeal to this Court against the High Court 's judgment it was contended that, the High COurt acting under section 423(1) (a) is not empowered to impose higher sentences than the lower court had passed and in any case not without a notice to show cause against enhancement.
It was also urged that the High Court could under section 423(1) (a) pass a sentence "according to law" and thus it did not enjoy the powers which it otherwise might have exercised under section 31(1) of the Code under which a High Court may pass "any sentence authorised by law".
HELD: (i) The difference in the wording of section 31 ( 1 ) and s.]23 ( 1 ) (a) is a matter of no moment.
The expression 'authorised by law means sanctioned by law while 'according to law ' means in conformity with law.
The question to be answered in either case remains the same i.e. what is the.
sentence the High Court is empowered to impose after it sets aside an order of acquittal when the same is preceded by a sentence of an inferior court.
[232 H] (ii) An appeal is a creature of statute and the power and jurisdiction of the appellate court must be circumscribed by the words of the statute.
At the same time a court of appeal is a 'court of error ' and its normal function is to correct the decision appealed from if necessary, and its jurisdiction should be co extensive with that of the trial court.
It cannot and ought not to do some.thing which the trial court was not competent to do.
There does.
not seem to.
be any fetter on its power to do.
what the trial court could do.
In this case the trial Magistrate was competent to pass a sentence of imprisonment up to two.
years and the High Court 's jurisdiction hearing an appeal would therefore be limited to a sentence up to that period, and no more.
[233 B] 228 (iii) Although the Sessions Judge, in hearing the appeal against the appellants ' conviction could not enhance the sentence the High Court in hearing appeal against the order of acquittal by the Sessions Judge could do so.
When the order of the Magistrate was set aside by the Sessions Judge the matter became one at large and the High Court hearing an appeal therefrom was empowered under section 423(1) (a) to pass a sentence according to law.
It could therefore pass any sentence which the Magistrate trying the case was empowered to pass and the High Court in the present case did not exceed that limit.
[238 A C] The. acceptance of the appellant 's contention would lead to the strange result that in an appeal against acquittal by the Magistrate the High Court could pass any sentence which the Magistrate was empowered to do but in an appeal against a judgment of a Sessions Judge setting.
aside a conviction by the Magistrate the High Court 's power would be limited to restoring the sentence which the Magistrate had actually passed.
Further the Sessions Judge would have been entitled to recommend enhancement of sentence to the High Court if he had maintained the conviction.
And the High Court could suo motu have issued notice for enhancement.
But on the appellant 's contention finality would be attached to the sentence given by the Magistrate.
Such .could not be attached to the sentence given by the Magistrate.
Such could not be the scheme of the Code.
[238 C E] (iv) When the accused is given notice of appeal under section 417 and actually takes part in the hearing before the High Court, it would be superfluous to give him notice to show cause why a sentence within the competence of the trial Magistrate should not be passed.
The accused knows or ought to know that the High Court was bound to form its own conclusions on the material before it and award a sentence which the merits of the case demanded within the limit of the trial court 's jurisdiction.
The absence of a show cause notice does not violate any known principle of natural justice.
[238 F G] On the above findings the 'appeal must be dismissed.
In re: Ramaswami Chetty & Anr.
[1902] 2 Weir 487, Muthiah vs Emperor, 29 Madras 190, Sita Ram vs Emperor, 11 Indian Cases 788.
Mahmudi Sheik vs Aji Sheik, 21 Calcutta 48, Parameswara Pillay vs Emperor, , Maung E. Maung vs The King, A.I.R. 1940 Rang.
118, Emperor vs Md. Yakub Ali.
45 Allahabad 594, Lakshminarayana vs Apparao, A.I.R. 1950 A,P. 530, Emperor
Abbas Ali, A.I.R. 1935 Nag.
139, Public Prosecutor vs Annamalai, A.I.R. 1955 Mad. 608, In the Tirumal Raju, A.I.R. 1947 Mad. 368, Jagat Bahadur Singh vs State of Madhya Pradesh, [1966]2 S.C.R. 822 and Emperor vs Abasali Yusufalli, 39 Calcutta 157, referred to. |
Appeal No. 1330 Of 1966.
Appeal from the judgment and order dated August 4, 7, 1964 of the Bombay High Court in Appeal No. 65 of 1962.
K.S. Shavaksha, R.A. Shah, J.B. Dadachanji and Bhuvanesh Kumari, for the appellant.
M.C. Chagla, 1.
M. Chagla,.
Anoop Singh, M.N. Shroff, for 1.
N. Shroff, for the respondent.
The Judgment of the Court was delivered by Ramaswami, J.
This appeal is brought by certificate from the judgment of the Bombay High Court dated August 17, 1964 in application No. 65 of 1962 upholding in part the judgment of Mr. Justice Tarkunde dated December 7, 1962 in Miscellaneous Petition No. 358 of 1961.
The appellant is a limited liability company incorporated under the laws of Switzerland and carries on business in the manufacture and sale of pharmaceutical and chemical products.
The respondent is a company incorporated under the Companies Act in India and also carries on business in the manufacture 'and sale of pharmaceutical products.
On December 2, 1946 the ,appellant applied for registration of its trade mark "PROTOVIT".
The application Was granted and the appellants mark was registered in Class V in respect of 215 "Pharmaceutical preparations for human use and for veterinary use, infants ' and invalids ' foods".
The appellant thereafter used that mark on multi vitamin preparations in liquid tablet forms and its goods are being sold under that mark at least since the year 1951.
On January 28, 1957 the respondent applied for registration of its mark "DROPOVIT" in respect of "medicinal and pharmaceutical preparations and substances".
The application was registered but the advertisement of the respondent 's application escaped the notice of the appellant who did not hence oppose the registration.
By a letter dated March 4, 1958 Messrs Voltas Ltd., the appellant 's 'agents, drew the attention of the appellant to the respondent 's mark "DROPOVIT".
There was negotiation between the parties but on March 19, 1958 the respondents wrote to the appellant refusing to alter its trade mark.
On January 21, 1959 the appellant applied for rectification of the Register by removal therefrom of the respondent 's trade mark.
The ground urged in support of the application was that the respondent 's mark so nearly resembled the appellant 's mark as to.
be likely to deceive or cause confusion.
On March 9, 1960 the appellant applied for amendment of the application and an additional ground was taken that "DROPOVIT" was not an invented word.
The application for amendment was allowed by the Registrar.
The amended application was opposed by the respondent.
By his judgment dated August 5, 1961 the Joint Registrar rejected the application for rectification holding that "DROPOVIT" was not deceptively similar to "PROTOVIT" and that the word "DROPOVIT" considered as a whole was not descriptive.
The appellant took the matter in appeal to the Bombay High Court.
On December 7, 1962 Mr. Justice Tarkunde dismissed the appeal.
The appellant preferred an appeal under Letters Patent but the appeal was dismissed by a Division Bench consisting of Chief Justice Chainani and Mody, J. on August 17, 1964.
During the hearing of.
the appeal the respondent restricted the designation of goods to " 'medicinal and pharmaceutical preparations and substances containing principally vitamins.
The application for rectification ' was made on January 21, 1959 be/ore the (Act No. 43 of 1958) came into operation.
But it is not disputed that under section 136(3) of this Act the decision of this case is governed by the provisions of Act No. 43 of 1958 (hereinafter called the Act).
Section 11 of the Act states: "A 'mark (a) the use of which would be likely to deceive or cause confusion; or 216 (b)the use Of WhiCh would be contrary to any law for the time being in force; or (c) which comprises or contains scandalous or obscene matter; or (d) which comprises or.contains any matter likely to hurt the religious susceptibilities of any class or section of the citizens of India; or .
(e) which would.otherwise be disentitled to protection in a court; shall not be registered as a trade mark".
Section 12( 1 ) provides "Save as provided in sub section (3 ), no trade mark.
shall be registered in respect.
of any goods or description of goods which is identical with or deceptively similar to a trade mark which is already registered in the name of a different proprietor in respect of the same goods.
or descriptive of goods.
" Section 56(1) reads: "On application made in the prescribed manner to 'a High Court or to the Registrar by any person aggrieved, the tribunal may make such order as it may think fit for cancelling or varying the registration of a trade mark on the ground of any contravention, or failure to observe a condition entered on the register in relation thereto." Section 2(1)(d) defines the phrase "deceptively similar" as follows: "A mark shall be deemed to.
be deceptively similar 'to another mark if it so nearly resembles that other mark as to be likely to deceive or cause confusion;" The first question to be considered in this appeal is whether the word "DROPOVIT" is deceptively similar to the word "PROTOVIT" and offends the provision of section 12 (1 ) of the Act.
In other words the question is whether the respondent 's mark so nearly resembles the registered m,ark aS to be "likely to deceive or cause confusion.
" It is not necessary that it should be intended to deceive or intended to cause ' confusion.
It is its probable effect on the ordinary kind of customers that one has to consider.
217 In Parker Knoll Ltd, vs Knoll International Ltd, (1) Lord Denning explained the words "to deceive, ' and the phrase "to cause confusion" as follows 1: .
"Secondly, 'to deceive ' is one thing.
To 'Cause confusion ' is another.
The difference is this: When you deceive a man, you tell him a lie.
You make a false representation to him and thereby cause him to believe a thing to be true.
which is false.
You may not do it knowingly, or intentionally, but still you do it, and so you deceive him.
But you may cause confusion without telling him 'a lie at all, and without making any false representation to him.
You may indeed tell him the truth, the whole truth and nothing but the truth, but still you may cause confusion in his mind, not by any ,fault of yours, but because he has not the knowledge or ability to.
distinguish it from the other pieces of truth known to him.
or because he may not even take the trouble to do so.
" The tests for comparison of the two word marks were formulated by Lord Parker in Pionotist Co., Ltd. 's application(2) as follows: "You must take the two words.
You must judge of them, both by their look and by their sound.
You must consider the goods to which they are to be applied.
You must consider the nature and kind of customer who would be likely to buy those goods.
In fact, you must ' consider all the surrounding circumstances; and ' you must further consider what is likely to happen if each of those trade marks is used in a normal way as a trade mark for the goods of the respective owners of the marks.
If, considering all those circumstances, you come to the conclusion that there will be a confusion that is to say, not necessarily that one man will be injured and the other will gain illicit benefit, but that there will be 'a confusion in the mind of the public which will lead 'to confusion in the goods then you may refuse the registration, or rather you must refuse the registration 'in that case.
" It is necessary to apply both the visual and phonetic tests.
In Aristoc Ltd. vs Rysta Ltd.(a) the House of Lords was considering the resemblance between the two words "Aristoc" and "Rysta".
The view taken was that considering the way the words were pronounced in English, the one was likely to be mistaken for the other.
(1) at 274 (2) at 777 (3) at 72.
218 Viscount Maugham cited the following passage of.
Lord Justice Luxmoore in.
the Court of Appeal, which passage, he said, he completely accepted as the correct exposition of the law :.
"The answer to the question whether the sound of one word resembles too nearly the sound of another so as to bring the former within the limits of section 12 of the Trade Marks Act, 1938, must nearly always depend on first impression, for obviously a person who is familiar with both words will neither be deceived nor confused; It is the person who only knows.
the one word and has perhaps an imperfect recollection of it who is likely to be deceived or confused.
.Little assistance, therefore, is to be obtained from a meticulous comparison of the two words, letter by letter .and syllable by syllable, pronounced with the clarity to be expected from a teacher of elocution.
The Court must be careful to.
make ' allowance for imperfect recollection .and the effect of careless pronunciation and speech on the part not only of the person seeking to.
buy under the trade description, but also of the shop.
assistant ministering to that person 's wants".
It is also important that the marks must be compared as wholes.
It is not right to take a portion of the word and say that because that portion of the word differs from the corresponding portion of the word in the other case there is no sufficient similarity to cause confusion.
The true test is whether the totality of the proposed trade mark is such that it is likely to cause deception or confusion or mistake in the minds of persons accustomed to the existing trade mark.
Thus in Layroma case(1).
Lord Johnston said ': ". ' . . we are not bound to scan the words as we would in a question of comparatio literarum.
It is not a matter for microscopic inspection, but to be taken from the general and even casual point of view of a customer walking into a shop.
" In order to decide whether the word "DIROPOVIT" is deceptively similar to the word "PROTOVIT" each of the two words must, therefore, be taken as a whole word.
Each of the two words consists of eight letters, the last three letters are common, and in the uncommon part the first two are consonants, the next is the same vowel '0 ', the next is a consonant and the fifth is again a common vowel '0 '.
The combined effect is to produce an alliteration.
The affidavits of the .appellant indicate that the last three letters "VIT" is a well known common abbreviation used in the pharmaceutical trade to denote Vitamin preparations.
(1) Tokajon Ltd. vs Davidson & Co., at 136.
219 his affidavit dated January 11, 1961 Frank Murdoch, has referred to the existence on the Register of about 57 trade marks which have the common suffix "VIT" indicating that the goods are vitamin preparationS.
It is apparent that the terminal syllable "VIT" in the two marks is both descriptive and common to the trade.
If greater regard is paid to the 'uncommon element in these two words, it is difficult to hold that one will be mistaken for or confused with the other.
The letters 'D ' and 'P ' in "DROPOVIT" and the corresponding letters 'P ' and 'T ' in "PROTOVIT" cannot possibly be slurred over in pronunciation and the words are so dissimilar that there is no reasonable probability of confusion between the words either from the visual or phonetic point of view.
In the High Court, counsel for the respondent made a statement that the respondent was willing that the Court should direct in exercise of its powers under section 56(2) that the Registrar should limit the respondent 's trade mark "DROPOVIT" to medicinal and pharmaceutical preparations and substances containing principally vitamins and that the appeal should be decided on this basis.
The question o,f deceptive similarity must therefore be decided o.n the basis of the class of goods to which the two trade marks apply subject to the limitation agreed to by the respondent.
From the nature of the goods it is likely that most of the customers would obtain a prescription.
from a doctor and show it to the chemist before the purchase.
In such a case, except in the event of the handwriting of the doctor being very bad or illegible the chance of confusion is remote.
As we have already observed the evidence shows that there are as many as 57 trade marks in the Register of Trade Marks with the suffix "VIT".
Therefore, even an average customer would know that in respect of Vitamin preparations the word "VIT" occurs in large number of trade marks and because of this he would naturally be on his guard and ' take special care against making a mistake.
In this connection the provisions of the Drug Rules, 1945 are also relevant.
Under r, 61(2) vitamin preparations would be covered by item 5 in Schedule C ( 1 ) to the Rules and a licence would be required to stock such vitamin preparations and to sell them retail.
The question of confusion must hence be determined on the basis that the goods with one of the two rival trade marks would be sold only by such 'a licensed dealer and would not be available in any other shop.
The fact that the vendor would be a licensed dealer also reduces the possibility of confusion to a considerable extent.
Having taken into account all circumstances of the present case we are of the opinion that the High Court and the Joint Registrar of Trade Marks were right in holding that there was no real tangible danger of confusion if respondent 's trade mark 220 was allowed to continue to remain on the Register and the application ' for rectification made by the appellant should be dismissed.
The question was also.
argued in the appeal whether the word "DROPOVIT" was not an invented word and whether it was a descriptive WOrd.
Section 9(1 ) of the Act states .
"A trade mark shall not be registered in Part A of the register unless it contains or consists of at least one the following essential particulars, namely (c) one or more invented words; (d) one or more words having no direct reference to the character or quality of the goods and not being according to its ordinary signification, a geographical name or a surname or a personal name or any common abbreviation thereof or the name of a sect, caste or tribe in India;" It is contended on behalf of the .appellant that "DROPOVIT" meant only "DROP OF VITAMIN" with the word 'of ' being mis spelled as 'O ' 'VIT ' being used to denote "Vitamins", and the three separate words are joined together to make "DROPOVIT" as one word. ' It was said that the word "DROPOVIT" was simply a combination of three common words in English language and cannot, therefore, be said to.
be an invented .word.
In Diabolo case(1) Parker J., has explained the meaning of "invented word" as follows: "To be an invented word within the meaning of the Act a word must not only be newly coined, in the sense of not being 'already current in the English language, but must be such as not to convey an, meaning, or, at any rate, any obvious meaning to ordinary Englishmen.
It must be a word having no meaning or no obvious meaning until one has been assigned to it.
" In the case of De Cordova and others vs Vick Chemical Co.(2) the Privy Council referred to that interpretation of Parker J., as "the best standing interpretation".
The question arising in this case is whether the word "DROPOVIT" would strike an ordinary person ' knowing English as meaning.
"DROP OF VITAMIN".
In this connection the High Court has pointed out that the original application for rectification did not contain the ground that the word of "DROPOVIT" was descriptive.
It was, therefore, legitimate to draw the inference that the word (1) (2) 221 "DROPOVIT" did: not strike even Messrs Depenning and DePenning the legal advisers of the appellant as being descriptive.
It was also pointed out that in his judgment Mr. Justice Tarkunde has remarked that when the case was opened before, him he did not understand that the word "DROPOVIT" meant "DROP OF VITAMIN" till the explanation of that word was given to.
We see no reason, therefore, to differ from the reasoning of the High Court on this 'aspect of the case.
If the word "DROPOVIT" is not a descriptive word it must be held to be an invented word.
It is true that the word "DROPOVIT" is coined out of words commonly used by and known to ordinary persons knowing English.
But the resulting combination produces a new word, a newly coined word which does not remind an ordinary person knowing English of the original words out of which it is coined unless he is so told or unless at least he devotes some thought to it.
It follows that the word "DROPOVIT" being an invented word was entitled to be registered as 'a trade mark and is not liable to be removed from the Register on which it already exists.
For the reasons expressed we hold that this appeal fails and must be dismissed with costs.
G.C. Appeal dismissed. | In 1946 the trade mark 'PROTOVIT ' was registered for one of the vitamin preparations manufactured by the appellant company.
In 1957 the respondent company applied for registration of its mark 'DROPOVIT ' in respect of "medical and pharmaceutical preparations and substances".
The application was granted.
When the appellant came to know about this trade mark it asked the respondent to alter it.
On the respondent 's refusal to do so, the appellant in 1959, applied to the Registrar for rectification of the Register of Trade Marks by removal thereform of the respondent 's trade mark.
Later the appellant amended its application by adding the ground that DROPOVIT ' was not an invented word.
The Joint Registrar by letter dated August 5, 1961 rejected the appellant 's application for rectification.
The appellant went in appeal to the Bombay High Court.
During the hearing of the appeal the respondent restricted the designation of goods covered by the mark 'DROPOVIT ' to "medical preparations and, substances containing principally vitamins.
" The Single Judge as well as the Division Bench decided in favour of the respondent.
The appellant came to this Court with certificate.
The questions that fell for consideration were: (i) whether the word 'DROPOVIT ' was deceptively similar to the word 'PROTOVIT ' and thus offended the provision of section 12(1) of the Trade and Merchandise Act, 1958; (ii) whether the word 'DROPOVIT ' was an invented or a descriptive word for the purpose of section 9(1) of the Act.
HELD: The appeal must be dismissed.
(i) In order that a trade mark may be found deceptively similar to another it is not necessary that it 'should be intended to deceive or intended to cause confusion.
It is its probable effect o.n the ordinary kind of customers that one has to consider.
For this purpose it is necessary to apply both the visual and phonetic tests.
It is also important that the marks should be compared as wholes.
It is not right to take a portion of the word and say that because that portion of the word differs from the corresponding portion of the word in the other case there is no sufficient similarity to cause confusion.
The true test is whether the totality of the trade mark is such that it is likely to cause deception or confusion or mistake in the minds of the persons accustomed to the existing trade mark.
[216 H; 217 G H; 218 E] Parker Knoll Ltd. vs Knoll International Ltd., at 274, Pianotist Co. Ltd. 's application , 777, Aristoc Ltd. vs Rysta Ltd., at 72 and Toklon Ltd. vs Davidson & Co., at 136, applied.
The terminal syllable 'VIT ' in the two marks 'DROPOVIT ' and 'PROTOVIT ' was both descriptive and, as the evidence showed.
common to the trade.
If greater regard was paid to the uncommon ejement in Jp CI/70 2 214 the two words it was difficult to, hold that one would be mistaken for or confused with the other.
The letters 'D ' and 'P ' in DROPOVIT ' and.
the corresponding letters 'P ' and 'T ' in 'PROTOVIT ' could not possibly be slurred over in pronunciation and the words were so dissimilar that there was no reasonable probability of confusion between the words either from the visual or phonetic point of view.
This was all the more so because the preparations from their very nature were likely to be purchased on the prescription of doctors, and under r. 61(2) of Drug Rules, 1945 could be sold only by licensed ' dealers SO that the possibility of confusion would be reduced to a considerable extent.
[219 A C, E] (ii) It could not be accepted that the Word 'DROPOVIT ' would strike an ordinary person knowing English as meaning 'DROP OF VITAMINS '.
The appellant 's original application for rectification did not contain the ground that the word 'DROPOVIT ' was descriptive.
It was therefore reasonable to presume that it did not strike even the legal advisers of the appellant as descriptive.
It was true that the word 'DROPOVIT ' was coined out of words commonly used by and known to ordinary persons knowing English.
But the resulting combination produced a new word, a newly coined word which did not remind an ordinary person knowing English of the original words out of which it was coined unless he was so told or unless at least he devoted some thought to it.
It followed that the word 'DROPOVIT ' being an invented word was entitled to be registered as a trade mark and was not liable 'to be removed from the Register on which it already existed.
[220 H 221 D] |
Appeal No. 147 of 1958.
Appeal from the judgment and decree dated January 4, 1955, of the Allahabad High Court in Special Appeal No. 36 of 1955.
A. V. Viswanatha Sastri, C. P. Lal and G. C. Mathur, for the appellants.
K. B. Bagchi, section N. Mukherjee for P. K. Bose, for the respondent No. 1. 1961.
April 18.
The Judgment of the Court was delivered by SUBBA RAO, J.
This appeal by certificate raises the question of construction of a will executed by one Pyare Mohan Bannerji.
29 The facts giving rise to this appeal lie in a small compass and they are as follows: Pyare Mohan Bannerji died in October 1874 leaving behind him considerable property.
He executed a will dated February 12, 1874, making various bequests, including the payment of certain amounts to the first respondent, Uttar para Hitakari Sabha.
After his death, his widow held the property for life till her death on March 25, 1945.
Thereafter, the property went into the possession of the appellants, who are the heirs at law of the testator.
On March 17, 1950, the first respondent, Uttarpara Hitakari Sabha (hereinafter referred to as the Sabha) filed an application in the High Court of Judicature at Allahabad under section 10 of the Official Trustees Act (Act II of 1913) claiming that the late Pyare Mohan Bannerji had created a trust by his will and praying that an official trustee be appointed to be the trustee of the properties of the trust.
This was registered as Testamentary Case No. 9 of 1950.
The appellants contested the claim of the Sabha and contended, inter alia, that no trust had been created by the testator and that the appellants, being the legal heirs of the testator, were entitled to succeed to the entire pro perty left by him.
Mootham, J., as he then was, who heard the said case at the first instance, held that by his last will Pyare Mohan Bannerji created a trust in favour of the Sabha, and appointed the Official Trustee a trustee of all the properties left by Pyare Mohan Bannerji specified in Schedule B to the petition.
On appeal, a division bench of the said High Court, consisting of Malik, C. J., and Agarwala, J., agreed with Mootham, C. J., that the will created a trust in favour of the Sabha; but the learned Judges held that the Sabha was entitled only to a half share in the cash and properties pertaining to the estate of the said testator, and appointed the Official Trustee as trustee only in regard to the said share: on that basis, suitable directions were given.
The first respondent accepted that position, but the appellants, i.e., the persons claiming to be the heirs at law, preferred the present appeal against the judgment of the High Court in so far as it went against them.
30 Learned counsel for the appellants contends that under the will not a trust but only a charge was created in favour of the first respondent and, therefore, the first respondent could not invoke in aid the provisions of section 10 of the Act.
Section 10 of the Act reads: "(1) If any property is subject to a trust other than a trust which the Official Trustee is prohibited from accepting under the provisions of this Act, and there is no trustee within the local limits of the ordinary or extraordinary original civil jurisdiction of the High Court willing or capable to act in the trust, the High Court may on application make an order for the appointment of the Official Trustee by that name with his consent to be the trustee of such property.
" It is common case that if the will created a trust, it would not fall under any one of the exceptions mentioned in the section.
Therefore, the only question is whether the will created a trust or a charge in favour of the first respondent.
The concepts of trust and charge are well defined.
A trust is "an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner or declared and accepted by him, for the benefit of another, or of another and the owner.
" Where property "of one person is made security for the payment of money to another, the latter person is said to have a charge on the property.
" The boundaries between the two concepts are well demarcated; but, more often than not, courts found considerable difficulty in construing a particular document to place it in one or other of the categories.
The same difficulty was encountered even in England.
The test laid down for marking out the one from the other by some of the authoritative text books on the subject may be useful in construing the will in question.
In Halsbury 's Laws of England, 2nd Edn.
33 (Lord Hailsham), the distinction between the two concepts has been stated thus at p. 98: "Where property is given to a person upon condition that he does a certain act or confers a 31 certain benefit on another person, the condition may constitutes a trust if it is directed to be, or must necessarily be, performed and satisfied out of the property, and consequently imposes a fiduciary obliga tion in respect of the property; but it will not be construed as a trust if this is not the case and the condition merely imposes a collateral duty.
Similarly, a devise of land upon condition of paying a sum of money or an annuity does not create a trust, though it may create a charge.
A charge does not in itself create a trust, but it may do so if it is coupled with other trusts or the context, otherwise so requires.
Conversely a trust may amount merely to a charge." Lord St. Leonards points out (Sugden on Powers, 7th Edn., p. 122) that, "What by the old law was deemed a devise upon condition, would now, perhaps, in almost every case be construed as a devise in fee upon trust, and by this construction, instead of the heir taking advantage of the condition broken, the cestui que trust can compel an observance of the trust by suit in equity.
" In The Commissioners of Charitable Donations and Bequests vs Wybrants (1) a testator had devised lands to trustees and their heirs upon trust to grant and convey the same to the use of John Wybrants for life 'subject nevertheless to and charged and chargeable with ' four annuities, three of which were to be paid to charitable institutions and the fourth to the poor of a parish.
In construing that provision, the Lord Chancellor said at p. 285: "It certainly is not necessary to use the word 'trust ' in order to create an express trust.
I do not intend to lay it down that every charge creates a trust, although it imposes a burden; but a charge may create a trust; depending on the nature of the charge.
In Bailey vs Ekins (2) Lord Elton said he was confident Lord Thurlow 's opinion was that a charge (of debts) is a devise of the estate, in substance and effect, pro tanto upon trust to pay the (1) (1845) 69 R.R. 278.
(2) , 323.
32 debts:and this is supported by the current of authorities.
The principle is no less powerful in the case of charities, particularly where the charity is to a fluctuating, uncertain body, like the poor of a parish.
The testator gives the estate to one, subject to this charge.
Who is to pay the annuities but the person who is liable to the burden: and this, in the case of a charity, impresses him with the character of a trustee for the charity.
By the ancient rule of equity, no one could acquire an estate, with notice of a charitable use, without being liable to it.
" The fact that a beneficial interest is also created in favour of the trustees in respect of the property subject to a trust does not make the transaction any the less a trust.
The law permits a person to bequeath his property to another subject to a trust in respect of a portion of the income in favour of a third party or a charity.
On this subject in Lewin on Trusts, it is stated at P. 133: "Upon this subject a distinction must be observed between a devise to a person for a particular purpose with no intention of conferring the beneficial interest, and a devise with the view of conferring the beneficial interest, but subject to a particular injunction.
" So too, Tudor in his book on Charities, 5th Edn., says much to the same effect at p. 52: "A charitable trust may be made to attach to a part of the property only, or it may be limited to particular payments directed to be made out of the income, as in the numerous cases where property has been given to a college, or municipal corporation, or city guild, upon trust or to the intent that certain specified charitable payments shall be made or subject to or charged with certain charitable payments.
In these cases, as will be seen, the donees as a rule take beneficially, subject only to the specified charitable payments.
" The said tests may afford a guide to ascertain whether a document creates a charge or a trust; but they are subject to the fundamental rule of construction that a trust may be created in language sufficient 33 to show the intention, and no technical words are necessary; the said intention must be gathered from a fair reading of the provisions of the document.
In the light of the foregoing discussion, let us look at the provisions of the will to ascertain the express intention of the testator.
At the time the testator executed the will he had a wife, and a nephew by name Sital Prasad Chatterji, but no children.
He had many other close relatives and dependents.
He was also charitably disposed.
He executed the will making suitable provision for his wife, nephew, relatives and for charities.
He could carry out his intention in two ways: he could bequeath his entire property to his widow and nephew subject to a fiduciary obligation imposed on them to pay certain amounts to the relatives and the charities; or, he could give the entire property to his widow and nephew subject to the payment of certain amounts charged on the said property.
The question is, what did he intend to do by this document? He did not use either the word "trust" or "charge" and, therefore, we must gather the intention only from the circumstances obtaining at the time the document was executed and the recitals found therein.
Under the will the testator made the following bequests depending upon different contingencies: Firstly, the property was given to his wife and nephew in equal shares for their lifetime subject to the payment of all his debts, annuities and charges; it is also provided therein for the sale of a standing jungle in Doomree and Sukhiae in the Gorakhpore District for the purpose of discharging the debts.
The second contingency related to the event of the testator and his nephew begetting son or sons; in that event, after the lifetime of his wife and nephew the son or sons of his nephew would get one fourth share subject to their paying one fourth of the annuities and charges, and whole of the remainder was given to his son or sons subject to their paying the remaining three fourths of the annuities and charges.
The third contingency related to the testator getting no children, but his nephew having sons; in that event, after the 34 death of his wife and nephew, the whole of his property would go to the said son or sons subject to the said annuities and charges.
In the event of the testator having children and the nephew having no son or sons, after the death of his wife and nephew, the property would go to his children subject to the payment of annuities and charges mentioned in the first portion of the will.
The last contingency contemplated was that neither the testator nor his nephew had any issue; in that event the whole of the property was given to his legal heirs subject to the payment of annuities and charges.
The quantum of bequests made in favour of the Sabha expanded from contingency to contingency.
During the lifetime of the nephew and the widow, the said Sabha got rupees fifteen per month.
In the event of either the testator or his nephew not having any children, the direction was that the said Sabha should get rupees fifty per month.
In that contingency not only the said Sabha but any other institution which took its place ' would get the said amount.
It was also mentioned that the amount should be given only to be spent in paying the school fees of indigent boys of Coterie reading in the Ooterpara School and whose parents or guardians might not have the means to pay their school fees.
On the happening of the last contingency, that is, both the testator and his nephew dying without children, his legal heirs took the property subject to the payment of half of the net income to the said Sabha or any institution which might take its place.
The said amount was directed to be paid thus: "Rupees fifty per month in payment of schooling fees of indigent boys of Ooterpara reading in the Ooterpara school and the balance, if any, as scholarships to persons resident of Ooterpara or failing such of Bengal who after passing the entrance examination of the Calcutta University may wish to learn practical agriculture or Chemistry or Mechanics.
" At present it is common case that all the relatives for whom provision was made in the will passed away, that there are no daughters of testator 's nephew and that the Sabha is the only institution entitled to receive the 35 amounts provided for under the will.
We are, therefore, only concerned with the question whether a trust was created in favour of the first respondent or not, on the happening of the last contingency, namely, the testator leaving no children and his nephew no sons.
On the happening of that event the property passed to his legal heirs.
When that stage was reached the testator was more interested in charities than to make provision for persons for whom he had love and affection.
The amount was payable to the Sabha or any other institution which might take its place.
Further, there was a direction that the said amount should be spent towards specified charitable purposes.
The direction was couched in an elastic form to prevent the charitable object being defeated.
The charity was conceived to be a permanent one and it was necessary that the regular payment of the amount was secured.
It is, therefore, clear that under the will, on the happening of the said contingency, the testator clearly intended that his legal heirs should regularly pay half the net income to the first respondent so that the specified charities may be carried out perpetually.
That object would not be achieved if the first respondent was placed in the position of a creditor with a charge on the property with an off chance of the charge being defeated by a bonafide purchaser for value of the property bequeathed to the legal heirs.
Learned counsel emphasized the fact that under the will the first respondent had to spend the moneys for specified objects and not the legal heirs and contended that the first respondent might be in the position of a trustee in respect of the amounts received from the legal heirs, but the legal heirs were not trustees in respect of the charity.
The question is not whether the legal heirs, or the first respondent, are the trustees in respect of the fund after it reached the hands of the first respondent; but the question is whether the legal heirs, as owners of the property, were under a fiduciary obligation to pay the said amount for charitable purposes.
Having regard to the circumstances visualized at the time the last contingency happened, 36 the fluctuating amount the donees had to pay, the permanent nature of the charity and the declared intention of the testator to pay as much as half the net income towards the carrying out of the said charitable object, we hold that the legal heirs took the property of the testator subject to a trust rather than a charge.
No other question arises in this appeal.
For the foregoing reasons, we hold that the conclusion arrived at by the High Court is correct.
In the result, the appeal fails and is dismissed with costs.
Appeal dismissed. | One P died in 1874 leaving considerable property.
He also left a will which provided for several contingencies; the first respondent was given an interest under each contingency which was enlarged from contingency to contingency.
Under the last contingency which happened the entire property was given to the heirs with a direction that half of the income of the property be given to the first respondent.
The heirs contended that the direction merely created a charge and not a trust of half of the property.
Held, that the direction created a trust rather than a charge.
The charity was conceived to be a permanent one and it was necessary to secure regular payments to it.
The testator clearly intended that the heirs should regularly pay half the income to the first respondent so that the specified charities may be carried on perpetually.
This object could not be achieved if the direction merely created a charge and not a trust.
The Commissioners of Charitable Donations and Bequests vs Wybrants , (1845) 69 R. R. 278 and Bailey vs Ekins, 7 Ves. 319, referred to. |
Appeal No. 748 of 1966.
Appeal by special leave from the judgment and order dated February 16, 1965 of the Allahabad High Court in Civil Revision No. 373 of 1963.
B. Sen and O.P. Rana, for the appellant.
Yogeshwar Prasad, Paras N. Tiwari,S.S. Khanduja for B. Dutta, for the respondent.
The Judgment of the Court was delivered by Ramaswami, J.
This appeal is brought by special leave from the judgment of the Allahabad High Court dated February 16, 1965 in Civil Revision No. 373 of 1963 which was filed against the judgment of the Additional Civil Judge, Mirzapur dated December 4, ]962 in Revenue Appeal No. 417 of 1961.
The respondent made an application before the Rehabilitation Grants officer, Mirzapur under section 79 of the U.P. Zamindari Abolition and Land Reforms Act, 1950 to obtain the determination and payment of rehabilitation grant to him.
The case of the respondent was that he was the son of the late Raja Sharda Mahesh Narain Singh Shah of Agori Barhar Raj, tehsil Robertsganj in Mirzapur district.
Raja Anand Brahma Shah who was a Malgujar of more than Rs. l0,000 annually executed Gujaranama deeds in favour of his younger brothers and Iris mother separately in the year 1949.
By these deeds, certain villages were transferred by the raja to the Raj Kumar and the mother in lieu of their right of maintenance.
One of such Gujaranamas was executed by Raja Anand Brahma Shah in favour of respondent, Raj Kumar Rukmini Raman Brahma who is one of his younger brothers.
The document was executed on October 5, 1949 and registered on January 357 18, 1950.
The application of the respondent before the Rehabilitation Grants Officer was opposed 'by the appellant.
The. objection of the appellant was that the transfer in favour of the respondent cannot be legally recognised in view of section 23( 1 )(a) of the U.P. Zamindari Abolition & Land Reforms Act, 1950 (U.P. Act 1 of 1951 ) (hereinafter called the Act) for the purpose of assessing the amount of rehabilitation grant.
By his order dated January 28, 1961 the rehabilitation Grants Officer held that the respondent was entitled to rehabilitation grant.
The appellant preferred an appeal against the order of the Rehabilitation Grant Officer.
The appeal was heard by the Additional Civil Judge, Mirzapur, who rejected the objection of the appellant and dismissed the appeal.
The appellant took the matter in revision to the Allahabad High Court, but the Revision Application was dismissed on February 16, 1965.
It is necessary at this stage to set out the relevant provisions of the Act: Section 3 (12): "In this Act, unless there is anything repugnant in the subject or context (12) 'Intermediary ' with reference to any estate means a proprietor, under proprietor, sub proprietor, thekedar, permanent lessee in Avadh and permanent tenure holder of such estate or part thereof.
" Section 23: "Transfer by way of sale or gift not to be recognised (1 ) Notwithstanding anything contained in 'any law, no transfer, by way of sale or gift, of any estate or part thereof (a) made on or after the first day of July, 1948, shall be recognised for the purpose of assessing the amount of rehabilitation grant payable to the intermediary; (2) Nothing in sub section (1 ) shall apply to (a) any sale made under order of a court in execution of any decree or order for payment of money; or; (b) any sale or gift made in favour of a wakf, trust, endowment or society established wholly for charitable purposes, unless the State Government in any particular case directs otherwise.
" up(CI)/70 l1 358 Section 24(b) "Any contract or agreement made between an intermediary and any person on or after the first day of July, 1948, which has the effect, directly or indirectly, (a) (b) of entitling an intermediary to receive on account of rehabilitation grant an amount higher than what he would, but for the contract or agreement, be entitled to under this Act shall be made and is hereby declared null and void.
" Section 73: "There shall be paid by the State Government to every intermediary (other than a thekedar), whose estate or estates have been acquired under the provisions of this Act, a rehabilitation grant as hereinafter provided; Provided that, where on the date immediately preceding the date of vesting, the aggregate land revenue payable by the intermediary in respect of all his estates situate in the areas to which this Act applies exceeded rupees ten thousand, no such grant shall be paid to him.
" The principal question involved in this appeal is whether the Gujaranama deed dated October 5, 1949 executed by Raja Anand Brahma Shah is a transfer by way of sale or gift within the meaning of section 23 (1 ) of the Act 'and cannot, there,fore, be recognised for purpose of assessing the amount of Rehabilitation Grant. was argued on behalf of the appellant that on a true construction of the document the transaction must be taken to be a gift of the property by Raja Anand Brahma Shah to the respondent.
In our opinion there is no warrant for this argument.
The relevant portion of the Gujaranama deed dated October 5, 1949 states: " .
I Shri Raja Anand Brahma Shah son of Shri Raja Sharda Mahesh Prasad Singh Shah of Agori Barhar Raj, Rampur Estate Pargana Barhar, Tehsil Robertsganj, District Mirzapur, am the proprietor of Angori Raj District Mirzapur which is an impartible estate.
That according to law and custom the eldest son of the Raja becomes the owner of the estate on the death of the earlier Raja and the younger sons have a fight to maintenance and they are given a reasonable share of the estate in lieu of the right of maintenance so as to enable them to pass their life in accordance with their 359 status.
The estate is under 'an obligation to provide ' maintenance of this type.
Therefore it is obligatory upon me also to make some provision for the maintenance of my younger brother Shri Rukmini Raman Brahma by giving him some property.
He also desires that some maintenance should be provided for him.
Therefore I out of my sweet will 'and willingness do hereby execute this document in the terms following: 1.
That from today 's date I give the property detailed below to my younger brother Shri Rukmini Raman Brahma in lieu of his right of maintenance and I deliver to him the proprietary possession of the properties aforementioned which include all rights pertaining to Sir land, self cultivated land, water and forest rates, houses and buildings, shops, jungles, hills etc.
That Shri Rukmini Raman Brahma and his male lineal descendants will as per the custom of maintenance prevailing in my estate, remain in possession of the said properties from generation to generation and that in case of there being no male lineal descendants of the transferee the property shall revert to the holder of the jagir.
That the erstwhile transferee for maintenance shall be competent to transfer the property detailed below subject to the condition that prior to sale it is and shall be obligatory on his part to give intimation in this behalf to the erstwhile holder of the jagir by means of a registered notice and if he be not willing to have the deed executed in his favour the property may be given in sale to.
any other person.
Otherwise the deed of sale shall be invalid and shall be liable to pre emption.
That the transferee for maintenance shall pay land revenue and other customary dues and taxes to the Government.
The jagir shall not be responsible for the payment of the same.
That the transferee for maintenance may get his name entered in the revenue papers.
We shall have No. objection in this regard.
Since the decision of the Privy Council in Shiba Prasad Singh vs Rani Prayag Kumari Devi(1) it must be taken to be well settled that an estate which is impartible by custom cannot be said to be the separate or exclusive property of the holder of the (1) 59 I.A. 331. 360 estate.
If the holder has got the estate as an ancestral estate and he has succeeded to it by primogeniture it will be a part of the joint estate of the undivided Hindu family.
In the case of an ordinary joint family property the members of the family can claim four rights: (l)the right of partition; (2) the right to restrain alienations by the head of the family except for necessity; (3) the right of maintenance and (4) the right of survivorship.
It is obvious from the very nature of the property which is impartible that the first of these rights cannot exist.
The second is also incompatible with the custom of impartibility as was laid down by the Privy Council in the case of Rant Sartaj Kuari vs Deoraj Kuari(1) and the First Pittapur case(2).
The right of maintenance and the right of survivorship.
, however, still remain and it is by reference to these rights that the property, though impartible has, in the eye of law, to be regarded as joint family property.
The right of survivorship which can be claimed by the members of the undivided family which owns the impartible estate should not be confused with a mere spes successionis.
Unlike spes succession is, the right of survivorship can be renounced or surrendered.
It was held by the Judicial Committee in Collector of Gorakhpur vs Ram Sunder Mal(3), the: right of maintenance to junior members out o,f an impartible estate was based on joint ownership of the junior members of the family.
In that case Lord Blanesburgh after stating that the judgment of Lord Dunedin in Baijnath Prasad Singh vs Tej Bali Singh(4) had definitely negatived the view that the decisions of the Board in Sartaj Kuari 's case ( 1 ) and the First Pittapur case ( 2 ) were destructive of the doctrine that an impartible zamindari could be in any sense joint family property, went on to observe: "One result is at length clearly shown to be that there is no reason why the earlier judgments of the Board should not be followed, such as for instance the Challapalli case (Raja Yarlagadda Mallikariuna Prasad Nayadu vs Raja Yarlagadda Durga Prasad Nayadu(6) which regarded their right to maintenance, however, limited, out of an impartible estate as being based upon the joint ownership of th e junior members of the family, with the result that these members holding zamindari lands for maintenance could still be considered as joint in estate with the zamindar in possession." Lord Blanesburgh said: "The recent decisions of the Board constitute a further landmark in the judicial exposition of the question 'at issue here.
While the power of the holder of (1) 15 I.A. 51.
(2) 26 I.A. 83.
(3) 61 I.A. 286, (4) 48 I.A. 195.
(5) 271.A. 151. 361 an impartible raj to dispose of the same by deed (Sartaj Kuari 's case(1) or by will (the First Pittapur case(") and Protap Chandra Deo vs Jagadish Chandra Deo(3) remains definitely established, the right of the junior branch to succeed by survivorship to the raj on the extinction of the senior branch has also been definitely and emphatically re affirmed.
Nor must this right be whittled away.
It cannot be regarded as merely visionary.
" As pointed out in Baijnath Prasad Singh 's case(4) when before the Allahabad High Court the junior members of a great zamindari enjoy a high degree of consideration, being known as babus, the different branches holding babuana grants out of the zamindari.
Their enjoyment of these grants is attributable to their membership of the joint family, and until the decisions above referred to beginning in 1888 supervened, they had no reason to believe that their rights of succession were being imperilled by their estrangement from the zamindar in possession.
" In the present case there is the statement of Raja Anand Brahma Shah in the Gujaranama deed that according to the law and custom of the estate, the eldest son of the Raja becomes the owner of the estate on the death of the earlier Raja and that the "younger sons have right to maintenance and they are given reasonable share of the estate in lieu of right of m 'aintenance".
In view of this admission of Raja Anand Brahma Shah it is not possible to hold that the transfer of the properties in the Gujaranama deed was a transfer by way of gift.
It is also not possible to contend that it was a sale of the properties for there is no money consideration.
It is manifest that the transaction is by way of a settlement to the respondent by Raja Anand Brahm, a Shah in lieu of the right of maintenance of the respondent which is obligatory upon the holder of impartible estate.
In our opinion, the Gujaranama deed dated October 5, 1949 is not hit by the provision of section 23 of the Act and the argument of the appellant on this aspect of the case must be rejected.
It was contended on behalf of the appellant that the case should be remanded to the Rehabilitation Grants Officer on account of certain procedural irregularities.
It was pointed out that the Rehabilitation Grants Officer did not follow the provisions of the Civil Procedure Code by treating the application under section 79 as a plaint and the objection of the State Government as a written statement.
It was said that the Rehabilitation Grants Officer was bound to.
frame proper issues and to take evidence of the parties (1) 15 I.A. 51.
(2) 26 I.A. 83.
(3) 54 I.A. 289.
(4)481.A. 195.
362 on those issues as in the civil suit.
But no case has been made out for remand because the appellant has not denied in the written statement that there was the customary right of maintenance of the junior members of the family of Raja Anand Brahma Shah.
No disputed question of fact was raised on behalf of the appellant before the Rehabilitation Grants Officer, the award of the Rehabilitation Grants Officer was challenged only on a question of law.
For these reasons we hold that this appeal fails and must be dismissed, with costs.
G.C. Appeal dismissed. | The Raja of an impartible Estate in U.P. executed certain Gujaranama deeds in 1949 including one in favour of the respondent, his younger brother.
After the U.P. Zamindari and Land Reforms Act, 1950 (U.P. Act 1 of 1951) came in force the respondent made an application before the Rehabilitation Grants Officer under section 79 of the Act.
The Rehabilitation Grants Officer held that the respondent was entitled to the Grant and the order was upheld by the higher courts including the High Court.
In appeal by the State of U.P. before this Court it was contended that the Gujaranama executed by the Raja in favour of the respondent was.
a transfer by way of sale or gift within the meaning of section 23(1 ) of the Act and therefore could not be recognised for purposes of assessing the amount of Rehabilitation Grant.
HELD: (i) After the decision of the Privy Council in Shiba Prasad Singh 's case it must be taken to be well settled that an estate which is impartible by custom cannot be said to be the separate or exclusive property of the holder of the estate If the holder has got the estate as an ancestral estate and he has succeeded to it by primogeniture it will be a part of the joint estate of the undivided Hindu family.
In the case Of an ordinary joint family property the members o.f the family can claim four rights: (1) the right of partition; (2) the right to restrain alienations by the head of the family except for necessity; (3) the right of maintenance; and (4) the right of survivorship.
It is obvious from the very nature of the property which is impartible that the first of these rights cannot exist.
The second is also incompatible with the custom of impartibility.
The right of maintenance and the right of survivorship, however, still remain and it is by reference to these rights that the property, though impartible has, in the eve of law, to be regarded as joint family property.
The right of survivorship, unlike mere spes successionis can be surrendered.
The right of maintenance to junior members out of an impartible estate is based on joint ownership of the junior members of the family.
[361 H 362 D] Shiha Prasad Singh vs Rant Prayag Kumari Devi, 59 I.A. 331, Rani Sartaj Kuari vs Deoraj Kuari, 15 I.A. 51, First Pittapur case.
26 I.A. 83, Collector of Gorakhpur vs Ram Sunder Mal, 61 I.A. 286 and Baijnath Prasad Singh vs Tej Bali Singh, 48 I.A. 195, applied.
Raja Yarlagadda Mallikarjuna Prasad Nayadu vs Rain Yarlagadda Durga Prasad Nayadu, 27 I.A. 151 and Protap Chandra Deo vs Jagadish Chandra Deo, 54 I.A. 289, referred to.
(ii) In the present case there was the statement of the Raja in the Gujaranama deed that according to the law and custom of the estate the 356 eldest son of the Raja becomes the owner of the estate on the death the earlier Raja and that the "younger sons have right to maintenance and they are given reasonable share of the estate in lieu of right of maintenance.
In view of this admission of the Raja it was not possible to hold that the transfer of the properties in the Gujaranama deed was a transfer by way of gift.
It was also not a sale of the properties for there is no money consideration.
It was manifest that the transaction was by way of a settlement to the respondent by the Raja in lieu of the right of maintenance of the respondent which was obligatory upon the holder of impartible estate.
The Gujaranama was therefore not hit by the pro vision of section 23 of the Act.
[363 D F] (iii) The plea on behalf of the appellant that the case must be remanded to the Rehabilitation Officer because no issues were framed or evidence taken in the case had no force because there were no questions of fact raised in the written statement on which evidence could be taken.
[364 A] |
vil Appeals Nos.
1671 87 of 1987.
From the Judgment and order dated 22.4.1987 of the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi in Appeal No. 1546, 1547 etc.
in Order No. 267 to 283 of 1987 B I. M.K. Banerjee, Solicitor General, R.P. Srivastava and P. Parmeswarn for the Appellants.
Soli J. Sorabji, K.K. Patel, Rajiv Dutta and R.S. Sodhi for the Respondents .
The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J.
These are appeals from the decision of the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi (hereinafter referred to as 'CEGAT ') under Section 35L(b) of the Central Excises & Salt Act, 1944 (hereinafter called 'the Act ).
The respondent Calcutta Steel Industries filed revised classification lists wherein they had classified all rectangular products of thickness below 3.0 mm manufactured by them as bars covered by Tariff item 26AA(ia) of the Central Excise Tariff.
The Assistant Collector, Central Excise was of the tentative view that rectangular products of thickness less than 3.0 mm and of width less than 75 mm conform to the definition of Hoops and merit classification under item (ii) of Tariff Item 26AA attracting effective rate of duty of Rs.450 per MT less the PG NO 597 reduction provided for under Notification No. 55/80 dated 13th May, 1980.
The respondents were, therefore, called upon to show cause as to why the classification list should not be amended and duty charged accordingly.
The respondents submitted their written statement and requested for a personal hearing.
The matter came up for adjudication before the Assistant Collector, Central Excise.
He held inter alia that the type of Mills used for the manufacture was irrelevant.
He relied on the definition of "Hoops" evolved in consultation with the Ministry of Steel and the Indian Standard Institution.
The revised definition was as follows: "The finished product, generally of cross section with edges of controlled contour and of thickness 3.0 mm and over width 400 mm and below and supplied in straight lenths.
The product shall have rolled edges only (square or slightly rounded).
This group also includes flat bars with bulb that has swelling on one or two phases of the same edge under width of less than 400 mm.
The Assistant Collector, Central Excise on the basis of certain discussion, in his order, was of the view that rectangular products of thickness less than 3.0 mm and of width less than 75 mm were hoops and were correctly classified under sub item (ii) of Tariff item 26AA of the Central Excise Tariff and accordingly exigible to the appropriate duty.
The revised classification list was accordingly modified and approved.
The respondents preferred appeals to the Collector of Central Excise (Appeals).
The Collector considered the Indian Standard 1956 62 (2nd reprint May 1975) which defined "Hoops" as follows: "5.54 HOOP (bailing, hoop iron) a Hot Rolled Flat Product, rolled in rectangular section of thickness less than 3.0 mm and width less than 75.0 mm." He held that according to the specifications the product in question sequarely fell within the above definition particularly when the description of the Tariff Items covered "Hoops, all sorts".
The Appellate Collector also considered the definition of "Hoop and Strips" in the Brussels Tariff Nomenclature which described these as follows: "Hoop and Strip (heading No. 73.
12) rolled products with sheared or unsheared edges of rectangular section, of a thickness set exceeding 6 milli PG NO 598 metres, of width not exceeding 500 millimetres and of such dimension that the thickness does not exceed one tenth of the width, in straight strips, coils or flattened coils." He accordingly held that this definition showed that the edges of the product in question might be sheared or unsheared and the products might be in straight lengths or in coils.
He also held that the nature or type of mill cannot by itself be the determining factor of the issue in dispute which has to be determined taking into account all relevant considerations, viz., the phraseology and the scope of the Tariff Entry, the trade practice terminology, well recognised standard national and international technical literature.
In the result, the Appellate Collector of Central Excise inter alia for the reasons stated above, found no reason to interfere with the order of the Assistant Collector, Central Excise which was accordingly upheld.
The respondents preferred appeals to the Tribunal.
The Tribunal allowed the appeals and held that the flat product of thickness less than 3.0 mm and a width of less than 75 mm is classifiable as bars as claimed by the respondents herein and not as hoops as held by the Assistant Collector, Central Excise and upheld by the Appellate Collector of Central Excise.
in allowing the appeals, the Tribunal referred to U.S. Steel Publications (The shaping and treating of steel) wherein it is stated as follows: "goods have been rolled in a bar mill and have not been subjected to the process mentioned by the book for producing hoops and that they were not meant for bailing or packaging which a hoop is meant for. ' ' The Tribunal in its order discussed various aspects of the matter.
The Tribunal noted that the Collector had stated and what are the different categories.
In U.S. Steel Publication (The Making, Shaping and Treating of Steels) edited by Herald E. Mc.
Gannon 9th Edition whom the Tribunal has described as an authority on the Steel and we presume he is, there are some observations at page 808 under the heading "Narrow Flat rolled products" which are relevant.
There,"Hoops" have been described as follows: "Hoop There are four general classification of this type of products: 1.
Tight cooperage hoop for barrels to hold liquid.
PG NO 599 2.
Slack barrell hoop for barrels to hold dry products.
Tobacco barrel hogshead hoop, and 4.
Special hoop for special packages.
" It has further to be noted that "hoop" is made either by slitting coiled strip rolled in multiple width, into narrow coiled strip of the desired width, or from narrow coiled strip with a not rolled or mill edge and the type and width of hoop being produced influences the choice of the method used.
It further appears that the method of the products in question is not one of the methods listed in this authoritative work for hoops.
The so called hoops were not produced by slitting coiled strip nor rolled from narrow coiled strip, with hot rolled or mill edge.
The article, as has been noted, says that "hoop" is produced as ' curled hoop ' or 'a straight length '.
Curled hoop is made by a pinchroll and curved guide shoe arrangement that permits the hoop to take a circular form.
A straight length hoop is produced merely by removing the curved guide shoe.
The Tribunal was conscious that the goods in question were neither curled hoops nor straight length.
In those circumstances, it was necessary to understand clearly that the "straight length" used in this book is not the straight length understood by the department which seems to think that any short straight length is the straight length signified by the term for these products.
It is nothing of the kind as can be seen from the above passage quoted from the authority.
Straight length is not a short length, it is long.
The means of producing the goods is completely different from what is generally written.
The Tribunal was justified in holding that it is not possible to agree with the department that the manner of production of the goods can be taken into account.
It has also to be borne in mind that the very nature of the mill was a criteria to decide the nature of the product manufactured.
Further, however, taking into account the nature and type of the mill cannot itself be the determining factor in the issue in dispute.
The Tribunal also took into account that these are produced in a mill which cannot produce hoops or strips.
The Tribunal found the fact that they were produced in a mill that could produce hoops and strips.
Their lengths are not such as to place them in the same class as hoops.
Having, therefore, regard to this and the relevant tariff item, the Tribunal came to the conclusion that it will be more appropriate to assess them PG NO 600 under item 26AA(ia) than under Item 26AA(ii).
The Tribunal has considered all the relevant facts.
There was no misdirection on the facts.
All proper and relevant materials relevant for the determination of the question before the Tribunal have been applied to.
Reliance was placed on certain observations of this Court in South Bihar Sugar Mills Ltd. vs Union of India & Ors., ; There, this Court was dealing with Item 14A and the appellants ' manufacturing mixture of gases containing carbon dioxide by burning lime stone with coke in using only the carbon dioxide from the mixture for refining sugarcane juice and for producing soda ash by solvay ammonia soda process Whether the mixture of gases was kiln gas or compressed carbon dioxide covered by Item 14 H in Schedule I to the Act.
It was held by this Court that the gas generated by the appellant companies was kiln gas and not carbon as known to the trade, i.e., to those who deal in it or who use it.
The kiln gas in question therefore is neither carbon dioxide nor compressed carbon dioxide known as such to the commercial community and therefore cannot attract Item 14 H in the First Schedule.
It was held that it was incorrect to say that because the sugar manufacturer wants carbon dioxide for carbonisation purposes and sets up a kiln for it that he produces carbon dioxide and not kiln gas.
In fact what he produces is a mixture known both to trade and science as kiln gas one of the constituents of which is no doubt, carbon dioxide.
The kiln gas which is generated in these cases is admittedly never liquified nor solidified and is therefore neither liquified nor solidified carbon dioxide, assuming that it can be termed carbon dioxide.
It cannot be called compressed carbon dioxide as understood in the market among those who deal in compressed carbon dioxide.
If the Revenue wants to tax a particular goods known as such then the onus is on the Revenue.
That they have failed.
The Tribunal has analysed all the aspects.
In appeal, we have to see the propriety and the correctness of adjudication.
Having examined the aspects from all angles, we find that there was no misdirection in law nor any non consideration of facts.
There is no exclusion from consideration of legitimate and proper materials.
In the premises, we have also examined the ultimate conclusion of the Tribunal.
That conclusion appeals to us.
It follows irresistibly from the other premises as indicated hereinbefore.
In the premises, the appeals fail and are accordingly dismissed.
S.K.A. Appeals dismissed. | The respondent company filed revised classification lists classifying all rectangular products of thickness below 3.0 mm manufactured by them as bars covered by Tariff Item 26AA(ia) of the Central Excise Tariff.
The Asstt.
Collector, Central Excise took the view that rectangular products of thickness less than 3.0 mm and of width less than 75 mm fell under the definition of 'Hoops ' and merit classification under Tariff Item 26AA(ii) and exigible to the appropriate duty.
The respondent preferred an appeal before the Collector of Central Excise who held that the product fell within the definition of 'Hoops ' and upheld the order of the Asstt.
Collector.
The respondent appealed to the Tribunal which held that the flat product of thickness less than 3.0 mm and a width of less than 75 mm was classifiable as 'bars ' as claimed by the respondent company and not as 'Hoops ' and allowed the appeals.
The Department therefore filed the appeals under Section 35L(b) of the Central Excises & Salt Act, 1944 before this Court.
Dismissing the appeals, this Court, HELD: If the revenue wants to tax a particular goods known as such then the onus is on the Revenue.
[600F] 'Hoop ' is made either by slitting coiled strip rolled in multiple width, into narrow coiled strip of the desired width, or from narrow coiled strip with a hot rolled or mill edge and the type and width of hoop being produced influences the choice of the method used.
[599B] Curled hoop is made by a pinch roll and curved guide shoe arrangement that permits the hoop to take a circular form.
A straight length hoop is produced merely by removing the curved guide shoe.1599D] PG NO 597 PG NO 598 Straight length is not a short length, it is long.
[599E] The fact is that they were produced in a mill that could produce hoops and strips.
Their lengths are not such as to place them in the same class as hoops.
Having, therefore, regard to this and the relevant tariff item, the Tribunal came to the conclusion that it will be more appropriate to assess them under Item 26AA(ia) than Item 26AA(ii).
[599(G H; 600A] South Bihar Sugar Mills Ltd. vs Union of India & Ors., ; , referred to.
In an appeal under Section 35L(b) this Court has to see the propriety and the correctness of adjudication.
There was no misdirection in law nor any non consideration of facts.
There is no exclusion from consideration of legitimate proper materials.
[600F G] |
Civil Appeal No. 1784 of 1966.
Appeal from the judgment and decree dated March 17, 1952 of the Bombay High Court in Appeal No. 385 of 1948 from original decree.
276 D. Narsaraju, .4.
K. Sen, Balkrishan Acharya and S.S. Shukla, for respondents Nos. 3 and 4.
K. K, Jain, M.K. Garg and H.K. Puri, for respondents Nos.
13(a) to 13(f).
The judgment of the Court was delivered by Hegde J.
The main question for decision in this appeal is whether the Haveli at Nadiad in which the idol of Shree Gokulnathji is installed as well as the other properties detailed in plaint schedules A & B are the properties of a public religious trust created by the followers of Vallabh cult, residing at Nadiad.
The history of the suit institution and its management as also the various pleas taken by the parties have been elaborately set out by the High Court in a well considered judgment.
Hence we shall refer only to such pleas as are necessary to decide the contentions advanced before us.
The plaintiffs are the residents of Nadiad.
They are Vaishnavites.
They belong to the Vallabh Sampradaya.
They sued for a declaration that the properties mentioned in S.chs.
A & B of the plaint are properties oF the ownership of the trust ,mentioned earlier.
They are suing on behalf of the Vallabha Sampradayees residing at Nadiad.
According to their case as finally evolved that even during the last quarter of the 18th century, the Mandir of the Gokulnathji existed at Nagarwad in Nadiad Prant but in about 1821 a new Mandir was constructed by the followers of the Vallabha School at Santh Pipli, Nadiad and the idol of Gokulnathji which was previously worshiped at Nagarwad was taken and consecrated there.
In about 1831 they invited Goswami Mathuranathji, a direct descendant of Shree Vallabhacharya to come over to Nadiad and take up the management of the Mandir as its Maha Prabhu.
According to the plaintiffs the Mandir in question was constructed by the Vallabha Sampradayees and the expenses of the sevas as well as the utsavas performed in the Mandir were contributed by them.
They ,further say that the properties belonging to the trust were purchased from the contributions made by the devotees of that temple.
They assert that the persons belonging to the Vallabha Sampradaya have a right to have darshan of the deities in the Mandir, according to usage, as of right.
In short their case is that the Mandir in question is a place of public religious worship by the persons belonging to Vallabh Sampradaya and the Maha 'Prabhuji is ' only a trustee.
He has a right to reside in the upstair portion of the Mandir and further he can utilise a reasonable portion of the income of the trust, after meeting the requirements of the trust for his maintenance as well as the maintenance of the members of his family.
They contend that the suit properties were dedicated to Shri Gokulgathji 277 and the Maha Prabhu has no independent right of his own in those properties.
It is further said that the management of the temple was carried on efficiently by Mathuranathji and his descendants till about the time Annirudhalalji became the Maha Prabhu in Samy 1955.
Annirudhalalji under evil advice sought to.
secure the Jamnagar Gadi and for that purpose spent enormous sums of money from out of the funds belonging to the suit temple.
He also incurred considerable debts in that connection.
He died in Samy.
Thereafter defendant No. 1, his widow took over the management of the suit temple and its properties.
During her management she began to.
assert that she was the absolute owner of the suit properties including the suit temple.
She alienated several items out of the suit properties.
Hence they were constrained to bring the suit under appeal for the declaration mentioned earlier and also for a further declaration that the alienations effected by her are illegal, improper and unauthorised and not binding on the deity.
They also sought a mandatory injunction against defendants Nos. 2, 7 to 14 to restore lot No. 2 property in Sch.
A to defendant No. 1 for the benefit of the deity Shree Gokulnathji after declaring that the sale deed dated 19th April 1953 passed by defendant No. 1 to defendant No. 2 in respect of it is illegal, improper, unauthorised and without consideration and the same is not binding on the deity.
They have also asked for a permanent injunction against defendants 3, 4, 5 and 6 restraining them from enforcing the mortgages dated 4 3 1939, 27 1 1942, 12 1 1942 and 17 12 1941 passed by defendant No. 1 in their favour.
The suit was mainly contested by defendant No. 1 According to her Goswami Mathuranathji Maharaj was the owner of the idol Shri Gokulnathji.
It is he who established the Haveli at Nadiad and rounded his Gadi there; he was not only the owner of the Haveli but he.
was also the owner of the deities that were being worshiped in that Haveli.
She further pleaded that as per the tenets ,and usages of the Vallabha school, it is not possible for the members of that cult to found a temple.
They can only worship through the Acharya (Maha Prabhu) in his house known as Haveli.
According to.
their cult the Goswami Maharaj otherwise known as Maha Prabhu is the emblem of God head and the living representative of divinity.
She went further and took up the plea that according to the.
Vallabha Sampradaya no deity can own any property.
She further averred that Mathuranathji Maharaj and his descendants received from time to time presents and gifts made by his followers.
Those presents were made to them as a mark of reverence and respect to them and with a view to receive their grace.
They were the absolute owners of the idols they worshiped, the presents and gifts made to them and of the properties acquired by them.
She denied that the Haveli in which Shree Gokulnathji is worshiped is a public temple.
She also denied that the Vallabh Sampradayees were entitled L2Sup.
CI/70 6 278 to have the Darshana of that deity in that Haveli as of right.
She denied the plaint averments that all or any portion of the suit properties were acquired from the funds raised by the devotees or that the sevas or festivals were conducted from out of the contributions made by them.
She justified the impugned alienations mainly on the ground that she had absolute right to deal with the suit properties as she pleased.
The other defendants supported the defence taken by the Ist defendant.
They further pleaded that the alienations effected in their favour were supported by consideration and they were bona fide alienees and therefore those alienations they are not open to challenge.
The trial court dismissed the plaintiffs ' suit principally on the ground that as per the tenets and usages of Vallabha School it is impermissible for Vallabh Sampradayees to found a public temple and therefore, it is not possible to uphold the pleas advanced on behalf of the plaintiffs.
In appeal the High Court reversed the judgment and decree of the trial court.
It accepted the plaintiffs case that suit properties were the properties of a public religious trust and the alienations impeached were not valid and binding on the trust.
This appeal has been brought by the I st defendant.
The alienees have not appealed against the decree of the High Court.
In this Court they merely supported the pleas taken by the Ist defendant.
In this case voluminous evidence both oral and documentary has been led by the parties.
Fiftyone witnesses were examined in court and two on commission.
The oral evidence mainly relates to the tenets and beliefs of the devotees of the Vallabh Cult and the usages that prevail in their places of worship.
Before proceeding to examine the issues arising for decision in the case it is necessary to mention certain circumstances which have a bearing on those issues.
At the stage of pleadings it was common ground between the parties that Mathuranathji was the first person to be recognised as their Mahraj by the Vallabh Sampradayees of Nadiad.
The plaintiffs ' case as mentioned earlier, was that there was a temple of Shree Gokulnathji at Nagarwad in Nadiad even before Mathuranathji arrived ,at that place and according to them Mathuranathji had in fact been invited by the Vallabh Sampradayees of Nadiad to take over the manage ment of the temple that was already existing.
In her written statement defendant No.1 admitted that Mathuranathji was the first descendant of Vallabha to settle down in Nadiad.
According to her he brought with him the idol of Shree Gokulnathji and started worshiping that idol in his Haveli.
At a later stage the 1st defendant changed her version and put forward the theory that the ancestors of Mathuranathji had brought the idol of Shree 279 Gokulnathji to Nadiad and installed the same there long before Mathuranathji came to that place.
This significant deviation in the Ist defendant 's case has evidently been introduced to meet the evidence led on behalf of the plaintiffs about the existence of Gokulnathji temple even before Mathuranathji was born in 1806.
Yet another circumstance that has to be borne in mind in appreciating the evidence adduced by the parties is about the manner in which Mathuranathji and his descendants were managing the Haveli.
They had maintained regular and systematic accounts.
It is obvious they were maintaining two sets of accounts, one relating to.
the income and expenses of the deity and another relating to the personal income 'and expenses of the Maharaj.
But when the I st defendant was summoned to produce those accounts, the accounts relating to certain important periods were not produced and no satisfactory explanation is forthcoming for their non production.
From this omission the High Court has drawn the inference that those account books have been kept back as the evidence which those books would have afforded was not favorable to the 1st defendant 's case.
We agree with that conclusion.
Similarly certain important documents have been kept back by the 1st defendant.
Some of those documents were available at the time of the inventory but when the I st defendant was summoned to produce them she failed to do so.
This circumstance has again led the High Court to infer that those documents were deliberately kept back in order to suppress material evidence supporting the plaintiffs ' case.
Two of the important documents produced into court namely Exhs.
501 and 503 were found to have been tampered with.
501 appears to be a register of the temple properties but the title page of that book has been mutilated.
The top portion of that page had been clearly cut and removed.
It is reasonable to assume that the portion that has been removed contained the title of the register.
Possibly it mentioned that it is the property register of Shree Gokulnathji 's temple.
It is reasonable to draw this inference from the surrounding circumstances.
503 is the register relating to the expenses incurred for repairs of Shree Gokulnathji 's temple.
That register was also tampered with.
The original book was not made available to us for examination but the High Court which had the opportunity of examining that book has made the following remarks.
in its judgment: "a new slip was affixed to this document, and the heading which showed that the properties belonged to Shree Gokulnathji 's temple was torn out.
" The High Court has also held that Exh. 633, which evidences the sale of section No. 1840, was torn in such a way as to justify the plaintiffs complaint that in the torn portion was the description 280 of the Maharaj as the Vahiwatdar of the temple.
The High Court observed: "We have looked at all these three documents (Exhs. 501,503 and 633) and we are satisfied that the complaint made by the plaintiffs against the advisers of defendant No. 1 cannot be said to be without substance.
It seems to us clear, on examining these documents that the advisers of defendant No. 1 have unscrupulously tampered with the documents.
This conduct naturally raises suspicion against the defence, and we would be justified in drawing an inference against defendant No. 1 by holding that, if the books of account which have been kept back by her had been produced they would have supported the plaintiffs ' case.
We agree with these observations.
We may now proceed to examine the material on record for finding out 'the true character of the suit properties viz. whether they are properties of a public trust arising from their dedication of those properties in favour of the deity Shree Gokulnathji or whether the deity as well as the suit properties are the private properties of Goswami Maharaj.
In her written statement as noticed, earlier, the Ist defendant took up the specific plea that the idol of Shree Gokulnathji is the private property of the Maharaj the Vallabh Cult does not permit any dedication in favour of an idol and in fact there was no dedication in favour of that idol.
She emphatically denied that the suit properties were the properties of the deity Gokulnathji but in this Court evidently because of the enormity of evidence adduced by the plaintiffs, a totally new plea was taken namely that several items of the suit properties had been dedicated to Gokulnathii but the deity being the family deity of the Maharaj, the resulting trust is only a private trust.
In other words the plea taken in the written statement is that the suit properties were the private properties of the Maharaj and that there was no trust, private or public.
But the case argued before this Court is a wholly different one viz. the suit properties were partly the properties of a private trust and partly the private properties of the Maharaj.
The Ist defendant cannot be permitted to take up a case which is wholly inconsistent with that pleaded.
This belated attempt to bypass the evidence adduced appears to be more a manor than a genuine explanation of the documentary evidence adduced.
It is amply proved that ever since Mathuranathji took over the management of the shrine, two sets of account books have been maintained, one relating to the income and expenses of the shrine and the other relating to that of the Maharaj.
These account books and other documents show that 281 presents and gifts used to.
be made to the deity as well as to the Maharaj.
The two were quite separate and distinct.
Maharaj himself has been making gifts to the deity.
He has been, at times utilising the funds belonging to.
the deity and thereafter reimbursing the same.
The account books which have been produced clearly go.
to show that the deity and the Maharaj were treated as two different and distinct legal entities.
The evidence afforded "by the account books is tell tale.
In the trial court it was contended on behalf of the I st defendant that none of the account books produced relate exclusively to the affairs of the temple.
They all record the transactions of the Maharaj, whether pertaining to.
his personal dealings or dealings in connection with the deity.
This is an obviously untenable contention.
That contention was given up in the High Court.
In the High Court it was urged that two sets of account books were kept, one relating to the income and expenditure of the deity and the other of the Maharai, so.
that the Maharai could easily find out his financial commitments relating to the affairs of the deity.
But in this Court Mr. Narasaraju, learned Counsel for the appellant realising the untenability of the contention advanced in the courts below presented for our consideration a totally new case and that is that Gokulnathji undoubtly is a legal personality; in the past the properties had been dedicated in favour of that deity; those properties are the properties of a private trust of which the Maharaj was the trustee.
On the basis of this newly evolved theory he wanted to explain away the effect of the evidence afforded by the account books and the documents.
We are unable to accept this new plea.
It runs counter to the case pleaded in the written statement.
This is not a purely legal contention.
The I st defendant must have known whether there was any dedication in favour of Shri Gokulnathji and whether any portion of the suit properties were the properties of a private trust.
She and her adviser 's must have known at all relevant times the true nature of the accounts maintained.
Mr. Narasaraju is not right in his contention that the plea taken by him in this Court is a purely legal plea.
It essentially relates to questions of fact.
Hence we informed Mr. Narasaraju that we will not entertain the plea in question.
We shall now proceed to assess the evidence adduced in this case to find whether the plaintiffs have succeeded in establishing that the suit temple and the properties annexed thereto constitute a public trust.
Before doing so, it is necessary to examine certain basic contentions advanced on behalf of the appellant.
It is the case of the appellant that Vallabh Sampardaees cannot worship in a public temple; according to their cult they can have the Darshan of one or the other swaroops of Lord Krishna in the house of their Maharaj.
In Other words their cult prohibits public 282 worship.
They can only worship through their Maharaj and that too in his Haveli.
In support of this contention great deal of reliance was placed in the High Court and the trial court on the views expressed by Dr. Bhandarkar in his Works on 'Vaishnavism, S 'aivism and Minor Religous systems '.
The views expressed by Dr. Bhandarkar had greatly weighed with the trial court and it is mainly o.n the basis of those views, the trial court rejected the plaintiff 's suit.
The High Court after examining the doctrines of Vallabha School, its tenants and usages as well as the views expressed by eminent writers like Dr. Radhakrishanan and Dasgupta came to.
the conclusion that it would not be correct to.
say that worship.
in public temple is prohibited by the Vallabh cult though in the absence of any positive evidence it may be taken that the place where the Vallabha Sampardaees worship is a private temple.
It is not necessary for us to go into that controversy in view of the decision of this Court in Tilkavat Shri Govindlalji Maharaj vs The State of Rajasthan and ors.(1) In that case this Court was.
called upon to consider whether Nathdwara Temple in Udaipur, a temple rounded by the Vallabha Sampardaees is a public temple or not.
After examining the various treatises on the subject including Dr. Bhandarkar 's book on 'Vaishnavism, S 'aivism and Minor Religious Systems ', this Court observed (at p.585): "Therefore, we are satisfied that neither the tenets nor the religious practices of the Vallabha school necessarily postulate that the followers of the school must worship in a private temple.
Some temples of this cult may have been private even today.
Whether or not a particular temple is a public temple must necessarily be considered in the light of the relevant facts relating to it.
There can be No. general rule that a public temple is prohibited in Vallabha School.
" In view of this decision Mr. Narasaraju, learned Counsel for the appellant did not press forward the contention that the Vallabha School prohibits worship in public temple.
Yet another contention taken on behalf of the appellant is that the architecture of the building in which Gokulnathji is housed and the nature of that building is such as to show that it is not a public temple.
It was urged that building does not possess any of the characteristics of a Hindu temple.
It has not even a dome.
This contention again has lost much of its force in view of the decision of this Court referred to earlier.
Evidence establishes that Ballabha 's son and his immediate successor Vithaleshwar had laid down a plan for the construction of temples (1) [1964] 1 S.C.R. 561.
283 by the Vallabha Sampardaees.
He did not approve the idea of constructing rich and costly buildings.
for temples.
Evidently he realised that religious temple buildings were not safe under the Mohommedan rule.
For this reason he advised his followers to construct temples of extremely simple type.
The external view of those temples gave the appearance of dwelling houses.
It appears to be a common feature of the temples belonging to the Vallabha Sampardaees that the ground floor is used as the place of worship and the first floor as the residence of Goswami Maharaj, therefore the fact that Gokulnathji temple at Nadiad had the appearance of a residential house does not in 'any manner militate against the contention that the temple in question is a public temple.
It was said that according to the usage prevailing in that temple, the public are asked to enter the temple only after the Maharaj had finished his worship.
This circumstance again is of no consequence.
Each sect nay each temple has its own customs.
The usage pleaded by the appellant is not inconsistent with that temple being a public temple.
The appellant attempted to prove that on two occasions certain individuals were forbidden from entering the temple.
In the first place this plea has not been satisfactorily established.
Further according to the evidence adduced on behalf of the appellant those individuals were kept out of the temple because of some act of indiscipline on their part.
The power to manage a temple includes within itself the power to maintain discipline within the precincts of that temple.
The only other circumstance relied on by the appellant to establish that the temple in question is not a public temple is that the sale proceeds of Nagarwad Haveli were credited to the account of the Maharaj.
The learned judges of the High Court have carefully looked into that aspect.
After examining the relevant evidence on record they arrived at the conclusion that though initially the amount in question was credited to the account of the Maharaj, at a subsequent stage it was transferred to the account of the temple by means of adjustment entries.
The learned Counsel for the appellant was unable to satisfy us that this conclusion of the High Court was incorrect.
We shall now see how far the plaintiffs have succeeded in establishing that Gokulnathji Mandir is a public Mandir.
The burden of establishing that fact is undoubtedly on them.
Though most of the present day Hindu public temples have been found as public temples, there are instances of private temples becoming public temples in course of time.
Some of the private temples have acquired great deal of religious reputation 284 either because of the eminence of its founder or because of other circumstances.
They have attracted large number of devotees.
Gradually in course of time they have become public temples.
Public temples are generally built or raised by the public and the deity installed to enable the members of the public or a section thereof to.
offer Worship.
In such a case the temple would clearly be a public temple.
If a temple is proved to have originated as a .public temple, nothing more is necessary to be proved to show that it is a public temple but if a temple is proved to have originated as a private temple or its origin is unknown or lost in antiquity then there must be proof to show that it is being used as a public temple.
In such cases the true character of the particular temple is decided on the basis of various circumstances.
In those cases the courts have to.
address themselves to various questions such as : (1 ) Is the temple built in such imposing manner that it may prima facie appear to be a public temple? (2) Are the members of the public entitled to worship in that temple as of right ? (3 ) Are the temple expenses met from the contributions made by the public ? (4) Whether the sevas and utsavas conducted in the temple are those usually conducted in public temples ? (5) Have the management as well as the devotees been treating that temple as a public temple ? Though the appearance of a temple is a relevant circum stance, it is by no means.
a decisive one.
The architecture of temples differs from place to place.
The circumstance that the public or a section thereof have been regularly worshiping in the temple as a matter of course and they can take part in the festivals and ceremonies conducted in that temple apparently as a matter of fight is a strong piece of evidence to establish the public character of the temple.
If votive offerings are being made by the public in the usual course and if the expenses of the temple are met by public contribution, it is safe to presume that the temple in question is a public temple.
In brief the origin of the temple, the manner in which its affairs are managed, the nature and extent of gifts received by it, rights exercised by the devotees in regard to worship therein, the consciousness of the manager and the consciousness of the devotees themselves as to the public character of the temple are factors that go to establish whether a temple is a public temple or a private temple.
In 285 Lakshmana vs Subramania(1) the Judicial Committee was dealing with a temple which was initially a private temple.
The Mahant of this, temple opened it on certain days in each week to the Hindu public free to worship in the greater part of the temple, and on payment of fees in one part only.
The income thus received by the Mahant was utilised by him primarily to meet the expenses of the temple and the balance went to support the Mahant and his family.
The Privy Council held that the conduct of the Mahant showed that he had held out and represented to the Hindu public that the temple was a public temple at which all Hindus might worship and the inference was, therefore, that he had dedicated it to the public.
In Mundancheri Koman vs Achutan Nair,(2) the Judicial Committee again observed that the decision of the case would depend on the inferences to be derived from the evidence as to the way in which the temple endowments had been dealt with and from the evidence as to the public user of the temples.
Their Lordships were satisfied that the documentary evidence in the case conclusively showed that the properties standing in the name of the temples belonged to the temples and that the position of the manager of the temples was that of a trustee.
Their Lordships further, added that if it had been shown that the temples had originally been private temples they would have been slow to hold that the admission of the public in later times possibly owing to altered conditions would affect the private character of the trusts.
In Deoki Nandan vs Murlidar(3), this Court observed that the issue whether a religious endowment is a public.
or a private one is a mixed question of law and fact, the decision of which must depend on the application of legal concepts of a public and private endowment to the facts found.
Therein it was further observed that the distinction between a public and private endowment is that whereas in the former the beneficiaries, which means the worshipers are specific individuals and in the later the general public or class thereof.
In that case the plaintiff sought to establish the true scope of the dedication from the user of the temple by the public.
In Narayan Bhagwant Rao Gosavi Balajiwale vs Gopal Vinayak Gosavi and Ors.(4), this Court held that the vastness of the temple, the mode of its construction, the long user of the public as of right, grant of land and cash by the Rulers taken along with other relevant factors in that case were consistent only with the public nature of the temple.
In examining the evidence adduced by the plaintiffs in proof of the fact that the temple in question is a public.
temple we have to bear in mind the tests laid down by the courts for determining whether a given temple is a public temple or not.
(1) [1923] A.I.R. 1924 PC.
44 (2) (3) ; (4) ; 286 The case for the plaintiffs is that this temple originated as a public temple.
According to them it was rounded long before Mathuranathji was born; the idol of Gokulnathji was originally worshiped at Nagarwad and later on the suit temple was built and that idol installed therein.
We have earlier seen that the case of the I st defendant on this point was that the idol of Gokulnathji was the private property of Mathuranathiji.
Mathuranathji brought that idol alongwith him when he came to Nadiad and worshiped the same as his private deity.
This part of her case was given up at a later stage, and she put forward a new case to the effect that the idol Gokulnathji was brought by the ancestors of Mathuranathii to: Nadiad and it is they who started worshiping that idol at Nadiad.
From this it is clear that the appellant has no consistent case as to the origin of the worship of Gokulnathji at Nadiad.
The new plea put forward by her was evidently intended to meet the evidence adduced to show that the idol of Gokulnathji was being worshiped at Nadiad even before Mathuranathji was born.
In order to show that the idol of Gokulnathji was being worshiped in Nadiad even in the 18th century, oral evidence of local repute has been adduced by the plaintiffs.
In the very nature of things that evidence cannot, but be inconclusive.
In this connection the plaintiffs have also placed reliance on Exh.791, an extract showing the list of Devasthans in the Pargana of Nadiad to.
which the former Baroda State was making contributions, one of such Devasthan is the "Shree Gokulnathji".
This extract relates to Fasli Samvat 1833 (i.e. 1781 82 A.D.).
On the basis of this exhibit, we are asked to conclude that the suit temple was in existence even before 1781 82 A.D. The. evidence afforded by this document undoubtedly probabilises the version of the plaintiffs but it cannot be said with any definiteness that the entry in question relates to the suit temple.
Therefore it is not possible to come to a positive conclusion that the suit temple originated as a public temple nor there is any conclusive evidence before us to determine the date of its origin.
All that we can say is that the origin of this temple is lost in antiquity.
Therefore for determining whether it is a public temple or not we must depend on other circumstances.
It is established by the evidence on record that Gokulnathji is neither the Nidhi Swaroop nor Seva Swaroop of Mathuranathji 's branch.
Therefore it is unlikely that Mathuranathji branch would have installed the idol of Shree Gokulnathji for their private worship though the idol of Shree Gokulnathji is one of the Swaroops of Lord Krishna.
The plea taken by the appellant that Gokulnathji was one of the Nidhi Swaroop given to the branch of Mamuranathji by Vallabha is opposed to the documentary evidence produced by herself.
That plea has not been pressed before us for our acceptance.
287 From the account books produced in this case, it is clear that ever since 1965 two sets of accounts had been maintained by the Maharai, one relating to the temple and another relating to him.
The temple accounts are referred to as "Nichena Khata" and Maharaj 's accounts as "Uparna Khata".
At this stage we may emphasize that the evidence discloses that the entire ground floor is being used as the place of worship of Gokulnathji and upstairs portion as the residence of the Maharaj.
For the years 187 '7 to 1892, no books of account have been produced.
The appellant has stated that these books are not with her.
But this is not a satisfactory explanation for their disappearance.
The temple accounts for the years 1892 to 1894 have been produced but the personal accounts of the Maharaj for those years have not been produced.
Again for the years 1900 to 1907, only the temple accounts have been produced but for the period from 1908 and 1934 both the sets have been produced.
Again for the period 1935 to 1943, only the temple account books have been produced and not the personal account books of the Maharaj.
This pick and choose method adopted in the matter of producing account books unmistakably indicate that the appellant was deliberately keeping back unfavorable evidence.
Evidence on record establishes that some of the documents.
which were there at the time of the inventory were not produced when summoned.
Under those circumstances the High Court was justified in drawing an adverse inference against the appellant.
The existence of two sets of accounts ' clearly goes to indicate that the Maharajas had always considered the temple as an entity different from themselves.
That circumstance goes to negative the contention of the appellant that the deity was owned by the Maharaj and therefore the deity as well as the suit properties are his private properties.
Right back in 1861 under a gift deed executed by a devotee by name Bai Jasubai, two fields and a house were gifted in favour of the temple of Gokulnathji Maharaj at Nadiad.
The properties gifted by Jasubai were sold in 1865 and the sale proceeds credited in the 'Nichen Khata '.
In 1865 when Sri Vrairatna Maharaj left Nadiad he made a present of Rs. 5 to the idol of Shree Gokulnathii.
This was also.
credited in the 'Nichen Khata '.
Then we come to Exh.
593, an application made by several merchants and other residents of Nadiad to the Collector of Kaira in the year 1866.
That application recites that the ancestors of the applicants had voluntarily levied a cess known as Laga on several articles four the benefit of the suit temple.
Originally this Laga was separately recovered from the devotees by the Maharaj but later on at the request of the merchants the same 288 used to be recovered by the Government alongwith the custom duty and made over to Maharaj for the benefit of the temple.
Therein it was prayed that the newly established municipality should be directed to collect the Laga alongwith its dues and make up over to the Maharaj.
That application was signed by a large number of persons.
That application inter alia states : "There is a temple of Shree Gokulnathji at Nadiad.
A son of our preceptor, Shree Goswami Mathuranathji performs the seva in the said temple.
Our ancestors have granted for his expenses from the town a laga on several articles which may be received, a list whereof is enclosed herewith.
" The signatories to that application must have been familiar with the history of the suit temple.
We can reasonably assume that the facts stated therein are correct.
Those facts support the case ,of the plaintiffs.
We next go to the entries in the account books.
In the temple accounts for the year 1870, there is a credit entry of Rs. 27/4/It is in respect of the fine imposed by the Mahajan on three persons who appear to have played mischief at the time of darshan.
This entry clearly shows that the supervision of the 'temple, in a general sense, vested in the Mahajan of the place.
It appears from the accounts that in 1874, the Mahajan examined the account books of the temple see Exh.
This conduct on the part of the Mahajan would be inconsistent with the appellant 's claim that Gokulnath 's shrine is her private property.
In 1881 one Bai Harkore under her will made certain bequests in the name of the Gokulnathji Maharaj at Nadiad for providing Samagri for Shree Gokulnathii.
This is a bequest to.
the idol. 'Therein the.there is no refere.nce to the Maharaj.
Then we come to Exh.
534, under which a substantial portion of lot No. 1 of the :suit properties wherein the temple is situated was purchased on April 4, 1885.
The sale deed was taken in the name of Pari Pranvallabh Vrajlal and others on behalf of Shree Gokulnathji of Nadiad.
This is a clear indication that the deity of Gokulnathji was treated by the devotees as an independent legal entity.
Further the importance of this document is that it is taken in the name of the representatives of the public and not in the name of the Maharaj.
Under Exh. 691, a gift was made in 1888 in the name of Vrajratnalalji for and on behalf of Shree Gokulnathji temple.
The donor paid Rs. 1,200 and desired that a meal of six breads every day should be given till the temple exists to the person whom the Mabaraj would name and if the person named by the Maharai does not come to take the meal the same should be given to any visitor to the temple.
Still more significant is the bequest contained in Exh.
512, the will executed by one Bai 289 Vasant.
Under this will two bequests were made, one in favour of the temple of Shree Gokulnathji and the other in favour of the Maharani Vahuji who was then the Maharani of .the temple.
This will was executed on September 20, 1897.
Under a prior will executed by the same devotee (Exh. 189), the same distinction between the Maharaj and the temple is to.
be found.
That document was executed in 1888.
Similarly when bhets (presents) were made by .the devotees to the idol as well as to the Maharaj, they were separately credited in the respective account books.
As an illustration, we may refer to entries in the accounts books for the year 1896.
Therein Rs. 22 was credited to the temple accounts and Rs. 5 to the Maharaj 's personal account.
The account books clearly show the various presents made to the temple as well as to the Maharaj.
It is established by evidence that in 1896 when the question of taxing the income of the Maharaj came up for consideration, the Maharaj pleaded that the income of the temple cannot be treated as his income.
The balance sheets prepared in that connection showed the income of the temple separately from that of the Maharaj.
The correspondence that passed between the Maharaj and the authorities in that connection establishes beyond doubt that the Maharaj did not treat the income of the temple as his income.
The contention that the admission in question was made under wrong advice receives No. support from the evidence on record.
Similarly with regard to the payment of the municipal tax, the properties of the Maharaj had been treated separately from that of the temple.
In 1907 one Shah Chaganlal made a gift of some property to the temple.
That property was subject to a mortgage.
The donor directed that the Maharaj of the temple should divide the annual income of the mortgaged property into nine shares, out of which one share should be given for the samagri of Shree Gokulnathji Maharaj on posh vad 3rd of every year and eight shares of the income should be given for the samagri of the said Gokulnathji every year on Vaishakh Sud 8th.
In that document the Maharai was shown as the agent of the temple.
property was subsequently sold and the sale proceeds were credited to.
the temple accounts.
The: accounts show numerous other instances of receipts and expenses relating to the temple as distinguished from that of the Maharaj.
The High Court has enumerated those receipts and expenses with elaborate fullness.
It would be superfluous to.
refer to them.
The above mentioned instances go to falsify the contension of the appellant that the idol of Shree Gokulnathji was the private property of the.
Maharaj.
On the other hand they establish that the temple in question was treated by all concerned as a public temple.
290 In proof of her case that the suit temple and the properties are individual properties of the Maharaj, the appellant relied on the wills executed by Vrajratanlalji in 1882 and Maharani Vahuji in 1898.
Under the former the testator provided for the management of the properties mentioned therein after Iris death.
Therein he asserted his right to make vahivat according to his pleasure of movable and immovable properties shown in the will during his.
life time.
One of the stipulations in the will was that if he dies leaving no son, natural or adopted, those properties should go to his wife, as owner subject to the condition that the expenses of worship of "his Shree Thakorji" according to usage should come out of its income.
There are similar assertion in the will executed by Maharani Vahuji .in 1898.
These statements are at best self serving statements.
They have little evidentiary value.
They are likely to. have been made by the executants of those wills under a misconception as to their rights.
If the account books for the years 1877 to 1892 had been produced we would have been able to find out how Vrajratanlalji himself dealt with the properties of the temple.
There is clear, consistent and reliable evidence to show that Vallabha Sampardaees have been worshiping in the suit temple as of right.
There is also evidence to show that the temple has all along been primarily maintained from the contributions made by the devotees belonging to the Vallabha School.
The suit temple appears to be an important temple attracting a large number of devotees.
Utsavas and other festivals are performed in that temple in a reasonably grand scale.
The devotees as well as the Maharaj were treating that temple as a public temple.
From the facts proved we have no hesitation in agreeing with the High Court that the temple in question is a public.
temple.
This takes us to the question whether all or any of the properties detailed in the plaint schedule are proved to.
be that of the temple.
We have earlier come to the conclusion that the temple has been getting substantial contributions from its devotees in diverse ways.
It was also.
the recipient of several gifts.
It had adequate resources to make the acquisitions with which we are concerned in this case.
The temple is exclusively managed by the Goswamiji Maharaj.
It maintains regular accounts.
Maharaj also maintains his separate accounts.
Therefore it was easy for the appellant to.
prove the source from which the acquisitions in question were made and how their income was treated.
The appellant has led no evidence to show that they were her own properties.
She has failed to produce some of the accounts relating to the relevant periods.
In this background let us proceed to examine the title to the suit properties.
291 Lot No. 1 is.
the site in which the suit temple is situate.
It was conceded on behalf of the appellant that if we come to the conclusion that the suit temple is a public temple that item of property will have to. be considered as the property of the temple.
Lot No. 2 is.
the garden land in Survey No. 2031.
It is used for raising flowers for worship in the temple.
That land appears to have been granted to Mathuranathji but the appellant admitted in her deposition that that item of property was at all time managed by the Haveli and whoever is the owner of the Haveli is the owner of the garden.
This admission is corroborated by considerable other evidence.
Vaishnav merchants of Nadiad contributed for the expenses of installation of an electric pump in that garden and for its subsequent repairs.
All expenses incurred for that garden have always been debited and all income received therefrom credited to the temple accounts.
That garden is included in the Patriks of the temple property, prepared long before the present dispute arose.
When a part of that property was compulsorily acquired on three different occasions, the compensation received was credited to.
the temple account.
These circumstances.
conclusively establish that lot No. 2 is temple property.
Lot No. 3 is the building known as Goshala.
Its Survay survey No. is 994.
It is used for the purpose of tethering the cows reared for supplying milk and butter for the worship of Balkrishnalalji, one of the deities installed in the temple.
This property is included in Exh. 500 and 501.
It is shown in the property register as the property belonging to the Devasthan Charity.
The balance sheet prepared in 1896 treats the rent of the shops and houses in that site as the income from temple properties see Exh.
We think the High Court was right in concluding on the basis of this evidence that that item belongs to the temple.
Lot No. 4 is a shop bearing city survey No. 720.
This property was gifted by Kuber Jetha Vashram as per his will Exh. 673 for the samagri of the temple.
The bequest is made in favour of Shree Gokulnathji Maharai.
Hence this is clearly an item of property belonging to the suit temple.
Lot No. 5 is survey No. 121.
It is gifted under Exh.
610 dated June 29, 1868.
The gift is purported to have been made in favour of the Maharaj but the income from this property has always been credited to the temple accounts, the earliest entry being that of the year 1870.
In the property register, this property is shown as temple property and the rent note Exh.
535 is taken in the name of the Vahivatdar of Shree Gokulnathji.
Hence this item of the property should also be held to be that of the temple.
292 Lot No. 6 consists of 14 small items.
of property.
They are all agricultural fields.
They have been shown in the property register as the properties of the temple.
Out of 14 items in this lot, items No.s. 6, 9, 11, 12 and 14 originally belonged to the Maharaj but they have been all along dealt with by the Maharaj as temple property.
Item No. 1 in lot No. 6 belongs to the temple.
The mortgage Exh. 608 relates to this item and the same was executed in favour of the, temple on May 17, 1897.
A rent note in respect of this property was taken on April 22, 1915 in the name of the Vahivatdar of the temple.
Items 2, 3 and 4 of that lot are shown in the record of rights in the name of the Maharaj but the income from those properties and the expenses incurred for the same have always been entered in the temple accounts.
Item 5 of this lot had been gifted to the temple under Exh.
Item 8 of this lot had bee.n purchased in the name of the Maharani Vahuji on June; 2, 1897 for Rs. 1150.
The income of this property has been shown in the temple accounts.
far as item 10 is.
concerned though the record of rights stands in the name of the.
Maharaj personally, its sale p.rice (Rs. 800 0 6) has been credited to the temple accounts.
From all this it is clear that the temple is the owner of lot No. 6.
Now coming to.
lot No. 7, the entries in the account books clearly show that this is temple property.
The consideration for the purchase of a portion of it was paid from the temple funds.
A portion of that property had been gifted to the temple under Exh.
Lot No. 8 was purchased in 1877 from the temple funds and lot No. 13 was gifted to the temple.
Lo.t No. 9 was received by the temple under will Exh. 512 and lot No. 10 was always treated as temple property in the account books.
So also lot Nos. 11 and 12.
Similarly lots Nos. 13 and 14 were always being treated as temple properties.
We are in agreement with the learned judges of the High Court that the properties detailed in the plaint schedule are all temple properties.
For the reasons mentioned above this appeal must fail.
But before we conclude we should like to clarify one aspect which undoubtedly is implicit in the judgment of the High Court.
The Goswami Maharais o.r Maharanis are not mere managers.
In the temples belonging to the Vallabha School they have an important place.
The Maharaj is the Maha Prabhu.
The Vallabh devotees worship their deity through him.
It is true that the income from temple properties.
has to be primarily used for the expenses of the sevas and utsavas in the temple, the upkeep renovation and improvements of the temple premises but subject to these demands, the Maharaj has a right to utilise the temple income in 293 maintaining himself and his family in a reasonably comfortable manner.
The learned Counsel for the plaintiffs conceded this position.
This suit has been brought by the plaintiffs with the sole purpose of preserving the temples assets and maintaining its dignity.
They do not want to undermine the position or prestige of their Maha Prabhu.
In the circumstances of the case we see no useful purpose in directing the: appellant to pay the costs of the plaintiffs in this appeal.
She can only pay the same from temple funds.
The alienees have not appealed against the judgment of the High Court.
When we mentioned this aspect to Mr. S.T. Desai, learned Counsel for the plaintiffs he indicated that the parties may be left to bear their own costs in this appeal.
For the reasons mentioned above this appeal is dismissed but we make no order as to costs. | In deciding whether a temple is private or public, Courts have to address themselves to various questions such as: (1) Is the temple built in such imposing manner that it may prima facie appear to be a public temple ? (2) Are the members of the public entitled to worship in that temple as of right ? (3) Are the temple expenses met from the. contributions made by the public ? (4) Whether the sevas and utsavas conducted in the temple are those usually conducted in public temples ? (5) Have the management as well as the devotees been treating the temple as a public temple.
Though the appearance of a temple is a relevant circumstance, it is by no means 'a decisive one.
The architecture of temples differs from place to place.
The circumstance that the public or a section thereof have been regularly worshiping in the. temple as a matter of course and they can take part in the festivals 'and ceremonies conducted in that temple apparently as a matter of right is a strong piece of evidence to establish the public character of the temple.
If votive offerings are being made by the public in the usual course and if the expenses of the temple are met by public contribution, it is safe to presume that the temple question is a public temple.
In brief the origin of the temple.
, the manner in which its affairs are managed, the nature and extent of gifts received by it, rights exercised by the devotees in regard to worship therein, the consciousness of the manager and the consciousness of the devotees themselves as to the public character of the temple are factors that go to establish whether a temple is public temple or a private temple.
[286 H H] Tilkayat Shri Govindlalji Mahraj vs The State of Rajasthan and Ors.
,[1964] 1 S.C.R. 561; Lakshmana vs Subramania, (1923) A.I.R. 1924 P.C. 44; Mundancheri Koman vs Achutan Nair (1934) 61 I.A. 405; Deoki Nandan vs Murlidar, ; ; Narayan Bhagwant Rao Gosavi Balajiwle vs Gopal Vinayak Gosavi and Ors.
[1960] I S.C.R. 773; referred to. |
iminal Appeal No. 84 Of 1968.
Appeal by special leave from the judgment and order dated Febru`ary 9, 12, 1968 of the Bombay High Court in Criminal Appeal No. 541 of 1966.
A.S.R. Chari, T.H. Sardar and M. 1.
Khowaja, for the appellant.
B.D. Sharma, for the respondent.
The Judgment of the Court was delivered by Mitter, J.
The appellant along with two other persons were prosecuted on a charge under section 379/34 of the Indian Penal Code committing theft .of a valuable parcel of diamonds from the person of one Wadilal C. Mehta in a railway train between Masjid Bander and Byculla railway stations on November 9, 1965 in furtherance of their common intention.
One of these two other persons (hereinafter described as accused No. 2) was acquitted by the Chief Presidency Magistrate but the appellant and accused No. 3 were each sentenced to undergo rigorous 'imprisonment for l 2 months.
In appeal to the High Court the conviction of the appellant.
was altered to one under section 411 and the sentence was reduced to one of nine months ' rigorous imprisonment.
The appellant has come up to this Court by special leave his main contention being that a statement ascribed to him as having been made to the police was artificial and false and in any event there was no discovery of any fact made as a result of that statement to render it admissible in evidence against him under section 27 of the .
The case for the prosecution was as follows.
Mehta who had about 215 pieces of diamonds in paper packets wrapped in a silk handkerchief in the inside breast pocket of his garment got into a local train at Masjid Bander along with a companion at about 8 p.m. on 9th November 1965.
As the compartment which they wanted to board was already full of passengers, he and his 334 companion had to stand in the passage outside the compartment where there were many other persons already standing including .accused 2 and 3.
Taking exception to the posture of accused No. 2 who was in close contact Mehta asked him to stand erect and at the same time happened to notice a piece of his silk handkerchief lying on the floor of the compartment.
Feeling his garment the realised that his pocket had been picked and the packet of diamonds had disappeared.
Mehta and his companion caught hold of accused 2 and 3 and searched their persons but to no purpose.
At Byculla railway station they were dragged out of the train on to the platform by Mehta and his companion but the former managed to get free and slip, back into the train.
On shouts being raised the train was brought to a halt but the two accused could not be found.
Mehta went on to Victoria Terminus Railway station and lodged a complaint there about the happening.
He was shown a number of photographs kept at the police station and he pointed out therefrom three of the persons resembling the suspects concerned in the theft of his diamonds.
The police immediately got busy and on the basis of some information received started looking for the appellant but were not able to trace him that night.
The next morning (10 11 1965 the complainant went to the V.T. Railway station once more and identified the photographs of accused No. 2.
The appellant was arrested at 12.30 p.m. on November 10, 1965 and accused No. 2 was apprehended very shortly thereafter.
Both the them were brought to the C.I.D. office for interrogation.
Apparently being familiar with the modus operandi of pick pockets the police went round the offices of several newspapers in Bombay and at the office of Bombay Samachar Press S.I. Guad was told by Pawri, the advertisement manager of the Bombay Samachar, that two persons had come to their office on that day at about 11 a.m. for 'the purpose of putting in an advertisement about the recovery of a packet of diamonds.
S.I. Guad learnt from Pawri the name and address of one D.S. Parekh as one of the two persons who had earlier interviewed Pawri for the insertion of the advertisement.
Attempts to contact Parekh by S.I. Gaud were however unsuccessful.
On the morning of 11th November 1965 the appellant made a statement before Inspector Mokasi and S.I. Graud and this was recorded in the presence of panchas.
The portion of the statement with which we are concerned reads: "It will point out one Gaddi alias Ramsingh of Delhi at Bombay Central Railway station at/II Class Waiting Hall to whom I have given a packet containing diamonds of different sizes more than 200 in number.
" The appellant thereafter led the police and the panchas to the Said waiting hall and there from among a crowd of people the 335 appellant pointed out accused No. 3 to the police.
D.S. Parekh was also there.
The appellant is alleged to have repeated there the same statement which he had made earlier at the police station.
Accused No. 3 produced a handkerchief containing a packet in which 211 diamonds were found.
Both accused No. 3 and D.S. Parekh were put under arrest.
The diamonds were identified by Mehta as a portion of those which he had lost on the night of 9th November.
An identification parade was held by a Justice of the Peace at 4.15 p.m. at which Mehta and his companion identified the appellant as also accused 2 and 3 as being persons who were standing in the passage outside the first class compartment of the local train when Mehta 's pocket was picked.
The High Court came to the conclusion that the complicity of the appellant with the crime alleged rested only on two pieces of evidence brought forward at the trial.
The first was his identification by Mehta and his companion at the identification parade to the effect that he was present in the train on the material date and at the material hour.
By itself this means nothing because there were a number of other persons who were standing in the passage at the same time and there is no suggestion and indeed there could be none that any of these persons were connected with the crime.
To fasten the guilt on the appellant the prosecution had to rely on the evidence furnished by the statement alleged to have been made by the appellant to the police and the panchas in consequence whereof he was said to have led the police party to the Bombay Central railway station waiting hail and to the discovery of the diamonds from accused No. 3.
As the statement of the accused recorded above was in the nature of a confession it would come under the embargo of section 26 of the Evidence Act unless it can be brought within the ambit of section 27 of the Evidence Act.
which reads: "Provided that, when any fact is deposed to as discovered in consequence of information received from a person accused of any offence, in the custody of a police officer, so much of such information, whether it amounts to a confession or not, as relates distinctly to the fact thereby discovered, may be proved." In order that the section may apply the prosecution must establish that the information given by the appellant led to the discovery of some fact deposed to by him.
It is evident that the discovery must be of some fact which the police had not previously learnt from other sources and that the knowledge of the fact was first d.erived from information given by the accused.
If the police had no information before of the complicity of accused No. 3 with the crime and had no idea as to whether the diamonds would 336 be found ' with him and the appellant had made a statement to the police that he knew where the diamonds were and would lead t,hem to the person who had them, it can be said that the discovery of the diamonds with the third accused was a fact deposed to be the appellant and .admissible in evidence under section 27.
However, if it be shown that the police already knew that accused No. 3 had got the diamonds but did not know where the said accused was to be found, it cannot be said that the information given by the appellant that accused No. 3 had the diamonds and could be pointed out in a large crowed at the waiting hall led to the discovery of a fact proving his complicity with any crime within the meaning of section 27.
The ,fact deposed to him would at best lead to the discovery of the whereabouts of accused No. 3.
Under section 25 of the Evidence Act no confession made by an accused to a police officer can be admitted in evidence against him.
An exception to this is however provided by section 26 which makes a confessional statement made before a Magistrate admissible in evidence against an accused notwithstanding the fact that he was in the custody of the police when he made the incriminating statement.
Section 27 is a proviso to section 26 and makes admissible so much of the statement of the accused which leads to the discovery of a fact deposed to by him and connected with the: crime, irrespective of the question whether it is confessional or otherwise.
The essential ingredient of the section is that the information given by the accused must lead to the discovery of the, fact which is the direct outcome of such/nformation.
Secondly, only such portion of the/nformation given as is distinctly connected with the said recovery is admissible against the accused.
Thirdly, the discovery of the fact must relate to the commission of some offence.
The embargo, on statements of the accused before the police will not apply if all the above conditions are fulfilled.
If an accused charged with a theft of articles or receiving stolen articles, within the meaning of section 411 I.P.C. states to the police, 'I will show you the articles at the place where I have kept them ' and the articles are actually found there, there can be no doubt that the information given by him led to the discovery of a fact i.e. keeping of the articles by the accused at the place mentioned.
The discovery of the fact deposed to in such a ease is not the discovery of the articles but the discovery of the fact that the articles were kept by the accused at a particular place.
In principle there is no difference between the above statement and that made by the appellant in this ease which in effect is that 'I will show you the person to whom I have given the diamonds exeeding 200 in number".
The only difference between the two statements is that a "named person" is substituted for the place ' where the article is kept.
In neither case are the articles or the diamonds the fact discovered.
337 The section was considered by the Judicial Committee of the Privy Council in Pulukuri Kotayya vs King Emperor(1).
A question there arose as to what ' part of a statement of the accused leading to the recovery of a knife in a murder case was admissible in evidence.
The statement read: "About 14 days ago.
, I Kotayya and people of my party lay in wait for Sivayya and others at about sunset time at the corner of Pulipad tank.
We all beat Boddupati China Sivayya and Subbayya to.
death.
The re maining persons Pullayya, Kotayya and Narayana ran away.
Dondapati Ramayya who was in our party received blows on his hands.
He had a spear in his hands.
He gave it to me then.
I hid it and my stick in the rick of Venkatanarasu in the village.
I will show if you come.
We did all this at the instigation of Pulukuri Kotayya.
" The Board held that the whole of the statement except the passage "I hid it (a spear) and my stick in the rick of Venkatanasrasu in the village.
I will show if you come" was inadmissible.
Holding that the extent of the information admissible must depend on the exact nature of the fact discovered to.
which such information was required to relate the Judicial Committee pointed out that "the fact discovered embraces the place from which the object is produced and the knowledge of the accused as to this, and the information given must relate distinctly to the fact.
" The Board was careful to observe that "information as to past user, or the past history of the object produced was not related to its discovery in the setting in which it was discovered.
" This Court had to consider the scope of section 27 of the Evidence Act in K. Chinnaswamy Reddy vs State of Andhra Pradesh(2).
There the appellant was convicted under section 411 I.P.C. by an Assistant Sessions Judge.
He was tried along with another person who was convicted under sections 457 and 380 I.P.C. A house had been burgled and valuable articles stolen.
During the course of investigation the police recovered 17 ornaments on the information given by the appellant.
The other accused had also given information on the basis of which another stolen ornament was recovered.
The Assistant Sessions Judge came to the conclusion that the other accused had actually committed house breaking and had removed the ornaments from the house burgled and had handed over 17 of them to the appellant.
He also came to the conclusion that the l 7 ornaments recovered at the instance of the appellant were in his possession and he therefore found him guilty under section 411 I.P.C. On appeal the Sessions Judge held that the appellant had not been proved to be in possession of the 17 orna (1) 76 I.A. 65.
(2) ; 338 ments which were recovered at his instance from a garden.
According to the Sessions Judge the full statement of the appellant that "he would show the place where he had hidden them (the ornaments)" was not admissible against him.
The Sessions judge held that the part of the statement of the appellant which related to his having hidden the ornaments was inadmissible.
There was a criminal revision to the High Court and re trial was ordered and it was against that order that the appeal to this Court was directed.
Overruling the interpretation of the Sessions Judge, this Court held that the whole of the statement related distinctly to the discovery of the ornaments and was admissible under section 27 of the Evidence Act.
It was said: "These words (namely, where he had hidden them) having nothing to.
do with the past history of the crime and are distinctly related to the actual discovery that took place by virtue of that statement.
" The contention that in a case where the offence consisted of possession even the words "where he had hidden them" would be inadmissible as it amounted to an admission by the accused that he was in possession of them was rejected on the ground that if the statement related distinctly to the fact thereby discovered it would be admissible in evidence irrespective of the question as to.
whether it amounted to a confession or not.
There can be no doubt that the portion of the alleged statement of the appellant extracted by us would be admissible in evidence.
The question still remains as to whether the said statement was really a discovery of a fact disposed to or weather there was no discovery within the meaning of section 27 of the Evidence Act because the police was already in possession of the fact that the accused No. 3 was a person who had the diamonds.
In order to find out the extent of the knowledge of the police as to the whereabouts of the diamonds it is necessary to look at the testimony of section 1.
Gaud and Pawri, the advertisement manager, of the Bombay Samachar.
Gaud stated at the trial that he had taken up the investigation at about 11 p.m. on the night of 9th November 1965 and after going to V.T. Railway station he had gone to Kamathipura 6th lane to trace the appellant on the basis of some information received at the railway station.
He learnt the next day about the identification of the photograph of the second accused by the complainant and arrested the appellant at 12.30 p.m. and the second accused at 1 p.m. on the same day.
The same afternoon he visited different newspaper establishments including that of Bombay Samachar Press and received information from the advertisement manager, Pawri in consequence whereof he went to find D.S. Parekh.
He did not succeed in tracing him and continuing the interrogation of the appellant and the second 339 accused he called panchas on the morning of 11th November to, have the statement of the appellant recorded.
Thereafter he went to the Bombay Central railway station and there found the diamonds with the accused No. 3 pointed out to him by the appellant.
In cross examination he said that he had contacted Pawri.
at 3 p.m. on loth November but he had not asked Pawri to produce the advertisement material nor was the same shown to him.
His testimony was that he had only asked for the name and address of the person who had given him the advertisement material and Pawri had done so from memory.
He denied having ' seen any letter or any advertisement material at Pawri 's office.
He also denied that he had told Pawri not to publish the advertisement.
It is to be noted that Police Inspector Mokashi examined before S.I. Gaud at the trial had stated in his examination inchief that at 2.30 p.m. on 10 11 1965 he had asked Gaud to visit different newspaper establishments including Bombay Samachar to find out whether the appellant had sent anyone there to surrender the diamonds as unclaimed.
Pawri 's evidence was that two persons had come to see him on November 10, 1965 for the purpose of putting in an advertisement relating to the finding of a packet of diamonds.
According to Pawri the two persons had given him a text of an advertisement to b.e published along with a covering letter signed by one and counter signed by the other and that the third accused was one of the persons who had met him at his office and that the covering letter as well as the advertisement material had been ' signed by both the persons who had met him.
The charges for advertisement amounting to Rs. 40 had been paid by one of them and a receipt taken.
One of the two persons had also produced a card of Dawood Suleman attached to the covering letter in response to a request for identification.
The letter dated 10 11 1965 shows that it was addressed to the manager, Bombay Samachar signed by Ramsingh Santram and Dawood Suleman Ghanchi and the text of it: "We have found diamond packets on (platform) No. 3 of Masjid Bunder station at eight o 'clock at night on the date 9 11 1965.
A public notice in respect thereof is sent herewith.
Please publish the same on the first page of the issue dated 11 11 1965, Thursday.
" The text of the statement meant for insertion in the newspaper ran: "A diamond packet has been found at Bombay Central Railway station on 9 11 65.
Please contact Bombay Samachar by proving identity and paying the charges for the public notice.
" 340 Below the above were the words: 'Care of ' Anand Savarorup Samma, Market, West Malad.
Ramsingh Santram Dawood Suleman Ghanchi Ghoghari Mohalla 136, Niaz Building Ground Floor, Bombay 3.
Pawri stated that Bombay Central railway station had been written by him after scoring out Masjid Bunder.
In cross examination he said that the two persons had brought the diamonds and wanted to leave the same at the newspaper office but this was declined.
They had come to the office at about 11 a.m. and seen a director before meeting the witness.
The advertisement was to.
be published on the morning of 11th but this was not done because the police had given instructions to the contrary.
The police had gone to their office in the afternoon when he had to1d them what had taken place in the morning.
In view of the evidence of Pawri and Mokashi it is not possible to accept the testimony of Gaud.
It is incredible that Guad who had gone to the newspaper office specially for the purpose of finding out whether anybody had approached the newspaper people to surrender the diamonds would not ask Pawri in detail about the persons who had met him or what they had told him or what they had done about the publication of the finding of the diamonds.
Pawri 's definite statement was that he had told the police all that had happened in the morning.
In our view, Pawri must have shown Gaud the advertisement material, the covering letter with the card and the names of the two persons and the address of one of them.
He could not possibly have failed to tell Gaud that the two persons who had come to him had even offered to hand over the diamonds.
There is no positive evidence as to whether Gaud had asked the Bombay Samachar people not to insert the advertisement on the morning of the 11th.
nothing turns on that.
It was 11.0 'clock in the morning when Parekh and accused No. 3 had gone to the newspaper office and it was about 3 in the afternoon that Gaud met Pawri for the purpose of making enquiries.
Gaud 's statement that Pawri had given him Parekh 's address from memory cannot be accepted.
Besides it is absurd to suggest that Gaud would not have asked Pawri to show him the documents made over by Parekh and accused No. 3 or that there would have been any reluctance on the part of Pawri to tell Gaud about it when he knew that the police were making investigations about a packet of diamonds picked from the pocket of someone who had lodged a complaint with the police.
341 In our view Gaud must have learnt that Parekh and or accused No. 3 had the custody of the diamonds.
Therefore the statement of the appellant that accused No. 3 had the custody of the diamonds would not be something unknown to the police so as to constitute "a fact deposed to as discovered in consequence of the information received" from the appellant.
The discovery, if any, merely related to the whereabouts of accused No. 3.
There was no discovery of any fact deposed to by the appellant within the meaning of section 27.
If the police had not gone to the office of the Bombay Samachar and had not learnt of the complicity of the third accused with the crime, the statement of the appellant would amount to information received from him relating to the discovery of the diamonds in the custody of accused No. 3.
the result although the statement.
might otherwise have been admissible in evidence, that there was no discovery of a fact connecting the appellant with the receipt of the diamonds which were stolen within the meaning of section 27 of the Evidence Act because the police already knew that the third and or the fourth accused had the diamonds.
The appeal must be allowed and the appellant directed to be set at liberty.
Y.P. Appeal allowed. | The appellant was charged under section 379/34 I.P.C. for committing theft of a parcel containing diamonds along with the, two other persons.
ln the course of investigation the police went to a newspaper office where they learnt that one of the.
co accused had come to put in advertisement respecting the recovery of the diamonds, stating that it was in his possession, and left 'an address with the newspaper.
The police could not trace that co accused, but later, as a result of information furnished by the appellant to the police and the panchas the police were taken to a place where the diamonds were discovered from that other co accused.
On the question whether the statement of the appellant was admissible in evidence against him under section 27 of the , HELD: The statement was not admissible.
Under section 25 of the Evidence Act no confession made by an accused to a police officer can be admitted in evidence against him.
An exception to this is however provided by section 26 which makes a confessional statement made before a Magistrate admissible in evidence against an accused notwithstanding the fact that he was in custody of the police when he made the incriminating statement.
Section 27 is a proviso to s, 26 and makes admissible so much of the statement of the accused which leads to the discovery of a fact deposed to by him and connected with the crime, irrespective of the question whether it is confessional or otherwise.
The essential ingredient of the section is that the information given by the accused must lead to the discovery of the fact 'which is the direct outcome of such information.
Secondly, only such portion of the information given as is distinctly connected with the said recovery is admissible against the accused.
Thirdly, the discovery of the fact must relate to the commission of some offence.
The embargo.
on statements of the accused before the police will not apply if all the above conditions are fulfilled.
If an accused ' charged with a theft of articles or receiving stolen articles, within the meaning of section 411 I.P.C. states to the police. 'I will show you the articles at the place where 1 have kept them ' and the.
articles are actually found there, there can be no doubt that the information given by him led to the discovery of a fact i.e. keeping of the articles by the accused at the place mentioned.
The discovery of the fact deposed to in such a case is not the discovery of the articles but the discovery of the fact that the articles were kept by the accused at a particular place.
In principle there is no difference between the above statement and that made by the appellant in this case which in effect is that 'I will show you the.
person to whom 1 have given the diamonds exceeding 200 in number '.
The only difference between the two statements is that a 'named person ' is substituted for 'the place ' where the article is kept.
In neither case are the articles or the diamonds the fact discovered.
[338 C H] In the present case, the police had learnt earlier that the other accused had the custody of the diamonds.
Therefore, the statement of the appel 333 lant that the other accused had the custody of the diamonds would not be something unknown to the police so as to constitute 'a fact deposed to as discovered in consequence of information received ' from the appellant.
The discovery, if any, merely related to the whereabouts of the other accused.
There was no discovery of any fact deposed to by the appellant within the meaning of section 27.
If the police had not gone to the office of the newspaper and had not learnt of the complicity of the other accused with the crime, the statement of the appellant would amount to information received from him relating to the discovery of the diamonds in the custody of that other accused.
[343 B] Pulukuri Katayya vs King Emperor, 76 I.A, 65 and K. Chinnaswamy Reddy vs State of Andhra Pradesh, ; , referred to. |
iminal Appeal No.71 of 1968.
Appeal from the judgment and order dated January 15, 1968 of the Kerala High Court in O.P. No. 4394 of 1967 (Contempt).
A.S.R. Chari and B.R.G.K. Achar, for the appellants.
A. C. Jose, S.K. Mehta, K.L. Mehta and Sona Bhatiani, for the respondent.
412 M.R.K. Pillai, for the Advocate General for the State of Kerala.
The Judgment of S.M. SIKRI and P. JAGANMOHAN REDDY, JJ.was delivered by SIKRI, J. MITTER, J. gave 'a dissenting Opinion.
Sikri, J.
In this appeal by certificate of fitness granted by the Kerala High Court two questions arise: (1) Whether on the day when the appellant, A.K. Gopalan, made the statement complained of or when it was published in "Deshabhimani" any proceedings in a court could be said to be imminent; and (2) whether this statement amounts to contempt of court.
The facts in brief are that on September 11, 1967, the ruling parties in Kerala State staged what is called 'Kerala Bandh '.
A serious incident took place on that day during the course of which one C.P. Karunakaran lost his life at a place called Kuttoor.
A First information report was lodged on that very day.
On September 12, 1967 the first information report was transferred to another police station.
On September 20, 1967, the appellant, A.K. Gopalan, made the following statement: "Tearful story It was the story of a young man who had to sacrifice his life to the naked goondaism of Congressmen, that was heard from the trembling lips of so many people in Kuttoor.
Had this tragedy occurred in the course of a sudden fight one could have understood it.
But what I was able to make out was that it was in prosecution of a deliberate conspiracy to commit murder.
It appears that a prominent Congress leader of the Cannanore District had given instructions for this the previous day.
It was as a result of being pounced upon and stabbed while he was in a peaceful and disciplined manner calling for the observance of the Bandh by the closure of shops that Comrade C.P. Karunakaran suffered martyrdom.
Comrade Kunhikannan who was with him also suffered serious injuries.
The police have seized an unlicensed loaded gun and other weapons from the shop of a congressman at the scene of occurrence.
Murder too was planned.
Is it not to be inferred from all this that there was a prearranged plan to commit murder ? The enlightened people of the locality were determined to press forward to the chosen destination of that class for whom Comrade.
Karunakaran has sacrificed his life.
" 413 On September 23, 1967 K.P. Noordeen was arrested along with his two brothers.
On September 24, 1967 the Magistrate remanded the accused to police custody.
In its issue dated September 25, 1967, the Malayalam Daily newspaper called "Deshabhimani" of which P. Govinda Pillai, the second appellant,was the editor and M. Govindankutty was the printer, printed the statement which we have reproduced above.
On September 29, 1967, all the three accused were produced before the Magistrate.
On October 5, 1967, bail was refused by the District Magistrate but was granted by the Sessions Judge.
On November 1, 1967, Noordeen filed the petition under sections 3 and 4 of the (32 of 1952) impleading the three respondents, A.K. Gopalan, P. Govinda Pillai and M. Govindankutty.
The High Court held all the three respondents guilty of contempt of court and convicted them accordingly.
The High Court imposed a sentence of fine of Rs. 200/ on the first respondent and of administering an admonition to respondents 2 and 3.
The High Court discharged respondents two and three after due admonition.
The appellants A.K. Gopalan and P. Govinda Pillai havingsecured certificate of fitness under article 134(1)(c) the appeal is now before us.
This Court in Surendra Mohanty vs State of Orissa(1) exa mined the question whether the publication of a statement at a time when the only step taken was the recording of first information report under section 154, Cr.
P.C., could be contempt of court.
As the judgment in this case has not been reported we think that we should reproduce the main portion of the judgment.
Kapur, I., speaking on behalf of the Court, observed: "Before the publication of the comments complained of, only the first information report was filed in which though some persons were mentioned as being suspected of being responsible for causing the breach in the bund, there was no definite allegation against any one of them.
In the chargesheet subsequently filed by the police these suspects do not appear to be amongst the persons accused.
It was, therefore, argued that by the publication there could not be any tendency or likelihood to interfere with the due course of justice.
The learned Additional Solicitor General for the State submitted on the other hand that if there was a reasonable probability of a prosecution being launched against any person and such prosecution be merely imminent, the publication would be a contempt of court.
The Contempt of Courts Act confers on the High Courts the power to punish for the contempt of inferior Criminal Appeal 107 of 1966 decided on 23 1 1961 414 courts.
This power is both wide and has been termed arbitrary.
The courts must exercise this power with circumspection, carefully and with restraint and only in cases where it is necessary for maintaining the course of justice pure and unaffected.
It must be shown that it was probable that the publication would substantially interfere with the due course of justice; commitment for contempt is not a matter of course but within the discretion of the court which must be exercised with caution.
To constitute contempt it is not necessary to show that :as a matter of fact a judge or a jury will be prejudiced by the offending publication but the essence of the offence is conduct calculated to produce an atmosphere of prejudice in the midst of which the proceedings will have to go on and a tendency to interfere with the due course of justice or to prejudice mankind against persons who are on trial or who may be brought to trial.
It must be used to preserve citizens ' right to have a fair trial of their causes and proceedings in an atmosphere free of all prejudice or prepossession.
It will be contempt if there is a publication of any news or comments which have a tendency to or are calculated to or are likely to prejudice the parties or their causes or to interfere with due course of justice.
As to when proceedings begin or when they are imminent for the purposes of the offence of contempt of court must depend upon the circumstances of each case, and it is unnecessary in this case define the exact boundaries within which they are to be confined.
The filing of a first information report does not, by itself, establish that proceedings in a court of law are imminent.
In order 'to do this various other facts will have to be proved and in each ,case that question would depend on the facts proved.
" Then Kapur J. examined the facts of that case and observed: "In the present case all that happened was that there was a first information report made to the police in which certain suspects were named; they were not arrested; investigation was started and on the date when the offending article was published no judicial proceedings had been taken or were contemplated against the persons named in the first information report.
Indeed after investigation the suspects named in that report were not sent up for trial.
At the date this offending publication was made there was no proceeding pending in a court of law nor was any such proceeding imminent.
" 415 On the first point it seems to us clear that on the facts of this case it cannot be said that any proceedings were imminent on September 20, 1967 in a court.
It is true that the first information report was lodged on September 11, 1967, but this Court has definitely held in Surendra Mohanty 's case(1) that lodging of a first information report does not by itself establish that proceedings in a court were imminent.
This court further said that it would depend on the facts proved in a particular case whether the proceedings are imminent or not.
There are no other facts which tend to establish the imminence of proceedings in a court.
Even the accused were not arrested till September 23, 1967, and even if it be relevant there is no proof that arrest was imminent on September 20, 1967.
Ordinarily until an accused is arrested it cannot be said that any proceedings in a court are imminent against that person because he may never be arrested or he may be arrested after a lapse of months or years.
It would be an undue restriction on the liberty of free speech to lay down that even before any arrest has been made there should be no comments on the facts of a particular case.
In same cases no doubt, especially in cases of public scandal regarding companies, it is the duty of a free press to comment on such topics so as to bring them to the attention of the public.
As observed by Salmon, L.J., in R.v.
Sayundranaragan and Walker(").
"It is in the public interest that this should be done.
Indeed, it is sometimes largely because of facts discovered and brought to light by the press that criminals are brought to justice.
The private individual is adequately protected by the law of libel should defamatory statements published about him be untrue, or if any defamatory comment made about him is unfair".
Salmon, L.J. further pointed out that "no one should imagine that he is safe from committal for contempt of court if, knowing or having good reason to believe that criminal proceedings are imminent, he chooses to publish matters calculated to prejudice a fair trial." The learned counsel for the State urges that the crucial date is not September 20, 1967, when the statement was made, but September 25, 1967, when the newspaper published the statement.
The latter date may be relevant in the case of the other appellant but as far as Gopalan is concerned it is September 20, 1967, which is the relevant date.
There is no evidence that he was instrumental in getting this statement published on September 25, 1967.
We are accordingly of the opinion that the appellant Gopalan was wrongly convicted by the High Court.
There is no evidence that any proceedings in a court were imminent.
(1) Cr. A. 107 of 1956 decided on 23 1 1951.
(2) [1968]3 All E.R. 439.
416 Let us now examine the case of P. Govinda Pillai, the second appellant.
The statement was published, as we have already said, in the daily newspaper Called "Deshabhimani" on September 25, 1967.
Were any proceedings in a court imminent on that date ? The accused had already been arrested on September 23, 1969, in a serious cognizable case.
Arrest means that the police was prima facie on the right track.
The accused must have been produced before a magistrate within 24 hours of the arrest in accordance with article 21 of the Constitution, and, the magistrate must have authorised further detention of the accused.
In these circumstances it is difficult to say 'that any proceedings in a court were not imminent on that date.
The fact that the police may have after investigation come to the conclusion that the accused was innocent does not make the proceedings any the less imminent.
Proceedings in a court may be imminent on one day and yet not be brought the next day.
For instance, the accused may in the meantime die or he may be proved innocent.
To advance the day of imminence to the day when the police makes a report under section 173, Cr.
P.C would do untold harm to those who may actually be ultimately prosecuted.
Not only will it tend to harm the accused but would also tend to subvert the scheme of our criminal law and procedure.
It would subvert it because it would tend to encourage public investigation of a crime and a public discussion of the character and antecedents of an accused in detention.
The investigation of a cognizable case is eminently the province of the police, and if a person has information relevant to the commission of a particular crime there is nothing to prevent him from transmitting it to the police.
This it seems to us would be the ordinary rule in the case of an investigation of a murder.
It may be that in an investigation involving prolonged examination of account books of companies and the ramifications of a conspiracy, proceedings may not be said to be imminent as soon as the accused is arrested.
Some of these cases take a long time to investigate and as observed by this Court, it is difficult to lay down any inflexible rule.
But as far as an investigation of a charge of murder is concerned once an accused has been arrested proceedings in court should be treated as imminent.
In view of this conclusion we must hold that as far as the appellant P. Govinda Pillai is concerned proceedings in a court were imminent on September 25, 1967.
It has not been argued that Govinda Pillai did not know of the arrest of the accused or that he had good reasons to believe that no arrest had been effected by September 25, 1967.
It is true that the statement does not mention the name of the accused but it does suggest that the person who committed the deliberate murder was acting as a result of a conspiracy and it was not a 417 case of a sudden fight.
It seems to us that the statement would tend to prejudice mankind against the accused.
In the result we maintain the conviction entered by the High Court against the appellant P. Govinda Pillai.
Accordingly the appeal of A.K. Gopalan is allowed and the appeal of P. Govinda Pillai dismissed.
The fine, if already paid by A.K. Gopalan, shall be refunded.
Mitter, J.
With respect I agree with the order proposed as regards Govinda Pillai but I am unable to concur in allowing the appeal of the first appellant.
The facts are stated sufficiently in the judgment of my learned brother and need not be repeated.
He has held and indeed there can be no doubt that any publication or comment which has a tendency to or is calculated or likely to prejudice the parties or their causes or with the.
due course of justice in pending proceedings would constitute a contempt of court.
It is also universally accepted that even if proceedings have not actually begun but are imminent conduct of the kind referred to above would be punishable.
In my view the consensus of authorities both in England and in India is that contempt of court may be committed by any one making a comment or publication of the exceptionable type if he knows or has reason to believe that proceedings in court though not actually begun are imminent.
There does not appear to be any decision of this Court on the last aspect and it is therefore necessary to make a brief reference to the.
authorities.
It is agreed that there were no proceedings pending in a court when the first appellant made his statement on September 20, 1967 which was actually published in the Malayalam Daily newspaper in its issue dated September 25, 1967.
In my view although no criminal proceedings Were actually pending in any court on 20th September, it is not possible to hold that at that time such proceedings were not imminent or that the first appellant had no reasonable cause to believe that they were not imminent.
The does not purport to define what actually constitutes such contempt.
This was done with a purpose as attempts to interfere with the course of justice are of so many different kinds and may be committed in circumstances so various that the Legislature possibly thought it unwise to define the limits thereof.
Courts in India have referred to the manifold aspects of the law of Contempt of court and accepted the principles laid down in English decisions which go back to a date well over a century.
Early in the present century in Rex vs Parke(1) one Dongal was brought up before the petty Sessions of Saffron Walden charged with forgery and remanded without any evidence (1) 418 being taken.
Articles to his disadvantage appeared in a newspaper of which the defendant was the editor.
A rule was issued by the High Court to show cause why he should not be committed for contempt of court.
A point was taken that the jurisdiction would not be attracted if at the time of the publication of the article complained of there were no proceedings actually pending in any court but the petty sessions court and that the jurisdiction to punish the publishers of articles of the kind before the court was confined to cases in which at the moment of publication there was some cause actually de:ending in the High Court.
In rejecting this contention Wills J. observed: "The reason why the publication of articles like those with which we have to deal is treated as a contempt of court is because their tendency and sometimes their object is to deprive the court of the power of doing that which is the end for which it exists namely to administer justice duly, impartially, and with reference solely to the facts judicially brought before it.
Their tendency is to reduce the Court which has to try the case to impotence, so far as the effectual elimination of prejudice and prepossession is concerned .
If it be once grasped that such is the nature of the offence, what possible difference can it make whether the particular Court which is thus sought to be deprived of its independence, and its power of effecting the great end for which it is created, be at that moment in session or even actually constituted or not.
" Dealing with the argument that the remedy only existed when there was a cause pending in the court the Judge said: ".
in very nearly all the cases which have arisen there has been a cause ' actually begun so that the expression quite natural under the circumstances, accentuates the fact, not that the case has been begun, but that it is not at an end.
That is the cardinal consideration.
It is possible very effectually to poison the fountain of justice* before it begins to flow.
It is not possible to do so when the stream has ceased." In a recent judgment of the Court of Appeal in England observations have been made which run counter to the dictum in the lust sentence.
The last extract from the judgment of Wills, J. was quoted by Lord Hewart C.J. in R.V. Daily Mirror(1) and by Lord Goddard C.J. in Regina vs Odhams Press Ltd.(2).
Dealing with the ques (1) [1927] I K.B. 84.5 at 851.
(2) [1957]1 Q.B. 73 at 81.
tion whether mens rea was necessary to constitute the offence the learned Chief Justice said: "It is obvious that if a person does not know that proceedings have begun or are imminent, he cannot by writing or speech be said to influence the course of justice or to prejudice a litigant or accused person, but that is no answer if he publishes that which in fact is calculated to prejudice a fair trial.
" In R.V. Savundaranayagan and Walker(1) to be referred in detail later the Court of Appeal in England expressed similar views in no unmistakable terms.
We may now turn to the decisions of our High Courts.
In Tuljarama Rao vs Sir James Taylor(") and in the matter of "Tribune", Lahore(3) opinions were expressed that a comment on proceedings which were imminent but not yet launched in court with knowledge of the fact was as much a contempt as a comment of a case actually launched.
According to the Lahore High Court it was sufficient that the proceedings were imminent to the know]edge of the person charged with contempt.
It was pointed out in Surendra Mohanty vs The State of, Orissa(4) that: "As to when proceedings begin or when they are imminent for the purposes of the offence of contempt of Court must depend upon the circumstances of each case, and it is unnecessary in this case to define the exact boundaries within which they are to be confined.
The filing of a First Information Report does not, by itself, establish that proceedings in a court of law are imminent.
In order to do this various other facts will have to be proved and in each case that question would depend on the facts proved.
" The facts in Surendra Mohanty 's case(4) were that there was a breach in a bund in a big reservoir between August 12 and 13, 1953 as 'a result of which some fields were flooded.
On August 13, 1953 a first information was lodged at a police station stating that it had been cut and the cutting was suspected to have been done by one or more of the persons whose names were therein mentioned, The police thereupon started investigation and on the 24th September under the orders of the Sub Divisional Magistrate statements of five witnesses were recorded presumably under section 164 Criminal Procedure Code.
On October 26, 1953 a report called the charge sheet for an offence under section 430 I.P.C. was received (1) at 441.
(2) I.L.R. at 476.
(3) I.L.R. 25 Lahore 111.
(4) C.A. 107 of 1956 decided on 23 1 1961.
420 ,by the Magistrate who took cognizance and summoned the per sons accused therein and the proceedings were continued in the court of the Magistrate.
Between August 14 and October 26, 1953 two Oriya papers published comments in regard to the incident thus: "In the year 1952, a water reservoir had been constructed at Dangarpara in the Titlagarh Sub Division of the District of Bolangir by the Government at a cost of Rs. 33,000.
This has been breached due to heavy rainfall.
It is heard that 15 days before the breach of this bund, Abhut Sankh, Chintamani Subudhi and Bhagaban Das and others of Lakhana on seeing the condition of the reservoir apprehended a breach and brought it to the notice of the S.D.O. and requested him to open an escape for the discharge of the surplus water.
But in spite of 'hearing this, the S.D.O. did not open an escape.
When there was excessive accumulation of water, the Bund was unable to withstand and gave way.
It is heard that the S.D.O. in order to conceal his own fault is accusing Mangra Naihi of Bana Bahal, Nilamani Mahakud of Kumanbahal and Satya Ganda, Banemali, Nariha and others of Dangarpara of the offences of cutting the bund and trying to create evidence by assaulting them through the police and by keeping watch (over the locality).
If actually the aforesaid persons had reported to the S.D.O. regarding the said bund and the S.D.O. neglected in taking proper steps himself, why he should not be responsible for this." This Court held that the order of conviction by the High Court could not be sustained in view of the facts that on the date when the offending article was published no judicial proceeding had been taken or were contemplated against the persons named in the first information report.
According to the report the breach was not caused through any natural cause but was due to cutting by some persons who were suspected.
Indeed, after investigation the suspects named in that report were sent up for trial.
On the date when offending publication was made, there was no proceeding pending in a court of law nor was any such proceeding imminent.
It is difficult to hold on the facts of this case that the first appellant did not know or had no reason to believe that proceedings in court were not imminent when he made the statement on 20th September.
It is common knowledge that whenever a man loses 421 his life through a cause other than natural the police will invariably come to the scene, take custody of the dead body and start investigations.
Indeed under section 174 Cr.
P.C. even when information is received that a person has died under circumstances raising a reasonable suspicion that some other person has committed an offence, it is the duty of the officer in charge of the police station within whose jurisdiction the death occurs to give intimation thereof to the nearest Magistrate empowered to hold inquest and to proceed to the place where the body of such deceased person is, to make an investigation and draw up a report.
Here a person lost his life in broad day light not by accident but by stabbing when two groups of people clashed.
One of the groups was charged by the statement of the first appellant to be guilty of deliberate conspiracy to commit murder and it was further alleged that a prominent member of that party had given instructions for this, the day prior to the violent disturbance.
The first appellant was not an illiterate person who could not be reasonably expected to know that criminal proceedings were bound to be launched in respect of the affair: whether anybody would be successfully prosecuted is a different matter, but that would depend upon the evidence which would be brought before the court.
But no person with any experience of worldly affairs, much less a person of the standing of the first appellant, a member of Parliament and a leader of a political group could be ignorant of the fact that a murder in broad day light when two groups of people clash is sure to be investigated into and made the subject of criminal proceedings.
The statement of the appellant suggests that he had made some personal enquiries in the matter and had come to gather therefrom that certain members of a particular political party had entered into a conspiracy to murder and had actually carried their plan into execution.
He had also charged a leader of a rival party, who was not named, with having given instructions the previous day.
There can be no doubt that the motive and the object was not only to further the cause of a particular political party but also to create an atmosphere of prejudice against members of that party and charge some of them with one of the most serious offences known to law, namely, that of conspiracy to murder followed by actual homicide.
In the case of R.V. Savundranayagan and Walker (1) the Court of Appeal in England although of opinion that a free press had the right and duty to comment on topics of public interest so as to bring them to the attention of the public like the failure of an insurance company in which the moving figure was a man with an unsavory record who appeared to have used large sums of the company 's money for his own purposes and disappeared abroad (1) up.
CI/70 15 422 at a point of time when there was nothing to suggest that criminal proceedings were even in contemplation, yet took a different view of the television programme depicting an interview with the appellant shortly after his return to England, when according to the Court: "It must surely have been obvious to everyone that he was about to be arrested and tried on charges on gross fraud".
Salmon, L.J. added: "It must not be supposed that proceedings to commit for contempt of court can be instituted only in respect of matters published after the proceedings have actually begun.
No one should imagine that he is safe from committal for contempt of court if, knowing or having good reason to believe that criminal proceedings are imminent, he chooses to publish matters calculated to prejudice a fair trial.
" How jealously courts of law regard the preservation of the purity of the course of justica and the prevention and punishment of any attempt at pollution or perversion thereof as a solemn obligation will appear from a recent decision of the English Court of Appeal in Attorney General vs Butterfield & others(1).
The words of Lord Denning, M.R. are worth repeating.
He said: "I have no hesitation in declaring that the victimisation of a witness is a contempt of court, whether done while the proceedings are pending or after they have finished.
Such a contempt can be punished by the court itself before which he has given evidence: and so that those who think of doing such things may know where they stand, I would add that, if the witness has been damnified by it, he may well have redress, in a civil court for damages.
" In my view, we should hold that a contempt of court may be committed by a person when he knows or has good reason to believe that criminal proceedings are imminent.
The test is whether the circumstances in which the alleged contemnor makes the statement are such that a person of ordinary prudence would be of opinion that criminal proceedings would soon be launched.
In my way of thinking the first appellant must have realised on September 20, 1967 that the investigation by the police was sure to lead to cognizance of the offence being taken by a Magistrate and the prosecution of some persons for the offence of culpable homicide.
His statement itself shows that to his knowledge the police (1) 423 were on the track of the ,guilty and had seized an unlicenced loaded gun and other weapons from the shop of a person belonging to a political party some members whereof were being accused of the crime.
I would therefore dismiss the appeal by the first appellant also.
ORDER BY COURT In accordance with the opinion of the majority, the appeal of A.K. Gopalan is allowed and the appeal of P. Govinda Pillai is dismissed.
The fine, if already paid by A.K. Gopalan, shall be refunded. | A first information report was lodged on Sept. 11, 1967 regarding the loss of life of a person when two groups of people clashed.
On Sept. 20, 1967 the first appellant made a statement charging one of the groups being guilty of deliberate conspiracy to commit the murder and alleging that a prominent member of that party had given instructions for this.
The respondent along with his two brothers was arrested on Sept. 23, 1967 and on the next day the Magistrate remanded the accused to police custody.
In its issue dated Sept. 23, 1967 a newspaper of which the second appellant was the editor printed the statement of the first appellant.
Later on all the three accused were produced before the Magistrate.
The respondent filed a petition under sections 3 and 4 of the against the first appellant, second appellant and the printer of the newspapers.
The High Court found all the persons guilty of contempt of court.
In appeal by certificate obtained by the first and second appellants this Court, HELD : (Per Full Court): The second appellant was guilty of contempt of court, as proceedings in a court were imminent on Sept. 23, 1967 when the statement was published in the newspaper.
When the accused had already been arrested on September 23, 1969 in connection with a serious cognizable case proceedings in a court were imminent on that date.
The fact that the police might, after investigation, come to the conclusion that the accused was innocent.
would not make the proceedings any the less imminent.
To advance the day of imminence to the day when the police makes a report under section 173 Cr.
P.C. would do untold harm to those who may actually be ultimately prosecuted.
[418 B D] (Per Sikri and Jaganmohan Reddy, JJ.) : The first appellant was not guilty of contempt of court as there was no evidence that any proceedings in a court were imminent on the date when the statement was made.
The lodging of a first information report does not by itself establish that proceedings in a court were imminent.
It would depend on the facts proved in a particular case whether the proceedings are imminent or not As far as the first appellant was concerned the relevant date was Sept. 20, 1967 when he made the statement and not Sept. 25, 1967 when the newspaper published the statement.
There was no evidence that the first appellant was instrumental in getting this statement published on Sept 25, 1967.
Even the accused were not arrested till September 23, 1967, and ordinarily until an accused is arrested it cannot be said that any proceedings in a court are imminent against that person because he may never be arrested or he may be arrested after a lapse of months or years.
[416 E, F; 4 17 A C] 411 Surendra Mohanty vs State of Orissa Cr.
A No. 107 of 1956 dt.
23 1 1961.
relied on.
It would be an undue restriction on the liberty of free speech to lay down that even before any arrest has been made there should be no comments on the facts of a particular case.
In some case no doubt, especially in cases of public scandal regarding companies, it is the duty of a free press to comment on such topic so as to bring them to the attention of the public.
[417 D] R.v.
Savundranayagan and Walker, , referred (Per Mitter, J. dissenting) : A contempt of court may be committed by a person when he knows or has good reason to believe that criminal proceedings are immigrant.
The test is whether the circumstances in which the alleged contemnor makes the statement are such that a person of ordinary prudence would be of opinion that criminal proceedings would soon be launched.
The first appellant must have realised on September 20, 1967 that the investigation by the police was sure to lead to cognizance of the offence being taken by a Magistrate and prosecution of some persons for the offence of culpable homicide.
The first appellant was not an illiterate person who could not be reasonably expected to know that Criminal proceedings were bound to be launched in respect of the affair; whether anybody would be successfully prosecuted is a different matter.
but that would depend upon the evidence which would be brought before the court.
But no person with any experience of worldly affairs, much less a person of the standing of the first appellant, a member of Parliament and a leader of a political group could be ignorant of the fact that a murder in broad day light when two group of people clash is sure to be investigated into and made the subject of criminal proceedings.
His statement suggested that he had some personal enquiries in the matter and had come to gather therefrom that certain members of a particular political party had entered into a conspiracy to murder and had actually carried their plan into execution.
There, can be no doubt that the first appellant 's motive and object was not only to further the cause of a particular political party but also to create an atmosphere of prejudice against members of that party and charge some of them with one of the most serious offences known to law, namely, that of conspiracy to murder folio.wed by actual homicide.
[422 H 423G] Surendra Mohanty vs The State of Orissa, Cr. A. No. 107 of 1956 dr. 23 1 1961, distinguished.
Rex vs Parke, , R.V. Daily Mirror. , 851, Ragina vs Odhams Press Ltd. at 81, R.V. Savundaramareyagan and Walker, at 441, Tuljarama Rao vs Sir James Tavlor.
I.L.R. at 476, In the matter Tribune, Lahore.
25 Lahore 111, and Attorney General vs Butterworth & Ors. , referred to. |
Appeal No. 1115 of 1966.
Appeal by special leave from the judgment and decree dated November 18, 1965 of the Punjab High Court in Regular Second Appeal No. 1169 of 1962.
Rameshwar Dial and .4.
D. Mathur, for the appellants.
K.S. Chawla, K.L. Mehta and S.K. Mehta, for respondents Nos. 1 to 7.
The Judgment of the Court was delivered by Shah, J.
Ram Sarup was the owner of a piece of land measuring 30 bighas 12 biswas.
By a deed dated August 16, 1935, Ram Sarup mortgaged without possession a part of the land measuring approximately 26 bighas with one Meda.
Ram Sarup on November 27, 1941, mortgaged with possession the entire area of the land to Ananda.
Ram Sarup then sold his rights in 27 bighas and 1 biswa of the land on May 14, 1943 to Buru and others who may be collectively called 'the plaintiffs ' for Rs. 6,000.
The plaintiffs then applied on May 23, 1951, under section 4 of the Redemption of Mortgages (Punjab) Act 2 of 1913 for redeeming the mortgage in favour of Meda.
This application was rejected on June 29, 1951.
Thereafter the plaintiffs instituted on August 20, 1960, a suit in the civil court for redemption of the mortgage.
The suit was resisted, inter alia, on the ground that the period of limitation prescribed by article 14 of the Indian Limitation Act, 1908, had expired.
It was submitted that the plaintiffs had moved an application for redemption of mortgage under section 4 of the Redemption of Mortgages (Punjab) Act 2 of 1913 but the same was dismissed oft June 29, 1951, by the Assistant Collector and since no suit was filed within one year from that date, the suit for redemption of the first mortgage in favour of Meda was barred.
The Trial Court dismissed the suit for redemption of the mortgage in favour of Meda, and granted a decree for redemption of the second mortgage dated November 27, 1941.
The plaintiffs appealed to the District Court, Gurgaon.
The District Court allowed the appeal and ordered redemption of the land including the mortgage in favour of Meda.
The decree passed by the District Court was confirmed in second appeal by the High Court of Punjab With special leave, this appeal has been preferred by sons of Meda.
The record of the proceedings before the Assistant Collector was, it was reported, destroyed before the suit was filed, and an 407 extract from the register of redemption applications could be tendered in evidence.
The last column of the extract contained the entry: "The application is rejected and should be consigned to the record room".
An endorsement on the docket maintained by the Advocate who appeared in the case before the Assistant Collector showed an endorsement dated June 29, 1951: "Application rejected.
The petitioner has today been ordered to file a civil suit.
" The Trial Court and the District Court held that the petition for redemption was not tried by the Assistant Collector; he ' rejected the petition holding that the application raised complicated questions of fact and law, and on that account was not triable in exercise of the summary jurisdiction prescribed under Act 2 of 1913.
With this view the High Court agreed.
Counsel for the appellants contends that the order of the Assistant Collector rejecting the petition under section 4 of the Punjab Act 2 of 1913 became final by virtue of section 12 of the Act and the mortgagor could not sue to redeem the mortgage in favour of Meda after the expiry of one year from the date of the order.
The relevant provisions of the Redemption of Mortgages (Punjab) Act 2 of 1913 may first be noticed.
By section 4 it is provided: "The mortgagor or other person entitled to institute a suit for redemption may, at any time after the principal money becomes payable and before a suit for redemption is barred, present a petition to the Collector applying for an order directing that his mortgage be redeemed, and where the mortgage is with possession that he be put in possession of the mortgaged property.
Sections 5, 6 and 7 deal with the procedure to be followed in the trial of applications under the Act.
Section 8 provides: "Where both parties appear when the petition is called on for hearing, the Collector shall enquire from the mortgagee whether he admits that the petitioner is entitled to redeem, whether he is willing to accept the sum in deposit in full discharge of the mortgage debt, and where the mortgage is with possession whether he is willing to surrender possession of the mortgaged property.
If the mortgagee replies in the affirmative, the Collector shall make an order as laid down in section 6(a), (b), (c) and (d) of this Act.
408 Section 9 on which reliance is primarily placed provides: "If the mortgagee raise 's objection on any ground other than the amount of the deposit, or if the petitioner is not willing to pay the sum demanded by the mortgagee, the Collector may either (a) for reasons to be recorded dismiss the petition, or (b) make a summary enquiry regarding the objection raised by the mortgagee or regarding the sum due.
" Section 10 provides for enquiry into objections raised by the mortgagee, and section 11 provides for enquiry regarding the sum due under the mortgage and further provides for making deposit by the mortgagor within the period to be fixed by the Collector.
Section 12 provides by the first paragraph: "Any party aggrieved by an order made under sections 6, 7, 8, 9, 10 or 11 of this Act may institute a suit to establish his rights in respect of the mortgage; but, subject to the result of such suit, if any, the order shall be conclusive.
" Article 14 of Sch. 1 of the Limitation Act, 1908, provides that a suit to set aside any act or order of an officer of Government in his official capacity, not herein otherwise expressly provided for, shall be filed within one year of the date of the act or order.
We are unable to agree with the appellant 's contention that since no suit was filed within one year of the date on which the application of the plaintiffs was rejected by the Assistant Collector, the order dismissing the application was conclusive, and the suit for redemption by the plaintiffs was not maintainable.
Section 9(1)(a)of the Act authorises the Collector or dismiss the petition for reasons to be recorded, where the mortgagee raises objection on a ground other than the amount of deposit or if the mortgagor is not willing to pay the sum demanded by the mortgagee.
There is no evidence that the mortgagor declined to pay the sum demanded by the ' mortgagee.
Again the Assistant Collector did not pass an order dismissing the petition for any reasons recorded by him.
He merely ordered that the case raised complicated questions of fact and law which could not be tried in a summary proceeding.
Such an order, in our judgment, does not fall within the terms of section 9 of Act 2 of 1913.
Even if by the order the petition was dismissed, not the form of the order, but its substance will determine the application of the period of limitation prescribed by article 14 of the Limitation Act.
An order relegating the mortgagor to a civil suit for obtaining an order of redemption even if it becomes final does not bar a suit for redemption, for it raises no cloud on the title of the mortgagor arising out of the mortgage.
Such 409 an order is not one which is required to be set aside.
An order required to be set aside is one which the officer making it has jurisdiction to make and has the effect of barring the claim for relief unless it is set aside.
The order of the Assistant Collector merely declared the rights of the plaintiff under the common law: It did not bar the claim to relief_ for redemption in a civil suit, and on that account it was not an order which was required to be set aside.
Tulsi Das vs Diala Ram(1), Tek Chand, J., delivering the principal judgment of the Court dealt with the question which falls to be determined in this case.
The learned Judge observed: " . the suit referred to in section 12 is to establish the 'erroneous nature of the order '.
Now what is the error committed by the Collector in his order which the mortgagor must seek to have set right by a declaratory suit ? No civil court can grant a declaration that the Collector 's view that the matter was too difficult for summary redemption was wrong and compel him to proceed with the summary enquiry.
The order of the Collector does not affect the rights of the parties in any way; it is conclusive to this extent only that the petition for summary redemption has been dismissed and no other petition under the Act would lie.
No suit under section 12 being necessary or competent, there was no bar to the mortgagor suing for redemption in the civil courts within the period allowed by law in ordinary course.
" The same view was expressed in a judgment of the Punjab High Court Dewan Chand vs Raghbir Singh(2).
The Court, in that case pointed out, in our judgment rightly, that article 14 of Sch. 1 to the Limitation Act does not apply to a suit which does not seek to set aside the order of an officer of the Government.
When the Collector decides nothing against the mortgagor and directs that the matter be settled in a civil court, the Collector 's decision does not stand in the way of the suit for redemption.
The appeal fails and is dismissed with costs.
R.K.P.S. Appeal dismissed.
(1)I.L.R. (2) I.L.R. [1966] 1 Punjab 193. | In August, 1935 the owner of a piece of land mortgaged a part of it without possession to M.
In November 1914 he mortgaged the entire area of the land to A.
Thereafter he sold his rights in the land (except in a small area) in May. 1943 to the plaintiffs.
In May, 1951 the plaintiffs applied under section 4 of the Redemption of ' Mortgages (Punjab Act 2 of 1913) for redeeming the mortgage in favour of M but this application was rejected by the Assistant Collector on June 29, 1951.
A suit filed by the plaintiffs in August, 1960 in a civil court for redemption of the mortgage was resisted, inter alia, on the ground that it was time barred by virtue of article 14 of the Limitation Act, 1908 as it was not filed within one year of the rejection of the application by the Assistant Collector.
The trial court dismissed the suit for redemption of the mortgage in favour of M and granted a decree for redemption of the second mortgage of November, 1941.
The District Court, allowing an appeal, ordered redemption of the land including the mortgage in favour of M and this decision was confirmed in second 'appeal by the High Court.
There was a concurrent finding by the courts below that the petition for redemption was not tried by the Assistant Collector on the merits but that he rejected it holding that the application raised complicated questions of fact and law and on that account was not triable in exercise of ' the summary jurisdiction prescribed under Act 2 of 1913.
On appeal by special leave to this Court.
HELD: Dismissing the appeal.
The suit for redemption filed by the plaintiffs was not barred by the Law of Limitation.
The Assistant Collector merely ordered that the case raised complicated questions of fact and law which could not be tried in a summary proceeding. 'Such an order does not fall within the terms of section 9 of Act 2 of 1913.
Even if by the order the petition was dismissed, not the form of the order, but its substance will determine the application of the period of limitation prescribed by article 14 of the Limitation Act.
An order relegating the mortgagor to a civil suit for obtaining an order of redemption even if it becomes final does not bar a suit for redemption.
for it raises no cloud on the title of the mortgagor arising out of the mortgage.
Such an order is not one which is required to be set aside.
An order required to be set aside is one which the officer making it has jurisdiction to make it and has the effect of barring the claim for relief unless it is set aside.
[410 F H] L2Sup(CI)/70 14 406 Tulsi Das vs Diala Ram, I.L.R. [1944] Lab. 1 (F.B.) and Dewan Chand vs Raghbir Singh, I.L.R. [1966] 1 Punjab 193; referred to and approved. |
Appeal No. 1360 1966.
Appeal from the judgment and decree dated January 19, 1962 of the Madras High Court in Appeal No. 351 of 1958.
M.C. Chagla, M.K. Ramamurthi, section Sethuratnam, J. Ramamurthy and Vineet Kumar, for the appellant.
V.V. Nair, for the respondent.
456 The Judgment of the Court was delivered by Shah, J.
Palani Gounder 'and his son T.P. Sengottaiah hereinafter collectively called "the defendants" own Survey No. 765 B in Kugallur village.
Kalianna Gounder hereinafter called "the plaintiff" agreed on July 4, 1956 to purchase from the defendants that land for Rs. 12,000.
A memorandum reciting that Rs. 2,000 were paid as advance by the plaintiff to the defendants was executed by t,he plaintiff and the defendants.
The memorandum was written by one Ramamurthy Iyer and the signatures thereon were attested by one Kaliyanna Gounder.
On July 7, 1956, the defendants informed the plaintiff by a letter that, only a sum of Rs. 350 was paid by the plaintiff to the defendants and not Rs. 2,000 as recited in the memorandum, and since 'the balance of Rs. 1,650 which was promised to be paid within three days was not paid, the agreed stood cancelled.
The plaintiff on receipt of the letter instituted an action in the Civil Court for a decree for specific performance of the agreement, and deposited in Court Rs. 10,000 which according to him was the balance of the purchase price due by him.
The defendants filed their written statement contending, inter alia, that they were in urgent need of money, and they had agreed to sell the land to the plaintiff, but the plaintiff paid only Rs. 350 on July 4, 1956, and obtained possession of the memorandum on a representation that he will pay the balance of Rs. 1,650 within three days and since the amount was not paid the agreement was cancelled, and that in any event the agreement having been altered in material particulars, after it was executed, by adding the words: "Clear the debt.
s and execute the sale deed free from encumbrance", the suit was not maintainable.
The Court of First Instance upheld the plaintiff 's claim and decreed the suit for specific performance of the agreement.
In appeal to the High Court of Madras the decree was reversed.
The High Court, held that the plaintiff paid Rs. 350 only on July 4 1956, and on a representation that he will pay the balance of Rs. 1,650 payable as advance obtained possession of the agreement of sale, and the plaintiff not having paid the amount payable by him the suit for specific performance of the agreement was maintainable.
The High Court also held that the agreement was altered in material particulars by adding the covenant relating to "clearance of encumbrance" after the memorandam was executed With certificate granted by the High Court this appeal is preferred by the plaintiff.
Two questions fall to be determined in this appeal; (1) whether the plaintiff paid Rs. 350 only as contended by the defendants 457 on July 4, 1956, and obtained possession of the agreement on a false representation: and (2) whether the memorandum was altered in material paticulars after execution, and was on that account discharged ? The plaintiff in his statement before the Court asserted that he paid the full amount of Rs. 2,000 on July 4, 1956 to the defendants.
He was supported by his witness Ramamurthy Iyef the writer of the document.
On the side of the defendants there is the evidence of T.P. Sengottaiah who asserted that only Rs. 350 were paid at the time of the execution of the memorandum and when the balance was demanded the plaintiff promised to pay the same within three days.
He also stated that the amount was not paid within three days as promised and on that account the agreement was cancelled.
His testimony was supported by the attesting witness.
The learned Trial Judge accepted the testimony of the plaintiff and his witness Ramamurthy Iyer.
The High Court was of the view that the testimony of T.P. Sengottiah and the attesting witness should be preferred.
In our judgment the dispute may be resolved by considering the conflicting testimony of the witnesses in the light of broad probabilities.
The memorandum expressly recites that the defendants "have received Rs. 2,000 as advance" and "within sixty days from today" the plaintiff "should pay the balance of the sale price and execute the sale deed.
Failing that, besides losing the advance amount, nothing is binding as per the agreement".
The memorandum containing a recital that Rs. 2,000 were received by the defendants as advance was delivered to the plaintiff.
The plaintiff is an illiterate agriculturist, whereas the defendants are educated people, and the second defendant was at the material time President of the Local Panchayat.
The case of the defendants that they relied upon the bare word of the plaintiff that he will pay the balance of Rs. 1,650 within three days and on that representation they parted with the memorandum is, in our judgment, unreliable.
There was no relation between the plaintiff and the defendants which placed the former in a position of trust or confidence.
If the defendants were willing to execute an agreement with the recital that the amount of Rs. 2,000 was received, though in fact it was not so received, they would have insisted upon making an endorsement at the foot of the agreement that only Rs. 350 were paid and the plaintiff had obtained extension of time for payment of the balance within three days.
In any event they would have, when they parted with the memorandum, insisted upon some writing from the plaintiff that he had paid only Rs. 350 and not Rs. 2,000 as recited in the memorandum.
458 The High Court was of the view that the plaintiff was unable to show that he could procure a sum of Rs. 2,000 for payment as advance to the defendants and that there was no independent evidence regarding the actual payment of Rs. 2,000.
But the burden of proving in the circumstances of the case, that Rs. 2,000 were not paid lay heavily upon the defendants.
Again, there is strong evidence to indicate that the plaintiff had at his disposal a substantial amount on which he could have drawn.
On July 14, 1956, exactly ten days after t, he date on which the agreement was entered into, the plaintiff deposited in Court a sum of Rs. 10,000 in the action for specific performance commenced by him.
If the case of the plaintiff depended merely upon his oral testimony for payment of Rs. 2,000, absence of independent evidence evidencing payment may have some value as supporting the case of the defendants.
But when there was an express recital in the agreement that a sum of Rs. 2,000 was paid by the plaintiff and it was received by the defendants, it was not necessary for the plaintiff to lead evidence as to the source from which he obtained the money.
The High Court observed that the plaintiff did not reply to the notice dated July 7, 1956.
But it was the plaintiff 's case that he received the notice on July 14, 1956, and on the same day he instituted the suit.
Failure to reply to the notice cannot therefore be a circumstance of any value in the present case.
It was also observed by the High Court that there was no particular reason for the defendants to resile from the terms of the agreement within three days of its execution, and set up a false plea, and that in "such cases evidence is given to prove that it was a temptation of a better offer that induced the party to resile from the agreement".
The plaintiff did state in his evidence that his pangalis who were inimical to him had made an offer of Rs. 16,000 for the property, and because of that offer the defendants resiled from the agreement.
In the view of the High Court this part of the case of the plaintiff could not be believed because it was not expressly pleaded in the plaint.
But the plaintiff did plead in paragraph 6 of the plaint the defendants had "with the evil influence and instigation of Karuppa Gounden, Pongia Goundar and Appachi Gounder of the place who are now planning to have the suit properties for themselves are now evading to rescind the contract".
This, in our judgment, is a sufficient plea, if it was necessary to plead it, in support of the case which the plaintiff sought to make out.
The High Court discarded the testimony of Ramamurthy Iyer on the view that he was inimical to the defendants.
We have been taken through his evidence and we see no justification for hold 459 ing that his testimony could not be believed.
If Ramamurthy Iyer was an enemy of the defendants, it is very unlikely that they would permit him to write out an important document at their residence.
The broad probabilities of the case strongly support his testimony.
Having carefully considered the evidence we are of the view that the story of the defendants that only Rs. 350 were paid to them on July 4, 1956, and not Rs. 2,000 as recited in the memorandum is untrue and has been put up as an excuse for resiling from the agreement.
The second plea that there was an alteration in the memorandum in material particulars cannot also be sustained.
The original document is not before us, but from the cross examination of the writer and the plaintiff 's witnesses and also from the testimony of T.P. Sengottiah and his witnesses it does not appear that the words "Clear the debts and execute the sale deed free from encumbrance" were written in a cramped style.
This sentence occurs immediately before the Schedule of property sold and after the first three paragraphs of the convenants of the memorandum.
There was no reason for the writer to leave any space which could be availed of to add this sentence after the document was executed.
There is no denial that the sentence has been written by Ramamurthy.
It is true that the High Court has observed that the ink in which the sentence was written appeared to be slightly different in shade from the rest of the document.
But Ramamurthy Iyer has deposed that it was not true that the portion in the, agreement relating to the encumbrance was written subsequent to the agreement in collusion with the plaintiff.
He explained that the ink in his fountain pen was exhausted when he wrote with one pen, and he wrote the portion after reading the document with another fountain pen, and since the portion was written in a hurry the ink may have differed.
According to him he did not notice any difference in ink.
There is no reason to disbelieve the testimony of Ramamurthy Iyer.
Even if it be assumed that the sentence regarding encumbrance was written after the deed was executed it will not invalidate the deed.
The second defendant and his witnesses have admitted that there was no discussion at the time of the writing and execution of the agreement about the encumbrances upon the land.
There is not even evidence that there were any encumbrances subsisting on the land.
Ordinarily when property is agreed to be sold for a price, it would be the duty of the vendor to clear it of all the encumbrances before executing the sale deed.
The alteration, if any, cannot therefore be regarded as material.
As observed in 460 Halsbury 's Laws of England, Vol. 11, 3rd Edn., article 599 at 368: "A material alteration is one which varies the rights, liabilities, or legal position of the parties as ascertained by the deed in its original state, or otherwise varies the legal effect of the instrument as originally expressed,or reduces to certainty some provision which was origInally unascertained and as such void, or may otherwise prejudice the party bound by the deed as originally executed.
The effect of making such an alteration, without the consent of the party bound, is exactly the same as that of canceling the deed.
" It is also stated in article 604 at pp.
370 and 371: "An alteration made in a deed, after its execution, in some particular which is not material does not in any way affect the validity of the deed; an alteration is not material which does not vary the legal effect of the deed in its original state, but merely expresses that which was implied by law in the deed as originally written, or which carries out the intention of the parties already apparent on the face of the deed, provided that the alteration does not otherwise prejudice the party liable thereunder.
" This rule has been applied by the Privy Council in Nathu Lal and Ors.
vs Mussamat Gomti Kuar and Others(1).
The Judicial Committee observed in that case at p. 331: "A deed is nothing more than an instrument or agreement under seal; and the principle of those cases is that any alteration in a material part of any instrument or agreement avoids it, because it thereby ceases to be the same instrument." The Judicial Committee observed at p. 333: "A material alteration has been defined in the rule as one which varies the rights, liabilities or legal position of the parties ascertained by the deed, etc.", and after applying that test they held that the alteration in that case was not material in the sense of altering the rights, liabilities or legal position of the parties or the legal effect of the document.
(1) L.R. 67 I.A.318.
461 Since the defendants were liable to clear the encumbrances, if any, subsisting on the land before executing the sale deed, assuming that the covenant was incorporated after the execution of the deed, it cannot be regarded as a material alteration on that account, for it does not alter the rights or liabilities of the parties or the legal effect of the instrument.
The appeal is therefore allowed and the decree passed by the High Court is set aside and the decree of the Trial Court is restored with costs in this Court and in the High Court.
R.K.P.S. Appeal allowed. | The appellant agreed on July 4, 1956 to purchase certain lands from the respondents for Rs. 12,000.
A memorandum reciting that Rs. 2,000 were paid as advance by the appellant to the respondents was executed by both parties.
Three days later the respondents informed the plaintiff by a letter that only a sum of Rs. 350 was paid by the appellant and not Rs. 2,000 as 'recited in the memorandum and since the balance of Rs. 1,650 which was promised to be paid within three days was not paid, the agreement stood cancelled.
The appellant thereafter immediately instituted a suit for a decree for specific performance of the agreement and deposited in court a sum of Rs. 10,000 on account of the balance purchase price due from him.
In their written statement the respondents claimed that Rs. 1,650 out of Rs. 2,000 not having been so paid, the agreement was cancelled; and that in any event the agreement having been altered in material particulars after its.
execution by the addition of the words; "clear the debts and execute the sale deed free from encumbrances", the suit was not maintainable.
The Trial Court upheld the: appellant 's claim and decreed the suit.
The High Court in appeal, reversed the decree.
On appeal to this Court, HELD : Allowing the appeal: (i) On the evidence and in view of the express recital in the agreement that a sum of Rs. 2,000 was paid by the appellant and received by the respondents, the respondents" story that only Rs. 350 was in fact paid was untrue and had been put up as an excuse for resigning from the agreement.
(ii) Even assuming that the words in question were introduced in the memorandum after its execution since the respondents were liable to clear any encumbrances subsisting on the land before executing the sale deed, cannot be regarded as a material alteration for, it did not alter the rights or liabilities of the parties or the legal effect of the instrument [463 A] Nathu Lal and Ors.
vs Mussamat Gomti Kuar and Others, L.R. 67 I.A. 318; referred to. |
iminal Appeal No. 7 of 1957.
38 Appeal from the judgment and order dated July 12, 1956, of the Calcutta High Court in Criminal Revision No. 270 of 1956.
section C. Mazumdar, for the appellants.
B. Sen, D. N. Mukherjee and P. K. Bose, for the respondent.
April 18.
The Judgment of Sinha C. J., section K. Das, K. C. Das Gupta and N. Rajagopala Ayyangar JJ.
was delivered by Das Gupta J. Mudholkar J. delivered a separate Judgment.
DAs GUPTA, J.
This appeal on a certificate granted by the High Court of Calcutta under article 134(1)(c) of the Constitution is against a judgment and order of that court, upholding the conviction of these appellants under section 73 of the Indian , for contravention of Rule 7 of the Mines Creche Rules, 1946.
Rule 3 of these rules requires the owner of every Mine to Construct there a creche in accordance with the plans prepared in conformity with the rules and previously approved by the competent authority; Rule 7 provides that the owner of the mine shall appoint "a creche in charge, who shall be a woman possessing such qualifications and training as may be approved by the competent authority.
The complaint which resulted in the conviction of the two appellants, of whom, one Goenka was the owner of the Khas Jawbad Colliery, and the other, viz., J. N. Gupta, the manager of the colliery, alleged that they had contravened Rule 7 of the Mines Creche Rules, 1946, inasmuch as no creche attendant as required by that rule had been appointed there.
After an appeal of the present appellants to the Court of Sessions was dismissed, they moved the High Court in revision, but were unsuccessful, except that their sentences were reduced.
The High Court however gave a certificate under article 134(1)(c) and on that certificate the present appeal has been filed.
The main contentions raised on behalf of the appellants are, (1) that the Mines Creche Rules, 1946, had stood repealed, along with the repeal by section 88 of the of 1952, of the Mines Act, 1923,.
under which these rules were admittedly framed and, (2) they having 39 been framed under section 30 (bb) of the Mines Act, 1923, cannot be deemed to be rules made under the , as.
the requirements of the corresponding section of the 1952 Act, viz., section 58(b) are different from what is required by section 30(bb) of the 1923 Act.
In Criminal Appeals Nos. 98 to 106 of 1959 we have decided that regulations framed under section 29 of the Mines Act, 1923, survive the repeal of that Act.
The same reasons which form the basis of that decision apply to the rules framed under section 30 of the Mines Act, 1923; and so, the first contention raised on behalf of the appellants must be rejected as unsound.
The second question arises in this way.
Clause (bb) of section 30 of the 1923 Act mentions one of the purposes for which rules may be made in these words "For requiring the maintenance in mines, wherein any women are ordinarily employed, of suitable rooms to be reserved for the use of the children under the age of 6 years belonging to such women, and for prescribing, either generally or with particular reference to number of women ordinarily employed in the mine, the number and standards of such rooms, and the nature and extent of the supervision to be provided therein.
" In the , section 58 contains the provision empowering the Central Government to make rules for all or any of the purposes mentioned there.
Clause (d) of this section runs thus: "For requiring the maintenance in mines, wherein any women are employed or were employed, on any day of the preceding twelve months, of suitable rooms to be reserved for the use of the children under the age of six years belonging to such women, and for prescribing either generally or with particu lar reference to the number of women employed in the mines, the number and standards of such rooms, and the nature and extent of the amenities to be provided and the supervision to be exercised therein;".
While it is obvious that cl.
(d) of section 58 of the 1952 Act corresponds to cl.
(bb) of section 30 of the 1923 Act, it has to be noticed that the requirement in the 1952 40 Act is wider.
For, whereas rules under section 30(bb) could require the maintenance of creches and could prescribe certain matters in regard to these, only in mines, wherein "any women are ordinarily employed", section 58(d) authorises the framing of similar rules for maintenance of creches and prescription of similar matters, in respect of all mines, "wherein any women are employed or were employed on any day of the preceding twelve months".
It is contended on behalf of the appellants that the Creche Rules, 1946, framed as they were under section 30(bb) of the 1923 Act, must be read as requiring the maintenance of creches and prescribing certain matters relating to creches, only for mines "wherein any women are ordinarily employed".
They cannot therefore be considered to be rules under section 58(d) of the 1952 Act, which have to require the maintenance of creches, and prescribe matters relating thereto, not only for mines where women are ordinarily employed, but for mines "wherein any women are employed or were employed on any day of the preceding twelve months".
It is urged that the content of the rules cannot be extended by the fact that the 1952 Act permits rules to be framed in respect of mines other than those in respect of which the rules were originally framed.
In our opinion, the argument is not without force, and it might be difficult to say that, the Mines Creche Rules framed under section 30(bb) of the 1923 Act, would apply to all mines contemplated by section 58(d) of the 1952 Act.
This difficulty would not however stand in the way of the Mines Creche Rules, 1946, operating in respect of "mines where women are ordinarily employed", as rules under the 1952 Act.
It has to be noticed that the mines in respect of which rules may be made under section 58(d) of the 1952 Act, do not exclude mines, where women are ordinarily employed; the description "mine wherein any women are ordinarily employed "include, in the first place the mines where women are ordinarily employed and include in addition to those other mines", 'wherein any women are employed or were employed on any day of the preceding twelve months ', even though the attribute of "women being ordinarily 41 employed there", is not present.
Assuming therefore as correct the argument that the content of the rules does not stand extended, the Mines Creche Rules, 1946, may still be reasonably deemed to be rules under section 58(d) of the 1952 Act, though not fully exhausting the purpose mentioned in that section.
In other words, the position is that while under section 58(d) of the 1952 Act rules may be framed in respect of (1) mines wherein women are ordinarily employed and (2) mines wherein though women are not ordinarily employed, women are employed and (3) mines, where though women are not ordinarily employed, women were employed on any day of the preceding twelve months, the Mines Creche Rules, 1946, cover a part of the ground that could be covered by rules under section 58(d) of the 1952 Act.
To the extent the provisions of section 58(d) of the 1950 Act and section 30(bb) of the earlier enactment overlap, these rules would continue in force by virtue of section 24 of the .
On an examination of the evidence adduced in the case before the Magistrate, we find that the Jawabad Mine was one, where women were ordinarily employed.
With regard to this Mine therefore the Mines Creche Rules operated as rules under the 1952 Act; and consequently, contravention of Rule 7 of the Mines Creche Rules, 1946, was in law a contravention of a rule made under the 1952 Act, within the meaning of section 73 of that Act.
On behalf of the second appellant, Gupta, who was the manager of the colliery at the relevant time, a further contention is raised.
It is pointed out that Rule 7(1) does not in terms lay any duty on the manager and it is contended that the manager having no duty to perform under Rule 7(1) of the Creche Rules; no question of his contravening the same by omission to appoint a creche in charge arises.
The answer to this question depends on the interpretation of section 18 of the , which is in these words: "18.
Duties and responsibilities of owners, agents and managers: 6 42 (1) The owner, agent and manager of every mine shall be responsible that all operations carried on in connection therewith are conducted in accordance with the provisions of this Act and of the regulations, rules and bye laws and of any orders made thereunder.
(2) In the event of any contravention of any such provisions by any person whosoever, the owner, agent and manager of the mine shall each be deemed also to be guilty of such contravention unless he proves that he had taken all reasonable means, by publishing and to the best of his power enforcing those provisions, to prevent such contravention.
(3) It shall not be a defence in any proceedings brought against an owner or agent of a mine under this section that a manager of the mine has been appointed in accordance with the provisions of this Act".
It has to be noticed that after the first sub section states in general terms that the owner, agent and manager shall be responsible for the carrying out of "all operations carried on" in connection with the mine, in accordance with the provisions of the Act and of the regulations, rules and bye laws and of any orders made thereunder, the second sub section d eals with the question of guilt of the owner, the agent and manager for contravention of such provisions by "any person whosoever"; and the third sub section goes on to say that the owner or agent cannot escape liability merely because a manager of the mine has been appointed.
The first contention urged on behalf of the appellant is that the Mines Creche Rules have nothing to do with "operations carried on in the mines" and that section 18 deals only with the proper observance of the provisions of the Act directly touching the work carried on in the mines, for raising coal and allied activities.
In our opinion that will be an unduly narrow interpretation of the section.
The employment of female labour is obviously and admittedly connected with the raising of coal in the mine; and all conditions of employment of female labour should reasonably be held to be 43 inextricably connected with "operations carried on" in the mines.
The Mines Creche Rules are no less conditions of female labour than are the provisions of, say, section 46 of the Act.
That section prohibits the employment of women in a mine which is below ground and also employment of women in mines above ground except between 6 a.m. and 7 p.m. except to the extent there is variation of the hours of employment above ground by the Central Government in exercise of the powers given by that very section.
Section 46 as it now stands also provides that every woman shall be allowed an interval of not less than eleven hours, between the termination of employment on any day and the commencement of the next period of employment.
It cannot be seriously argued that if in any mine, women labour is employed, in breach of these provisions of section 46, operations would have been carried on in the mine in accordance with the provisions of the Act.
We see no reason why employment of female labour in a mine, without compliance with the Mines Creche Rules, should not be similarly held to amount to "carrying on operations in connection with the mine" in contravention of a rule made under the Act.
The true position in our opinion is that in order that operations carried on in connection with the mine can be said to have been conducted in accordance with the provisions of the Act, and of the regulations, rules and bye laws, and of the orders made thereunder, it is necessary not only that such provisions as are directly connected with the work of raising coal are observed, but also that provisions governing the conditions of employment of the persons engaged in the mining operations are also observed.
The Mines Creche Rules, as already pointed out undoubtedly form part of the conditions of employment, of female labour engaged in mining operations.
Observance of these rules is therefore necessary before operations can be said to have been carried on in accordance with the rules made under the Act.
In our opinion, therefore, the effect of section 18(1) is that all three the manager, the agent and the owner are responsible for the Observance of the Mines Creche Rules.
44 On behalf of the State it is urged that the result of such a responsibility being laid on all the three is that the manager is liable to penalty for a contravention of the Mines Creche Rules by the owner.
It is unnecessary however to consider whether section 18(1) by itself has this consequence; for the matter is put beyond doubt by section 18(2).
This sub section of section 18 makes all the three the owner, the agent and the manager severally liable for the breach of any regu lations by "any person whosoever".
Not only is that person who contravened the provisions guilty but each of these three the manager, the agent and the owner is also deemed to be guilty though the contravention was not by himself.
It would be illogical to say in the face of this provision that two of them should not be held liable for the contravention of the provisions within section 18(1) by the third.
But, says, the manager appellant, such a construction of section 18(2) should be avoided as it will be thorough.
by unjust.
"How am I to secure", says he, "the observance of a rule which in terms fixes a duty on the owner only to do certain things".
The argument really is that the Legislature acted improperly making the owner, the agent and the manager vicariously liable for the contravention of certain provisions by " any person whosoever".
With the wisdom of the law the Court is not however concerned.
It is pertinent to notice however that it was clearly to avoid injustice which may result from the fixation of such vicarious liability that the legislature has provided for a special defence of the owner, the agent and the manager in such cases.
Thus, if a rule or a bye law in terms lays a duty on the manager, and the owner is prosecuted he will escape punishment as soon as he shows that he did all that he could reasonably do in seeing that the manager duly performed his duty.
The effect of sub section (3) is that the mere appointment of a manager would not be a sufficient defence.
Where, as in the present case, the rule in question lays a duty in terms on the owner and the manager is prosecuted he will escape conviction on showing that he took all reasonable 45 means to prevent the contravention of the rules by the owner.
The whole purpose of section 18 read as a whole appears to be clearly this: The provisions of the Act and of the regulations, rules and bye laws or orders made thereunder may require certain things to be done or forbidding the doing of certain things with or without mentioning the person required to do the thing or forbidden to do it.
Where a person definitely indicated is required to do or forbidden to do a certain thing he is straightaway, liable to penalty for contravention of the rules.
But the owner, the agent and the manager will have the additional responsibility that even though any of them is not named as the person required or forbidden to do a thing, the owner, the manager or the agent, will be liable to punishment for the contravention of the rule, subject to this that the liability will disappear as soon as he shows that he had taken all reasonable means to prevent the contravention.
In the present case, the manager appellant has neither suggested nor proved that he took all reasonable means to prevent the contravention of the provisions of Rule 7 of the Mines Creche Rules by the owner.
He must therefore be deemed guilty of the contravention, even though the rule in terms laid no duty on him.
In support of his contention that the law does not impose any duty on the manager of the mines to carry out the provisions of the Creche Rules, Mr. Majumdar relied on a decision of the Nagpur High Court in the State Government, M. P. v Deodatta Diddi (1).
The question there was whether one Deodatta Diddi, Agent, Rawanwara Khas Colliery, could be held to have contravened rule 3(1) of the Coal Mines Pithead Bath Rules, 1946, where no pithead baths had been con structed as required by the rules.
In terms, rule 3(1) provided that the owner of every coal mine shall construct pithead baths in accordance with the plans prepared in conformity with the rules and approved by the competent authority.
It was held by the High (1) A.I. R. (1956) Nag.
46 Court that it was the owner alone who could be deemed to have contravened the rule and that the Agent even assuming that he was the representative of the owner in respect of the management of the colliery had no duty to perform in this matter.
We notice however that the attention of the learned Judges was not drawn to the provisions of section 18 of the Indian .
This decision is therefore of no assistance.
The question as regards the liability of any agent or manager of the mine for the construction of pithead baths or of mine creches appears to have been raised before the Calcutta High Court in G. D. Bhattar vs The State (1).
In that ease both the learned Judges considered section 18 of the , but came to different conclusions, one of them holding that under section 18 the manager would be liable for carrying out the provisions of these rules while the other learned Judge took a different view.
In our opinion, the former view is correct.
All the contentions raised on behalf of the appellants therefore fail.
The appeal is accordingly dismissed.
MUDHOLKAR, J.
While I agree to the order proposed with respect to Mohan Lal Goenka, I am of the opinion that the conviction of the co appellant Gupta who was a manager of the mines cannot be sustained.
It has throughout been accepted that under r. 7(1) of the Mines Creche Rules, 1946, as they stood on the date of the alleged contravention the responsibility for appointing a creche in charge was on the owner of the mine only.
It was, therefore, contended on behalf of Gupta that he cannot be held liable for the contravention of the rule made by the owner Mohan Lal Goenka.
Reliance was, however, placed on behalf of the State in the courts below as well as before us on the provisions of section 18 of the (35 of 1952).
That section reads thus: "(1) The owner, agent and manager of every mine shall be responsible that all operations carried on in connection therewith Are conducted in accordance with the provisions of this Act and of the (1) A.I.R. (1957) Cal.
47 regulations, rules and bye laws and of any orders made thereunder.
(2) In the event of any contravention of any such provisions by any person whosoever, the owner, agent and manager of the mine shall each be deemed also to be guilty of such contravention unless he proves that he had taken all reasonable means, by publishing and to the best of his power enforcing those provisions, to prevent such contravention: Provided that the owner or agent shall not be so deemed if he proves (a) that he was not in the habit of taking, and did not in respect of the matter in question take, any part in the management of the mines; and (b) that he had made all the financial and other provisions necessary to enable the manager to carry out his duties; and (c) that the offence was committed without his knowledge, consent or connivance.
(3) Save as hereinbefore provided, it shall not be a defence in any proceedings brought against an owner or agent of a mine under this section that a manager of the mine has been appointed in accordance with the provisions of this Act.
" It was urged that this section holds the owner, the agent as well as the manager liable for the contravention of any provision of the Act or of a regulation, rule or bye law made by any person unless the owner, agent or manager can bring his case within any of the exceptions set out in sub section (2) of section 18.
It is pointed out that Gupta has not relied on any exception and, therefore, his conviction is correct in law.
Section 18 is in Chapter IV of the which deals with "Mining operations" and "Management of mines".
This chapter thus deals with two topics.
Section 18, however, deals with only one of these two topics, that is, "Mining operations".
This would clearly follow from the language of sub section
(1) or section 18.
The duties and responsibilities of owners, agents and managers with which this section deals are with respect to "all operations carried on in connection there with", i.e., the mine.
Therefore, the inference must be that this section deals with duties etc., in connection with mining 48 operations only.
The chapter itself has drawn a distinction between "Mining operations" and "Management of mines".
Employment of labour, providing amenities for them and allied matters would pertain mainly to "management" and not to "Mining operations".
The expression "Mining operations" occurring in an Act dealing with mines should be accorded that meaning which it has in the mining industry.
In the industry a mining operation is understood to mean an opera tion undertaken for the purpose of winning minerals and cannot, as suggested by my learned brother, be given an extended meaning so as to embrace within it matters such as employment of labour, providing amenities to labour etc., even though that labour is utilised or required for the purpose of carrying on mining operations.
I can see no justification for giving an extended meaning to the expression "Mining operations" and none was suggested at the bar.
Upon this view it would follow that the manager of a mine cannot be made vicariously liable for the omission of the owner, to carry out his duty under r. 7(1) of the Mines Creche Rules.
There is an additional reason for coming to the same conclusion.
Upon the language of section 18(2) the manager of a mine cannot be held liable for the contravention by the owner of any provision of the Act, regulation, rule or bye law unless that contravention was with respect to a matter in ' regard to which the exception could be available.
To put it a little differently, a manager cannot be held vicariously liable for a contravention unless there was on his part also an omission to do something which was in his power to do.
Sub section (2) of section 18 would absolve a manager from vicarious liability if he could show "that he had taken all reasonable means by publishing and to the best of his power enforcing those provi.
sions to prevent such contravention".
This, therefore, implies that by resorting to certain steps he can escape liability.
The first part of the quotation is clearly in.
applicable to the present case.
The second part would apply provided the manager had the power to enforce the performance of a particular duty by the owner.
49 There is nothing in the Act or the rules which empowers the manager to enforce the performance by the owner of his duties under sub r.
(1) of r. 7.
Since that is the position it must be held that the manager is not liable for the contravention by the owner of his duty under sub r.
(1) of r. 7 of the Mines Creche Rules.
That the construction I am placing on this provision is the proper one would appear from the following illustration.
Section 17 of the Act provides that the owner or an agent of every mine shall appoint a person having the prescribed qualification as a manager of the mine.
Section 57(c) provides for the framing of regulations prescribing the qualifications for the manager of mines.
I will assume that regulations have been made thereunder prescribing the qualifications for managers.
If a person is appointed as a manager of a mine even though he does not possess the prescribed qualification would he be held vicariously liable for the contravention by the owner or the agent of the duties placed upon the owner and agent by a Regulation and by section 17? I do not think that there would be any difficulty in saying that he would not be liable for the simple, reason that it was not within his power to enforce the compliance by the owner of the duty cast upon him by the regulations.
I would, therefore, allow the appeal of Gupta and set aside the sentence of conviction passed upon him.
ORDER.
In accordance with the opinion of the majority the appeal, on behalf of both the appellants, is dismissed.
Appeal dismissed. | The appellants one of whom was the owner and the other the manager of a colliery were convicted for contravening the provisions of the Mines Creche Rules, 1946, under which the owner of every mine employing women was required to construct creches for the use of the women employees and also to appoint a "Creche in charge" for the supervision of the creches.
Their contentions mainly were (1) that the Mines Creche Rules, 1946 stood repealed as the Mines Act, 1923 itself under which those rules were framed were repealed by the Mines Act of 1952 and (2) that the said rules having been framed under section 30(bb) of the Mines Act, 1923, could not be deemed to be rules made under the corresponding section 58(d) of the 1952 Act the requirements of which were different from those of section 30(bb) of the 1923 Act.
On behalf of the manager a further contention was raised that he was not liable for the Contravention of r. 7(1) under which he 37 had no duty to perform and no question of his omission to appoint a creche in charge arose.
Held, per Sinha, C. J., section K. Das, Das Gupta and Ayyangar, JJ., that the regulations framed tinder section 30 of the Mines Act, 1923, survived the repeal of that Act.
Criminal Appeals Nos.
go to 106 of 1959, followed.
The Mines Creche Rules, 1946, framed under section 30(bb) of the Mines Act of 1923 covered a part of the ground that was covered by the provisions of section 58(d) of the Mines Act of 1952, and to the extent the provisions of the two enactments overlap each other these rules would continue to be in force by virtue of section 24 of the and operate as rules under the 1952 Act.
Contravention of r. 7 of the Mines Creche Rules, 1946, was in law contravention of a rule under section 58(d) of the 1952 Act within the meaning of section 73 of the Act.
Under section 18(1) of the , the manager, the agent and the owner are responsible for observance of the Mines Creche Rules which form part of the conditions of employment of female labour engaged in "mining operations" and under subS. (2) of section 18 each of them shall be deemed to be guilty of the contravention of any rule by "any person whosoever", unless he proves that he took all reasonable means to prevent such contravention.
The manager in the present case not having proved that he took all reasonable means to prevent the contravention of r. 7 by the owner even though the rule in terms laid no duty on him, must be deemed to be guilty of the contravention.
State Government, M. P. vs Deodatta Diddi, A.I.R. (1956) Nag. 71, held inapplicable.
G. D. Bhattar vs State, A.I.R. (1957) Cal.
483, the view making the manager liable to be approved.
Per Mudholkar, J.
In the mining industry a "mining operation", as contemplated under section 18 of the , is understood to mean an operation undertaken for the purpose of mining minerals and cannot be extended to mean "management of mines" such as employment of labour and providing amenities to employees etc.
The manager of a mine cannot be made vicariously liable for the omission of the owner to carry out his own duty under r. 7(1) of the Mines Creche Rules.
Sub section
(2) of section 18 would also absolve the manager from vicarious liability if he could show "that he had taken all reasonable means by publishing and to the best of his power enforcing those provisions to prevent such contravention".
But there is nothing in the Act or the rules which empowers the manager to enforce the performance by the owner of his duty under sub r.
(1) of r. 7 of the Mines Creche Rules and the manager was therefore not liable for the breach of that rule. |
Appeal No. 810 of 1967.
Appeal by special leave from the judgment and order dated August 3, 1966 of the Kerala High Court in Income tax Referred Case No. 49 of 1965.
K. Javaram, for the appellant.
S.T. Desai, R.N. Sachthey and B.D. Sharma for the respondent.
Sardar Bahadur Saharya. ,for the Intervener.
The Judgment of the Court was delivered by Shah, J.
In computing the income of the appellant 's father to tax for the assessment year 1959 60 the Income tax officer included Rs. 75,000 received under an agreement for cutting and removing trees from 500 acres of Mangayam Katchithode forest.
The Appellate Assistant Commissioner after calling ,for a report on certain facts confirmed the order.
But the Tribunal held that the receipt was of a capital nature and deleted it from the taxable income.
At the instance of the Commissioner of Income tax, the Tribunal referred the following question to the High Court of Kerala: "Whether on the ,facts and in the circumstances of the case, the Income tax Appellate Tribunal was correct in holding that Rs. 75,000/ being income from felling of trees from forests is not subject to income tax ?" The High Court answered the question in the negative.
We are of the view that the facts found by the Tribunal are not sufficient to enable us to record an answer to the question referred.
The Income tax officer held that the income was taxable because 500 acres of forest land was leased for "clear felling" by the father of the appellant and this fetched an income of Rs. 75,000/ .
What the expression "clear falling" meant was not investigated by the Income tax officer.
The Appellate Assistant Commissioner in dealing with the contention raised by the appellant that the receipt was of the nature of a Capital, observed: "The claim is based on the reasoning that the clear felling of ' forest trees amounts to sterilisation of a capital asset.
In other words clear felling is said to involve total destruction of the 549 forest.
It is admitted that the trees are of spontaneous growth and it has not been established that removal of trees has in any way affected the value of the property.
As a matter of fact, _clear felling is resorted to make the land more productive and more valuable.
At any rate the claim has not been substantiated beyond doubt and hence there is no scope for any relief.
" The Tribunal relying upon the observation of the Income tax officer "that the trees were not cut together with the roots but only 6" above the ground and that they were later on destroyed" held that there was "nothing to show that there was a diminution of capital assets".
On the other hand, the Income tax officer had given a clear finding that this was a case of "clear felling".
After making 'an extensive quotation from the Judgment of the High Court of Bombay in Commissioner of Income tax vs
N. Patwardhan(1), the Tribunal stated that the observations applied to the facts in the case before them, and on that account they upheld the claim of the 'appellant.
The High Court observed that "it was agreed that the Mangayam Katchithode forest was within the ambit of the Madras Preservation of Private Forests Act, 1949, and the statutory rules on the subject and that the expression "clear feeling" is an expression with a definite and specific meaning as far as such forests are concerned".
They then proceeded to quote r. 7 framed under the Madras Preservation of Private Forests Act, 1949, and after setting out conditions (b) & (c) observed that "the felling of the trees under the "clear felling" method will not permit a removal of the trees along with their roots.
On the other hand, the clear indications were that the felling of the trees under the clear indications were that the felling of the trees under the regeneration and future growth of the trees concerned.
In other words, what is contemplated by the clear felling method is not sterilisation of an asset but the removal of a growth ,above a particular height, leaving intact the roots and the stumps in such a manner as to ensure regeneration, future growth, further felling and subsequent income.
" On that view the Court held that the receipt of Rs. 75,000/ was a revenue receipt and not a capital receipt as held by the Appellate Tribunal.
The departmental authorities.
the Tribunal and the High Court have expressed different views on the import of the expression "clear ,felling" and about the true effect of the agreement.
The Income tax officer taxed the amount of Rs. 75,000/ on the footing that the 500 acres of forest lands were leased for clear felling.
The Appellate Assistant Commissioner held that the trees being of spontaneous growth and the falling of the trees not having (1) 550 affected the value of the property as a result of the clearance, the lands became more productive and the receipt was a revenue income.
The Tribunal held that the case being one of "clear felling" and the trees having been cut 6" above the ground and "that they were later on destroyed" it was a case of clear felling 'and the receipt was of capital nature.
The High Court was of the view that the "clear felling" of forest lands meant cutting trees and not removal of the roots so that there would be regeneration, future growth of the roots and the stumps and on that account the receipt was of revenue nature.
It appears that before the Income tax Officer the agreement dated Sept. 11, 1957 was not produced.
After the Appellate Assistant Commissioner remanded the case to the Income tax Officer the latter submitted the "remand report" and at that time the agreement was produce.
The Tribunal in support of its conclusion referred to the preamble of the document and the conditions thereof.
The learned Judges of the High Court observed that they did not place any reliance on the extracts in the lease given in paragraph 2 of the statement of the case for coming to the conclusion they had reached.
Why the High Court thought it fit to discard the recitals, is not clear from the record.
The facts found being not clear, it is difficult to record any conclusion whether the receipt was of a revenue nature or of a capital nature.
We therefore call upon the Tribunal to submit to this Court a supplementary statement setting out the terms of the agreement between the father of the appellant relating to the rights conveyed to, the lessees in the forest lands and especially about the import of the term relating to "clear felling".
The Tribunal will submit the supplementary statement of the case only on the basis of the evidence on the record and will not take any additional evidence.
The report to be submitted within three months from the date on which the papers reach the Tribunal.
Shah, J.
By our order dated February 13, 1969, we called for a supplementary statement of the case setting out the terms of the agreement conveying the rights in the forest trees to the lessees, and the true import of the expression "clear felling".
The Income tax Appellate Tribunal has submitted a supplementary statement o,f the case.
The Tribunal has set out the relevant terms of the agreement and has also observed that the import of the expression "clear felling" is that "all trees except casuring are to be felled at 'a height not exceeding six inches from the ground, the barks being left intact on the stump and adhering to it all round the stump without being torn off or otherwise changed".
There is no suggestion that there were any casurina trees in the forest lands let out to the lessees.
It is common ground also that the trees in the forest were of spontaneous growth.
The 551 Tribunal has found that by the use of the expression "clear felling" it was stipulated that the trees are to be cut so that 6" of the trunk with the barks intact and adhering to it all round the stump is left.
This is with a view to permit regeneration of the trees.
The question whether receipts from sale of trees by an owner of the land who is not carrying on 'business in timber may be regarded as income liable to tax has given rise to.
some difference of opinion in the High Courts.
In Commissioner of Income tax, Madras vs
T. Manavedan Tirumalpad,(1) a Full Bench of the Madras High Court held that the receipts ,from sale of timber trees by the owner of unassessed forest lands in Malabar were revenue and not capital.
The Court observed that if income from the sale of coal from a coal mine or stone won from a quarry or from the sale of paddy grown on land be regarded as income, but for the special exemption granted under the Income tax Act, there is no logical reason for holding that income from sale of trees is not income liable to tax.
In re Ram Prasad(2) a Division Bench of the Allahabad High Court held that receipt from sale of timber is income liable to be taxed and is not a capital receipt.
The case arose under the Government Trading Taxation Act 3 of 1926.
In Maharaja of Kapurthala vs Commissioner of Income tax, C.P. and U.P.(3) the Oudh Chief Court held that net receipt from the sale of forest trees is income liable to income tax, eventhough the ,forest may be gradually exhausted by fellings.
The Court further observed that income from the sale of forest trees of spontaneous growth growing on land which is assessed to land revenue is not agricultural income within the meaning of section 2(1 ) (a) of the Income tax Act and is not exempt from income tax under section 4(3)(viii) of the Act.
In Raja Bahadur Kamakshya Narain Singh vs Commissioner of Income tax, Bihar and Orissa(4) a similar view was expressed by the Patna High Court.
In Fringford Estates Ltd., Calicut vs Commissioner of Income tax, Madras(b) it was held that profits realised from the sale of timber were trade profits and were liable to income tax.
In that case the assessee Company formed with the object of purchasing, clearing and improving of estates and the cultivation and sale of tea, coffee etc.
in such estates, purchased a tract of land part of which had already been cultivated with tea and the rest was a jungle capable of being cleared and made fit for plantation.
The (1) I.L.R. 54 Mad.21.
(2) I.L.R.52 All.
(3) (4).
(5) 552 Company entered into an agreement with a timber merchant for clearing a part of the forest of all trees and for sale of the trees m the market.
This was held to be a part of the business activity of the Company.
The cases on the other side of the line are to be found in Commissioner of Income tax, Bombay South vs N.T. Patwardhan(1) in which a Division Bench of the Bombay High Court held that when old trees which stood on the land of the assessee were disposed of with their roots "once and for all", the receipts were capital.
The Court observed (p. 318): "The asset of the man was the land with the wild growth of trees on it.
If the land with the trees had been sold, there could have been no doubt that the sale was a realisation of capital and it would not have been possible to argue that the transaction in so far as it involved a sale of the trees was a sale producing income and the remaining part of the transaction was a capital sale.
In the present case the land is retained by the assessee but a part of the asset is disposed of in its entirety by selling the trees with roots once and for all.
" In State of Kerala vs Karimtharuvi Tea Estate Ltd.(2) the Kerala High Court held in a case arising under the Kerala Agricultural Income tax Act, 1950, that the amount realised by sale as firewood of old and useless gravelia trees grown and maintained in tea gardens for the purpose of affording shade to tea plants is capital receipt and not revenue receipt.
The Court observed: "The gravelia trees were grown and maintained for the sole purpose of providing shade to the tea bushes in the tea estates of the assessee.
That such shade is essential for the proper cultivation of tea cannot be disputed and the trees should hence be considered to be as much a part of the capital assets of the company as the tea bushes themselves or the equipment in its ,factories.
Some of the gravelia trees became old and useless with the efflux of time and they naturally had to be cut down and sold.
The sale proceeds of such trees cannot possibly amount to a revenue receipt." In Commissioner of Income tax, Mysore V.H.B. Van Ingen(3) the Mysore High Court held that the assessee who had purchased a coffee estate of which a part had been planted with coffee plants and the rest was jungle, and had cleared the jungle (1)41 I.T.R. 313.
(2) 5 I.T.P 129.
(3) 553 for the purpose of planting coffee and had sold the trees felled, price realised by the sale of the trees was a capital and not a revenue receipt, because the trees had grown spontaneously, and the assessee had purchased the estate including the trees.
It is not necessary for the purpose of this case to enter upon a detailed analysis of the principle underlying the decisions and to resolve the conflict.
On the finding in the present case it is clear that the trees were not removed with roots.
The stumps of the trees were allowed to remain in the land so that the trees may regenerate.
If a person sells merely leaves or fruit of the trees or even branches of the trees it would be difficult (subject to the special exemption under section 4(3)(viii) of the Income tax Act, 1922) to hold that the realization is not of the nature of income.
Where the trunks are cut so that the stumps remain intact and capable of regeneration, receipts from sale of the trunks would be in the nature of income.
It is true that the tree is a part of the land.
But by selling a part of the trunk, the assessee does not necessarily realise a part of his capital.
We need not consider whether in case there is a sale of the trees with the roots so that there is no possibility of regeneration, it may be said that the realisation is in the nature of capital.
That question does not arise in the present case.
The appeal fails and is dismissed with costs.
G.C. Appeal dismissed. | In computing the income of the appellant 's father for the assessment year 1959 60 the Income tax Officer included Rs. 75,000 received under an agreement for cutting and removing trees from 500 acres of forest land in Madras State.
The Income tax Officer held that the income was taxable because the land was leased for clear felling by the father of the appellant.
What the expression 'clear felling ' meant was not investigated by the Income tax Officer.
The Appellate Assistant Commissioner confirmed the assessment order.
But the Tribunal held that the receipt was of a capital nature and deleted it from the taxable income.
In reference the High Court differed from the Tribunal.
In appeal 'against the High Courts order this Court directed the Tribunal to submit to this Court a supplementary statement of case setting out the terms of the agreement between the father of the appellant relating to the rights conveyed to the lessees and especially about the import of the ' term relating to 'clear felling.
The Tribunal in its supplementary statement of case set out the relevant terms of the agreement and observed that the import of the expression 'clear felling ' is that 'all trees except casurina are to be felled at a height not exceeding six inches from the ground, the barks being left intact on the stump and adhering to it all round the stump without being torn off or otherwise changed.
" It was not suggested that there were any casurina trees in the forest land let out to the lessees and it was common ground that the trees in the forest were of spontaneous growth.
HELD: The appeal must be dismissed.
the finding in the present case it was clear that the trees were not removed with roots.
The stumps of the trees were allowed to remain in the land so that the trees may regenerate.
If a person sells merely leaves or fruit of the trees or even branches of the trees it would be1 difficult (subject to the special exemption under section 4(3)(viii) of the Income tax Act, 19 '22) to hold that the realisation is not of the nature of income.
It is true that the tree is a part of the land.
But by selling a part of the trunk, the assessee does not necessarily realise a part of his capital.
[553 B C] Commissioner of Income tax, Madrs, vs
T. Manavedan Tirumalpad, I.LR. , In re: Ram Prasad, I.L.R. 52 All.
419, Maharaja of Kapurthala vs Commissioner of Income tax, C.P. & U.P. , Raja Bahadur Kamkshya Narain Singh vs Commissioner of Income tax, Bihar & Orissa, , Fringford Estate Ltd., Calicut vs Commissioner of Income tax, Madras, , Commissioner of Income tax, Bombay South vs
N.T. Patwardhan, ,State of Kerala vs Karimtharuvi Tea Estate Ltd. and Commissioner of Income tax, Mysore vs
H.B. Van Ingen, , referred to.
548 [Question whether in case of sale of trees with the roots so that there is no possibility of regeneration the realisation may be said to be, in the nature of capital, left open.] [553 D] |
Appeal No. 444 of 1966.
Appeal by special leave from the judgment and order dated October 9, 1963 of the Allahabad High Court in F.A.F.O. No. 268 of 1957.
N.D. Karkhanis and O.P. Rana, for the appellant.
R. Gcpalakrishnan, for respondents Nos. 1 (i), to (iv), (vii) and (xi), The Judgment of the Court was delivered by Shah, J.
One Radhey Lal instituted Suit No. 4 of 1950 in the Court of the Civil Judge, Jaunpur, for a declaration that he was the "owner in possession" of the estate left by Dhan Devi.
To that suit Ram Krishan Burman was impleaded as a party defendant.
This suit was decreed ex parte.
Ram Krishan then filed Suit No. 14 of 1956 in the Court of the Civil Judge, Jaunpur, against the heirs of Radhey Lal (who had died since the passing of the decree in Suit No. 4 of 1950), claiming that he was "appointed an heir by Dhan Devi" of properties described in lists B, J & D in the plaint, that the dispute concerning the inheritance to the estate left by Dhan Devi was settled between him and Radhey Lal, that Radhey Lal admitted his title to the properties in Lists B, J & D and it was agreed that in the properties in Lists A, B, J & D Radhey Lal had 11/16th share and that he had 5/16th share, that a memorandum was drawn up in that behalf, and that Radhey Lal represented to him that a compromise decree will be obtained in that suit, but thereafter taking advantage of his ignorance Radhey Lal obtained a decree ex parte.
The following substantive reliefs were claimed by the plaintiff: "(a) that a declaratory decree in favour of the plaintiff and against the defendants declaring the plaintiff as the owner of the properties in Lists, A, B, J & D be passed; (b) in case in the opinion of the Court prayer (a) cannot be granted, then, alternatively, declaration declaring the plaintiff as the owner of properties in B, J and D being the stridhana of Rani Dhan Dai Kaur be 590 issued, decree in Suit No. 4 of 1950 has no adverse effect on the rights of the plaintiff;" The plaintiff valued the properties in dispute at Rs. 5,99,503/6/3, but on the footing that he had claimed a mere declaration paid Rs. 18/12/0 as.
court fees as in a claim under Sch.
II el. 17(iii) of the Court Fees Act.
The Inspector of Stamps reported to the Civil Judge that in his view the case fell within section 7(vi A) as incorporated by the U.P. State Legislature, and court fee was chargeable according to the value of the subject matter, and the plaintiff was liable to pay Rs. 3,528/8/ as court fee on the plaint.
The Civil Judge ordered the plaintiff to amend the plaint and to pay the court fee remaining due.
The plaintiff appealed against the order of the Civil Judge to the High Court of Allahabad.
The High Court held that the court fee paid by the plaintiff was proper, and set aside the order holding that the case did not fall within section (iv A) of the Court Fees Act.
The State of U.P. has appealed to this Court with special leave.
Section 7 (iv A) of the Court Fees Act as enacted by the U.P. State Legislature, insofar as it is relevant, reads: "In suits for or involving cancellation of or adjudging void or voidable a decree for money or other property having a market value, or an instrument securing money or other property having such value.
(1) where the plaintiff or his predecessor in title, was a party to the decree or the instrument, according to the value of the subject matter, and There is no dispute that the plaintiff claimed a declaration adjudging void the decree in Suit No. 4 of 1950 declaring Radhey Lal box be the "owner in possession of the estate of Dhan Devi".
The plaintiff by his plaint had claimed two declarations in the alternative, and prima facie, the plaint was of the description in Sch.
II CL 17(iii) of the Court Fees Act.
But counsel for the State of U.P. contends that the reliefs claimed fell within section 7(iv A) of the Court Fees Act.
Counsel says that the expression "decree for money or other property" does not mean a decree awarding money or other property, but a decree concerning or relating to money or other property, and he says that where the Court declares the plaintiff 's title to money or property simpliciter, the decree is one for money or for other property.
We are unable to 591 agree with that contention.
The expression "for" occurs twice in the opening part of the clause.
Evidently the expression "for" when it occurs for the first time means "for obtaining a decree ordering (payment or recovery of)".
The expression "for" also occurs in several other clauses of the Court Fees Act.
In section 7 of the Court Fees Act as amended by the U.P. Legislature which deals with computation of court fee payable in certain classes of suits, following clauses occur: "(i) In suits for money (ii) (a) In suits for maintenance and annuities or other sums payable periodically : (b) In suits for reduction or enhancement of maintenance and annuities or other sums payable periodically (iii) In suits for movable property other than money, where the subject matter has a market value (iv) In suits (b) for accounts (iv) B.
In suits (a)for a right to some . to arise out of land.
(iv) C.
In suits (a) for the restriction of conjugal fights, (b)for establishing or annulling or dissolving a marriage, (c) for establishing a fight to the custody or guardianship of any person.
(v) A.
In suits for possession . (v) B.
In suits for possession between rival tenants.
(vi) A.
In suits for partition.
(vii) In suits for the interest of an assignee of land: ' revenue.
(ix) In suits against a mortgage for the recovery of the property mortgaged.
(x) In suits for specific performance 592 (xi) In the following suits between landlord and tenant (a)for the delivery by a tenant of the counter part lease, (c) for the delivery by a landlord of a lease, (cc) for the recovery of immovable property from a tenant.
(f) for abatement of rent, (g) for commutation of rent, In all these clauses the expression "for" is used as meaning "for obtaining a decree ordering (payment or recovery of)".
If the expression "for" occurring for the first time in section 7 (iv A) means in the context in which it occurs obtaining a decree for cancellation of or adjudging void or voidable a decree, it would be difficult to hold that the expression "decree for money or other property" has a wider connotation and means a decree which concerns or relates to money or other property.
A decree for declaration of title to money or other property is not a decree for money or other property.
In our judgment the expression "decree for money or other property" means only a decree for recovery of money or other property.
It does not include a decree concerning title to money or other property.
It was urged that in any event the plaintiff had sued for adjudging void or voidable an "instrument" securing money or other property having market value.
But a decree in invited is not an instrument securing money or other property: such a decree is a record of the formal adjudication of the Court relating to a right claimed by a party to a suit.
It does not by its own force secure money or property.
A consent decree in certain cases may be regarded as an instrument securing money or other property, where the decree proceeds upon a contract which had that effect, but that is only because a consent decree is a record of the contract between the parties to which is superadded the seal of the Court.
In our view the High Court was right in holding that the court fee paid on the plaint was proper.
It may be pointed out that the plaintiff had claimed nothing more than a declaration with regard to certain properties.
593 We are also unable to accept the contention of counsel for the State that the relief for declaration was a mere device or subterfuge intended to conceal the true purport of the claim.
It iS evident that the District Magistrate, Jaunpur was in possession of the property in dispute and if the civil court declared the title of the plaintiff, he would be entitled to secure recognition of his rights.
Before parting with the case we must observe that we have felt greatly perturbed by the course which this litigation has taken.
The suit was filed in 1956.
And after 13 years only the question of court fee payable on the plaint is decided.
In the meanwhile the original plaintiff died.
The delay is largely attributable to the rigid attitude of the State which has by insisting upon a comparatively small claim, held up the proceedings for all these long years by raising contentions which had no merit.
We trust the Court of First Instance will take up this suit for hearing with the least practicable delay and dispose of the suit according to law.
The State to pay in this appeal the costs of the heirs of the original plaintiff.
G.C. Appeal dismissed. | As the reversioner of a Hindu widow 's estate one 'R ' instituted suit No. 4 of 1950 in the court of the Civil Judge Jaunpur, for a declaration that he was the 'owner in possession ' of the said estate. 'B ' who claimed to be an heir of the widow was impleaded as a party defendant.
The suit was decreed ex parte. 'B ' then filed suit No. 14 of 1956 in the same court against the heirs of 'R ' who died after the, passing of the decree in his suit.
In suit No., 14 of 1956 'B ' claimed that as heir of the said widow he was entitled to her stridhuna properties.
He averred that in suit No. 4 of 1950 'R ' had arrived at an oral compromise with him promising him 5/16th share in the, whole estate.; that the oral compromise was later reduced into a memorandum; that 'R ' had represented to him that a compromise decree would be obtained in the suit; and that taking advantage of his ignorance 'R ' had obtained an ex parte decree against him.
On these allegations 'B ' prayed that he be declared the owner of all the properties left by the widow, and in the alternative he be declared owner of her stridhan properties, the decree in suit No. 4 of 1950 having no adverse effect on his rights.
On the footing that he had claimed a mere declaration 'B ' paid Rs. 18/12/ as court fees as in a claim under Sch.
II cl.
17(iii) of the Court Fees Act.
The Inspector of Stamps, however, reported to the Civil Judge that in his view the case fell within section 7(iv A) of the Act as incorporated therein by the U.P. State Legislature and court fee was payable on the value of the subject matter of the suit.
The Civil Judge ordered the plaintiff to amend the plaint and pay the court fee remaining due.
In appeal the High Court decided in favour of the respondent.
The State of U.P. appealed.
It was contended on behalf of the appellant: (i) that the plaintiff sought a declaration adjudging void the decree in suit No. 4 of 1950 which was a decree "for money or other property" within the meaning of section 7(iv A) since that expression must include a decree concerning or relating to money or other property, (ii) that in any case the decree in suit No. 4 was an 'instrument ' securing money or other property having market value and section 7(iv A) was therefore attracted; (iii) that the relief for declaration was a mere device intended to conceal the true purport of the claim.
HELD: The appeal must be dismissed.
(X) A decree for declaration of title to money or other property is not a decree for money or property.
The expression "decree for money or other property" means only a decree for recovery of money or other property.
It does not include a decree concerning title to money or other property.
[592 E F] (ii) A decree ad invitum is not an instrument securing money or other property: such a decree is a record of the formal adjudication of the 589 court relating to a right claimed by a party to the suit.
It does not by its own force secure money or property.
[592 G] (iii) The relief for declaration was not a mere device or subterfuge intended to conceal the true purport of the claim for the property in dispute was in the possession of the District Magistrate, and if the Civil Court declared the plaintiff 's title he would be entitled to secure recognition of his rights by the District Magistrate.
[593 A B] |
l Appeal No. 1613 of 1966.
Appeal from the judgment and decree dated August 19, 1963 of the Punjab High Court, Circuit Bench at Delhi in Letters Patent Appeal No. 50 D of 1960.
V.A. Seyid Muhammad, S.P. Nayar and B.D. Sharma ', for the appellants.
S.T. Desai, K.L.Arora, Bishambar Lal and H.K. Puri, for the respondent.
The Judgment of the Court was delivered by Ramaswami, J.
This appeal is brought by certificate from the judgment of the Division Bench of the Punjab High Court dated August 19, 1963 in Letters Patent Appeal No. 50 D of 1960.
An auction was held for the sale of licence of country liquor shop in Bela Road for the year 1949 50 on March 23, 1949.
The auction took place in pursuance of the conditions of "Auction of Excise Shops in Delhi for the year Clauses 31 and 33 of the conditions were to the following effect: "31.
The Chief Commissioner is under no obligation to grant any license until he is assured of financial status of the bidder.
At the conclusion of the auction an enquiry will be made into the financial position of any bidder not known to the excise staff and any such bidder shall if necessary be called upon to furnish security for the observance of the terms of his licence as required by sub section (2) of section 34 of the Punjab Excise Act 1 of 1914, as extended to Delhi Province.
596 33.
All final bids will be made subject to the confirmation by the Chief Commissioner who may reject any bid without assigning any reasons.
If no bid is accepted for any shop,_ the Chief Commissioner reserves the right to dispose.
it off by tender or otherwise as he thinks The respondent offered the highest bid of Rs. 4,01,000/ for the shop.
Under the Excise Rules the bidder had to deposit one sixth of the purchase price within seven days of the auction but the deposit was not made by the respondent.
In these circumstances the Chief Commissioner did not confirm the bid of the respondent and resale of the Excise Shop was ordered.
On May 3, 1949 the shop was again auctioned when Messrs Daulat Ram Amar Singh offered the highest bid of Rs. 2,20,000/ which was confirmed by the Chief Commissioner, on July 7, 1949.
Holding the respondent liable for the loss of Rs. 1,81,000 being the difference between the bid of the respondent and of Messrs Daulat Ram Amar Snigh the Collector of Delhi started proceedings for the recovery of Rs. 1,81,000,./. On July 22, 1949 the respondent filed a suit in the court of Senior Subordinate Judge, Delhi praying for a permanent injunction restraining the appellants from taking any proceedings to recover the amount.
The trial judge decreed the suit holding that the sale was subject to confirmation by the Chief Commissioner under cl. 33 and since the auction in favour of the respondent was not accepted by him there was no binding obligation between the parties.
The decree of the trial court was upheld by the lower appellate court.
In second appeal False, J., took the view that cl. 3 3 was not in consonance with the statutory rules and the contract came into existence when the bidding was closed in favour of the respondent on March 23, 1949.
The respondent was therefore held liable to make good the loss which the Government sustained in resorting to the resale of the excise shop.
The resportdent preferred an appeal under Letters Patent.
The Division Bench allowed the appeal reversing the decision of the single Judge and restored that of the trial court.
Clause 21 of rule 5.34 states: "A person to whom a shop has been sold shall pay one sixth of the annual fee within seven days of the auction (any deposits already made shall be credited to this sum, and any excess shall be either returned to him or credited to future payments).
By the 7th of the month in which he begins his business under his license and by the 7th of every subsequent month the licensee shall pay one twelfth of the annual fee till the whole fee is paid.
But he may at any time pay the whole amount due if he wishes.
If the total amount due is less than Rs. 100 it shall be payable in one sum unless the Collector for 597 special reasons, allows payment to be made in instalments.
If any person whose bid has been accepted by the officer presiding at the auction fails to make the deposit of one sixth of the annual fee, or if he refuses to accept the license, the Collector may resell the license, either by public auction or by private contract, and any deficiency in price and all expenses of such resale or attempted resale shall be recoverable from the defaulting bidder in the manner laid down in section 60 of the Punjab Excise Act, 1 of 1914, as applied to the Delhi Province.
Rule 22 states: "When a license has been cancelled, the Collector may resell it by public auction or by private contract and any deficiency in price and all expenses of such resale or attempted resale shall be recoverable from the defaulting licensee in the manner laid down in section 60 of the Excise Act as applied .to the Delhi Province.
" On behalf of the appellants it was contended by Dr. Seyid Muhammad that the respondent was under a legal obligation to pay one sixth of the annual fee within seven days of the auction under cl. 21 of r. 5.34 and it.
was due to his default that a resale of the excise shep was ordered.
Under cl. 22 of r. 5.34 the respondent was liable for the deficiency in price and all expenses of such resale* which was caused by his default.
We are unable to accept this argument.
The first portion of cl. 21 requires the "person to whom the shop has been sold" to deposit one sixth of the total annual fee within seven days.
But the sale is deemed to have been made in favour of the highest bidder only on the completion of the formalities before the conclusion of the sale.
Clause 16 of r. 5.34 states that "all sales are open to revision by the Chief Commissioner".
Under cl. 18, the Collector has to make a report to the Chief Commissioner where in his discretion he is accepting a lower bid.
Clause 33 of the Conditions, exhibit D 28, states that "all final bids will be made subject to the confirmation by the Chief Commissioner who may reject any bid without assigning any reasons.
" It is, therefore, clear that the contract of sale was not complete till the bid was confirmed by the Chief Commissioner and till such confirmation the person whose bid has been provisionally accepted is entitled to withdraw his bid.
When the bid is so withdrawn before the confirmation of the Chief Commissioner the bidder will not be liable for damages on account of any breach of contract or for the shortfall on the resale.
An acceptance of an offer may be either absolute or conditional.
If the acceptance is conditional the offer can be withdrawn at any moment until absolute acceptance has taken place.
This view is borne out by the 598 decision of the Court of Appeal in Hussey vs HornePayne(1).
In that case V offered land to P and P accepted 'subject to the title being approved by my solicitors '.
V later refused to go on with the contract and the Court of Appeal held that the acceptance was conditional and there was no binding contract and that V could withdraw at any time Until P 's solicitors had approved the title.
Jessel, M.R. observed at p. 626 of the report as follows: "The offer made to the Plaintiff of the estate at that price was a simple offer containing no reference whatever to title.
The alleged acceptance was an acceptance of the offer, so far as price was concerned, 'subject to the title being approved by our solicitors '.
There was no acceptance of that additional term, and the only question which we are called upon to decide is, whether that additional term so expressed amounts in law to an additional term or whether it amounts, as was very fairly admitted by the counsel for the Respondents, to nothing at that is, whether it merely expresses what the law would otherwise have implied.
The expression 'subject to the title being approved by our solicitors ' appears to me to be plainly an additional term.
The law does not give a right to the purchaser to say that the title shall be approved by any one, either by his solicitor or his conveyancing counsel, or any one else.
All that he is entitled to require is what is called a marketable title, or, as it is sometimes called, a good title.
Therefore, when he puts in 'subject to the title being approved by our solicitors ', he must be taken to mean what he says, that is, to make a condition that solicitors of his own selection shall approve of the title.
" It was submitted on behalf of the appellant that the phrase "person to whom a shop has been sold" in cl.
21 of r. 5.34 means a " 'person whose bid has been provisionally accepted".
It is not possible to accept this argument.
As we have already shown the first part of cl.
21 deals with a completed sale and the second part deals with a situation where the auction is conducted by an officer lower in rank than the Collector.
In the latter case the rule makes it clear that if any person whose bid has been accepted by the officer presiding at the auction fails to make the deposit of one sixth of the annual fee, or if he refuses to accept the licence, the Collector may resell the licenee, either by public auction or by private contract and any deficiency in price and all expenses of such resale shall be recoverable from the defaulting bidder.
In the present case the first part of cl. 21 applies.
It is not disputed that the (1) at 676.
599 Chief Commissioner has disapproved the bid offered by the respondent.
If the Chief Commissioner had granted sanction under cl. 33 of exhibit D 23 the auction sale in favour of the respondent would have been a completed transaction and he would have been liable for any shortfall on the resale.
As the essential pre requisites of a completed sale are missing in this case there is no liability imposed on the respondent for payment of the deficiency in the price.
For these reasons we hold that the judgment of the Punjab High Court dated August 19, 1963 in L.P.A. No. 50 D of 1960 is correct and this appeal must be dismissed with costs.
G.C. Appeal dismissed. | The respondent gave the highest bid at an auction for the sale of license for a country liquor shop in Delhi for the year 1949 50.
Under cl. 31 of the conditions of sale for that year, the Chief Commissioner was under no obligation to grant a license until he was assured of the financial status of the bidder.
Under el.
33 all final bids were made subject to confirmation by the Chief Commissioner who could reject any bid assigning any reasons.
However under cl. 21 of r. 5.34 of the Delhi Liquor License Rules a person to whom a shop had been sold had to pay one sixth of the annual fee within seven days of the auction.
The respondent not having paid one sixth of the annual fee as required by the said cl. 21, the Chief Commissioner did not confirm his bid.
Resale of the excise shop was ordered.
At the new auction it was sold at a lower price.
The Collector Delhi thereupon held the respondent liable to pay the difference between his bid and the bid for which the shop was later sold, and commenced proceedings for the recovery of the sum.
The respondent filed a suit in the Court of the Senior Subordinate Judge, Delhi praying for a permanent injunction restraining the appellants (Union of India & Ors.) from taking any proceedings for the recovery of the amount.
The trial judge decreed the suit.
The decree was upheld by the first appellate court.
In second appeal the Single Judge decided against the respondent.
The Division Bench decided in his favour.
The appellants came to this Court with certificate.
It was contended on behalf of the appellants that the respondent was under a legal obligation to pay one sixth of the annual fee within seven days of the auction under el.
21 of r. 5.34; it was due to his default that a resale of the excise shop was ordered; and under cl. 22 of r. 5.34 the respondent was liable for the deficiency in price and all expenses of such resale which was caused by his default.
HELD: (i) An acceptance of an offer may be either absolute or conditional.
If the acceptance is conditional the offer can be withdrawn at any moment until absolute acceptance has taken place.
[H 597] From cl. 33 of the conditions of sale it is clear that the contract of sale is not complete till it is confirmed by the Chief Commissioner and till such confirmation the person whose bid has been provisionally accepted is entitled to withdraw his bid.
If the bid is so withdrawn before the confirmslion of the Chief Commissioner the bidder will not be liable for damages on account of any breach of contract or for the shortfall on resale.
[G H 597] Hussers vs Horne Payne, , 676, referred to.
595 (ii) The phrase "person to whom a shop has been sold" in el.
21 r. 5.34 cannot be accepted to mean a "person whose bid has bern provisionally accepted".
The first part of el.; 21 deals with a completed sale and the second part with a situation where the auction is conducted by an officer lower in rank than the Collector.
In the latter case the rule makes it clear that if any person whose bid has been accepted by the officer presiding at the auction fails to make the deposit of one sixth of the annual fee, or if he refuses to accept the licence.
the Collector may resell the licence either by public auction or by private contract and any deficiency in price and all expenses of such resale shall be recoverable from the defaulting bidder.
[F G 598] In the present case the first part of d. 21 was applicable.
If the Chief Commissioner had not disapproved the bid offered by the respondent under el.
33 of the conditions of sale, the auction sale in favour of the respondent would have been a completed transaction and he would have been liable for any shortfall on the resale.
As the essential prerequisites of a completed sale were lacking in this case there was no liability imposed on the respondent for payment of the deficiency in the price.
[598 H; 599 A B] |
Appeal No. 2227 of 1966.
689 Appeal from the judgment and decree dated December 10, 1963 of the Kerala High Court in Appeal Suit No. 1094 of 1959.
section V. Gupta and Lily Thomas, for the appellants.
Rameshwar Nath, for respondent No. 2.
Sardar Bahadur, Vishnu Bahadur Saharya and Yougindra Khushalani, for respondent No. 3.
The Judgment of the Court was delivered by Hegde, J.
The question for decision in this appeal by certificate is short but important and that question is what are the principles governing the assessment of damages under sections 1A and 2 of the (Act XIII of 1855) (to be hereinafter referred to as the Act) ? One Krishnamoorthy son of plaintiffs 1 and 2 aged about 8 years was hit by a bus owned by the 1st defendant (who died during the pendency of this suit) and driven by the second defendant on February 26, 1956.
As a result of that accident Krishnamoorthy sustained very severe injuries.
He became unconscious almost immediately after the accident and died in the hospital on the early morning of February 28, 1956.
Krishnamoorthy was the eldest son of plaintiffs 1 and 2.
Both the courts have come to the conclusion that he was a bright boy and was at the top of his class in his school.
At the time of his death he was in Standard III.
His parents are affluent.
They could have afforded to give him good education.
Hence there was a bright future for him.
The plaintiffs claimed a sum of Rs. '30,000 as damages under sections IA and 2 of the Act.
The District Judge computed the damages under sections IA and 2 at Rs. 5,000.
In appeal the High Court determined the damages under section 1A at Rs. 5,000 and under section 2 at Rs. 1,000.
Aggrieved by that decision, the plaintiffs have brought this appeal.
We shall first read section 1A and 2 for the purpose of ascertaining the principles governing the assessment of the damages under those sections.
Section IA reads : "Whenever the death of a person shall be caused by wrongful act, neglect or default and the act, neglect or default is such as would (if death had not ensued) have entitled the party injured to maintain an action and recover damages in respect thereof, the party who would have been liable it death had not ensued shall be liable to an action or suit for damages notwithstanding the death of the person injured, and although the death shall have been caused under such circumstances as amount in law to felony or other crime.
Every such action or suit shall be for benefit of the wife, husband, parent and child, if any, of the person 690 whose death shall have been so caused, and shall be brought by and in the name of the executor, administrator or representative of the person deceased;" Section 2 reads thus : "Provided always that not more than one action or suit shall be brought for, and in respect of the same subject matter of complaint.
Provided that, in any such action or suit, the executor, administrator or representative of the deceased may insert a claim for and recover any pecuniary loss to the estate of the deceased occasioned by such wrongful act, neglect or default, which sum, when recovered, shall be deemed part of the assets of the estate of the deceased.
" The rights under the two provisions are quite distinct and independent.
Under the former section the damages are made payable to one or the other relations enumerated therein whereas the latter section provides for the recoupment of any pecuniary loss to the estate of the deceased occasioned by the wrongful act complained of.
Sometimes, the beneficiaries under the two provisions may be the same.
Section IA is in substance a reproduction of the English Fatal Accidents Acts 9 and 10 Vict.
93 known as the Lord Campbell 's Acts.
Section 2 corresponds to one of the provisions in the English Law Reform (Miscellaneous Provisions) Act, 1934.
The scope of section 1 of the Campbell 's Acts was considered by the House of Lords in Davies and Anr.
vs Powell Dufferyn Associated Collieries Ltd.(1), Dealing with the mode of asse ssment of damages under that section Lord Russel of Killowen observed "The general rule which has always prevailed in regard to the assessment of damages under the is well settled, namely, that any benefit accruing to a dependant by reason of the relevant death must be taken into account.
Under those Acts the balance of loss and gain to a dependant by the death must be ascertained, the position of each dependant being considered separately.
" Lord Wright stated the law on the point thus "The general nature of the remedy under the Fatal Accidents general Acts has often been explained.
These Acts provided a new "cause of action and did not merely regulate or enlarge an old one", as Lord Summer observed in Admiralty Commissioners vs section section (1) 691 America(1).
The claim is, in the words of Bowen L.J., in The Vera Cruz (No. 2)(2) for injuriously affecting the family of the deceased.
It is not a claim which the deceased could have pursued in his own life time, because it is for damages suffered not by himself, but by his family after his death.
The Act of 1846, section 2 provides that the action is to be for the benefit of the wife or other member of the family, and the jury (or judge) are to give such damages as may be thought proportioned to the injury resulting to such parties from the death.
The damages are to be based on the reasonable expectation of pecuniary benefit or benefit reducible, to money value.
In assessing the damages all circumstances which may be legitimately pleaded in diminution of the damages must be considered : Grand Trunk Ry.
Co. of Canada vs Jennings(4).
The actual pecuniary loss of each individual entitled to sue can only be ascertained by balancing, on the one hand, the loss to him of the future pecuniary benefit, and, on the other, any pecuniary advantage which from whatever source comes to him by reason of the death.
" In ascertaining pecuniary loss caused to the relations mentioned in section IA, it must be borne in mind that these damages are not to be given as solatium but are to be given with reference to a pecuniary loss.
The damages should be calculated with reference to a r easonable expectation of pecuniary benefit from the continuance of the life of the deceased see Franklin vs The South East Railway Company (4 In that case Pollock, C.B. observed : "We do not say that it was necessary that actual benefit should have been derived, a reasonable expectation is enough and such reasonable expectation might well exist, though from the father, not being in need, the son had never done anything for him.
On the other hand a jury certainly ought not to make a guess in the matter, but ought to be satisfied that there has been a loss of sensible and appreciable pecuniary benefit, which might have been reasonably expected from the continuance of the life." In Taff Vale Railway Company vs Jenkins(5), the Judicial Committee observed that it is not a condition precedent to the maintenance of an action under the Fatal Accidents Act, 1846, (1) ,52 (3) 13 Appeal Cases.800, 804.
(4) 157, English Reports 3 H & N.T. 448.
(5) (2) , 101: 692 that the deceased should have been actually earning money or money 's worth or contributing to the support of the plaintiff at or before the date of the death provided that the plaintiff had a reasonable expectation of pecuniary benefit from the continuance of the life.
Therein Lord Atkinson stated the law thus : "I think it has been well established by authority that all that is necessary is that a reasonable expectation of pecuniary benefit should be entertained by the person who sues.
It is quite true that the existence of this expectation is an inference of fact there must be a basis of fact from which the inference can reasonably be drawn; but I wish to express my emphatic dissent from the proposition that it is necessary that two of the facts without which the inference cannot be drawn are, first, that the deceased earned money in the past, and second, that he or she contributed to the support of the plaintiff.
These are, no doubt, pregnant pieces of evidence, but they are only pieces of evidence; and the necessary inference can I think be dr awn from circumstances other than and different from them." in an action under the Act, it is not sufficient for the plaintiff to prove that he lost by the death of the deceased a mere speculative possibility of pecuniary benefit.
In order to succeed, it is necessary for him to show that he has lost a reasonable proba bility of pecuniary advantage.
In Barnett vs Cohen and ors.(1), McCardie J. speaking for the Court quoted with approval the following observations of Lord Haldane in his judgment in Taff Vale Ry.
Co. vs Jenkins(2) : " "The basis is not what has been called solatium, that is to say, damages given for injured feelings or on the ground of sentiment, but damages based on compensation for a pecuniary loss.
But then loss may be prospective, and it is quite clear that prospective loss may be taken into account.
It has been said that this is qualified by the proposition that the child must be shown to have been earning something before any damages can be assessed.
I know of no foundation in principle for that proposition either in the statute or in any doctrine of law which is applicable; nor do I think it is really established by the authorities when you examine them. . .
I have already indicated that in my view the real question is that which Willes, J. defines in one of the cases quoted to us, Dalton vs South (1) (2) 693 Eastern Rv. Co.(1) 'Aye or No, was there a reasonable expectation of pecuniary advantage ?" Proceeding further the learned judge referred to the observations of Pollock, C. B. in Taff Vale Ry.
Co. vs Jenkins(2) : " "It appears to me that it was intended by the Act to give compensation for damage sustained, and not to enable persons to sue in respect of some imaginary damage, and so punish those who are guilty of negligence by making them pay costs." " Dealing with the facts of the case before him McCardie, J. observed : "In the present action the plaintiff has not satisfied me that he had a reasonable expectation of pecuniary benefit.
Ms child was under four years old.
The boy was subject to all risks.
of illness, disease, accident and death.
His education and upkeep would have been a substantial burden to the plaintiff for many years if he had lived.
He might or might not have turned out a useful young man.
He would have earned nothing till about sixteen years of age.
He might never have aided his father at all.
He might have proved a mere expense.
I cannot adequately speculate one way or the other.
In any event he would scarcely have been expected to contribute to the father 's income, for the plaintiff even now possesses 1,0001, a year by his business and may increase it further, nor could the son have been expected to aid in domestic service.
The whole matter is beset with doubts, contingencies and uncertainties.
Equally uncertain, too, is the life of the plaintiff himself in view of his poor health.
He might or might not have survived his son.
That is a point for consideration, for, as was pointed out by Bray J., when sitting in the Court of Appeal in Price vs Glynea and Castle Coal Co.(3): "Where a claim is made under Lord Campbell 's Acts, as it is here, it is not only a question of the expectation of the life of the claimant".
Upon the facts of this case the plaintiff has not proved damage either actual or prospective.
His claim is pressed to extinction by the weight or ht or multiplied contingencies.
The action therefore fails.
" The mode of assessment of damages is not free from doubt.
It is beset with certain difficulties.
It depends on many impon derables.
The English courts have formulated certain basis for (1) ; (2) (3) , 198.
694 calculating damages under Lord Campbell 's Acts.
The rules ascertained by the English courts are set out in Winfield on Torts 7th Edn.
at pp.
135 and 136 as follows : "The starting point is the amount of wages which the deceased was earning, the ascertainment of which to some ex tent may depend on the regularity of his employment.
Then there is an estimate of how much was required or expended for his own personal and living expenses.
The balance will give a datum or basic figure which will generally be turned into a lump sum by taking a number of years ' purchase.
That sum, however, has to be taxed down by having regard to the uncertainties, for instance, that the widow might have again married and thus ceased to be dependent, and other like matters of speculation and doubt".
The number of years ' purchase is left flud, from twelve to fifteen has been quite a common multiple in the case of a healthy man, and the number should not be materially reduced by reason of the hazardous nature of the occupation of the deceased man.
These principles are, however, only appropriate where the deceased was the bread winner of the family.
Obviously they cannot be applied, for example, where the claim is in respect of a mere expectation of pecuniary benefit from the deceased or where the decased 's contribution to the family was in kind and not in cash.
In truth, each case must depend upon its own facts.
In Dolbey vs Godwin(1), the plaintiff was the widowed mother of the deceased, an unmarried man 29 years of age, and he had contributed substantially to her upkeep.
The Court of Appeal held that it would be wrong to assess the damages on the same basis as if the plaintiff were the widow of the deceased, principally on the ground that it was likely that he would have married in due course and that then his contributions to his mother would have been reduced.
" The mode and manner of ascertainment of damages in fatal accidents cases came up for consideration in Nance vs British Columbia Electric Rly.
Co. Ltd.(2).
In that case Viscount Simon, formulated the following tests for ascertaining the damages : (1) First estimate what was the deceased man 's expectation of life if he had not been killed when he was; and (2) What sums during those years, he would have probably applied to the support of the dependant.
In fixing the expectation of life of the deceased regard must be had not only to his age and bodily (1) , 1103.
(2) 695 health but premature termination of his life by a later accident.
In estimating future provision for his dependant the amounts he usually applied in this way before his death are obviously relevant, and often the best evidence available though not conclusive, since if he had survived, his means might have expanded or shrunk, and his liberality might have grown or wilted.
After making the calculations on the basis of the two tests, his Lordship observed that deduction must further be made for the benefit accruing to the dependant from the acceleration of his interest in his estate and further allowance must be made for the possibility that the dependant himself might have died before he died.
In Gobald Motor Service Ltd. and anr.
vs R. M. K. Veluswami and ors.(1), this Court held that the actual extent of the pecuniary loss to the aggrieved party may depend on a data which cannot be ascertained accurately but must necessarily be an estimate, or even partly a conjecture.
Shortly stated, the general principle is that the pecuniary loss can be ascertained only by balancing on the one hand the loss to the claimants of the future pecuniary benefit and on the other any pecuniary advantage which from whatever sources come to them by reason of the death, that is, +the balance of loss and gain to a dependant by the death must be ascertained.
Therein it was further observed that where the courts below have on relevant material placed before them ascertained the amount of damages under the head of pecuniary loss to the dependants of the deceased, such findings cannot be disturbed, in second appeal except for compelling reasons.
The law on the point arising for decision may be summed up thus : Compulsory damages under section IA of the Act for worngful death must be limited strictly to the pecuniary loss to the beneficiaries and that under section 2, the measure of damages is the economic loss sustained by the estate.
There can be no exact uniform rule for measuring the value of the human life and the measure of damages cannot be arrived at by precise mathematical calculations but the amount recoverable depends on the particular facts and circumstances of each case.
The life expectancy of the deceased or of the beneficiaries whichever is shorter is an important factor.
Since the elements which go to make up the value of the life of the deceased to the designated beneficiaries are necessarily personal to each case, in the very nature of things, there can be no exact or uniform rule for measuring the value of human life.
In assessing damages, the court must exclude all considerations of matter which rest in speculation or fancy though conjecture to some extent is inevitable.
As a general rule parents are entitled to recover the present cash value of the prospective service of the deceased minor child.
In addition they may receive (1) ; 696 compensation for loss of pecuniary benefits reasonably to be expected after the child attains majority.
In the matter of ascertainment of damages, the appellate court should be slow in disturbing the findings reached by the courts below, if they have taken all the relevant facts into consideration.
Now applying the above rules to the facts of the present case, it is seen that the deceased child was only 8 years old at the time of his death.
How he would have turned out in life later is at best a guess.
But there was a reasonable probability of his becoming a successful man in life as he was a bright boy in the school and his parents could have afforded him a good education.
It is not likely that he would have given any financial assistance to his parents till he was at least 20 years old.
As seen from the evidence on record, his father was a substantial person.
He was in business and his business was a prosperous one.
As things stood he needed no assistance from his son.
There is no material on record to find out as to how old were the parents of the deceased at the time of his death.
Nor is there any evidence about their state of health.
On the basis of the evidence on record, we are unable to come to the conclusion that the damages ordered by the High Court are inadequate.
In the result this appeal fails and the same is dismissed.
But in the circumstances of the case we make no order as to costs.
G.C. Appeal dismissed. | The appellants filed a suit claiming a sum of Rs. 30,000 as damages under sections 1A and 2 of the for the death of their son aged 8 years.
The boy had stood first in Standard III and his future was claimed to be bright.
The trial court computed the damages under sections 1A and 2 at Rs. 5,000.
In appeal the High Court determined the damages under section 1A at Rs. 5,000 and under section 2 at Rs. 1,000.
In appeal by certificate before this Court.
HELD : Compulsory damages under section IA of the Act for wrongful death must be limited strictly to the pecuniary loss to the beneficiaries and under section 2 the measure of damages is the economic loss sustained by the estate.
There can be no exact uniform rule for measuring the value of human life and the measure of damages cannot be arrived at by precise mathematical calculations but the amount recoverable depends on the particular facts and circumstances of each case.
The life expectancy of the deceased or of the beneficiaries whichever is shorter is an important factor, Since the elements which go to make up the value of the life of the deceased to ' the designated beneficiaries are necessarily personal to each case in the very nature of things, there can be no exact or uniform rule for measuring the value of human life.
In assessing the damages the court must exclude all considerations of matter which rest in speculations or fancy though conjecture to some extent is inevitable.
As a general rule parents are entitled to recover the present cash value of the prospec tive service of the deceased minor child.
In addition they may receive compensation for loss of pecuniary benefits reasonably to be expected after the child attains majority.
In the matter of ascertainment of damages, the appellate court should be slow in disturbing the findings reached by the courts below, if they have taken all the relevant facts into consideration.
[695 F 696 A] Davies and Anr.
vs Powell Dufleryn Associated Collieries Ltd. , Franklin vs South East Railway Company, ; H. & N. 448, Taff Vale Railway Company vs Jenkins, , Bartlett V. Cohen & Ors. , Nance vs British Columbia Electric Rly.
Co. Ltd. and Gobald Motor Service Ltd. & Anr.
vs R.M.K. Veluswami & Ors.
; , applied.
(ii) In the present case although the deceased was a bright child, it was uncertain how much assistance he would have given after growing up to his parents.
The father was a prosperous business man and hardly needed assistance.
There was no material on record as to the age of the parents and their state of health.
On the basis of the evidence on record it could not be said that the damages ordered by the High Court were inadequate.
[696 C] |
minal Appeal No. 146 of 1954.
Appeal from the judgment and order dated the 27th November 1954 of the Court of Judicial Com 683 missioner at Ajmer in Criminal Appeal No. 15 of 1954 arising out of the judgment and order dated 25th August 1954 of the Court of Special Judge at Ajmer in Criminal Case No. 5 of 1953.
B. P. Maheshwari, for the appellant.
C. K. Daphtary, Solicitor General for India, Porus A. Mehta, H. R. Khanna and B. H. Dhebar, for the respondent.
September 21.
The Judgment of the Court was delivered by BHAGWATI J.
This Appeal with a certificate of fitness under article 134(1)(c) of the Constitution against the decision of the Judicial Commissioner at Ajmer raises an important question as to the connotation of the word "officer" contained in section 21(9), Indian Penal Code.
The appellant was a Class III servant employed as a metal examiner, also called Chaser, in the Railway Carriage Workshops at Ajmer.
I He was charged under section 161, Indian Penal Code with having accepted from one Nanak Singh currency notes of the value of Rs. 150 as illegal gratification as a motive for securing a job for one Kallu.
He was also charged under section 5(1)(d) of Act II of 1947 with abusing his position as a public servant and obtaining for himself by corrupt or illegal means pecuniary advantage in the shape of Rs. 150 from the said Nanak Singh.
He was further charged with having committed an offence under section 420, Indian Penal Code for having induced the said Nanak Singh to deliver to him currency notes of the value of Rs. 150 by dishonest representation that be could secure a job for the said Kallu.
The learned Special Judge, State of Ajmer, who tried him in the first instance for the said offences convicted him of the offence under section 161, 'Indian Penal Code as also the offence under section 5(1) (d) of Act II of 1947 and sentenced him to suffer rigorous imprisonment for six months and one year respectively in regard to the same, both the sentences to run concurrently.
In so far, 684 however, as it was not proved that the appellant did not believe when he accepted the money that he could secure or would try to secure a job for Kallu, it was held that no case under section 420, Indian Penal Code was made out and he was acquitted of that charge.
The appeal taken to the Judicial Commissioner, State of Ajmer, by the appellant failed and on the 10th December, 1954, the learned Judicial Commissioner granted to the appellant a certificate of fitness for appeal on two main grounds, viz., (1) whether the appellant was an "officer" within the meaning of clause (9) of section 21, Indian Penal Code, and (2) whether the provisions of section 137 of the Railways Act excluded all railway servants from the definition of public servants except for purposes of Chapter ' IX, Indian Penal Code.
Concurrent findings of fact were reached by both the Courts below on the question as to whether the appellant accepted Rs. 150 from Nanak Singh as and by way of illegal gratification and these findings could not be and were not challenged before us by the learned counsel for the appellant.
The only questions which were canvassed before us were the two legal points which formed the basis of the certificate of fitness for appeal granted by the learned Judicial Commissioner, State of Ajmer, to the appellant.
The second question has now become academical in the facts of the present case by virtue of a decision of this Court in Ram Krishan vs Delhi State(1), which lays down that before the amendment of section 137 of the Railways Act by Act 17 of 1955 railway servants were treated as public servants only for the purposes of Chapter IX, Indian Penal Code, but in any event they were public servants under the Prevention of Corruption Act (Act II of 1947).
In so far as the appellant has, in our opinion, been rightly convicted of the offense under section 5(1)(d) of Act If of 1947 and awarded the sentence of rigorous imprigonment for one year, the question whether he was rightly convicted of the offence under section 161, (1) ; 685.
Indian Penal Code for which he was awarded the lesser sentence of six months ' rigorous imprisonment has become merely academical and the only question which remains to be considered by us here is whether he was an "officer" within the meaning of section 21 (9), Indian Penal Code.
The provisions of law in regard to the first question may be conveniently set out at this stage: Section 2 of the Prevention of Corruption Act II of 1947 provides: "for the purposes of this Act "public servant" means a public servant as defined in section 21 of the Indian Penal Code".
Section 21, Indian Penal Code provides so far as is relevant for the purposes of the present appeal: "The words 'public servant ', denote a person falling under any of the descriptions hereinafter following, namely, Ninth. . . . and every officer in the service or pay of the Government or remunerated by fees or commission for the performance of any public duty".
There is no doubt that the appellant was.
in the service or pay of the Government and was performing the duty of a metal examiner known as Chaser in the Railway Carriage Workshops at Ajmer and was thus performing a public duty.
It was, however, contended that the appellant was not an officer within the meaning of that term as used in section 21(9), Indian Penal Code.
An Officer, it was contended, on the authority of Reg.
vs Ramajirav jivbajirav and another(1), meant one to whom was delegated by the supreme authority some portion of its regulating and coercive powers and who was appointed to represent the State in its relations to individual subjects.
According to the dictum of West, J., the word "officer" meant some person employed to exercise to some extent and in certain circumstances a delegated function of Government.
He was either himself armed with some authority or repre (1) XII Bom.
H.C.R. 1. 386 sentative character or his duties were immediately auxiliary to those of some one who was so armed.
It was, therefore, contended that the appellant being a metal examiner known as Chaser in the Railway Carriage Workshops had not delegated to him by the supreme authority some portion of its regulating and coercive powers nor was he appointed to represent the State in its relations to individual subjects.
He was neither armed with some authority or representative character nor were his duties immediately auxiliary to those of some one who was so armed.
He was not employed to exercise to some extent and in certain circumstances the delegated function of Government and, therefore, was not an "officer" within the meaning of that term as used in section 21(9), Indian Penal Code.
If he was thus not an officer of the Government, he could not be a public servant within the meaning of section 21, Indian Penal Code nor could he be a public servant for the purposes of Act 11 of 1947 and could not be convicted of the offence under section 5(1)(d) of Act II of 1947.
It has to be noted, however, that the case before the learned Judges of the High Court of Bombay in 12 Bombay High Court Reports 1, concerned an Izaphatdar, that is a lessee, of a village who bad undertaken to keep an account of its forest revenue and pay a certain proportion to the Government, keeping the remainder for himself and the question 'that arose for the consideration of the Court was whether such a person was an officer within the meaning of section 21(9), Indian Penal Code.
It was in this context that the aforesaid observations were made by West, J., and the Court came to the conclusion that Deshmukhs and Deshpandes would be sufficiently within the meaning of the clause they being appointed to perform for the State a portion of its functions or to aid those who were its active representatives but not so an Izaphatdar or the lessee such as the accused.
He was not an officer but a mere contractor bound by his engagement but not by the terms of his office or employment to pay a certain proportion to the Government.
There was no delegation to him of any 687 authority for coercion or interference nor was he an assistant appointed to help any one who was vested with such authority.
The duties which he performed were contractual duties frauduler deception in the discharge of which might subject him to punishment for cheating but not duties attached to any office conferred on him or his predecessor in title, failure to perform which with integrity could make him liable, as an officer, to the special penalties prescribed for delinquent public servants.
This decision in 12 Bombay High Court Reports 1, came to be considered by the Calcutta High Court in Nazamuddin vs Queen Empress(1).
The petitioner in that case was a peon attached to the office of the Superintendent of the Salt Department in the district of Mozafferpur and he had been convicted under section 161, Indian Penal Code.
The contention urged on behalf of the petitioner was that he did not fall within the terms of the last portion of clause (9) of section 21, Indian Penal Code which declared "every officer in the service or pay of Government" was a public servant be cause he was not an officer.
The case of Reg.
vs Ramajirav Jivbajirav(2) was cited in support of that contention and the learned Judges of the Calcutta High Court observed at page 346 as under: "The learned Judges in that case had to consider whether a lessee from Government was on the conditions of his lease a public servant and, in doing so, they considered generally the meaning of the term "officer".
It was there held that an officer means "some person employed to exercise, to some extent and in certain circumstances, a delegated function of Government.
He is either armed with some authority or representative character, or his duties are immediately auxiliary to those of some person who is so armed".
The meaning which we are asked to put on these words seems to us to be too narrow as applied to the present case.
The peon who has been convicted as a public servant is in service and pay of the Government, and he is attached to the office of the Superintendent of the Salt Department.
The exact (1) I.L.R. (2) XII Bom.
H.C.R. 1.
688 nature of his duties is not stated, because this objection was not taken at the trial.
, but we must take it that, from the nature of his appointment, it was his duty to carry out the orders of his official superior, who undoubtedly is a public servant, and in that capacity to assist the Superintendent in the performance of the public duties of his office.
In that sense he would be an officer of Government, although he might not possibly exercise "any delegated function of the Government".
Still his duties would be "immediately auxiliary to those of the Superintendent who is so armed".
We think that an "officer in the service or pay of Government" within the terms of section 21 of the Penal Code is one who is appointed to some office for the performance of some pulice duty.
In this sense the peon would come within section 21, cl. 9".
The true test, therefore, in order to determine whether a person is an officer of the Government, is: (1) whether he is in the service or pay of the Government, and (2) whether he is entrusted with the performance of any public duty.
If both these requirements are satisfied it matters not the least what is the nature of his office, whether the duties he is performing are of an exalted character or very humble indeed.
As has been stated in Bacon 's Abridgment at Vol.
6, page 2, in the article headed "Of the nature of an officer and the several kinds of officers": "The word "officium ' principally implies a duty, and in the next place, the charge of such duty; and that it is a rule that where one man 'bath to do with another 's affairs against his will, and without his leave, that this is an office, and he who is in it is an officer".
The next paragraph thereafter may also be referred to in this context: "There is, a difference between an office and an employment, every office being an employment; but there are employments which do not come under the denomination of offices; such as an agreement to, make hay, herd a flock, &c which differ widely from that of steward of a manor" &c. (Vide 12 Bombay High Court Reports at page 5).
689 This was the sense in which the decision in 12 Bombay High Court Reports 1, was understood by the learned Judges of the Lahore High Court in Ahad Shah vs Emperor(1) when they observed at page 157: "But it is not enough that a person should be in the pay or service of Government to Constitute him a public servant within the meaning of section 21 (ninthly), I.P.C. He must also be an "Officer".
That expression is not, of course, to be restricted to its colloquial meaning of a Commissioned or non Commissioned Officer; it means a functional or holder of some "officium" or office.
The office may be one of dignity or importance; it may equally be humble.
But whatever its nature, it is essential that.
the person holding the office, should have in some degree delegated to him certain functions of Government".
The question for consideration before the learned Judges of the Lahore High Court was whether a Quarter Master 's 'clerk was a public servant within the meaning of that expression in section 21, Indian Penal Code.
On the facts elicited before them the learned Judges came to the conclusion that the Quarter Master 's clerk as such was just a Babu and no more an officer than a labourer or menial employed and paid by Government to do public work (See Queen vs Nachimuttu(2).
if therefore on the facts of a particular case the Court comes to the conclusion that a person is not only in the service or pay of the 'Government but is also performing a public duty, he has delegated to him the functions of the Government or is in any event performing duties immediately ' auxiliary to those of some one who is an officer of the Government and is therefore 'an officer ' of the Government within the meaning of section 21(9), Indian Penal Code.
Applying this test to the facts of the case before us, we find that the appellant was a Class III servant and was employed as a metal examiner known as Chaser in the Railway Carriage Workshop.
He was working under the Works Manager who was certainly (1) A.I.R. 1918 Lah.
(2) I.L.R. 7 Madras 18, 690 an officer of the Government and the duties which he performed were immediately auxiliary to those of the Works Manager who, beside being an officer of the Government was also armed with some authority or representative character qua the Government.
The appellant was thus, even on a narrow interpretation of the dicta of West, J. in 12 Bombay High Court Reports 1, an officer in the service or pay of the Government performing as such a public duty entrusted to him by the Government and was therefore, a public servant within the meaning of section 21 of the Indian Penal Code.
This being the true legal position, this contention of the appellant also does not avail him and the first question must be answered against him.
The appellant was, therefore, an officer within the meaning of section 21(9) and therefore a public servant within the meaning of section 21, Indian Penal Code and being such public servant be fell within the definition of a public servant contained in section 2 of the Prevention of Corruption Act II of 1947.
He was, therefore, on the facts and circumstances of the case, rightly convicted under section 5(1) (d) of Act II of 1947.
His conviction and the sentence imposed upon him by the Courts below were therefore quite in order and this appeal must therefore stand dismissed. | The appellant was a Class III servant employed as a metal examiner, also called chaser, in the Railway Carriage Workshop at Ajmer.
He accepted a sum of Rs. 150 as illegal gratification for securing a job for some person.
He was charged under section 5(1)(d) of the Prevention of Corruption Act, 1947 (Act II of 1947).
The appellant contended that he was not an "officer" within the meaning of the term used in section 21(9) of the Indian Penal Code and so could not be a public servant for purposes of Act II of 1947.
It was found that the appellant was working under the Works Manager who was certainly an officer of the Government and the duties which he performed were immediately auxiliary to those of the Works Manager who was also armed with some authority or representative character qua the Government.
Held, that the appellant was an officer within the meaning of section 21(9) of the Indian Penal Code and, therefore, a public servant within the meaning of section 2 of Act 11 of 1947.
The true test in order to determine whether a person is an officer of the Government, is: " .
(1) whether he is in the service or pay of the Government and (2) whether he is entrusted with the performance of any,public duty.
The public duty may be either,a function of the Government delegated to him or may be a duty immediately auxiliary to that of someone who is an officer of the Government.
vs Ramajirav Jivbajirav ([1875] XII Bom.
H.C.R. 1), explained.
Nazamuddin V. Queen Empress, ([1900] I.L.R. and Ahad Shah vs Emperor (A.I.R. 1918 Leh. 152), relied on |
Appeal No. 1122 of1966.
Appeal from the judgment and decree dated January 29, 1964 of the Calcutta High Court in Appeal from original order No. 28 of 1960.
B. P. Maheshwari and Sobhag Mal Jain, for the appellant.
Niren De, Attorney General, N. section Bindra and section P. Nayar, for the respondent.
The Judgment of the Court was delivered by Vaidialingam, J.
This appeal, by the plaintiffs appellants, on certificate granted by the Calcutta High Court, is directed against the judgment and decree of the Division Bench of that Court, dated January 29, 1964 in Appeal from Original Order No. 28 of 1960, affirming the judgment and decree, dated July 16, 1959 of the learned Single Judge in Suit No. 2745 of 1947.
The circumstances leading up to the institution of the said suit may be stated.
The appellants, who were dealing also in the purchase of new and second hand machinery, on coming to know from an adver tisement in a Daily that the defendant respondent was offering for sale aero scrap, addressed a letter, dated November 6, 1946 to the respondent intimating their desire to purchase the materials advertised for sale, and stating that one of their representatives 129 would be contacting them shortly.
Obviously the parties must have met and decided about the purchase, as is seen from the letter, dated November 18, 1946 addressed by the General Manager of the respondent, to the appellants.
That letter refers to a discussion that the parties had on that day and the respondents confirmed having sold to the appellants the entire lot of aero scrap lying at Panagarh, on the terms and conditions mentioned in the letter.
The material was stated to be in Dump No. 1 near the flight line at Panagarh and the approximate quantity was 4000 tons of aero scrap, more or less.
The letter refers to the appel lants having agreed to pay Rs. 10 lakhs as price of the materials in the said Dump No. 1, against which the receipt, by cheque, of a sum of Rs. 2,50,000 was acknowledged by the respondent.
There is a further reference to the fact that the appellants had agreed to pay the balance of Rs. 7,50,000 that day itself.
The letter also refers to the fact that the price mentioned does not include sales tax to be paid by the appellants and to certain other matters, which are not relevant for the purpose of the appeal.
The letter further says : "The company 's terms of business apply to this contract and a copy of this is enclosed herewith".
We shall refer to the relevant clauses in the company 's terms of business, referred to in this letter, a little later.
It is enough to note, at this stage that those terms of business have been made part of the terms and conditions governing the contract.
On the same day, the appellants sent a reply to the respondent, acknowledging the letter.
The appellants said that they noted that the respondent wants to sell the aero scrap as it is and that it wanted the appellants to pay the full value, viz., the balance of Rs. 7,50,000 at once.
The appellants confirmed the arrangement contained in the respondent 's letter; but regarding payment, the appellants said that they agree to pay the balance amount in two instalments viz., Rs. 2,50,000 on or before November 22, 1946 and the balance of Rs. 5,00,000 on or before December 14, 1946.
,They also further stated that they shall commence taking delivery after making full payment.
The, respondent by its letter dated November 20, 1946 acknowledged the receipt of the appellants ' letter dated November 18, 1946 together with the modifications contained therein.
But the respondent emphasised that the other terms and conditions will be as mentioned in its letter of November 18, 1946.
On November 22, 1946, the appellants sent a communication, purporting to be in continuation of their letter dated November 18, 1946.
In this letter they state that the transaction has been closed without inspecting the materials, merely on the assurance of the respondent that the quantity of aero scrap was about 4,100 tons.
The appellants further state that they have since obtained 130 information that the quantity stated to be available is not on the spot and therefore they cannot do the business.
Under the circumstances, they request the respondent to treat their letter, dated November 18, 1946 as cancelled and to return the sum of Rs. 2,50,000 already paid by them.
The respondent sent several letters to the appellants asking them to pay the balance amount and take delivery of the goods; but the appellants refused to pay any further amount to the respondent.
The respondent ultimately forfeited the entire sum of Rs. 2,50,000 which, according to it, was earnest money and then cancelled the contract.
Now that we have referred to the material correspondence that took place between the parties as well as the final action of the defendant of forfeiting the amount, it is now necessary to advert to certain clauses in the Company 's terms of business which, as mentioned earlier, have been made by the defendant 's letter dated November 18, 1946 as part of the terms and conditions of the contract.
We have also referred to the fact that the appellants in their reply dated November 18, 1946 have accepted the same.
The respondent 's terms of business contain various clauses, of which clauses 9 and 10 are relevant for our purpose.
They are "9.
Deposits The buyer s hall deposit with the Company 25% of the total value of the stores at the time of placing the order.
The deposit shall remain with the Company as earnest money and shall be adjusted in the final bills, no interest shall be payable to the buyer by the Company on such amounts held as earnest money.
Time and method of payment.
(a) The buyer shall, before actual delivery is taken or the stores despatched under conditions, pay the full value of the stores for which his offer has been accepted less the deposit as hereinbefore contained after which a Shipping Ticket will be issued by the Company in the name of the buyer.
The buyer shall sign his copy of the Shipping Ticket before the same is presented to the Depot concerned for taking delivery of the stores concerned.
(b) If the buyer shall make default in making payment for the stores in accordance with the provisions of this contract the.
Company may without prejudice to its rights under Clause 11 thereof or other remedies in law 131 forfeit unconditionally the earnest money paid by the buyer and cancel the contract by notice in writing to the buyer and resell the stores at such time and in such manner as the Company thinks best and recover from the buyer any loss incurred on such resale.
The Company shall, in addition be entitled to recover from the buyer any cost of storage, warehousing or removal of the stores, from one place to another and any expenses in connection with such a resale or attempted resale thereof.
Profit, if any, on resale as aforesaid, shall belong to the Company.
" From the above clauses, it will be seen that a buyer has to deposit with the company 25% of the total value and that deposit is to remain with the company as earnest money to be adjusted in the final bills.
The buyer is bound to pay the full value less the deposit, ' before taking delivery of the stores.
In case of default by the buyer, the company is entitled to forfeit unconditionally the earnest money paid by a buyer and cancel the contract.
The appellants instituted suit No. 2745 of 1947 in the Original Side of the Calcutta High Court against the respondents for recovery of the sum of Rs. 2,50,000 together With interest.
The plaintiffs pleaded that there had been no concluded agreement entered into between the parties and even when the matter was in the stage of proposal and counter proposal, the plaintiffs had withdrawn from the negotiations.
They alleged that even if there was a concluded contract, the same was vitiated by the false and an true representations made by the respondents regarding the quantity of scrap material available and the plaintiffs had been induced to enter into the agreement on such false representations.
Hence the plaintiffs were entitled to avoid the contract and they have avoided the same.
They pleaded that the respondents were never ready and willing to perform their part of the contract.
Even on the assumption that the plaintiffs had wrongfully repudiated the contract, such repudiation was accepted by the defendant by putting an end to the contract.
The respondents were not entitled to forfeit the sum of Rs. 2,50,000 as the latter cannot take advantage of their own wrongful conduct.
In any event, the sum of Rs. 2,50,000 represents money had and received by the defendants to and for the use of the plaintiffs.
The plaintiffs, in consequence, prayed for a decree directing the defendants to refund the sum of Rs. 2,50,000 together with interest at 6% from November 18, 1946.
The defendants contested the claim of the plaintiffs.
They pleaded that a concluded contract has been entered into between 132 the parties as per two letters dated November 18 and November 20, 1946.
The appellants had agreed to buy the lot of scraps lying in Dump No. 1 for Rs. 10,00,000 of which Rs. 2,50,000 was paid as deposit.
The defendants had agreed to the balance amount being paid in instalments as asked for by the plaintiffs in their letter of November 18, 1946.
The defendants further pleaded that there has been no misrepresentation made by them but the plaintiffs, without any justification, repudiated the contract by their letter dated November 22, 1946.
As the plaintiffs wrongfully repudiated the contract, the defendants, as they are entitled to in law, forfeited the sum of Rs. 2,50,000 paid by the plaintiff as earnest money, under the terms of business of the Company which had become part of the contract entered into between the parties.
The defendants further pleaded that they have always been ready and willing to perform their part of the contract and that they, in fact, even after the plaintiff repudiated the contract, called upon them to pay the balance amount and take delivery of the articles.
But the plaintiffs persisted in their wailful refusal to perform their part and therefore the defendants had no alternative but to forfeit the earnest money and conduct a resale of the goods.
The defendants further pleaded that the appellants had to pay them a sum of Rs. 42,499 for the loss and damage sustained 'by the defendants They further urged that the plaintiffs were not entitled to claim the refund of the sum of Rs. 2,50,000 or any part thereof which had been paid as earnest money and forfeited according to law, and the terms of contract, by the defendants.
Though the plaintiffs have raised various contentions in the plaint, it is seen from the judgments of the learned Single Judge and the Division Bench, on appeal, that the appellants conceded that they committed breach of contract and that the defendants have been at all material times ready and willing to perform their part of the contract.
The plea that the plaintiffs entered into the contract under a mistake of fact and that they were induced, to so enter into the contract due to the misrepresentation of the defendants regarding the quantity of scrap available, was also given up.
The appellants have also accepted the position that there has been a concluded contract between the parties and the said contract was concluded by the correspondence between the parties consisting of the letters dated November 18, 1946 and November 20, 1946.
The plaintiffs have further abandoned the plea that the defendants were not ready and willing to perform their part of the contract.
Therefore the two questions that ultimately survived for consideration by the Court were: (1) as to whether the sum of Rs. 2,50,000 was paid by the plaintiffs as and by way of part payment or as earnest deposit; and (2) as to whether the defendants were entitled to forfeit the said amount.
133 The learned Single Judge and, on appeal, the Division Bench, have held that the sum of Rs. 2,50,000 paid by the appellants was so paid as and by way of deposit or earnest money and that it is only when the plaintiffs pay the entire price of the goods and perform the conditions of the contract that the deposit of Rs. 2,50,000 will go towards the payment of the price.
It is the further view of the Courts that the amount representing earnest money is primarily a security for the performance of the contract and, in the absence of any provision to the contrary in the contract, the defendants are entitled to forfeit the deposit amount when the plaintiffs have committed a breach of contract.
In this view the defendant 's right to forfeit the sum of Rs. 2,50,000 was accepted and it has been held that the plaintiffs are not entitled to claim refund of the said amount.
The plaintiffs ' suit, in the result, was dismissed by the learned Single Judge and, on appeal, the decree of dismissal has been confirmed.
On behalf of the appellants Mr. Maheshwari, learned counsel, has raised two contentions : (1) That the amount of Rs. 2,50,000 paid by the plaintiffs and sought to be recovered in the suit is not by way of a deposit or as earnest money and that, on the other hand, it is part of the purchase price and therefore the defendants are not entitled to forfeit the said amount.
(2) In this case, it must be considered that the sum of Rs. 2,50,000 has been named in the contract as the amount to be paid in case of breach or in the alternative the contract contains a stipulation by way of penalty regarding forfeiture of the said amount and therefore the defendants will be entitled, if at all, to receive only reasonable compensation under section 74 of the Contract Act and the Courts erred in not considering this aspect.
Under this head, the counsel also urged that even a forfeiture of earnest money can only be, if the amount is considered reasonable and in this case the amount which represents 25 % of the total price cannot be considered to be reasonable and hence the appellants are entitled to relief in law.
The learned Attorney General, on behalf of the respondents, pointed out that the material correspondence between the parties, by which the contract was concluded, read along with the terms of business will clearly show that the sum of Rs. 2,50,000 paid by the appellants was as earnest.
It was further pointed out that the position in law is that the earnest money is part of the purchase price when the transaction goes through and is performed and that on the other hand it is forfeited when the transaction falls through by reason of the fault or failure of the vendee.
The learned Attorney General invited us to certain decisions laying down the salient features of 'earnest deposit ' and the right of the party to whom the amount has been paid to forfeit when the opposite party has committed a breach of contract.
Regarding the second contention of 134 the appellant, the learned Attorney General pointed out that the appellants never raised any contention that the amount of Rs. 2,50,000 deposited by the appellants is to be treated as a sum named in the contract as the amount to be paid in case of breach or that the contract must be considered to contain any stipulation by way of penalty.
He also pointed out that the question of reasonableness or otherwise of the earnest deposit forfeited in this case, was never raised by the appellant at any stage of the proceedings in the High Court.
Therefore section 74 of the Contract Act has "no application.
The first question that arises for consideration is whether the payment of Rs. 2,50,000 by the appellants was by way of deposit or earnest money.
Before we advert to the documents evidencing the contract in this case, it is necessary to find out what in law constitutes a deposit or payment by way of earnest money and what the rights and liabilities of the parties are, in respect of such deposit or earnest money.
Borrows, in Words & Phrases, Vol.
11, gives the characteristics of "earnest".
According to the author, "An earnest must be a tangible thing.
That thing must be given at the moment at which the contract is concluded, because it is something given to bind the contract, and, therefore, it must come into existence at the making or conclusion of the contract.
The thing given in that way must be given by the contracting party who gives it, as an earnest or token of good faith, and as a guarantee that he will fulfil his contract, and subject to the terms that if, owing to his default, the contract goes off, it will be forfeited.
If, on the other hand, the contract is fulfilled, an earnest may still serve a further purpose and operate by way of part payment.
" Benjamin, in his book on 'Sale, 8th Edition, after referring to clause 17 of the Statute of Frauds and section 4(1) of the Sale of Goods Act, 1893 providing for giving "something in earnest to bind the contract, or in part payment", says, at p. 219 : " give something in earnest ' or 'in part payment, ' are often treated as meaning the same thing, although the language clearly intimates that the earnest is something to bind the bargain, ' or, 'the contract, ' whereas it is manifest that there can be no part payment till after the bargain has been bound, or closed.
" The author further states that there are two distinct alternatives, viz., a buyer may give the seller money or a present as a token or evidence of the bargain quite apart from the price, i.e., earnest, or 135 he may give him part of the agreed price to be set off against the money to be finally paid, i.e., part payment and that if the buyer fails to carry out the contract and it is rescinded, cannot recover the earnest, but he may recover the part payment.
But this does not affect the seller 's right to recover damages for breach of contract unless it as by way of deposit or guarantee in which case it is forfeited.
It is further stated that an earnest does not lose its character because the same thing might also avail as a part payment.
Regarding "deposit", the author states at p. 946, that a deposit is not recoverable by the buyer, for a deposit is a guarantee that the buyer shall perform his contract and is forfeited on his failure to do so and if a contract distinguishes between the deposit and installments of price and the buyer is in default, the deposit is forfeited.
Halsbury, in "Laws of England", Vol.
34, III Edition, in paragraph 189 at p. 118, dealing with deposit, states : "Part of the price may be payable as a deposit.
A part payment is to be distinguished from a deposit or earnest.
A deposit is paid primarily as security that the buyer, will duly accept and pay for the goods, but, subject thereto, forms part of the price.
Accordingly, if the buyer is unable or unwilling to accept and pay for the goods, the seller may repudiate the contract and retain the deposit.
" Earl Jowitt, in his Dictionary of English Law, says "Giving an earnest or earnest money is a mode of signifying assent to a contract of sale or the like, by giving to the vendor a nominal sum (e.g., a shilling) as a token that the parties are in earnest or have made up their minds.
" In Howe vs Smith(1) Fry, L.J., discussed the history of "earnest", which is identical with a deposit.
In that case, the plaintiff agreed to purchase a property for the price mentioned in the agreement and paid pound 500 on the signing of the agreement Al as a deposit and in part payment of the purchase money." There where other stipulations in the agreement regarding title to the property and the payment of the balance of the purchase money.
The plaintiff, apprehending that the defendant vendor would resell the property, brought an action against him for specific performance of the agreement; but the suit was dismissed on the ground (1) L.R. [1884] Ch. D. 89.
136 that there had been inordinate delay on the plaintiffs part in insisting on the completion of the contract.
The plaintiff appealed.
Before the Court of Appeal a request was made on his behalf for leave to amend the plaint that if specific performance could not be decreed, he should get a return of the deposit of pound 500.
Leave was granted by the Appellate Court and the question hence arose as to whether the plaintiff was entitled to get a refund of the said amount.
In dealing with the deposit claimed back by the plaintiff, Cotton, L.J., at p. 95, observes "What is the deposit ? The deposit, as I understand it, and using the words of Lord Justice James (in L. R. 10 Ch.
512), is a guarantee that the contract shall be performed.
If the sale goes on, of course, not only in accordance with the words of the contract, but in accordance with the intention of the parties in making the contract, it goes in part, payment of the purchasemoney for which it is deposited; but if on the default of the purchaser the contract goes off, that is to say, if he repudiates the contract, then, according to Lord Justice James, he can have no right to recover the deposit.
" Bowen, L.J., at p. 98, states "We have therefore to consider what in ordinary parlance, and as used in an ordinary contract of sale, is the meaning which business persons would 'attach to the term 'deposit '.
Without going at length into the history, or accepting all that has been said or will be said by the other members of the Court on that point, it comes shortly to this, 'that a deposit, if nothing more is said about it, is, according to the ordinary interpre tation of business men, a security for the completion of the purchase.
But in what sense is it a security for the completion of the purchase ? It is quite certain that the purchaser cannot insist on abandoning his contract and yet recover the deposit, because that would be to enable him to take advantage of his own wrong" Fry, L.J., at p. 101, observes "Money paid as a deposit must, I conceive, be paid on some terms implied or expressed.
In this case no terms are expressed, and we must therefore inquire what terms are to be implied.
The terms most naturally to be implied appear to me in the case of money paid on the signing of a contract to be that in the event of the contract being performed it shall be brought into 137 account, but if the contract is not performed by the payer it shall remain the property of the payee.
It is not merely a part payment, but is then also an earnest to bind the bargain so entered into, and creates by the fear of its forfeiture a motive in the payer to perform the rest of the contract.
" Ultimately, the Court of Appeal rejected the claim of the plaintiff for refund of the deposit.
In Soper vs Arnold(1) the House of Lords had to consider the right of the plaintiff therein to claim a refund of the deposit made by him.
In that case the plaintiff had contracted to purchase a piece of land and entered into an agreement with the vendee.
The agreement provided that the purchaser viz., the plaintiff, should make a deposit and it further provided that if the vendee failed to comply with the conditions, the deposit should be forfeited.
The plaintiff, accordingly, paid the deposit but as he was not in a position to complete the contract by paying the balance purchase money, the contract could not be fulfilled.
When in another litigation it was subsequently found that the vendor 's title to the property was defective, the plaintiff brought an action to recover his deposit on the ground of mistake and failure of consideration.
The suit was dismissed and the Court of Appeal also confirmed the said decision.
The House of Lords also finally rejected the plaintiff 's claim.
In discussing the nature of the deposit made by the plaintiff under the agreement, Lord Macnaghten at p. 435 observes "The deposit serves two purpose if the purchase is carried out it goes against the purchase money, but its primary purpose is this, it is a guarantee that the purchaser means business; and if there is a case in which a deposit is rightly and properly forfeited it is, I think, when a man enters into a contract to buy real property without taking the trouble to consider whether he can pay for it or not." In Farr, Smith & Co. vs Messrs, Ltd. (2) dealing with the question as to whether the payment was by way of earnest given to bind the contract, or it was a part payment towards the price.
Wright J., observes at p. 408 : "Certain characteristics, however, seem to be clear, An earnest must be a tangible thing, in which definition it may be that a deposit is included, but in the old cases it was always some tangible thing.
That thing must be given at the moment at which the contract is concluded, (1) L.R. [1889]14 A.C. 429, (1) L.R. (1928] 1 K.B.D. 397.
CI/70 10 138 because it is something given to bind the contract, and, therefore, it must come into existence at the making or conclusion of the contract.
The thing given in that way must be given by the contracting party who gives it, as an earnest or token of good faith, and as a guarantee that he will fulfil his contract, and subject to the terms that if, owing to his default, the contract goes off, it will be forfeited.
If on the other hand, the contract is fulfilled, an earnest may still serve a further purpose and operate by way of part payment." The learned Judge, quoting the observations of Hamilton, J., in Sumner and Leivesley vs John Brown & Co.(1), observes at p. 409: " Earnest '.
meant something given for the purpose of binding a contract, something to be used to put pressure on the defaulter if he failed to carry out his part.
If the contract went through, the thing given in earnest was returned to the giver, or, if money, was de ducted from the price.
If the contract went off through the giver 's fault the thing given in earnest was forfeited.
" The Judicial Committee had to consider in Chiranjit Singh vs Har Swarup(2) the question as to whether a payment maade by way of earnest money by a buyer could be recovered when the buyer had committed breach of contract.
In that case the plaintiff had entered into a contract with the defendant for purchase of a property.
One of the terms of the contract of sale was "Willing on old terms namely earnest twenty thousand balance in two moieties.
first payable on executing conveyance, last within six months net cash we receive 4 lakhs 76,000.
" The plaintiff did not pay the earnest money eo nomine but sent two cheques amounting to Rs. 1,65,000 and obtained a receipt ?hat this amount was paid towards the sale price of the estate in question out of the total consideration of Rs. 4,76,000.
Later the plaintiff informed the defendant that he was not in a position to complete the purchase and gave opportunity to the latter to sell the property to any other party.
Therefore it was clear that the plaintiff purchaser was unable or unwilling to complete the contract of purchase.
The, plaintiff, notwithstanding his default, sued to recover the entire sum of Rs. 1,65,000 paid by him.
The High Court held that as the plaintiff had broken the contract, he must lose the earnest money of Rs. 20,000 but was entitled to a refund of the balance amount of Rs. 1,45,000 from and out of the amounts paid by him on that account.
The plaintiff, dissatis (1) 25 Times L. R, 745.
(2) A.I.R. 1926 P.C. 1.
139 fled with the decision of the High Court, carried the matter in appeal to the Judicial Committee for obtaining relief of repayment of earnest money also.
The Judicial Committee agreed with the High Court that from and out of the amounts paid by the plaintiff, a sum of Rs. 20,000 was earnest money and there was nothing in the contract to suggest that the seller had agreed to sacrifice the stipulated earnest.
Regarding the legal incidents of earnest money, the Judicial Committee stated "Earnest money is part of the purchase price when the transaction goes forward; it is forfeited when the transaction falls through, by reasons of the fault or failure of the vendee.
" Holding that the above principle applied squarely to the contract before them, they dismissed the paintiff 's appeal for refund of earnest.
From a review of the decisions cited above, the following principles emerge regarding "earnest": (1) It must be given at the moment at which the contract is concluded.
(2) It represents a guarantee that the contract will be fulfilled or, in other words, 'earnest ' is given to bind the contract.
(3) It is part of the purchase price when the transetion is carried out.
(4) It is forfeited when the transaction falls through by reason of the default or failure of the purchaser.
(5) Unless there is anything to the contrary in the terms of the contract, on default committed by the buyer, the seller is entitled to forfeit the earnest.
Having due regard to the principles enunciated above, we shall now consider, the relevant claims in the contract between the parties in the case, before us, to ascertain whether the amount of Rs. 2,50,000 paid by the appellant constitutes earnest money and if so whether the respondents were justified in law in forfeiting the same.
We have already referred to the letter, dated November 18, 1946 written by the respondents to the appellants confirming the sale of scrap lying in Dump No. 1.
That letter states that the total price for which the appellants agreed to purchase the scrap material is Rs. 10,00,000 against which a sum of Rs. 2,50,000 had been paid and the balance amount was to be paid that day itself.
In the reply sent by the appellant on the same day, they 140 confirmed the arrangement referred to by the respondents but, regarding the payment of the balance amount, they agreed to pay the same in two instalments.
The letter of November 18, 1946 to the appellants clearly refers to the fact that the Company 's Terms of Business applied to the contract and a copy of the said terms was also sent to the respondents.
The respondents, by confirming the arrangement, by their letter of November 18, 1946 were fully aware that the terms of business of the respondent company formed part of the contract.
entered into between the parties.
We have also referred, earlier, to clauses 9 and 10 of the Terms of Business of the respondents.
Clause 9 requires the buyer to deposit 25%of the total value of the goods at the time of placing the order.
That clause also further provides that the deposit shall remain with the company "as earnest money", to be adjusted in the final bills.
It further provides that no interest is payable to the buyer by the company "on such amounts held as earnest money".
There is no controversy in this case that the appellants deposited the sum of Rs. 2,50,000 under this clause nine, representing 25% of the purchase price of Rs. 10,00,000.
It is therefore clear that this amount deposited by the appellant is a deposit "as earnest money", Mr, Maheshwari drew our attention to the letter, dated Nov ember 18, 1946 sent by the respondents to the appellants wherein the respondents have stated that the appellants have agreed to pay Rs. 10,00,000 for all the materials in Dump No. 1 against which a cheque for Rs. 2,50,000 has been paid and that the appellants further agreed to 'pay the balance of Rs. 7,50,000 that day itself.
This statement, according to the learned counsel, will clearly show that the sum.
of Rs. 2,50,000 has been paid as part payment towards the total price, pure and simple, and there is no question of any payment by way of earnest money.
But this contention ignores the last recital in the said letter wherein it has been specifically stated that the terms of business of the respondent company applied to the contract.
This condition has also been accepted by the appellants; in their reply, dated November 18, 1946.
Therefore the position is this, that the terms of business of the respondent company have been incorporated as part of the letter and has been embodied in the terms of contract between the parties.
Clause 9, to which we have already referred, clearly shows that 25% of the total value is to be deposited and that amount is to remain with the respondents as earnest money.
It is again emphasized in clause 9 that the amount so deposited as earnest will not bear any interest, but will be only adjusted in the final bills.
Therefore the amount of Rs. 2,50,000 deposited by the appellants, representing 25% of the total of Rs. 10,00,000, is "earnest money" under clause 9 of the Terms of Business.
141 We have also earlier referred to clause 10 of the Terms of Business, which relates to the time and method of payment.
Under clause 10(b) a right is given to the respondents when the buyer makes default in making payment according to the contract, to forfeit unconditionally the earnest money paid by the buyer.
That clause further provides that this forfeiture of earnest money is without proudly to the other rights of the respondents in law.
We have referred to the fact that though the appellants raised pleas that they have not committed any breach of contract and that on the other hand the respondents were the parties in 'breach, these contentions were not pursued and had been abandoned before the High Court.
Further, as noted by the High Court, the appellants conceded that they had committed a breach of the contract.
If so, as rightly held by the High Court, under clause 10(b) the respondents were entitled to forfeit the earnest money of Rs. 2,50,000.
Before closing the discussion on this aspect, it is necessary to note that in the case before the Privy Council, in Chiranjit Singh 's Case, though the contract stipulated that a sum of Rs. 20,000 should be paid as earnest, the buyer did not pay any amount by way of earnest, as such, but he paid by two cheques the sum of Rs. 1,65,000 against the purchase price of Rs. 4,76,000.
The receipt of the sum of Rs. 1,65,000, granted by the seller was also stated to be only towards the sale price.
But, nevertheless, the High Court, as well as the Judicial Committee, treated a sum of Rs. 20,000 out of the sum of Rs. 1,65,000, as earnest money paid under the terms of the agreement, and a claim to recover that amount of earnest money was negatived.
In the case before us, the contract read with the Terms of Business of the company, clearly refers to the earnest money being paid and to the fact of Rs. 2,50,000 having been paid as earnest.
Therefore, there is no ambiguity regarding the nature of the above payment and the right of the respondents to forfeit the same, under the terms of the contract, when the appellants admittedly had committed breach of the contract, cannot be assailed.
The first contention for the appellants therefore fails.
The second contention of Mr. Maheshwari, noted earlier, is really based upon sections 73 and 74 of the Contract Act.
According to the learned counsel, under section 73, the respondents wilt be entitled only to compensation for any loss or damage caused to them by the breach of the contract, committed by the appellants.
Counsel very strongly relied upon section 74 of the Contract Act.
According to him, the sum of Rs. 2,50,000, referred to in the contract, must be treated as the amount to be paid in case of a breach.
In the alternative, counsel also urged that the provision in the contract regarding the forfeiture of the said amount, should be treated as a term containing a stipulation by way of a penalty.
Under any of 142 these circumstances, the remedy of the aggrieved party would be to get compensation which is adjudged reasonable by the Court.
Counsel also urged that "earnest money", unless it is considered to be a reasonable amount, could not be forfeited in law.
The learned Attorney General very strongly urged that the pleas covered by the second contention of the appellant had never been raised in the pleadings nor in the contentions urged before the High Court.
The question of the quantum of earnest deposit which was forfeited being unreasonable or the forfeiture being by way of penalty, were never raised by the appellants.
The Attorney General also pointed out that as noted by the High Court the appellants led no evidence at all and, after abandoning the various pleas taken in the plaint, the only question pressed before the High Court was that the deposit was not by way of earnest and hence the amount could not be forfeited.
Unless the appellants had pleaded and established that there was unreasonableness attached to the amount required to be deposited under the contract or that the clause regarding forfeiture amounted to a stipulation by way of a penalty, the respondents had no opportunity to satisfy the Court that no question of unreasonableness or the stipulation being by way of penalty arises.
He further urged that the question of unreasonableness or otherwise regarding earnest money does not at all arise when it is forfeited according to the terms of the contract.
In our opinion the learned Attorney General is well founded in his contention that the appellants raised no such contentions covered by the second point, noted above.
It is therefore unnecessary for us to go into the question as to whether the amount deposited by the appellants, in this case, by way of earnest and forfeited as such, can be considered to be reasonable or not.
We express no opinion on the question as to whether the element of unreasonableness can ever be considered regarding the forfeiture of an amount deposited by way of earnest and if so what are the necessary factors to be taken into account in considering the reasonableness or otherwise of the amount deposited by way of earnest.
If the appellants were contesting the claim on any such grounds, they should have laid the foundation for the same by raising appropriate pleas and also led proper evidence regarding the same, so that the respondents would have had an opportunity of meeting such a claim.
In this view, it is unnecessary for us to consider the decision of this Court in Maula Bux vs Union of India(1) relied on by the appellants and wherein there is an observation to the effect : "Forfeiture of earnest money under a contract for sale of property movable or immovable if the (1) ; amount is reasonable, does not fall within section 74 (of the Indian Contract Act).
That has been decided in several cases.
Kunwar Chiranjit Singh vs Har Swarup (AIR 1926 P.C. 1); Roshan Lal vs The Delhi Cloth and General Mills Co. Ltd. Delhi (ILR 33 All.
166); Muhammad Habibullah vs Muhammad Shafi (ILR 41 All. 324); Bishan Chand vs Radha Kishan Das (ILR 19 All. 489).
These cases are easily explained, for forfeiture of reasonable amount paid as earnest money does not amount to imposing a penalty.
But if forfeiture is of the nature of penalty, section 74 applies.
Where under the terms of the contract the party in breach has undertaken to pay a sum of money or to forfeit a sum of money which he has already paid to the party complaining of a breach of contract, the undertaking is of the nature of a penalty.
" The learned Attorney General has pointed out that the decisions referred to in the, above quotation do not lay down that the test of reasonableness applies to an earnest deposit and its forfeiture.
He has also pointed out that this Court, in the above decision, did not agree with the view of the High Court that the deposit, the recovery of which was sued for by the plaintiff therein, was earnest money.
The learned Attorney General also referred 'Us to various decisions, wherein, according to him, though the amounts deposited by way of earnest were fairly large in proportion to the total price fixed under the contract, nevertheless the forfeiture of those amounts were not interfered with by the Courts.
But, as we have already mentioned, we do not propose to go into those aspects in the case on hand.
As mentioned earlier, the appellants never raised any contention that the forfeiture of the amount amounted to a penalty or that the amount forfeited is so large that the forfeiture is bad in law.
Nor have they raised any contention that the amount of deposit is so unreasonable and therefore forfeiture of the entire amount is not justified.
The decision in Maula Bux 's Case(1) had no occasion to consider the question of reasonableness or otherwise of the earnest deposit being forfeited.
Because , from the said judgment it is clear that this Court did not agree with the view of the High Court that the deposits made, and which were under consideration, were paid as earnest money.
It is under those circumstances that this Court proceeded to consider the applicability of section 74 of the Contract Act.
Mr. Maheshwari has relied upon the decision of this Court in Fateh Chand vs Balkishan Das(1) wherein, according to him, this (1) ; (2) ; 144 Court has held, under similar circumstances, that the stipulation under the conrtact regarding forfeiture of the amount deposited is a stipulation by way of penalty attracting section 74 of the Contract Act.
On this assumption, counsel urged that there is a duty, statutorily imposed upon Courts by section 74 of the Contract Act not to enforce the penalty clause but only to award reasonable compensation.
This aspect, he urges, has been totally missed by tile High Court.
We are inclined to accept this contention of the learned counsel.
This Court had to consider, in the said decision, two questions : (i) Whether the plaintiff therein was entitled to forfeit a sum of Rs. 1,000 paid as earnest money on default committed by the buyer; and (ii) whether the plaintiff was further entitled to forfeit the entire sum of Rs. 24,000 paid by the buyer under the contract which recognised such right.
This Court held that the plaintiff was entitled to forfeit the sum of Rs. 1,000 paid as earnest money, when default was committed by the buyer.
But, regarding the second item of Rs. 24,000 this Court held that the same cannot be treated as earnest and therefore the rights of the parties would have to be adjudged under section 74 of the Contract Act.
In view of this conclusion the Court further had to consider the relief that the plaintiff had to get when breach of contract was committed by the buyer and, in dealing with this question, it observed at p. 526 "Section 74 of the Indian Contract Act deals with the measure of damages in two classes of cases (i) where the contract names a sum to be paid in case of breach and (ii) where the contract contains any other stipulation by way of penalty.
We are in the present case not concerned to decide whether a covenant of forfeiture of deposit for due performance of a conrtact falls within the first class.
The measure of damages in the case of breach of a stipulation by way of penalty is by section 74 reasonable compensation not exceeding the penalty stipulated for.
" Again, at p. 528 it observed "In our judgment the expression 'the contract contains any other stipulation 'by way of penalty ' comprehensively applies to every covenant involving a penalty whether it is for payment on breach of contract of money or delivery of property in future, or for forfeiture of right to money or other property already delivered.
Duty not to enforce the penalty clause but only to award reasonable compensation is statutorily imposed upon courts by section 74.
In all cases, therefore, where there is 145 a stipulation in the nature of penalty for forfeiture of an amount deposited pursuant to the terms of contract which expressly provides for forfeiture, the court has jurisdiction to award such sum only as it considers reasonable, but not exceeding the amount specified in the contract as liable to forfeiture." The Court further observed at p. 529 : "There is no ground for holding that the expression 'contract contains any other stipulation by way of penalty ' is limited to cases of stipulation in the nature of an agreement to pay money or deliver property on breach and does not comprehend covenants.
under which amounts paid or property delivered under the contract, which by the terms of the contract expressly or by clear implication are liable to be forfeited.
Section 74 declares the law as to liability upon breach of contract where compensation is by agreement of the parties predetermined, or where there is a stipulation by way of penalty.
But the application of the enactment is not restricted to cases where the aggrieved party claims relief as a plaintiff.
I The section does not confer a special benefit upon any party; it merely declares the law that notwithstanding any term in the contract predetermining damages or providing for for feiture of any property by way of penalty, the court will award to the party aggrieved only reasonable compensation not exceeding the amount named or penalty stipulated.
The jurisdiction of the Court is not deter mined by the accidental circumstance of the party in default being a plaintiff or a defendant in a suit.
Use of the expression 'to receive from the party who has broken the contract" does not predicate that the jurisdiction of the court to adjust amounts which have been paid by the party in default cannot be exercised in dealing with the claim of the party complaining of breach of contract.
" This Court applied section 74 of the Contract Act, and ultimately fixed a particular amount which the plaintiff would be entitled to as reasonable compensation in the circumstances.
Mr. Maheshwari placed considerable reliance on the above extracts in support of his contention and urged that the recitals regarding forfeiture of the amount of Rs. 2,50,000 shows that the contract contains a stipulation by way of penalty and therefore s.74 is attracted.
It is not possible to accept this contention.
As we have already pointed out, this Court, in the above decision, 146 recognised the principle that earnest money can be forfeited, but in dealing with the rest of the amount which was not, admittedly, earnest money, s.74 was applied.
In the case before us the entire amount, as evidenced by the contract and as held by us earlier, is earnest money and therefore the above decision does not apply.
Mr. Maheshwari finally urged that s.64 of the Contract Act may apply and he also relied on the decision of the Judicial Committee in Murlidhar Chatterjee vs International Film Co.(1).
On the basis of that ruling he urged that the respondents are bound to restore the benefit that they have obtained under the contract.
In our opinion there is no scope for applying s.64 of the Contract Act and it follows that the decision of the Judicial Committee, referred to above, and dealing with s.64 has no relevance.
We have already pointed out that the appellants raised a contention that they had been induced to enter into the agreement on a misrepresentation made by the respondents regarding the quantity of material available.
If the.
appellants had proceeded on that basis, then the contract would have been voidable at their instance under s.19 of the Contract Act.
But they have abandoned that plea and have admitted that the breach of contract was committed by them.
Hence section 64 cannot be invoked by the appellants.
In this view, the second contention also fails.
In the result ', the appeal fails and is dismissed with costs.
V.P.S. Appeal dismissed.
(1) L. R. 70 I.A, 35. | The respondent agreed to sell and the appellant agreed to buy some aero scrap for Rs. 10,00,000.
The appellant paid Rs. 2,50,000 on the date of the contract and it was agreed between the parties that the balance should be paid in two instalments.
It was also agreed that the respondent 's terms of business were made part of the terms and conditions gov erning the contract.
According to cl. 9 of the respondent 's terms of business the buyer has to deposit with the respondent 25% of the total value and that deposit is to remain with the respondent as earnest money to be adjusted in the final bills and no interest shall be payable to buyer on the amount.
Under cl. 10 of the terms and conditions, if the buyer makes default in making payment according to the contract, the respondent has a right to cancel the, contract and forfeit unconditionally the earnest money without prejudice to any other Tights of the respondent in law.
The appellant committed breach of the contract by refusing to pay the rest of the money and to take delivery of the aero scrap.
The respondent thereupon cancelled the contract and forfeited the deposit of Rs. 2,50,000.
A suit by the appellant for recovery of the amount was dismissed.
In appeal to this Court, HELD : (1) For a deposit by a purchaser to be treated as earnest money the 'following conditions must be satisfied : (i) it must be given at the moment at which the contract is concluded; (ii) it represents a guarantee that the contract will be fulfilled or, in other words, 'earnest ' is given to bind the contract; (iii) it is part of the purchase price when the transaction is carried out; (iv) it is forfeited when the transaction falls through by reason of the default or failure of the purchaser; and (v) unless there is anything to the contrary in the terms of the contract, on default committed by the buyer, the seller is entitled to forfeit the earnest.
[139 D F] In the present case, the payment of Rs. 2,50,000 could not be treated merely as part payment towards the total price, because, the terms of business of the respondent applied to the contract, and under those terms, since the conditions regarding earnest money are satisfied, the amount deposited by the appellant was earnest money and the respondent was entitled to forfeit if.
[140; 141 F] Howe vs Smith , Soper vs Arnold, I.R. , Farr, Smith & Co. vs Messers, Ltd. L.R. [1928] 1 K.B.D. 397, Sumner and Leivesley vs John Brown & Co. and Chiranjit Singh vs Har Swarup, A.I.R. , applied.
128 Roland Burrows, Words and Phrases Vol.
11, Benjamin on Sale, Halsbury 's Laws of England (111 Edition) Vol. 34, p. 118, para.
189 and Jowitt 's Dictionary of English Law, referred to.
(2) In Fateh Chand vs Balkishan Das, ; , this Court recognised the principle that earnest money could be forfeited, and that section 74 of the Contract Act applied only to the amount paid by the buyer which was not earnest money.
In the present case, since the entire amount paid by the appellant was earnest money under the contract, this decision has no application.
[145 H; 146 A] (3) As the plea of misrepresentation was abandoned by the appellant and the breach off contract was admittedly committed by the appellant,s. 64 of the Contract Act could not be invoked by the appellant.
[146 D] Murlidhar Chatterjee vs International Film Co. L.R. 70 I.A. 35, not applicable.
[The question as to whether the element of unreasonableness can even be taken into account when considering the forfeiture of an amount deposited by way of earnest, and if so what factors should be taken into account left open.] [142 F G] Maula Bux vs Union of India, ; , explained. |
Civil Appeals Nos. 942 and 943 of 1966.
Appeals by special leave from the judgment and order dated june 18, 1965 of the Kerala High Court in Writ Appeals Nos.
139 and 140 of 1964.
Jagdish Swarup, Solicitor General, T.A. Ramachandran and D. Sharma, for the appellant (in both the appeals).
S.T. Desai, M.C. Chacko, A.K. Verma, J.B. Dadachanji, and O.C. Mathur, for respondent No. 1 (in C.A. No. 942 of 1966).
A.G. Pudissery, for respondents Nos. 2 and 3 (in C.A. No. 942 of 1966).
J.B. Dadachanji, for respondents Nos. 1 and 2 (in C.A. NO. 943 of 1966).
A.G. Pudissery, for respondents Nos. 7 and 8 (in C.A. No. 943 of 1966).
The Judgment of the Court was delivered by Grover, J.
These two appeals by special leave involve a common question relating to the validity of a notification issued by the Government of Kerala in August 1963 empowering certain revenue officials including the Taluka Tahsildar to exercise the powers of a Tax Recovery Officer under the Income Tax Act 1961, hereinafter called the Act.
The notification was expressly stated to be effective from 1st April 1962 a date prior to the date of the notification.
The facts in one of the appeals (C.A. 942/66) may be stated: One Kunchacko of Alleppey allowed the income tax dues from him to fall into arrears.
The Income Tax Officer took steps to recover the arrears through the Tahsildar.
Certain shares standing in the name of the assessee were attached by the Tahsildar.
The first respondent Ponnoose claimed to have obtained a decree for a certain sum against the assessee.
He also got the shares 680 standing in the name of the assessee attached in execution proceedings, Ponnoose filed a petition under article 226 of the Constitution in the High Court of Kerala in which he challenged the action taken by the revenue officials including the Tahsildar for getting the shares, which had been attached, sold for satisfaction of the income tax dues of the assessee.
The learned Single Judge held that the notification empowering the Tahsildar to exercise the powers of a Tax Recovery Officer under the Act with retrospective effect was invalid.
Consequently ' the attachments made by the Tahsildar were quashed.
This view was affirmed by a division bench in appeal.
The Act came into force on first April 1962.
Section 2(44) defined the expression "Tax Recovery Officer" in the following.
terms: "Tax Recovery Officer ' means (i) a Collector; (ii) an additional Collector or any other officer authorised to exercise the powers of a Collector under any law relating to Land revenue for the time being in force in a State; or (iii) any gazetted officer of the Central or a State Government who may be authorised by the Central Government by notification in the Official Gazette, to exercise the powers of a Tax Recovery Officer".
Section 4 of the Finance Act, 1963 substituted a new definition for the original definition of Tax Recovery Officer.
It was provided that the new definition "shall be and shall be deemed always to have been substituted".
The new definition was as follows: "Tax Recovery Officer" means (i) a Collector or an additional Collector; (ii) any such officer empowered to.
effect recovery of arrears of land revenue or other public demand under any law relating to land revenue or other public demand for the time being in force in the State as may be authorised by the State Government, by general or special notification in the Official Gazette, to exercise the powers of a Tax Recovery Officer; (iii) any Gazetted Officer of the Central or a State Government who may be authorised by the Central Government, by general or special noti 681 fication in the Official Gazette, to exercise the powers of a Tax Recovery Officer.
" The impugned notification dated August 14, 1963 which was published in the Kerala Gazette dated August 20, 1963 referred to the powers conferred by sub clause (ii) of clause (44) of section 2 of the Act read with sub rule (2) of rule 7 of the Income tax (Certificate Proceedings) Rules, 1962 and authorised the various revenue officials mentioned therein including the Taluk Tahsildar to exercise the powers of a Tax Recovery Officer under the Act in respect of the arrears etc.
The concluding portion was, "This notification shall be deemed to have come into force on the first day of April 1962".
The Tahsildar had effected attachment of the shares subsequent to first April 1962 but prior to August 14, 1963.
In other words on the date on which he had effected attachment he was not a Tax Recovery Officer but he got the powers of a Tax Recovery Officer by virtue of the notification dated August 14, 1963.
The short question for determination, therefore, was and is whether the State Government could invest the Tahsildar with the powers of a Tax Recovery Officer under the aforesaid provisions of the Act with effect from a date prior to the date of the notification, i.e., retroactively or retrospectively.
Now it is open to a sovereign legislature to enact laws which have retrospective operation.
Even when the Parliament enacts retrospective laws such laws are in the words of Willes J. in Phillips vs Eyre(1) "no doubt prima facie of questionable policy and contrary to the general principle that legislation by which the conduct of mankind is to be regulated ought, when introduced for the first time, to deal with future acts, and ought not to change the character of past transactions carried on upon the faith of the then existing law.
" The courts will not, therefore, ascribe retrospectivity to new laws affecting rights unless by express words or necessary implication it appears that such was the intention of the legislature.
The Parliament can delegate its legislative power within the recognised limits.
Where any rule or regulation is made by any person or authority to whom such powers have been delegated by the legislature it may or may not be possible to make the same so as to give retrospective operation.
It will depend on the language employed in the statutory provision which may in express terms or by necessary implication empower the authority concerned to make a rule or regulation with retrospective effect.
But where no such language is to be found it has been held by the courts that the person or authority exercising subordinate legislative functions cannot make a rule, regulation or bye law which can operate with retrospective effect; (see Subba Rao J. in Dr. lndramani Pyarelal Gupta vs W. R. Nathu & (1) 40 Law J.Rep.(N.S.) Q.B. 28 at p. 37.
682 Others(1) the majority not having expressed any different opinion on the point; Modi Food Products Ltd. vs Commissioner of Sales Tax U.P.(2); India Sugar Refineries Ltd. vs State of Mysore(3) and General section Shivdev Singh & Another vs The State of Punjab & Others(4).
it can hardly be said that the impugned notification promulgates any rule, regulation or bye law all of which have a definite signification.
The exercise of the power under sub clause (ii) of cl.
(44) of section 2 of the Act is more of an executive than a legislative act.
It becomes, therefore, all the more necessary to consider how such an act which has retrospective operation can be valid in the absence of any power conferred by the aforesaid provision to so perform it as to give it retrospective operation.
In Strawboard Manufacturing Co., Ltd. vs Gutta Mill Workers ' Union(5) an industrial dispute had been referred by the Governor to the Labour Commissioner or a person nominated by him with the direction that the award should be submitted not later than April 5, 1950.
The award, however, was made on April 13, 1950.
On April 26, 1950 the Governor issued a notification extending the time up to April 30.
It was held that in the absence of a provision authorising the State Government to extend from time to time the period within which the Tribunal or the adjudicator could pronounce the decision the State Government had no authority to extend the time and the award was, therefore, one made without jurisdiction and a nullity.
This decision is quite apposite and it is difficult to hold in the present case that the Taluka Tehsildar could be authorised by the impugned notification to exercise powers of a Tax Recovery Officer with effect from a date prior to the date of the notification.
It may next be considered whether by saying that the new definition.
of "Tax Recovery Officer" substituted by section 4 of the Finance Act, 1963 "shall be and shall be deemed always to have been substituted" it could be said that by necessary implication or intendment the State Government had been authorised to invest the officers mentioned in the notification with the powers of a Tax Recovery Officer with retrospective effect.
The only effect of the substitution made by the Finance Act was to make the new definition a part of the Act from the date it was enacted.
The legal fiction could not be extended beyond its legitimate field and the aforesaid words occurring in section 4 of the Finance Act 1963 could not be construed to embody conferment of a power for a retrospective authorisation by the State in the absence of any express (1) ; (2) A.I.R. 1956 All. 35.
(2) A.I.R. 1960 Mys, 326 (4) (5) ; 683 provision in section 2(44) of the Act itself.
It may be noticed that in a recent decision of the Constitution Bench of this Court in B. 8.
vadera etc., vs Union of India & Others(1) it has been observed with reference to rules framed under the proviso to article 309 of the Constitution that these rules can be made with retrospective operation.
This view was, however, expressed owing to the language employed in the proviso to article 309 that ' 'any rules so made shall have effect subject to the provisions of any such Act".
As has been pointed out the clear and unambiguous expressions used in the Constitution, must be given their full and unrestricted meaning unless hedged in by any limitations.
Moreover when the language employed in the main part of article 309 is compared with that of the proviso it becomes clear that the power given to the legislature for laying down the conditions is identical with the power given to the President or the Governor, as the case may be, in the matter of regulating the recruitment of Government servants and their conditions of service.
The legislature, however, can regulate the recruitment and conditions of service for all times whereas the President and the Governor can do so only.
till a provision in that behalf is made by or under an Act of the appropriate legislature.
As the legislature can legislate prospectively as well as retrospectively there can be hardly any .justification for saying that the President or the Governor should not be able to make rules in the same manner so as to give them prospective as welt as retrospective operation.
For these reasons the ambit and content of the rule making power under article 309 can furnish no analogy or.
parallel to the present case.
The High Court was consequently fight in coming to the conclusion that the action taken by the Tahsildar in attaching the shares was unsustainable.
The appeals therefore fail and are dismissed with costs.
One hearing fee.
Y.P. Appeals dismissed. | By a notification dated August 14, 1963, issued by the State of Kerala the Taluka Tehsildar was authorised to exercise the powers of a Tax Recovery Officer under the Income tax Act, 1961.
The notification was made effective from April 1962.
The shares of the assessee, who was in arrears of his income tax, were.
attached by the Taluka Tehsildar after April 1, 1962 but prior to August 14, 1963.
A petition under article 226 of the Constitution was filed challenging the, action of the Tehsildar.
The High Court held that the notification empowering the Tehsildar to exercise the powers of a Tax Recovery Officer with retrospective effect was invalid and consequently quashed the attachments.
This view was affirmed by the Division Bench in appeal.
Dismissing the appeal by the Revenue, this Court, HELD: The courts will not ascribe retrospectivity to new laws affecting rights unless by express words or necessary implication it appears that such was the intention of the legislature.
The Parliament can delegate its legislative power within the recognised limits.
Where any rule or regulation is made by any person or authority to whom such powers have been delegated by the legislature it may or may not be possible to make the same so as to give retrospective operation.
It will depend on the language employed in the statutory provision which may in express terms or by necessary implication empower the authority concerned to make a rule or regulation with retrospective effect.
But where no such language is to be found it has been held by the courts that the person or authority exercising subordinate legislative functions rule, regulation or bye law .
which can operate with retrospective effect.
[681 F H] It can hardly be said that the impugned notification promulgates any rule, regulation or bye law 'all of which have a definite signification.
The exercise of the power under sub cl.
(ii) of cl.
(44) of section 2 of the Income tax Act, 1961 is more of an executive than a legislative act.
[682 B] Dr. Indramani Pyarelal Gupta vs
W.R. Nathu & Ors. ; , Strawboard Manufacturing Co. Ltd. vs Gutta Mill Workers ; , followed.
Phillips vs Eyre, 40 Law L Rep. (N.S.) Q.B. 28 at p. 37, referred to.
Modi Food Products Ltd. vs Commissioner of Sales tax U.P.A.I.R. [1956] All.
35, India Refineries Ltd. vs State of Mysore, A.I.R. 1960 Mys.
326 and General 8.
Shivdev Singh & Anr.
v, The State of Punjab & Ors. , approved.
679 By saying that new definition of "Tax Recovery Officer" substituted by section 1 of the Finance Act, 1963, "shall be and shall be deemed always to have been substituted" was to make the new definition a part of the income Tax Act from the date it was enacted.
The legal fiction could not be extended beyond its legiitimate field and the aforesaid words occurring in s.4 of the Finance Act, 1963 could not be construed to embody conferment of 'a power for retrospective authorisation by the State re.the absence of any express provision in section 2(44) of the Income Tax Act itself.
[682 G] B.S. Vadera etc.
vs Union of India & Ors. ; , distinguished. |
Civil Appeals Nos. 1782 and 1783 of 1966.
Appeals from the judgment and decree dated October 6, 1964, of the Kerala High Court in Appeal Suit No. 569 of 1963.
O.P. Malhotra and J.B. Dadachanji, for the appellant (in C.A. No. 1782 of 1966) and the respondents (in C.A. No. 1783 of 1966).
M.C. Chagla and A.G. Pudissery,.
for the respondents (in C.A. No. 1782 of 1966) and the appellants (in C.A. No. 1783 of 1966).
The Judgment of the Court was delivered by Hegde, J.
These connected appeals by certificate arise from the decision of the.
High Court of Kerala in Appeal Suit No. 569 of 1963 on its file.
Civil Appeal No. 1782 of 1966 is filed by the plaintiff in the suit and Civil Appeal No. 1783 of 1966 is filed by the second defendant (who shall hereinafter be referred to as the defendant), who is contesting this appeal.
The suit was for specific performance on the basis of an oral agreement alleged to have been entered into on 9.9.1121 (Malayalain Era.) between the plaintiff and the 1st defendant who died very soon after the filing of the suit.
The suit was contested by the second defendant, his widow.
The trial court decreed the suit as prayed for but in appeal the High Court did not accept the agreement pleaded by the plaintiff but still granted a decree directing the defendant to execute a sate deed in favour of the plaintiff in respect of item No. 1 of the plaint schedule properties less one acre of paddy field at its east for a sum of Rs. 11500/ .
923 Originally the plaintiff was the owner of the suit properties.
He sold the same to the 1st defendant on 9.9.1121 (Malayalam Era) under Exh.
According to the plaintiff at the time of the execution of P 1, there was an oral agreement between him and the 1st defendant whereunder the 1st defendant agreed to reconvey the properties sold for the very price it was sold whenever the plaintiff calls up.on him to reconvey them.
The suit from which these appeals arise has been rounded on the basis of the said agreement.
The 1st defendant died even before he could file his written statement in the case.
Before his death he had gifted the suit properties by means of a registered deed in favour of the defendant.
She denied the agreement pleaded in the plaint but on the other hand she stated that just before his death her husband had agreed to sell to plaintiff item No. 1 of the suit property less one acre of paddy field for a sum of Rs. 11500 but due to the illness of her husband the sale in question could not be effected.
She proceeded further and averred as follows in paragraph 10 of her written statement.
"This defendant has been asked by the 1 st defendant before his death that even after his death the properties in item No. 1 (in the plaint schedule which are the subject matter of the contract) as mentioned in paragraph 7, except the nilam on the eastern part thereof, should be assigned to the plaintiff for a consideration of Rs. 11500 and accordingly this defendant is willing to give such property as mentioned above to the plaintiff." After the defendant filed her written statement, the plaintiff did not amend his plaint and pray for any relief on the basis of the agreement pleaded by the defendant nor did he inform the court that he was ready and willing to accept the agreement pleaded by the defendant or that he was willing to perform his part of that agreement.
The suit proceeded on the basis of the agreement pleaded in the plaint.
The 1st question that arises for decision is whether the agreement pleaded in the plaint is true.
The burden of proving that agreement is naturally on the plaintiff.
The agreement in question as mentioned earlier is said to be an oral agreement.
Therefore the plaintiff 's task is all the more difficult.
The sale deed Exh.
P. 1 proceeds on the basis that it evidences an outright sale.
It does not either specifically or by implication lend support to the case put forward by the plaintiff.
On the other hand it records the following condition stipulated by the vendor: "Subject to the stipulation that during my life time the schedule properties shall not be mortgaged or assigned to anyone else without my knowledge and consent, I completely convey 'and surrender to you all my 924 remaining rights and possession, and the properties are given to your possession on receipt of the sale consideration of Rs. 24,500.
" From this clause it is clear that the plaintiff conveyed all his rights, title and interest in the suit properties to the vendee subject to the aforementioned stipulation.
It is not necessary to consider whether the restriction in question is a valid one.
Even if we assume that the same is valid, it does not support the plaintiff 's case.
On the other hand, by implication it negatives his case.
At best the clause referred to above merely confers on the vendor a right to preempt.
Hence by implication it negatives the plaintiff 's case that there was an agreement to reconvey the suit properties.
The plaintiff has not given any satisfactory explanation why the contract relating to reconveyance was not incorporated in the sale deed.
To explain this important omission he has examined P.W.2, who.
claims to be a document writer of considerable experience.
He claims that the document in question was written by one of his assistants.
His evidence is to the effect that the vendor and the vendee wanted to incorporate the agreement as regards re conveyance in Exh.
P.1 itself but he advised them that it could not be done.
This is a strange legal advice.
This evidence is on the.
face of it unbelievable.
There is also no satisfactory explanation why the alleged agreement was not reduced into.
writing.
In support of the alleged agreement reliance was tried to be placed on Exh.
P 2, which is said to be a document signed by the first defendant after the present suit was filed and before his death.
The High Court was unable to accept the genuineness of this document.
It opined that this document must have been got up by the plaintiff with the assistance of P.W. 7, his brother.
From the High Court 's judgment we find that though the document contains hardly few lines, for completing the same as many as three different types o.f ink had been used.
The original document has not been called for and therefore we have to proceed on the basis that the.
observations made by the High Court are correct.
The very recitals in the document show that it is a suspicious document.
For all these reasons we are unable.
to place any reliance on this document.
It may be again emphasized at this stage that this document has come into existence after the institution of the present suit.
The principal witnesses who are examined in support of the oral agreement pleaded in the case are P.Ws.1, 2 and 7.
We have already referred to the evidence of P.W. 2.
He does not appear to us to be a reliable witness.
P.W. 1 is no other than the plaintiff himself.
P.W. 7 is his brother.
P.W. 1 has no children and P.W. 7 is his nearest heir.
Therefore it is quite 925 clear that both P.Ws. 1 and 7 are interested witnesses.
Their evidence cannot carry much weight.
The story put forward by the plaintiff in the plaint is an im probable one.
ItI is true that the plaintiff and the 1st defendant are first cousins.
It is also true that their relationship was very cordial.
But if the 1st defendant could not trust the plaintiff to advance a sum of Rs. 24,000 without security as could be gathered from the plaintiff 's evidence, we fail to see why the 1st defendant should have relied on the oral assurances given by the plaintiff in the matter of reconveying the property.
From the averments made by the defendant in her written statement it does appear that when the 1st defendant was in his death bed being stricken by cancer, there was some talk about reconveying a portion of the suit properties to the plaintiff.
It may also be as held by the trial court that the suit property was worth more than Rs. 24,000 at the time of its sale.
It appears likely that neither side has come forward with the true version.
But before a court can grant a decree for specific performance, the contract pleaded must be a specific one and the same must be established by convincing evidence.
Rarely a decree for specific performance is granted on the basis of an agreement supported solely by oral evidence.
That apart, as mentioned earlier, in this case the oral testimony adduced in support of the agreement pleaded is a highly interested one.
We do not think that the trial court was justified in relying on that testimony for granting the decree prayed for.
The trial court itself observed in the course of its judgment (para 12) that "there is no clear cut evidence for proving the terms of the oral contract which is alleged to have been entered into by the plaintiff and the 1st defendant".
This finding alone should have been sufficient to non suit the plaintiff.
Therefore we agree with the High Court, though for reasons other than those mentioned by it that the plaintiff has failed to prove the agreement pleaded in the plaint.
This takes us to the decree passed by the High Court in respect of plaint item No. 1.
This decree is purported to have been passed on the basis of the admission made by the defendant.
It may be noted that the agreement pleaded by the defendant is wholly different from that pleaded by the plaintiff.
They do not refer to the same transaction.
plaintiff did not at any stage accept the agreement pleaded by the defendant as true.
The agreement pleaded by the plaintiff is said to have been entered into at the time of the execution of Exh.
P 1 whereas the agreement put forward by the defendant is one that is said to have been arrived at just before the filing of the suit.
The two are totally different agreements.
The plaintiff did not plead either in the plaint or at any subsequent stage that he was ready and willing to perform the agreement pleaded in the written statement of defendant.
A 926 suit for specific performance has to conform to the requirements prescribed in Forms 47 and 48 of the 1st Schedule in the Civil Procedure Code.
In a suit for specific performance it is incumbent on the plaintiff not only to set out the agreement on the basis of which he sues in all its details, he must go further and plead that he has applied to the defendant specifically to perform the agreement pleaded by him but the defendant has not done so.
He must further plead that he has been and is still ready and willing to specifically perform his.
part of the agreement.
Neither in the plaint nor at any subsequent stage of the suit the plaintiff has taken thos pleas.
As observed by this Court in Pt.
Prem Raj vs The D.L.F. Housing and Construction (Private) Ltd. and anr.(1) that it is well settled that in a suit for specific performance the plaintiff should allege that he is ready and willing to perform his part of the contract and in the absence of such an allegation the suit is not maintainable.
The High Court purported to rely on the decision of this Court in Srinivas Ram Kumar vs Mahabir Prasad and ors.
(2) in support of the decree passed by it.
We do not think that the ratio of that decision is applicable to the facts of this case.
Therein the plaintiff brought a suit for specific performance of an agreement to sell a house alleging that he had paid Rs. 30,000 towards the price and had been put into possession in part performance of the contract but the defendant pleaded that the amount of Rs. 30,000 was received as a loan and the plaintiff was put into possession only to facilitate the payment of interest.
This Court accepted the plea of the defendant and negatived the claim of the plaintiff and refused to decree the specific performance prayed for by the plaintiff but at the same time this Court thought that on the peculiar facts of that case, it was appropriate to grant a decree in favour of the plaintiff for Rs. 30,000 which admittedly remained unpaid.
As seen earlier before a decree for specific performance can be given the plaintiff has to plead and satisfy the court about his willingness to perform his part of the contract.
Hence in our opinion the decision in Srinivas Ram Kumar 's case (2) does not bear on the facts of the present case.
For the reasons mentioned above we dismiss Civil Appeal No. 1782 of 1966 and allow Civil Appeal No. 1783 of 1966.
In the result the suit from which these appeals arise stands dismissed.
Now coming to the question of costs, on the facts and circumstances of this case we think it is appropriate to direct the parties to bear their own costs throughout.
Our reasons for doing so are these: It is proved that the suit properties were sold to the 1st defendant at a very low price.
There must have been some good (1) ; (2) ; 927 reason for doing so but the parties have not chosen to place the true version before the Court.
It is also proved that the 1st defendant before his death was willing to resell a portion of the suit properties.
He had directed his wife to resell the major portion of item No. 1 of the plaint schedule to the plaintiff for a consideration of Rs. 11,500 though its price at that time is proved to be much more than Rs. 11,500.
As seen earlier, the defendant was willing to sell item No. 1 in the plaint schedule to the plaintiff for Rs. 11,500.
She expressed her readiness to do so in her written statement.
She is evidently not willing to stand by that offer now because of the enormous rise of price of properties in recent times.
Mr. M.C. Chagla, learned Counsel for the defendant told us at the time of the hearing that the property concerned in the defendant 's appeal is now worth over a lac of ' rupees.
That appears to be the reason why the defendant is backing out of the offer made by her in her written statement.
All that one need say is that all is not well with defendant 's ease either.
Civil Appeal 1782/66 dismissed.
Civil Appeal 1783/66 allowed. | The plaintiff as original owner of the suit properties sold the same to the 1st defendant who.
was husband of the 2nd defendant.
According to the plaintiff apart 'from the written sale deed there was an oral agreement between him and the 1st defendant whereunder the latter agrees to reconvey the properties sold at the same price whenever the plaintiff called upon him to do so.
The suit was filed for specific performance of the said oral agreement.
The 1st defendant died even before he filed his written statement.
Before his death he had gifted the suit properties to his wife, the 2nd defendant.
In her 'written statement the 2nd defendant denied the agreement pleaded in the point but stated that just before his death her husband had agreed to sell t6 plaintiff item No. 1 of the suit property less one acre of paddy field for a sum of Rs. 11,500 but due to his illness the sale could not be effected.
She reiterated the said offer in her written statement but the plaintiff did not accept it and the suit proceeded on the basis of the agreement pleaded in the plaint.
The trial court decreed the suit as prayed for.
In appeal the High Court did not accept the agreement pleaded by the plaintiff but still granted a decree directing the defendant to execute a sale deed in favour of the plaintiff in respect of item No. 1 of the plaint schedule properties less one acre of paddy field for a sum of Rs. 11,500.
Both the parties appealed to this HELD.
: (i) The burden of proving the oral agreement was on the plaintiff.
The sale deed on the face of it evidenced an outright sale.
The stipulation ha it that the purchaser would not mortgage or assign the properties to anyone else during the vendor 's lifetime went against the plaintiff 's case inasmuch as it only gave the vendor a right to preempt. ] 'here was no satisfactory explanation why such an important thing as the agreement to re convey was made orally and not reduced to writing.
[923 G,924B] It appeared likely in the present case that neither side had come forward with the true version.
But before a court can grant a decree for specific performance, the contract pleaded must be a specific one and the same must be: established by convincing evidence.
Rarely a decree for specific performance is granted on the basis of an agreement supported solely by oral evidence.
[925 D E] On the evidence adduced by him the plaintiff had failed to prove the agreement pleaded in the plaint.
[925 F] (ii) The High Court was wrong in passing the decree in respect of plaint item No. 1 on the basis of the admission of the 2nd defendant in her written statement.
The plaintiff did not at any stage accept the 922 agreement pleaded by the defendant as true.
The agreement pleaded by the plaintiff in his plaint and that pleaded by the defendant in her written statement were two totally different agreements.
The plaintiff did not plead at any stage that he was ready and willing to.
perform the agreement pleaded in the written statement of defendant.
A suit for specific performance has to conform to the requirements prescribed in Forms 47 and 48 of the 1st Schedule in the Civil Procedure Code.
Before a decree for specific performance can be given the plaintiff has to.
plead and satisfy the court about his willingness to perform his part of the contract.
[925 G926 B] Pt.
Prem Raj vs The D.L.F. Housing and Construction (P) Ltd. & Anr., ; , applied.
Srinivas Ram Kumar vs Mahabir Prasad & Ors., ; , distinguished.
(iii) Since the parties had not laid the true version before the court and the defendant had refiled from the offer made by her in her written statement it was a case in which it was appropriate to direct the parties to bear their own costs throughout.
[926 H] |
Appeal No. 524 of 1967.
Appeal from the judgment and order dated July 19, 1966 of the Madhya Pradesh High Court in Misc.
Petition No. 33 of 1965.
P. Ram Reddy and section section Khanduja, for the appellant.
I. N. Shroff, for the respondents.
Shyamala Pappu, C. L. Somesekhar and Vineet Kumar, for the intervener.
The Judgment of the Court was delivered by Hidayatullah C.J.
The appellant, who appeals :by certificate granted by the High Court of Madhya Pradesh, was appointed as Assistant Surgeon on probation, for one year by the Board of Directors, Hindustan Steel Ltd.
,Ranchi with effect from October 22, 1959.
After completing his period of probation he was employed on a contract for 5 years.
exhibit P 3 is the Contract of Service which he entered into with the Company.
Under the terms of the contract there.
was a further period of probation.
During the period of probation the Company could terminate his service without notice and without assigning any reason.
On the completion of the period of probation, either side could terminate the contract by 3 months ' notice without assigning any reason.
The Company could also terminate the employment by 'giving in lieu of notice, three months ' salary.
This term was .applicable till three months immediately before the end of the period of 5 years.
If a notice terminating the service was not ven three months before the close of the end of 5 years the contract was automatically extended till the incumbent became superannuated on reaching the age of 55 years.
The appellant passed the probation period and he was en titled to three months ' notice if his services were to be terminated.
The Company maintains certain set, of Rules governing the employment of its workmen, in addition to the Standing.
Orders of.
Company.
exhibit P 4 represents the procedure for imp sing major penalties and for punishment and appeal.
These are .extracts from the Disciplinary and Appeal Rules.
On September 17, 1964 the appellant.
was on duty in the Medical Out Patients Department.
He examined one Mrs. 365 Holey I who complained of cold, headache and weakness.
It appears that Mrs. Holey complained of some misbehaviour on the part of the appellant and her husband reported the matter to the Chief Medical Officer of the Bhilai Steel Plant where the appellant was then posted.
The Chief Medical Officer asked for the explanation of the appellant on September 21, 1964, but the appellant denied the allegation.
Some enquiry was then held.
The appellant in his appeal submits that he was not given a copy of the written complaint received from Mr. and Mrs. Holey.
On October 5, 1964 some witnesses were examined in the presence of the appellant.
Two days previously the statements of Mr. and Mrs. Holey were also recorded.
The enquiry was being held by the Commercial Manager.
The appellant then sent a notice to Mr. and Mrs. Holey charging them with defamation and actually filed a suit on November 17, 1964 demanding damages.
On December 15, 1964 the General Manager ter minated his services with effect from March 15, 1965, that is to say, after the expiry of three months ' notice under the contract.
It was stated in the order that the services were being terminated in terms of his employment.
The appellant thereupon filed a petition under article 226 of the Constitution in the High Court of Madhya Pradesh claiming inter alia that his services were wrongly terminated without giving him the protection granted by article 311 of the Constitution.
He also complained of breach of the principles of natural justice inasmuch as the enquiry was not proper.
His contention was that although the action was ostensibly taken according to the terms of the contract of employment, he was really punished and he was entitled, therefore, to the protection of article 3 1 1 of the Constitution.
The Company resisted the ground by saying that article 311 was not applicable to the appellant inasmuch as he was employed by a Corporation and neither belonged to the civil service of the Union nor held a civil post under the Union.
The High Court in its judgment ruled that the protection of article 311 of the Constitution was not available in the case because the appellant was not entitled to it.
It appears that this was the only point urged in the High Court.
In the appeal before us attempt was made to enlarge the case by arguing other points, namely, that the enquiry was not properly conducted, that the principles of natural justice were violated and that the appellant had no opportunity of defending himself.
None of these points is touched upon in the High: Court 's judgment and it appears that in the High Court only the constitutional question was raised.
Otherwise, one would expect the High.
Court to have said something about it, or the appellant to have said so in the application for certificate or in 366 the proposed grounds filed with that, application.
We decline to allow these fresh grounds to be urged.
The question that arises in this case is : whether the em ployeesof a Corporation such as the Hindustan Steel Ltd., are entitledto the protection of article 31 1 ? This question can only be answered in favour of the appellant if we hold that the appellant held a civil post under the Union.
It was conceded before us that the appellant could not be said to belong to the civil service of the Union or the State.
article 31 1, on which this contention is based, reads as follows : "31 1.
Dismissal, removal or reduction in rank of persons employed in civil capacities under the Union or a State.
(1) No person who is a member of a civil service of the Union or an all India service or a civil service or a State or holds a civil post under the Union or a State shall be dismissed or removed by an authority subordinate to that by which he was appointed.
(2)No such person as aforesaid shall be dismissed or removed or reduced in rank until he has been given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him; Provided that this clause shall not apply (a)where a person is dismissed or removed or reduced in rank on the ground of conduct which has led to his conviction on a criminal charge; (b)where an authority empowered to dismiss or remove a person or to reduce him in rank is satisfied that some reasons, to be recorded by that authority in writing, it is not reasonably practicable to give to that person an opportunity of showing cause; or (c) where the President or Governor, as the case may be, is satisfied that in the interest of the security of the State it is not expedient to give to that person such an opportunity.
(3)If any question arises whether it is reasonably practicable to give to any person an opportunity of showing cause under clause (2), the decision thereon of the Authority empowered to dismiss or remove such person or to reduce him in rank, as the case may be, shall be final." 367 Clause (2) of the article, which gives the protection opens with the words "no such person as aforesaid" and these words take one back to clause (1) which describes the person or persons to whom the protection is intended to go.
Clause (1) speaks of (i) persons who are members of (a) a Civil Service of the Union, or (b) an All India Service or (c) a Civil Service of a State, or (ii) hold a civil post under the Union or a State.
(a), (b) and (c) refer to the standing services which have been created in the Union and the States and which are permanently maintained in strength.
In addition to the standing services there are certain posts which are outside the permanent services.
The last category in article 311(l) therefore speaks of such posts on the civil side as opposed to the military side.
Incumbents of such posts also receive protection.
In the present case the appellant did not belong to any of the permanent services.
He held a post which was not borne on any of the standing services.
It was, however,, a civil post as opposed to a military post.
So far the appellant 's case is clear but the clause speaks further that such posts must be under the Union or a State.
The question thus is whether the servant employed here can be said to have held the post under the Union or a State ? The appellant contends that since Hindustan Steel Limited is entirely financed by the Government and its management is directly the responsibility of the President, the post is.
virtually under the Government of India.
This argument ignores some fundamental concepts in relation to incorporated companies.
In support of the contention that the post must be regarded as one under the Union the appeliant relies on some obiter observations of a single Judge in M. Verghese vs Union of India and others( 1).
In that case the petitioners were drivers working for the Durgapur Project under Hindustan Steel Limited.
The learned Judge considered the question by analysing the set up of Hindustan Steel Limited.
He found that it was a Government company and a private limited company, although it did not include in its name any notice Jr that it was a private company.
He referred in detail to the various provisions in the Articles of Association as also in the Indian Companies Act which rendered the ordinary company law in applicable in certain respects and conferred unlimited powers.
of management on the President of India and his nominees.
He also found that Hindustan Steel Limited was entirely owned by the Union of India.
From this the learned Judge wished to infer that Hindustan Steel Limited was really a department of" the Government but he did not express this opinion and decided 368 the case on another point.
The appellant contends that the conclusion which the learned single Judge did not draw in the Calcutta case is the conclusion to draw in this appeal.
We must, according to him, hold that there is no difference between Hindustan Steel Limited and a Department of the Government and that the service under Hindustan Steel Limited is a service under the Union.
On the other hand, in State of Bihar vs Union of India and Anr.(1) Hindustan Steel Limited was not held to be a "State" for purposes of article 131.
The question whether Hindustan Steel Limited was subject to the jurisdiction of the High Court under articles 226 and 227 was left open.
In dealing with the above conclusion, reference was made to the incorporation of Hindus tan Steel Limited as an independent company and thus a distinct entity.
In Praga Tools Corporation vs C. V. Imanual and Ors.(2) it was pointed out that a company in which 88 % of ,the capital was subscribed by the Union and the State Governments could not be regarded as equivalent to Government because being registered under the Companies Act it had a separate legal existence and could not be said to be either a Government Corporation or an industry run by or under the authority of the Union Government.
Similar views were also expressed in the High Courts.
In Lachmi and Others vs Military Secretary to the Government of Bihar( '), the expression "civil post under the Union or the State" was held to mean that the civil post must be in the control of the State and that it must be open to the State to 'abolish the post or regulate the conditions of .service.
Although the case concerned a Mali employed in Rai Bhavan, it was held that it was not a post under the State even though the funds of the State were made available for paying, his salary.
In a later case Subodh Ranjan Ghosh vs Sindhri Fertilizers and Chemicals Ltd.( ') the employees of the Sindhri Fertilizers were held not entitled to the protection of article 31 1.
Our brother Ramaswami (then Chief Justice) noticed that the corporation was completely owned by the Union Government; that the Directors were to be appointed by the President of India who could also issue directions.
He nevertheless held that in the eye of law the company was a separate entity and had a separate legal existence.
In our judgment the decision in the Patna case is correct.
It has also the support of a decision re ported in Ram Babu Rathaur vs Divisional Manager, Life Insurance Corporation of India(5) and another in Damodar Valley , 'Corporation vs Provat ROY( ').
Our brother Ramaswami relied (1)Civil Appeals Nos.
512 513 etc.
of 1969 decide on 19.9.1969.
(2) Civil Appeal No. 612 of 1966 decided on February 19, 1969.
(3) (4) A.I.R. 1957 Pat.
(5) (6) LX C.W.N. 1023.
369 in particular upon an English case Tamlin vs Hannaford(1).
In that case it was held in relation to a business that although the minister was really incharge, the corporation was different from.
the Crown and the services of the corporation were not civil services.
Justice P. B. Mukherjee of the Calcutta High Court, to.
whose judgment we referred earlier distinguished the English, case by pointing out certain differences between the Corporation in that case and Hindustan Steel Limited.
He pointed out that (a) in the English Corporation no shareholders were required to, subscribe the capital or to have a. voice in the affair, (b) the capital was raised by borrowing and not by issuance of shares, (c) the loss fell upon the consolidated fund and (d) the corpo ration was non profit making.
In our judgment these differences rather accentuate than diminish the applicability of the principle laid down in the English case to our case.
The existence of shareholders, of capital raised by the issuance of shares, the lack of connection between the finances of the corporation and the consolidated fund of the Union rather make out a greater independent existence than that of the corporation in the English case.
We must, therefore, hold that the corporation which is Hindustan Steel Limited in this case is not a department of the Government nor are the servants of it holding posts under the State.
It has its independent existence and by law relating to Corporations it is distinct even from its members.
In these circumstances, the appellant, who was an employee of Hindustan Steel Limited, does not answer the description of a holder of " a civil post under the Union ' as stated in the article.
The appellant was not entitled to the protection of article 311.
The High,, Court was therefore right in not affording him the protection.
The appeal fails and is dismissed but in the circumstances of the,case we make no order about costs.
G.C. Appeal dismissed. , (1) [1950] 1 K.B.D. 18. | The services of the appellant as Assistant Surgeon in the Hindustan Steel Ltd., Ranchi were terminated purportedly in terms of his contract of employment.
In a petition under article 226 he claimed that the termination was wrongful inasmuch as it was really by way of punishment and article 311 of the Constitution had not been complied with.
The company resisted the ground by saying that article 311 was not applicable to the appellant since he was employed by a corporation and neither belonged to the civil service of the Union nor held a civil post under the union.
The High Court dismissed the ' appellant 's petition.
In appeal before this Court by certificate, the appellant contended that since Hindustan Steel was entirely financed by the Government and its management was directly the responsibility of the President, the post was virtually under the Government of India.
HELD : (i) The protection of article 311(2) is available to the categories of persons mentioned in cls. (a)(b) and (c) of article 311(l).
The appellant did not fall in the categories mentioned in cls, (a) and (b).
He did hold a civil post as opposed to a military post but cl.
(c) further required that it must be under the Union or a State.
In view of the existence of shareholders, of capital raised by the issuance of shares, and the lack of connection between the finances of the corporation and the Consolidated Fund of the Union, it must be held that Hindustan Steel Ltd. was not a department of the Government nor were the servants of it holding posts under the State.
It had its independent existence and by the law relating to corporations it was distinct even from its members.
In these circumstances the appellant, as an employee of Hindustan Steel Ltd., did not answer the description of a holder of 'a civil post under the Union ' as stated in article 31 1.
The High Court was therefore right in not affording him the protection of that Article.
[367 D; 369 C E] State of Bihar vs Union of India, C.A. Nos.
512 513/69 dt.
19 9 1969 and Praga Tools 'Corporation vs C. V. Imanual & Ors.
C.A. No. 612 1966 dt.
19 2 1969, applied.
Subodh Raman Ghosh vs Sindhri Fertilizers and Chemicals Ltd. A.I.R. 1957 Pat. 10, approved.
M. Verghese vs Union of India & Ors.
A.I.R. 1963 Cal.
421, Lachmi and Ors.
vs Military Secretar to the Government of Bihar, Ram Babu Rathaur vs Divisional Manager, Life Insurance Corporation of India, , Damodar Valley Corporation V. Provat Roy, ILX C.W.N. 1023 and Tamlin vs Hannaford, [1950] 1 K.B.D. 18, referred to.
364 (ii)The contentions sought to be raised by the appellant regarding the validity of the departmental enquiry against him were not touched upon in the High Court 's judgment nor mentioned in the proposed grounds filed with the application for certificate.
The appellant could not be allowed to urge them for the first time in this Court. |
Appeal No. 1453 of 1966.
Appeal from the judgment and decree dated September.
14, 1965 of the Madras High Court in Second Appeal No. 1394 of 1963.
A. K. Sen, R.M. Mehta and J.B. Dadachanji, for.
the appellant.
R. Gopalakrishnan, for the respondent.
The Judgment of the Court was delivered by Sikri, J.
This appeal by certificate granted by the High Court of Madras is directed against its judgment and decree modifying the decree passed by the District Judge.
The relevant facts for the determination of the points raised before us are as follows: The plaintiff, K '.
M. Viswanatha pillai, appellant before us and hereinafter referred to as the plaintiff, and K.M. Shanmugham Pillai, respondent before us and hereinafter referred to as the defendant, were originally members of a Joint Hindu Family.
On June 29, 1953, the six brothers who constituted the Joint Hindu Family entered into a partition of the properties belonging to the Joint Family, evidenced by a registered document exhibit A 35.
A motor bus MDH 662 fell to the share of the plaintiff.
At the time of partition the permit was not in the name of the defendant and some proceedings for the transfer of the permit to his name were pending.
Accordingly it was provided in the partition deed as follows: "As soon as its route permit and registration etc. are transferred in the name of Shanmugam Pillai, he shall have the same transferred in the name of the 4th individual of us, Viswanatha Pillai." In September 1953, the permit was transferred in the name of the defendant.
In April 1954, the plaintiff purchased two more vehicles, namely, MDO 1106 and MDH 730, but the permits were obtained in the name of the defendant in whose name the vehicles were also actually acquired.
As the defendant was going to Kuala Lumpur on business he executed a general power of attorney, exhibit A 55, in favour of the plaintiff.
In this power of attorney the defendant admitted that the three buses above mentioned belonged to the plaintiff and were plying in his name as requested by the plaintiff.
Two more buses seem to have been acquired since then.
The plaintiff 's case in brief was that the defendant was carrying on business on his behalf as a benamidar.
He accordingly prayed for a declaration that the five buses alongwith the stage 898 carriage permits belonged to him and that he was entitled to run the same in terms of the power of attorney which was irrevocable.
The defendant had joined with the plaintiff earlier in filing a joint application for transfer of permits before the Regional Transport Authority.
The defendant, however, withdrew his consent and the application was rejected.
The plaintiff, accordingly, seeks a mandatory injunction directing the defendant to execute necessary documents required to effectuate the transfer of the permits.
The suit was decreed entirely by the Trial Court, but the District Judge confirmed the decree only with reference to four of the buses.
With reference to Bus No. MDU 4069 the decree was set aside.
The High Court held that "the plaintiff and the defendant practiced a fraud upon the authorities, conjointly, in contravention of the express provision of the .
The benamidar of the vehicles, representing himself to be the owner, falsely obtained the permits in his name, and allowed the true owner, who had no permit, to conduct the actual business; there cannot be a more flagrant violation of the basic requirements of the Act, or of its scheme.
" The High Court, accordingly, felt that they could not possibly grant mandatory injunction compelling 'the defendant to co operate in any further application for transfer, since that would, in effect, give recognition to the fraudulent contrivance and effectuate rights on the very basis of that contrivance.
The High Court also agreed with the District Judge that the plaintiff could not get a declaration as far as bus No. MDU 4069 was concerned.
The learned counsel for the appellant, Mr. A.K. Sen urges 'before us that no provision of the (IV of 1939) hereinafter referred to as the Act has been contravened and that it is not necessary under the Act that a permit should be obtained only by the real owner of the bus.
The relevant statutory provisions may now be noticed, and they 'are as follows: "The Section 2.
(3) "contract carriage" means a motor vehicle which carries a passenger or passengers for hire or reward under a contract expressed or implied for the use of the vehicle as a whole at or for a fixed or agreed rate or sum and from one point to another without stopping to pick up or set down along the line of route passengers not included in the contract; and includes a motor cab 899 notwithstanding that the passengers may pay Separate fares." (19) "owner" means, where the person in possession of a motor vehicle is a minor, the guardian of such minor, and in relation to a motor vehicle which.
is the subject of a hire purchase agreement, the person in possession of the vehicle under that agreement.
" (20) "permit" means the document issued by the commission or a State.
or Regional Transport Authority authorising the use of a transport vehicle as a contract carriage, or stage carriage, or authorising the owner as a private carrier or public carrier to use such vehicle." (22) "private carrier" means an owner of a transport vehicle other than a public carrier who uses that vehicle solely for the carriage of goods which are his property or the carriage of which is necessary for the purposes of his business not being a business of providing transport, or who uses the vehicle for any of the purposes specified in sub section (2) of section 42.
(23) "public carrier" means an owner of a transport vehicle who transports or undertakes to transport goods, or any class of goods, for another person at any time and in any public place for hire or reward, whether in pursuance of the terms of a contract or agreement or otherwise, and includes any person, body, association or company engaged in the business of carrying the goods of persons associated with that person, body, association or company for the purpose of having their goods transported." Section 42(1) on which the High Court has relied reads thus: "42(1) No owner of a transport vehicle shall use or permit the use of the vehicle in any public place, save in accordance with the.
conditions of a permit granted or countersigned by a Regional or State Transport Authority or the Commission authorising the use of the vehicle in that place in the manner in which the vehicle is being used; . " This section does not, in our view, on the language require that the owner himself should obtain the permit; it only requires the owner that the transport vehicle shall not be used except in accordance with the conditions of the permit.
The High Court would add the words "to him" after the words "permit granted", 900 but, in our view, there is no justification for inserting those words.
The definition of the "permit" itself shows that all permits need not be in the name of the ,owner because the latter part of the definition shows that it is only in the case of a private carrier or a public carrier that a permit has to be in the owner 's name.
The same inference follows from the definitions of "private carrier" and "public carrier".
This Court came to the same conclusion in Veerappa Pillai vs Raman & Raman(1).
Some reliance was placed on the amendments made in section 60( 1 ) (c).
The, section as ' amended reads :, "60 (1) The transport authority which granted a permit may cancel the permit or may suspend it for such period as it thinks fit (c) if the holder of the permit ceases to (own)(2) the vehicle or vehicles covered by the permit," .
There has been a conflict of opinion between the different High Courts as to the inference following that amendment.
It seems to us that the High Court of Allahabad in Khalil ul Rahman Khan vs State Transport Appellate Tribunal(3) rightly gives the effect of the amendment.
Srivastava, J., observed: "A reference was, however, made to cl.
(c) of sub section (1) of Section 60 of the Act and on the basis of that clause it was urged that it assumed that the permit holder should be the owner of the vehicle.
That clause provides for one of the contingencies in which a permit can be cancelled.
According to it, it is permissible for the Transport Authority to cancel a permit if the holder of it ceases to own the vehicle covered by the permit.
It is only a permissive clause and the Transport Authority has only been given a discretion to cancel the permit in that contingency.
It may or may not cancel it, even if the holder of the permit ceases to own the vehicle covered by it.
But it is by no means necessary that el.
(c) should be applicable to the case of every permit holder.
There may be permit holders who own the vehicle covered by the permit and there may be permit holders who do not own the vehicle.
This clause appears to apply only to t he former case and not to the latter.
On its basis, therefore, it cannot be held to be a requirement of the (1) ; (2) Substituted by section 54 of the Motor Vehicles (Amendment) Act, 1956 (100 of 1956) for "possess" (w.e.f. 16 2 1957).
A.I.R. 1963 All. 383, 388.
901 Act that in each case the person in whose favour a permit has been issued should necessarily be the owner of the vehicle covered by it.
" We agree with these observations.
The contrary view held in Varadarajulu Naidu vs Thavasi Nadar(x) that section 42(1 ) contemplates that only an owner will have a permit is erroneous.
The decision of the Andhra High Court in Chavali Venkataswami vs Chavali Kotayya(2) that section 60(1)(c) of the Act envisages the grant of a permit to the owner alone must also.
be dissented from.
The learned counsel for the respondent says that at any rate the Act does not contemplate persons applying for permits benami.
In India benami transactions are recognised and not frowned upon.
(see Gut Narayan vs Sheolal Singh)(a).
In C.I.T. Gujarat vs Abdul Rahim & Co. (4) it was held by this Court that the registration of the partnership deed under section 26A of the Indian Income Tax Act, 1922, could not be refused on the ground that K was the benamidar of V. We see nothing in the Act which expressly or by implication bars benami transactions or persons owning buses benami and applying for permits on that basis.
In the result the appeal is allowed, the decree of the High Court set aside and the decree passed by the District Judge restored.
We may mention that Mr. Sen did not press the claim regarding the fifth bus, MDU 4069.
The appellant will have half costs in this Court.
The parties.
will bear their own costs in the High Court.
Appeal allowed. | The appellant was the owner of 5 buses.
The Vehicles stood in the name of the respondent, appellant 's benamidar, and the stage carriage permits were also obtained in the respondent 's name.
The appellant, who was running the buses, flied a suit claiming the buses along with their permits.
It was decreed by the trial court, and the lower appellate court confirmed the decree in respect of 4 buses.
The High Court, in further appeal, held that the appellant and the respondent together practised fraud in contravention of as.
41(1) and 60(1)(c) of the in as much as the respondent representing himself to be the owner falsely obtained the permits in his own name, and allowed the true owner, who had no permit to conduct the actual business and dismissed the suit in toto.
In appeal this Court, HELD: There is nothing in the , which expressly or by implication bars benami transactions or persons owning buses benami and applying for permits on that basis.
Section 42(1) does not require that the owner himself should obtain the permit; it only requires the owner to see that the transport vehicles shall not be used except in accordance with the conditions of the permit.
The definition of 'permit ' itself shows that all permits need not be in the name of the owner because the latter part of the definition shows that it is only in the case of a private earner or a public carrier that a permit has to be in the owner 's name.
The same inference follows from the definitions of 'private carrier ' and 'public carrier '.
[899 H] The amended section 60(1)(c) provides for one of the contingencies in which permit can be cancelled.
According to it, it is permissible for the Transport Authority to cancel a permit if the holder of it ceases to own the vehicle covered by the permit.
It is only a permissive clause and the Transport Authority has only been g/yen a discretion to cancel the permit in that contingency.
It may or may not cancel it, even if the holder of the permit ceased to own the vehicles covered by it.
But it is by no means necessary that cl.
(c) should be applicable to the case of every permit holder.
There may be permit holders who own the vehicle covered by the permit and there may be permit holders who do not own the vehicle.
This clause appears to apply only to the former case and not to the latter.
[900] Veerappa Pillai vs Raman & Raman, ; , followed.
Khallil ul Rahman Khan vs State Transport Appellate Tribunal, A.I.R. 1963 All. 383, Gut Narayan vs Sheolaf Singh, and C.I.T. Gujarat vs Abdul Rahim & Co., , approved.
Varadarajulu Naidu vs Thavasi Nadar, (1963) 2 M.LJ. 20 and Chavali Venkataswami vs Chavali Kotayya, (1959) 2 and W.R. 407, disapproved. |
ons for special leave to Appeal (Civil) Nos.
2430, 2431, 2436 to 2438, 2442 2443.
2445, 2446, 2472 and 2480 of 1969 and 3 of 1970.
From the orders dated December 8, 1969 of the Madras High Court in Civil Misc.
Petitions Nos.
15375 of 1969 etc.
in Writ Appeals Nos.
519 of 1969 etc.
K. K. Venugopal and R. Gopalakrishnan, for the petitioner (in S.L.P. Nos.
2430, 2431 and 2438 of 1969).
section Mohan Kumaramangalam, M. K. Ramamurthi, G. Ramaswamy, Shyamala Pappu and Vineet Kumar, for the petitioners (in S.L.P. No. 2436 of 1969).
M. K. Ramamurthi, G. Ramaswamy, Shyamala Pappu and Vineet Kumar, for the petitioner (in S.L.P. No. 2437 of 1969).
A. section Nambiar, for the petitioner (in S.L.Ps.
2442, 2443 and 2472 of 1969).
496 M. C. Setalvad, V. Subramanian and K. Jayaram, for the petitioner (in S.L.P. Nos. 2445, 2446 and 2480 of 1969 and 3 of 1970).
Madan Mohan for respondent No. 1 (in S.L.P. Nos.
2430, 2431, 2436, 2437, 2438, 2442, 2443 and 2472 of 1969).
O. C. Mathur, for respondent No. 1 (in S.L.P. No. 2445 of 1969).
R. Gopalakrishnan, for respondent No. 1 (in S.L.P. No. 2480 of 1969).
K. Thirumalai, A. T. M. Sampath and E. C. Agrawala, for respondent No. 1 (in S.L.P. No. 3 of 1970).
The Order of the Court was delivered by Hidayatullah, C.J. These are petitions for special leave against the orders of the Division Bench of the High Court of Madras by which the High Court has ordered that the permits granted by the Regional Transport Authority will operate and not those which the State Transport Appellate Tribunal in appeal granted.
The facts may be stated, taking as a sample, Special Leave Petition No. 2430 of 1969.
The original grantee of the permit by the Regional Transport Authority may be described as 'A '.
The date of the grant was November 20, 1966.
On appeal by the respondent who may be described as 'B ', the State Transport Appellate Tribunal cancelled the grant made to A by the Regional Transport Authority.
This was on July 18, 1967.
A writ petition was thereupon filed by A and it was allowed by the learned single Judge on November 4, 1969 and the order of the State Transport Appellate Tribunal was quashed.
When the matter went before the Letters Patent Bench, it was observed that in view of the fact that only the grantee of the Regional Transport Authority had a valid permit, it was not possible to grant any permit to B who was recognised by the State Transport Appellate Tribunal.
They followed an earlier ruling of the court and restricted the grant pending disposal of the Letters Patent appeal to the grantee of the Regional Transport Authority who alone was permitted to operate on the route.
It appears that only one operator could be allowed on this route, because of a section 47(3) determination.
In these petitions for special leave which are ex facie against the orders made in interlocutory proceedings, the attempt is to get the permits restored to B.
It is claimed that this involves a question of jurisdiction and that question is whether the High Court could recognise A the grantee of the Regional Transport Authority when his permit had been cancelled by the State Transport Appellate 497 Tribunal.
We think that these are matters into which this Court cannot be invited to go under article 136 of the Constitution, because the appeal itself is pending before the High Court and what the High Court has done is to give effect to the order of the learned single Judge.
In other words, the Letters Patent Bench has not attempted to pass any special order of its own staying the operation of the decision of the learned single Judge.
We think it would be wrong for us to interfere at this stage.
It may be that the question may come up in some other form before us when the appeals from the Letters Patent decision are brought before this Court.
If and when this happens, we may find it convenient to express our opinion on the question of jurisdiction of the High Court to go into such matters in appeal or in original writ petitions.
Beyond this, we do not wish to express any opinion, one way or the other, at this stage.
We accordingly order the dismissal of these special leave petitions, reserving to the petitioners the right to raise such questions as may legitimately be raised when they choose to file appeals against the decision of the Letters Patent Bench.
Stay granted by this Court is vacated.
V.P.S. Special Leave Petitions dismissed. | The Regional Transport Authority granted to the respondent a permit to operate a bus on a route.
The grant was set aside by the State Transport Appellate Tribunal on appeal filed by another applicant.
The order of the S.T.A. was quashed by a Single Judge of the High Court in a writ petition filed by the grantee from the R.T.A.
When the matter went before the Letters Patent Bench it was observed that since only the grantee from the R.T.A. had a valid permit it was not possible to grant any permit to the appellant before the S.T.A. pending the disposal of the Letters Patent Appeal as only one operator could be allowed on the route.
In the petition for special leave to appeal to this Court under article 136 against the interlocutory order, on the question of the jurisdiction of the High Court to recognise the grantee from the R.T.A. when his permit was cancelled by the S.T.A., HELD: This Court would not go into the matter at this stage because the appeal itself was pending before the High Court and all that the Bench had done was to give effect to the order of the Single Judge pending disposal of the appeal.
[497 A B] |
iminal Appeal No. 40 of 1968.
Appeal by special leave from the judgment and order dated January 23, 1968 of the Patna High Court in Criminal Revision No. 91 of 1968.
D. P. Singh, D. N. Mishra and Govind Das, for the appel lant.
R. C. Prasad, for the respondent.
The Judgment of the Court was delivered by Hidayatullah, C. J.
On May 28, 1966, Bhola Prasad Mandal, Supply Inspector Pathargama with other officers searched a godown belonging to Nagarmal Tekriwal (appellant) and found stored therein 45 quintals of rice, 90 quintals of paddy, 5 50 quintals of grains, 3 quintals of wheat, one quintal Arhar and 207 quintals of Khesari together with weighing scale and weights and measures.
As Nagarmal did not possess a licence under the Bihar Foodgrains Dealer 's Licensing Order, 1966, he was prosecuted under section 7 of the Essential Commodities Act for violation of cl. 3 of the order.
He was convicted by the Munsif Magistrate, First Class and sentenced to undergo rigorous imprisonment for six months.
The foodgrains found in his possession were also ordered to be forfeited to the State.
He appealed unsuccessfully to the Sessions Judge, Santhal Parganas, Dumka and his revision in the High Court was summarily dismissed.
He now appeals by special leave granted by this Court.
The defence of the appellant was that he was an agriculturist and that the foodgrains were grown by him on the lands he had taken on lease from various parties.
In support of his defence, he produced both documentary and Oral evidence.
The documentary evidence consisted of certain lease deeds executed by 'him and his brother in favour of the lessors.
Oral evidence showed that he and, his brother were in possession of 80 90 bighas of land on which Paddy and other foodgrains found in his pos session, were grown, 901 The case proceeded against him on the basis of the presump tion under para 3 of the Order.
It may be read here "Licensing of wholesale and retail dealers (1) No person shall carry on business as a whole sale dealer or retail dealer except under and in accordance with the terms and conditions of a licence issued in this behalf by licensing authority.
(2) For the purpose of this clause, any person other than a bona fide consumer or an agriculturist, who stores any foodgrains in any quantity shall, unless the contrary is proved, be deemed to store the foodgrains for the purpose of sale.
" It was held that as he had stored foodgrains above the permitted quantities for a wholesale dealer, he would be regarded as a wholesale dealer within the order.
The defence, before us again is that he is an agriculturist and is not liable to the penalty under the law, because the presumption in his case cannot be drawn.
It is also submitted that his case that he was an agriculturist stands completely proved in this case.
The learned Magistrate rejected the documentary evidence on the ground that the lease deeds were not registered and were not admissible in evidence under section 49 of the Registration Act.
The learned Sessions Judge did not accept this ground; at least he did not say anything about it.
He held that such documents could be brought into existence at any time and were thus not reliable.
Both the Magistrate and the Sessions Judge did not accept the evidence of the witnesses on the ground that they were interested in the appellant.
Mr. B. P. Singh, in arguing the case has drawn our attention to a ruling of this Court in Manipur Administration vs M. Nila Chandra Singh(1) and contended that the appellant cannot be regarded as doing business as a dealer unless a series of transactions by him of sale were proved against him.
The ruling does say that the words "carrying on the business" in the context of the Act postulate a course of conduct and continuity of transactions.
Therulingmaynof be applicable in certain circumstances, as for example where even a single transaction can be demonstrated to be in the course of business.
Carrying on of business may be found in one instance or more, depending upon the circumstances of the case.
(1) ; 90 2 However, in the present matter we need not worry about the ,carrying on of business, because in our opinion, the appellant has successfully proved that he is an agriculturist and the presumption under paragraph 3(2) of the order cannot be drawn against him.
That paragraph expressly excludes bona fide consumers and agriculturists from the presumption to be drawn from proof of storage only.
It is obvious that sub paragraph speaks of storage for sale as a dealer although the words "as a dealer" are not there, because storage has reference to 'business as a dealer and that is the essence of the Order.
The fiction in the second sub paragraph must be carried to its logical conclusion.
In the present case, the appellant produced a number of lease deeds in which leases of various parcels of land are shows to have been granted to him.
He also produced receipts of payment of lease money and he cited witnesses who deposed on oath that he and his brother cultivated 80 90 bighas of land.
No doubt, the lease deeds are not registered, but for the purpose of a criminal prosecution, we have to see whether they are genuine or not and Whether an inference of innocence can be based upon them.
In our judgment they serve the collateral purpose of showing that the lands about which the witnesses spoke orally were held by him for purposes of cultivation.
If that be so, then, he is an agriculturist and it is easy to see that the evidence which was 'brought for ward of witnesses deposing orally was not concocted to set up a false defence.
Indeed no adequate reasons were given for rejecting the testimony of witnesses.
The learned Magistrate rejected the testimony of one witness on the ground that he is the next door neighbour and has a "soft corner for him".
We do not know why the evidence of the next door neighbour should be rejected; it can only be rejected if there is something intrinsically wrong with that evidence.
The total circumstances in the case show that the appellant was in fact carrying on agricultural ,operations.
He executed a number of lease deeds, produced receipts and proved by oral evidence that he was an agriculturist.
In his case, therefore, the presumption under para 3(2) could ,not be drawn.
If that presumption is not drawn, then the case against him stands unproved because of the exemption which agriculturists enjoy.
On the whole, we are satisfied that his conviction was im properly reached.
We allow the appeal and set aside his conviction.
His bail bonds are cancelled.
The order of forfeiture of foodgrains is also set aside.
We are informed that the foodgrains were sold.
If any money has been recovered by sale of the foodgrains, it shall be handed over to the appellant.
Appeal allowed. | On search of the appellant 's premises foodgrains above quantities permitted under the Bihar Foodgrain Dealer 's Licensing Order 1966 were found.
He was prosecuted under section 7 of the Essential Commodities Act for violation of cl. 3 of the Order.
The appellant produced oral and documentary evidence to show that he was an agriculturist and therefore the presumption tinder cl.
3(2) of the order that he had stored the foodgrains for sale could not be drawn against him.
The documentary evidence aforesaid consisted of lease deeds executed by the appellant and his brother in favour of lessees.
The oral evidence showed that he, and his brother were in possession of 80 90 bighas of land on which the foodgrains found in his possession were grown.
The documentary evidence was rejected by the trial magistrate on the ground that the lease deeds not being registered were not admissible in evidence under section 49 of the Registration Act.
The Sessions Judge in appeal did not 'rely on the lease deeds for the reason that such documents could be brought into existence at any time.
Both the trial magistrate and the Sessions Judge rejected the oral evidence as unreliable because it was given by persons who were next door neighbours and as such interested in the appellant.
The appellant 's revision petition before the High Court was summarily rejected.
By special leave he appealed to this Court.
HELD : (i) Cl.
3(2) of the Order expressly excludes bona fide consumers and agriculturists from the presumption to be drawn from proof of storage only.
It is obvious that the sub clause speaks of storage for sale as a dealer although the words 'as a deal& ' are not there because storage has reference to business as a dealer and that is the essence of the order.
The fiction in the second sub clause must be carried to its, logical conclusion.
[902 B] ii) No doubt the lease deeds were not registered but in a criminal case it had to he seen whether they were genuine or not and whether, an inference of innocence could be based ' on them They served the collateral purpose of showing that the lands about which the witnesses spoke orally were held by him for purposes of cultivation.
[902 D] (iii) There is no reason why the evidence of a next door neighbour should be rejected unless there is something intrinsically wrong with it.
[902 E F] (iv)The total circumstances in the case showed that the appellant was in fact carrying on agricultural operations.
He executed a number of lease deeds, produced receipts and proved by or a evidence that he 900 was an agriculturist.
In his case therefore the presumption under cl.
3(2) could not be drawn.
If that presumption was not drawn, the case against him stood unproved because of the exemption which agriculturists enjoy.
[902 F G] The appeal must accordingly be allowed.
Manipur Adminisration vs M. Nila Chandra Singh, [1964] 5 S.C.R.574.
referred to and explained. |
iminal Appeal No.100 of 1967.
Appeal from the judgment and order dated March 13,1967 of the Gujarat High Court in Criminal Appeal No. 566 of 1965.
J. L. Hathi, K. L. Hathi and K. N. Bhat, for the appellant.
section K. Dholakia, Badri Das Sharma and section P. Nayar, for the respondent.
The Judgment of the Court was delivered by Ray, J.
This is an appeal from the judgment of the High Court of Gujarat.
The appellants were charged with offences under sections 302 and 323 read with section 34 of the Indian Penal Code.
Accused Nos. 1 and 2 were charged for the individual offences under sections 302 and 323 of the Indian Penal Code for intentionally causing death of Amarji and for causing simple hurt to Vaghji Mansangji.
The deceased Amarji was the brother in .
law (sister 's husband) of Vaghji Mansangji.
Two important eyewitnesses were Pabaji Dajibha and Pachanji Kesarji.
Amarji 33 was Pabaji 's mother 's sister 's son.
Pachanji is the first cousin of Vaghji Mansangji.
Accused No. 3 Mulubha is the maternal uncle (mother 's bro ther) of accused No. 2 Ranubha Naranji and accused No. 1 Hethubha alias Jitubha is the son of another maternal uncle of accused No. 2.
Accused No. 2 was residing at Bhalot.
Vaghji also resided there.
About two months prior to the date of the occurrence on 26 January, 1965 at 8 p.m. there was a quarrel between the children of the house of accused No. 2 Ranubha and the children of the house of Vaghji.
There was exchange of words between the members of the two families.
Accused No. 2 Ranubha and his father Naranji assaulted the wife of Vaghji.
Vaghji then filed a complaint.
Ultimately, the complaint was compounded on the intervention of accused No. 3 Mulubha.
The prosecution case is that because of the behaviour of accused No. 2 Ranubha towards the wife of Vaghji, Ranubha had to leave his own village of Bhalot and had to go to reside with his maternal uncles at Bhuvad.
The further prosecution case is that the relations of Ranubha thereafter went to village Bhalot for fetching the goods of Ranubha and at that time they had threatened Vaghji and others that Ranubha had to leave the village and Vaghji and others would not be able to continue to, reside in the village.
On 26 January, 1965 Amarji, Pabaji Vaghji and Pachanji took their carts of fuel wood for selling it in the village Khedoi which is about 7 miles from Bhalot.
They left Bhalot at about 10 a.m. and reached Khedoi at about 1 p.m.
The cart loads of fuel wood were sold in Khadoi by about 5 p.m.
They made some purchases and then left Khedoi at about 7 p.m.
While returning home Amarjis cart was in the front and Pabaji, Pachanji and Vaghji followed him in.
that order.
There was not much distance between each cart.
When the carts had gone about 2 miles from Khedoi and they were about to enter village Mathda, the three accused persons were noticed waiting on the roads.
All of them caught hold of Amarji and attacked him who was in the first cart.
In the meantime, accused No. 3, Mulubha, caught hold of the hand of Pabaji and prevented him from going near Amarji.
Mulubha was armed with an axe.
Accused Nos. 1 and 2 dealt knife blows to Amarji.
The prosecution suggested that the accused persons realised their mistake that instead of Vaghji they had attacked Amarji, and so both the accused Nos. 1 and 2 left Amarji and went to the cart of Vaghji and gave blows with sticks to Vaghji.
On seeing the attack on vaghji Pabaji intervened and asked the accused to desist from attacking Vaghji any 34 longer as they had already killed Amarji.
Thereupon the accused stopped attacking Vaghji.
By this time Amarji had come staggering to the spot where Pabaji was standing.
Then Amarji was placed in one of the carts and Vaghji was made to sit in that cart.
Pachanji drove his cart first and the two carts without any drivers which had been formerly driven by Vaghji and Amarji, were kept in the middle and Pabaji with the two injured men in his cart was driving his cart last.
The carts were taken to village Khedoi.
It is the prosecution case that the three accused persons followed these carts up to a certain distance and then accused Nos '.
1 and 2 left while accused No. 3 disappeared near Khari Vadi.
Pabaji took the carts to Moti khedoi and saw police head constable Banesing who had come to Khedoi for patrolling work.
Banesing was attached to the police outpost at Bhuvad.
Banesing directed these persons to take Amarji to the Khedoi hospital.
By that time Amarji had died.
Banesing left Khedoi with Pabaji for Anjar police station which is about 8 miles from Khedoi.
They reached, Anjar at about 11 p.m. and Pabaji 's F.I.R. was recorded before police sub inspector Khambholja.
The police sub inspector then preceded to, Khedoi hospital.
Amarji was declared to be dead.
The police sub inspector recorded the statements of Vaghji and Pachanji and :then took steps in the investigation of the case.
At the trial all the three ' accused denied having committed the offence.
, The Sessions Judge acquitted all the three persons under section 302 read with section 34.
He however convicted all the accused for the offence punishable under section 304 Part II read,with section 34 and sentenced them to suffer rigorous imprisonment for five years.
Accused Nos. 1 and 2 were convicted for the offence under section 323 and accused No. 3 was convicted for the offence under section 323 read with section 34 of the Indian Penal Code.
Accused Nos. 1 and 2 were sentenced to suffer rigorous imprisonment for three months while accused No. 3 was sentenced to suffer rigorous imprisonment for two months.
All the sentences were to run concurrent All the accused filed appeals against their convictions.
Before the Division ' Bench in the High Court of Gujarat Divan, J. held that accused No. 1 alone was responsible for the fatal injury on Amarji and he was found guilty for the offence under section 302 while accused Nos. 2 and 3 were found, guilty for the offence under section 324 read with section 34.
Shelat, J. was of the view that all the accused must acquitted because he ' was not satisfied with the evidence and proof of the identity of the accused.
The case was then placed under Section 429 of Criminal ' Procedure Code before Mehta, J. who held that accused No. 1 35 must be Convicted for the offence under section 302 while accused Nos. 2 and 3 must be convicted for the offence under section 302 read with section 34 and all of them should be sentenced to suffer rigorous imprisonment for life.
The conviction of accused Nos. 1 and 2 under section 323 and of accused No. 3 under section 323 read with section 34 was upheld.
The conviction of all the accused under section 304 Part 11 was altered by convicting accused No. 1 under section 302 and accused Nos. 2 and 3 under section 302 read with section 34 of the Indian Penal Code.
Counsel for the appellants contended first that the third learned Judge under section 429 of the Criminal Procedure Code could only deal with the differences between the two learned Judges and not with the whole case.
The same contention had been advanced before Mehta, J. in the High Court who rightly held that under section 429 of the Criminal Procedure Code the whole case was to be dealt with by him.
This Court in Babu and Ors.
vs State of Uttar Peadesh (1) held that it was for tic third learned Judge to decide on what points the arguments would be heard and therefore he was free to resolve the differences as he thought fit.
Mehta, J. here dealt with the whole case.
Section 429 of the, Criminal Procedure Code states "that when the Judges comprising the Court of Appeal are equally divided in opinion, the case with their opinion thereon, shall be laid before another Judge of the same Court and such Judge, after such hearing, if any, as he thinks fit shall deliver his opinion, and the judgment or order shall follow such opinion".
Two things are noticeable; first, that the, case shall be laid before another Judge, and, secondly, the judgment and order will follow the opinion of the third learned Judge.
It is, therefore, manifest that the third learned Judge can or will deal with the whole case.
The second and the main contention of counsel for the ap pellants was that there was no common intention to kill Amarji.
The finding of fact is, ,that the attack the three accused was a concerted one under prearranged plan.
Amarji Was attacked by mistake :but whosoever inflicted, injury in the region of the collar bone of Amarji must be held guilty of murder.
under section 302.
Amarji was further found to have been attacked by accused Nos. 1 and 2 and accused No. 3 who was armed with an axe caught hold of the hand of Pabaji.
The injury on Amarji was an incised wound 1 3/4" *3/4" over the left side of the neck neck just above the left collar bone.
The direction of the wound was was towards right and downwards.
The other injury was incised (1) ; 36 wound 1" * 1/2" * 1/2" over the chest (right side) near the middle line between the 6th and 7 ribs.
The evidence establishes these features; first, that all the accused were related; secondly, they were residing at Bhuvad at the relevant time; thirdly, all the three accused made sudden appearance on the scene of the occurrence; fourthly, they started assault as soon as the carts arrived at the scene of the offence; fifthly, the way in which Amarji was attacked by accused Nos. 1 and 2 and stab wounds were infficted on him and the manner in which accused No. 3 held up Pabaji would show that the three accused were lying in wait under some pre arranged plan to attack these persons when they were returning to Bhalot.
It therefore follows that the attack took place in pursuance of the pre arranged plan and the rapidity with which the attacks Were made also shows the pre concerted plan.
The attack by accused Nos. 1 and 2 on Amarji and the holding up, of Pabaji by accused No. 3 all prove ,common intention, participation and united criminal behaviour of all and therefore accused No. 3 would be equally responsible with ,accused Nos. 1 and 2 who had attacked Amarji.
This Court in the case of Shankarlal Kachrabhai and Ors.
vs State of Gujarat(1) said that a mistake by one of the accused as to killing X in place of Y would not displace the common intention if the evidence showed the concerted action in furtherance of pre arranged plan.
The dominant feature of section 34 is the ,element of participation in actions.
This participation need not in all cases be by physical presence.
Common intention implies acting in concert.
There is a pre arranged plan which is proved either from conduct or from circumstances of from incriminating facts.
The principle of joint liability in the doing of a criminal act is embodied in section 34 of the Indian Penal Code.
The existence of common intention is to be the basis of liability.
That is why the prior concert and the pre arranged plan is the foundation of common intention to establish liability and guilt.
Applying these principles to the evidence in the present case it appears that there was pre arranged plan of the accused to commit offences.
All the accused were lying in wait to attack the party of Amarji, Vaghji, Pabaji and Pachanji.
Amarji was in the forefront.
The accused attacked him.
Vaghji was also attacked and prevented from going to the relief of Amarji.
The plea that Amarji was mistaken for Vaghji would not take away the common intention established by pre arranged plan and participation of all the accused in furtherance of common intention.
The act might be ,done by one of the several persons in furtherance of the common intention of them all, without each one of them having intended (1) ; 37 to do the particular act in exactly the same way as an act might be done by one member of an unlawful assembly in prosecution of the common intention which the other members of the unlawful assembly did not each intend to be done.
In view of the evidence that Amarji was killed in furtherance of the common intention of all the accused the appellants are guilty of murder. 'In Shankarlal 's case(1) this Court said that if the common intention was to kill A and if one of the accused killed B to wreck his private vengeance, it could not be possibly in furtherance of the common intention for which others can be liable.
But if on the other hand he killed B bona fide believing that he was A and the common intention was to kill A the killing of B was in furtherance of the common intention.
All the three accused in the present case were lying in wait and assaulted the driver of the first cart and stabbed him in pursuance of their prearranged plan Therefore, all the three accused including the appellant must share the liability of murder under section 302 read with section 34 of the Indian Penal Code.
Further, in view of the finding that the the concerted plan was to cause injuries to the intended victim with dangerous weapons with which the assailants were lying in wait, the liability of the appellant is established.
The conclusion of Mehta, J. is correct.
The appeal, there fore, fails and is dismissed.
The accused must surrender to the bail and serve out the sentences. | The three appellants were charged with offences under sections 302 and 323 read with section 34, of the Penal Code and appellants 1 and 2 were charged with the individual offences under sections 302 and 323 for intentionally causing the death of A, mistaking him for V and for causing simple hurt to V. The Sessions Judge acquitted all the three accused under section 302 read with section 34 but convicted them under section 304 Part 11 read with section 34 and sentenced them to suffer rigorous imprisonment for five years.
Appellants 1 and 2 were also convicted for the offence under section 323 and appellant 3 was convicted for the offence under section 323 read with section 34.
All three were sentenced for these convictions to rigorous imprisonment for terms.
to run concurrently.
On appeal to a Division Bench of the High Court one learned Judge held, that the first appellant alone was responsible for the fatal injury on A and found him guilty under section .302, while the second and third appellants were found guilty under section 324 read with section 34.
The second learned Judge was of the view that all the accused must be acquitted as he was not satisfied with, the evidence and proof of. the identity.
of the accused.
The case was then placed before , a, third learned Judge under section 429 Cr.
P.C. who held that the first appellant must 'be convicted under section 302 while the second and third appellants must be convicted, under section 302 read with section 34 and all of them must be sentenced to suffer rigorous prisonment for life.
The conviction of the first and second appellants under section 323 and of the third appellant under section 323 read with section 34 was upheld.
In appeal to this Court it was contended (i) that the third learned Judge under section 429 Cr. P.C. could only,.deal with the differences between the two learned Judges and not with the whole case; and (ii) that there was no comnmittee intend on within the meaning of supp I.P.C. on the part of the three appellants to kill A as he was attacked by, mistake.
HELD : Dismissing the appeal.
(i) Section on of the Criminal Procedure Code.states "that when the judges comprising the Court of Appeal are equally divided in opinion the case with their opinion thereon shall be laid before another Judge of the same Court and such Judge, after hearing,if any, as he thinks fit, shall deliver his opinion, and the judgment or order shall follow such before another Judge, and, secondly, the Judgment and order will follow the, opinion of the third learned Judge.
It is, therefore, manifest that the third learned Judge can or will deal with the whole case.
[35 D F] 32 Babu and Ors.
vs State of Uttar Pradesh, [1965] 2 S.C.R. 771; referred to.
(ii) The plea that A was mistaken for V would not take away the common intention established by a pre arranged plan and participation of all the accused in furtherance of common intention.
The act might be done by one of the several persons in furtherance of the common intention of them all without each one of them having intended to do the particular act in exactly the same way as an act might be done by one member of an unlawful assembly in prosecution of the common intention which the other members of the unlawful assembly did not each intend to be don. .
[36 H] On the facts, it was clear that the attack took place in pursuance of a pre arranged plan.
, The attack by appellants 1 and 2 on A and the evidence showing that appellant 3 held back P during the attack all proved common intention, participation and united criminal behaviour of all; appellant 3 was therefore equally responsible and guilty with appellants 1 and 2 who had attacked A. Shankarlal Kachrabbhai and Ors.
vs State of Gujarat, ; ; referred to.
The dominant feature of section 34 is the element of participation in actions.
This participation need not in all cases be by physical presence.
Common intention implies acting in concert.
There is a pre arranged plan which is proved either from conduct or from circumstances or from incriminating facts.
The principle of joint liability in the doing of a criminal act is embodied in section 34 of the Indian Penal Code.
The existence of common intention is to be the basis of liability.
That is why the prior concert and the pre arranged plan is the foundation of common intention to establish liability and guilt.
[36 E] |
Appeal No. 145 of 1953.
Appeal by Special Leave from the Judgment and Order dated the 8th day of September, 1950, of the High Court of Judicature for the State of Punjab at Simla in Civil Reference No. 3 of 1949.
Achhru Ram (R. section Narula and Naunit Lal, with him) for the appellants.
M. C. Setalvad, Attorney General for India, (G. N. Joshi and P. G. Gokhale, with him) for the respondent.
October 25.
The Judgment of the Court was delivered by DAS J.
This appeal by special leave arises out of a consolidated reference made on the 19th April, 1949, under section 66(1) of the Indian Income tax Act read with section 21 of the Excess Profits Tax Act by the Income tax Appellate Tribunal, Madras Bench.
The reference arose out of four several proceedings for assessment to excess profits tax of the appellant, the chargeable accounting periods being periods ending with 31st March of each of the years 1942, 1943, 1944 and 1945.
The relevant facts appearing from the consolidated statement of the case are as follows: Narain Swadeshi Weaving Mills, the appellant before us (hereinafter referred to as the assessee firm), is a firm constituted in 1935 upon terms and conditions set forth in a deed of partnership dated the 6th November, 1935.
The partners were Narain Singh and two of his sons, Ram Singh and Gurdayal Singh, their respective shares in the partnership being 6 annas, 5 annas and 5 annas.
The business of the firm which was carried on 954 at Chheharta, Amritsar, in the Punjab, was the manufacture of ribbons and laces and for this purpose it owned buildings, plant, machinery , etc.
On the 7th April, 1940, a public limited liability company was incorporated under the name of Hindus,tan Embroidery Mills Ltd. The objects for which the company was established were to purchase, acquire and take over from the assessee firm the buildings and leasehold rights, plant, machinery, etc., on terms and conditions mentioned in a draft agreement and the other objects set forth in the Memorandum of Association of the said company.
Out of the total subscribed capital represented by 41,000 shares 23,000 shares were allotted to the assessee firm.
Of these 23,000 shares so allotted 20,000 shares were not paid for in cash but the remaining 3,000 shares were paid for in cash.
The directors of the company were Narain Singh and his three sons Ram Singh, Gurdayal Singh and Dr. Surmukh Singh and one N. D. Nanda, a brother in law of Gurdayal Singh.
Dr. Surmukh Singh was at all material times residing in South Africa.
These 4 directors between themselves hold 33,340 shares including the said 23,000 shares.
The company was, accordingly, a director controlled company.
The funds available to the company were not sufficient to enable it to take over all the assets of the assessee firm.
The company, therefore, purchased only the buildings and the leasehold rights therein but took over the plant, machinery, etc.
on lease at an annual rent of Rs. 40,000.
On the 28th July, 1940, the company executed a managing agency agreement in favour of Uppal & Co., a firm constituted on the same day with Ram Singh and Gurdayal Singh, two of the sons of Narain Singh, as partners with equal shares.
Under the managing agency agreement dated the 28th July, 1940, Uppal & Co., was to be paid 10% of the net profits of the company besides salary and other allowances mentioned therein.
On the 25th January, 1941, the company appointed as its selling agent Ram Singh & Co., a firm which 955 came into existence on the same day with Ram Singh, Gurdayal Singh and Dr. Surmukh Singh, the three sons of Narain Singh, as partners, each having an one third share.
The terms of this partnership were recorded in writing on the 17th March, 1941.
Ram Singh & Co., was to get a commission of 3% on the net sales and 6% on the gross income of the company.
In the two new firms so constituted Narain Singh had no share and eventually with a view to make up for his loss the shares of the partners in the assessee firm were modified by an agreement made by them on the 21st April, 1941.
Under this agreement Narain Singh was to get a 12 annas share and the two sons Ram Singh and Gurdayal Singh 2 annas share each.
All the three firms mentioned above, namely, the assessee firm, Uppal & Co., and Ram Singh & Co., were registered as firms under section 26A of the Indian Income tax Act.
On the facts summarised above, the Excess Profits Tax Officer came to the conclusion that the main purpose of the formation of the company and the two firms of Uppal & Co., and Ram Singh & Co., was the avoidance of liability to excess profits tax.
Accordingly, on the 16th November, 1944, the Excess Profits Tax Officer issued notices under section 10A of the Excess Profits Tax Act to the company and the three firms.
Eventually, however, the proceedings against the company were dropped and the Excess Profits Tax Officer considered the case of the three firms only.
He held that the three firms were really one and he, therefore, amalgamated the income of all three and proceeded to assess the assessee firm to excess profits tax on that basis for the four several chargeable accounting periods mentioned above.
Under sub section (3) of section 10 A the assessee company preferred four several appeals to the Appellate Tribunal.
In their order the, Appellate Tribunal considered the four following issues: (1)Whether the income of the firms styled as "Uppal & Co.," and "Ram Singh & Co.," could be amalgamated with the income of the assessee firm 956 under the provisions of section 10 A of the Excess Profits Tax Act ? (2) Whether the share of income of Dr. Surmukh Singh, a partner in the selling agency of Ram Singh & ,Co., could be included under section 10 A in the excess profits tax assessment of the assessee firm ? (3) Whether the lease money obtained by the assessee firm could be legally treated as business profits liable to excess profits tax ? (4) Whether proper opportunity under section 10 A had been given to the assessee firm?" Before the Appellate Tribunal, as before the Excess Profits Tax Officer, the assessee firm objected to the application of the provisions of section 10 A of the Excess Profits Tax Act.
The contention was.
that as the assessee firm did not, during the relevant chargeable accounting periods, carry on any business within the meaning of section 2(5) of the Excess Profits Tax Act, section 10 A had no application and, therefore, the profits of Uppal & Co., and Ram Singh & Co., could not be amalgamated with its own income.
In other words, the argument was that there must be an existing business of an assesses during the relevant period before section 10 A could be applied in respect of transactions concerning that business.
The Appellate Tribunal took the view that instead of using the plant, machinery, etc., for its own manufacture the assessee firm turned that revenue yielding asset into another use by lettinh it out on an annual rent of Rs. 40,000 and that this was certainly an adventure in the nature of trade as contemplated by section 2(5) of the Excess Profits Tax Act read with rule 4 of Schedule I thereto.
Accordingly, it decided issue No. 3 against the assessee firm holding that the assessee firm carried on business in the letting out of the plant, machinery, etc., on hire and the lease money obtained thereby could be legally treated as business profits liable to excess profits tax.
On issue No. I the Appellate Tribunal agreed with the Excess Profits Tax Officer that it was evident beyond doubt that a definite scheme was adopted creating separate charges in order to avoid excess profits tax 957 by the three firms, namely, the assessee firm, Uppal & Co., and Ram Singh & Co., taken together.
Thefirst step in the scheme was the formation of the company.
The second step was the appointment of Uppal & Co., as managing agents instead of appointing the assessee Tfirm itself.
The third step was the creation of the firm Ram Singh & Co., for taking up the selling agency of the company and the final step was to adjust the shares of the partners of the assessee firm so as to equalise, as far as possible, the share of Narain Singh with the shares which his sons got in the several firms.
The Appellate Tribunal held that all the various steps noted above need not necessarily have been fictitious or artificial but they were certainly transactions so as to attract the operation of section 10 A.
The Appellate Tribunal decided issues Nos. 2 and 4 against the assessee.
All the four appeals were accordingly dis missed by the Appellate Tribunal.
The assessee firm thereupon preferred four several applications under section 66(1) of the Income tax Act read with section 21 of the Excess Profits Tax Act praying that the following questions arising out of the order of the Appellate Tribunal be referred to the High Court : (1) Whether, under the facts and circumstances of the case, the application of section 10 A with a view to amalgamating the income of the firms "Uppal & Co." and "Ram Singh & Co.", with the income of the appellant firms was correct and valid in law ? (2) Whether, in view of the facts admitted on record, the share of income of Dr. Surmukh Singh, a partner in the selling agency and not a partner in the appellant firm, could be legally included along with the share of income of section Ram Singh and section Gurdial Singh and is this inclusion at all within the purview of section 10 A ? (3) Whether, in view of the facts, circumstances and observations on record, the lease money obtained by the appellant firm could be legally treated as business profits or profits from an adventure in trade liable to excess profits tax ? 122 958 (4) Whether the type of a notice served on the appellant, under the facts and the circumstances of the case, legally amounts to a proper opportunity under section 10 A of the Excess Profits Tax Act, and if not ,what is the legal effect of such opportunity being not afforded ? (5) Whether the proceedings under section 1O A were not null and void ab initio, for want of necessary previous sanction from the Inspecting Assistant Commissioner of Excess Profits Tax, the fact of such previous sanction having been obtained being neither mentioned in the order nor proved before the Appellate Tribunal at the time of hearing although expressly required by the Court.
The Appellate Tribunal declined to refer questions (4) and (5) sought to be raised by the assessee firm and no grievance has been made before us on that score.
The Appellate Tribunal referred the earlier three questions after reframing the same so as to read as follows : (1) Whether there is any evidence before the Tribunal to support the conclusion that the main purpose of the transactions was the avoidance of excess profits tax ? (2) Whether on the facts admitted or proved the share of income of Dr. Surmukh Singh in the firm of Ram Singh & Co., can be legally included along with the share of income of Ram Singh and Gurdayal Singh ? (3) Whether on the facts and circumstances of the case the leasing of machinery, etc., by the assessee firm to the company was a business within the meaning of section 2(5) of the Excess Profits Tax Act ? The learned counsel appearing for the assessee firm submitted before the High Court that the third of the referred questions should be discussed and decided first, but the High Court took the view that the decision of the first question was a necessary preliminary to the consideration of the third question.
Taking up, then, the first question first the High Court referred to the ,several facts found by the Appellate Tribunal and 959 described as steps and regarding them as circumstantial evidence came to the conclusion that it could not be said that there was no evidence upon which the Tribunal was justified in coming to the conclusion that the formation of the firms, Uppal & Co., and Ram Singh & Co., was mainly for the purpose of avoidance or reduction of liability to excess profits tax.
In the result, the High Court held that the three firms, the assessee firm, Uppal & Co., and Ram Singh & Co., were in fact one and the same and on that basis proceeded next to take up the third question.
After referring to section 2(5) and certain judicial decisions, the High Court concluded as follows: " The argument of Mr. Pathak when applied to the present case would have force were it a fact that the sole concern of the assessee firm was the receipt of hire of machinery from a company or firm, in which the assessee firm had Do interest.
But this is not the state of affairs.
On the finding under the first question referred, the assessee firm, the firm of managing agents and the firm of selling agents are really one and the same firm.
This firm and its partners held the majority of shares in the company.
The agreement for payment of Rs. 40,000 as rent of machinery is an agreement between the assessee firm and the company which the assessee firm controls.
The business of the assessee firm was, and in effect still is, the manufacture of ribbons and laces, and the receipt of Rs. 40,000 is a profit from that business diverted into the pockets of the assessee firm.
" The High Court accordingly answered the third question in the affirmative and against the assessee firm.
The necessary certificate of fitness for appeal to this Court having been refused by the High Court, the assessee firm obtained special leave of this Court to prefer the present appeal.
The learned counsel appearing for the assessee firm has submitted before us and we think rightly that the approach of the High Court was erroneous in that they took up the discussion of question No. I first.
That question, as framed, proceeded on the assumption 960 that section 1O A applied to the case and only raised the question as to whether there was any evidence to support the finding of the Appellate Tribunal arrived at as a result of the enquiry under that section, namely, that the main purpose of the transaction was the avoidance of excess profits tax.
The long title and the preamble of the Excess Profits Tax Act refer to the imposition of tax on excess profits arising out of certain businesses.
Section 4, which is the charging section and section 5 which lays down the application of the Act to certain business, clearly postulate the existence of a business carried on by the assessee on the profits of which the excess profits tax can be imposed.
Therefore, if there is such a business during the relevant period, then and then alone can arise the question of the applicability of section 10 A.
If there is no such business as is contemplated by the Act, then the Act does not apply and section 10 A cannot come into operation at all.
Before the Excess Profits Tax Officer can embark upon an enquiry as to whether a transaction was effected for the avoidance or reduction of liability to excess profits tax and to make such adjustments as he considers appropriate_ there must be proof that the assessee was, during the chargeable accounting period, carrying on any business of the kind referred to in section 5 of the Act.
Logically, therefore, the Appellate Tribunal as well as the High Court should have taken up question No. 3 first, for on a decision of that question would depend the applicability of section 1O A and if that question were answered in favour of the assessee firm the further question of law as raised in question No. I would not, in such event, arise.
The approach of the High Court was, therefore, logically misconceived on the facts of this case.
What then are the facts found by the Appellate Tribunal apart from its findings under section 10 A ? The findings are that after the formation of the company the assessee firm was left with no business at all.
The company purchased the leasehold rights in the lands and buildings where the plant, machinery, etc., were installed.
The firm as such ceased to manufacture any ribbons and laces.
It was left with the plant, 961 machinery, etc., which it did not require and which ceased to be a commercial asset in its hands, for it had no longer any manufacturing business at all.
Further, the assessee firm had put it out of its power to use the plant, machinery, etc.
, for it had no right in the lands and buildings where the plant, machinery, etc., had been installed.
In these circumstances, the assessee firm let out the plant, machinery, etc., to the company.
It was thenceforth the company which was carrying on the business of manufacturing ribbons and laces and for that purpose hired the plant, machinery, etc., from the assesee firm.
Prima facie it was the company which appointed the managing agents and the selling agents.
Ex facie and apart from the alleged result of any enquiry under section 10 or section 1O A of the Excess Profits Tax Act those were not transactions of the assessee firm.
The assessee firm was, therefore, left only with some property which at one time was a commercial asset but had ceased to be so.
The assessee firm thereupon let out that property on rent.
The question is whether such letting out in such circumstances amounted to carrying on of a business.
"Business" as defined in section 2(5) of the Excess Profits Tax Act includes amongst others, any trade, commerce or manufacture or any adventure in the nature of trade, commerce or manufacture.
The first part of this definition of "a business" in the Excess Profits Tax Act is the same as the definition of a business in section 2(4) of the Indian Income tax Act.
Whether a particular activity amount to any trade, commerce or manufacture or any adventure in the nature of trade, commerce or manufacture is always a difficult question to answer.
On the one hand it has been pointed out by the Judicial Committee in Commissioner of Income tax vs Shaw Wallace & Co.(1), that the words used in that definition are no doubt wide but underlying each of them is the fundamental idea of the continuous exercise of an activity.
The word "business" connotes some real, substantial and systematic or organised course of activity or conduct with a set purpose.
On the other hand, a single and (1) Cal.
962 isolated transaction has been held to be conceivably capable of falling within the definition of business as 'being an adventure in the nature of trade provided the transaction bears clear indicia of trade.
The question therefore, whether a particular source of income is business or not must be decided according to our am ordinary notions as to what a business is.
The case of Commissioner of Excess Profits Tax, Bombay City vs
Shri Lakshmi Silk Mills Ltd.(1), decided by this Court is clearly distinguishable.
There, the respondent company which was formed for the purpose of manufacturing silk cloth installed a plant for dying silk yarn as a part of its business.
During the relevant chargeable accounting period, owing to difficulty in obtaining silk yarn on account of the war, it could not make any use of this plant and it remained idle for some time.
In August, 1943, the plant was let out to another company on a monthly rent.
The question arose whether the income received by, the respondent company in the chargeable accounting period by way of rent was income from business and assessable to excess profits tax.
It should be noted that in that case the respondent company was continuing its business of manufacturing silk cloth.
Only a part of its business, namely, that of dying silk yarn had to be temporarily stopped owing to the difficulty in obtaining silk yarn on account of the war.
In such a situation, this Court held that part of the assets did not cease to be commercial assets of that business since it was temporarily put to different use or let out to another and accordingly the income from the assets would be profits of the business irrespective of the manner in which that asset was exploited by the company.
This Court clearly indicated that no general principle could be laid down which would be applicable to all cases and that each case must be decided on its own circumstances according to ordinary common sense principles.
In the case before us the assessee firm 's business had entirely closed.
It no longer 'manufactured any ribbons and laces.
It had accordingly no further trading or commercial activity.
It could not in fact use the plant, machinery, etc., (1) ; 963 after the land and the buildings where they were installed had been sold to the company.
In these circumstances the assessee firm let out the plant, machinery, etc., on an annual rent of Rs. 40,000.
These facts are very similar to those found in Inland.
Revenue , Commissioners vs Broadway Car Co., Ltd.(1).
There the war conditions bad reduced the company 's business to very small proportions.
In that situation it was observed that in that case the company dealt with part of its property which bad become redundant and was sublet purely to produce incomes transaction quite apart from the ordinary business activities of the company.
The ratio decides in that case which was noticed in the judgment of this Court appears to us to apply to the facts found in the present case apart from the findings Under section 10 A. Applying also the common sense principle to the fact so found it is impossible to hold that the letting out of the plant, machinery, etc., was at all a business operation when its normal business activity had come to a close.
It is interesting to note that sub sections (3) and (4) of section 12 of the Indian Income tax Act recognise that letting out of plant, machinery, etc., may be a source of income falling under the head "other sources" within that section and not necessarily under the head "business" dealt with in section 10 of that Act.
In the facts and circumstances of this case, therefore, the letting out of the plant, machinery, etc.
,cannot be held to fall within the body of the definition of "business" under section 2(5) of the Excess Profits Tax Act.
In this view of the matter it is not necessary for us to express an opinion as to the meaning or implication of the proviso to that definition or rule 4(4) of Schedule I to the Act.
In our opinion, in the facts and circumstances of this case, question No. 3 should have been answered in the negative.
The question of law raised in the third question being answered in favour of the assessee firm, the question of the applicability of section 1O A of the Excess Profits Tax Act could not arise, for the assessee firm having, during the relevant period, no business to which that (1) 964 Act applied section 1O A could not be invoked by the revenue and, therefore, the question whether there was "evidence to support the finding of the Tribunal under that section could not arise.
On the contrary, the further question of law which would really arise out of the order of the Appellate Tribunal consequent upon the aforesaid answer to question No. 3 would be whether under the facts and circumstances of the case the application of section 1O A with a view to amalgamating the income of the firms Uppal & Co., and Ram Singh & Co., with the income of the assessee firm was correct and valid in law and that was precisely the first question which the assessee firm sought to raise by its application.
In our view the High Court should not only have answered question No. 3 in the negative but should also have raised, as a corollary to that answer to question No. 3, the further question of law on the lines indicated in question No. I of the assessee 's petition.
In other words, the High Court should have, after answering question No. 3 in the negative reframed the referred question No. I by restoring question No. 1 as suggested by the assessee firm in its petition and should have answered the question so restored in the negative and in favour of the assessee.
For the reasons stated above, we allow this appeal, reframe question No. I by restoring the first question suggested by the assessee firm, namely " Whether under the facts and circumstances of the case the application of section 1O A with a view to amalgamating the income of the firms Uppal & Co., and Ram Singh & Co., with the income of the appellant firm was correct and valid in law?" and we answer the question so reframed in the negative.
Question No. 2 must be answered in the negative and in favour of the assessee by way of necessary corollary.
We also answer question No. 3 in the negative.
The appellant will be entitled to the costs of this appeal and we order accordingly. | As condition precedent to the applicability of section 10 A of the Excess Profits Tax Act, 1940, it must be proved that during the chargeable accounting period the assessee was carrying on the kind of business to which the Act applies by virtue of section 5 of the Act.
Section 2(5) of the Act states what is included in the word "business".
It is not possible to lay down a general definition which would cover all cases of business.
Business involves the fundamental idea of a continuous activity.
It connotes some real, substantial and systematic or organised course of activity with a set purpose.
Single isolated transaction may also bear the clear indicia of trade or an adventure in the nature of trade which is included in the word "buisiness" mentioned in section 2(5) of the Act.
Hence whether a particular source of income is business or not must be decided on the facts and circumstances of each case according to our ordinary conception of business.
Since 1935 the assessee firm carried on the business of manufacturing ribbons and laces and for this purpose owned buildings, leasehold rights, plant, machinery etc.
On April 7, 1940, a public limited liability company was incorporated with the object of acquiring and taking over the buildings, leasehold rights, plant, machinery etc.
, from the assessee firm.
The company purchased leasehold rights in the lands and buildings where plant, machinery etc. were installed.
The assesses firm as such ceased to manufacture ribbons and laces and was left with plant and machinery etc.
which it did not require and which ceased to be commercial asset in the hands of the firm.
The land and the buildings having been sold the assessee firm put it out of its power to use the plant, machinery etc.
In these circumstances the company took and the assessee firm granted a lease of the plant, machinery etc., at an annual rent of Rs. 40,000.
Held, that this lease of the plant, machinery etc., given by the assesses firm could not be "business" within the meaning of section 2(5) of the Excess Profits Tax Act, 1940.
953 Commissioner of Excess Profits Tax, Bombay City vs Shri Lakshmi Silk Mills Ltd. ([1952] S.C.R. 1), distinguished.
Inland Revenue Commissioner vs Broadway Car Co., Ltd. ([1946] 2 A.E.R. 609), relied upon.
Commissioner of Income tax vs Shaw Wallace & Co., ([1932] I.L.R. , referred to. |
Appeal No. 104 of 1959.
Appeal by special leave from the judgment and decree dated December 19, 1956, of the Patna High Court in Appeal from the Appellate Decree No. 632 of 1949.
M. C. Setalvad, Attorney General of India and R. C. Prasad, for the appellants.
section P. Varma, for respondent No. 1.
N. section Bindra and D. Gupta, for Intervener.
April 27.
The Judgment of Sinha, C. J., Sarkar and Mudholkar, JJ., was delivered by Sarkar, J.
The judgment of Das Gupta and Ayyangar, JJ., was delivered by Ayyangar, J. SARKAR, J.
The parties to this litigation are all Hindus but it is not in dispute that the Mohammedan law of preemption is applicable to them by custom, nor that the appellants had a right of preemption.
The only question is whether the first demand called talab i mowasibat which has to be made after the completion of the sale in order that the right may be enforced, was made before or after such completion.
The making of the demand is not in dispute but the dispute is as to when the sale was completed.
The appellants had their residential house contiguous to the house owned by certain persons whom we may call Pandeys.
On January 31, 1946, the Pandeys executed a deed of sale in favour of the respondent purchaser in respect of their aforesaid house.
The appellants claim a right of are emption on account of this sale.
The consideration mentioned in the deed was Rs. 2,000.
There was a subsisting mortgage on that house and the deed provided that out of the consideration a sum of Rs. 200 would be left with 476 the respondent purchaser for clearing off that mortgage.
The deed also recited that the Pandeys had received Rs. 400 and "the remaining Rs 1,400 (Rupees fourteen hundred) in cash at the time of exchange of equivalents, (that is) at the time of (handing over) of the receipt of this deed. . .
On receipt of the whole and entire amount of consideration money we have put the said claimant into possession and occupation of this vended property as absolute owner in place of us, the executants and our heirs and representatives.
" The deed further stated, "this sale deed becomes operative from the date when we the executants affixed our signatures thereon.
Whatever title, we, the executants and our heirs had. . . with respect to this vended property, has become extinct, inoperative and null and void and the same has now been transferred to and acquired by the claimant.
" By the word "claimant", the respondent purchaser was referred to.
The deed was presented at the registration office for registration by the Pandeys on the day it was executed and it was left with the Registrar in the Registration Office for the necessary entries and copies being made, a receipt being given to the Pandeys.
On February 2, 1946, the appellants on coming to hear of the execution of the deed of sale made the talab imowasibat.
On February 7, 1946, the receipt granted by the Registration Office to the Pandeys was made over by them to the respondent purchaser who there upon paid the balance of the price as stipulated in the deed.
On February 9, 1946, the documents were copied in the Registrar 's books and thereupon the registration became complete as provided in B. 61 of the .
The respondent purchaser thereafter received the deed of sale from the Registrar 's Office on February 13, 1946.
The appellants filed their suit for preemption on September 9, 1946.
The suit was decreed by the trial court and this decision was maintained by the first Appellate Court.
The High Court, however, in second appeal set aside the decisions of the Courts below with the result that the suit stood dismissed and 477 the appellants have now come to this Court in further appeal.
The Mohammedan law of preemption is stated in Mulla 's Principles of Mohammedan law in these terms: "The right of preemption arises only out of a valid, complete and bona fide sale.
" This statement of the law is accepted by both the parties and there is no question that it is not correct.
There is furthermore no dispute that the sale to the respondent purchaser was valid and bona fide.
It is also agreed that one of the requisites before the right of pre emption can be exercised is the preliminary demand by the preemptor and that such demand must be made after the completion of the sale.
The case has been argued before us on behalf of the appellants on the basis that the sale was governed by the .
We will also proceed on that basis.
Section 54 of the provides that sale of tangible immovable property of the value of rupees 100 and upwards, which the house with which we are concerned is, can be made only by a registered instrument.
Section 3 of this Act defines " registered" as registered under the law for the time being in force regulating the registration of documents.
This, in the present case, means the Regis tration Act of 1908.
It is not in dispute that the registration under the is not complete till the document to be registered has been, copied out in the records of the Registration Office as provided in section 61 of that Act.
It was therefore con.
tended in the High Court that when a sale had to be made by a registered instrument it became complete only on the instrument of sale being copied in the books of the Registration Office.
The High Court accepted this view and held that the sale in the pre sent case, therefore, became complete on the completion of the registration of the instrument of sale which was done on February 9, 1946 when the instrument was copied out in the books of the Registration Office.
In this view of the matter, the High Court 61 478 came to the conclusion that the appellants were not entitled to enforce their right of preemption because they had not made the preliminary demand after the completion of the sale as the law required them to do, but before, that is, on February 2, 1946.
In answer to this view of the High Court, the learned Attorney General appearing for the appellants says that the High Court overlooked section 47 of the the effect of which was to make a registered document operate from the time from which it would have commenced to operate if no registration thereof had been required and not from the time of its registration.
His contention is that once a document is registered, as the deed of sale in this case was, it begins to operate from the time it would have otherwise operated and therefore, the position in this case is that the sale became operative and hence complete on January 31, 1946.
The learned Attorney General further contends that the proper construction of the deed of sale was that it became operative from the day it was executed and that if it was not so, it was not a sale but could only be an agreement to sell in which latter case his clients, though this present suit might fail, would be entitled, if they so desired, to enforce their right of preemption when the sale was completed in pursuance of that agreement.
As authority in support of his contention that in view of section 47 of the the sale in the present case must be deemed to have been completed on the day the instrument was executed, the learned Attorney General relied on Bindeshri vs Somnath Bhadry (1) and Gopal Ram vs Lachmi Misir (2).
We do not think that the learned Attorney General 's contention is well founded.
We will assume that the learned Attorney General 's construction of the instrument of sale that the property was intended to pass under it on the date of the instrument is correct.
Section 47 of the does not, however, say when a sale would be deemed to be complete.
It only permits a document when registered, to operate (1) A.I.R. (1916) All. 199.
(2) A.I.R. (1926) All. 549.
479 from a certain date which may be earlier than the date when it was registered.
The object of this section is to decide which of two or more registered instruments in respect of the same property is to have A effect.
The section applies to a document only after it has been registered.
It has nothing to do with the completion of the registration and therefore nothing to do with the completion of a sale, when the instrument is one of sale.
A sale which is admittedly not completed until the registration of the instrument of sale is completed, cannot be said to have been completed earlier because by virtue of section 47 the instrument by which it is effected, after it has been registered, commences to operate from an earlier date.
Therefore we do not think that the sale in this case can be said, in view of section 47, to have been completed on January 31, 1946.
The view that we have taken of section 47 of the seems to have been taken in Tilakdhari Singh vs Gour Narain (1).
We believe that the same view was expressed in Nareshchandra Datta vs Gireeshchandra Das (2) and Gobardhan Bar vs Guna Dhar Bar (3).
With regard to the two cases on which the Attorney General has relied, it has to be observed that they were not concerned with a right of pre emption arising on a sale of property.
Bindeshri Prasad 's case (4) was concerned with a suit for zar i chaharum.
It does not appear from the report what that right was or when it arose.
It is not possible therefore to derive much assistance from it.
Gopal Ram 's case( ') was concerned with a right of pre emption arising on the grant of a lease and the question was whether the suit for the enforcement of such a right was barred by limitation.
It appears that article 120 was applied to that suit and it was held that the cause of action for the excrcise of the right of pre emption arose as soon as the lease was executed and even before it was registered though before the actual registration the suit for pre emption could not have been maintained.
(1) A.I.R (1921) Pat, 150.
(2) Cal.
979 (3) I.L.R. (1940) II Cal.
270 (4) A.I.R. (1916) All. 199.
(5) A.I.R. (1926) All 549.
480 This view was taken in reliance upon section 47 of the .
We are not aware whether the law of pre emption applicable to the case required that there should be a completed lease before the right to pre empt could be enforced.
If that law did so require, then we do not think that the case was rightly decided.
It was said in that case that "When the law has given to a transaction a retrospective effect, it must have that effect.
" We do not think that a transaction which when completed has a retros pective operation can be said for that reason to have been completed on the date from which it has that operation.
In the view that we have taken, it is not necessary to discuss the question of the construction of the instrument of sale in this case, that is, to decide whether on its proper reading the transfer was intended to take immediate effect on its execution or later on after the balance of the purchase money had been paid.
Nor do we think it necessary to pronounce on the other argument of the learned Attorney General that a transfer which does not convey the property immediately can only be an agreement to transfer.
We think that for these reasons this appeal must be dismissed and we order accordingly.
The appellants will pay the costs of this appeal.
AYYANGAR, J. We regret that we are unable to agree to the order dismissing this appeal.
The facts have been very fully set out in the judgment of Sarkar, J. and it is therefore unnecessary to repeat them.
The following matters are beyond dispute: (1) that the law that is applicable to govern the right of the appellant before us is the law of pre emption as understood in Mohammedan law, (2) that according to the principles of Mohammedan law, the right of pre emption arises and the 2 talabs have to be performed immediately on the completion of a valid, and bona fide sale, and (3) that the two talabs which are required to be performed by a person claiming the right of pre emption have been performed by the appellant.
There being further no dispute that a sale did take 481 place, the only point in controversy in the appeal is as to whether the talabs which were performed on February 2,1946 were performed by the appellant after the right of pre emption accrued to her, viz.,, after the sale in favour of the respondent was effected or were they premature.
At one time there was a controversy as to whether it was the principle of the Muslim law that would determine the point of time when a sale should be taken to be complete (under which system crucial significance was attached to two of the ingredients of a sale, viz., payment of consideration and delivery of possession) or whether after the enactment of the it was to the statute and to the creteria laid down by it that one has to turn to determine when a sale should be held to have taken place.
The former view found favour with the majority of the Full Bench of the Allahabad High Court in Begam vs Muhammad (1), Justice Banerjee dissenting from the majority.
This controversy, however, is long past and it has now been decided by this Court in Radha Kishan vs Shri Dhar Ram Chandra (2) that the provisions of the supersede the principles of the.
Mohammedan law as to sale and it was to the statute that one should look to find out whether, and if so when, a sale was complete in order to give rise to a right of pre emption.
Turning now to the provisions of the , in the case of a sale of immovable property of the value of Rs. 100 or over (as in the case before us) section 54 of the Act enacts that it could be effected only by a registered instrument; sale itself being defined as "transfer of ownership in exchange for a price paid or promised or part paid and part promised".
In other words, the essence of a transaction of sale consists in the transfer of ownership and this transfer has to be effected by "a registered instrument".
The while prescribing the formalities of writing and Registration, does not itself determine the point of time when a sale becomes complete.
"Registered" under the Transfer (1) I.L.R. 16 All. 344.
(2) ; 482 of Property Act means: "registered under the law for the time being in force regulating the registration of documents" (section 3).
When one turns to the , provision is made, inter alia for the time within which after its execution a document could be presented for registration, the persons who could so present, the office in which the document could validly be presented and registration effected and sub Part B of starting from section 58 deals with the procedure on admitting documents to registration.
Section 60(1) enacts: "After such of the provisions of sections 34, 35, 58 and 59 as apply to any document presented for registration have been complied with, the registering officer shall endorse thereon a certificate containing the word registered ', together with the number and page of the book in which the document has been copied." and section 61 which follows makes provision for the copying of documents in Public registers from which the word "registration" is derived and enacts: "61.
The endorsements and certificate referred to and mentioned in sections 59 and 60 shall thereupon be copied into the margin of the Register book, and the copy of the map or plan (if any) mentioned in section 21 shall be filed in Book No. 1.
(2)The registration of the document shall thereupon be deemed complete, and the document shall then be returned to the person who presented the same for registration, or to such other person (if any) as he has nominated in writing in that behalf on the receipt mentioned in section 52.
" Much reliance has been placed by learned Counsel for the respondent and, indeed, in the judgment of the High Court, on the words the "registration of the document shall thereupon be deemed complete" occurring in sub section
(2) of section 61.
But in the context of the fasciculus of sections in which it appears it is clear that it refers to the fact that the registering officer had completed his duty and had no more to do with the document presented to him, beyond returning the original to the party entitled to receive the same.
In 483 our opinion, these words have nothing to do with the time from which the transaction covered by the registered document operates or with reference to the present context, when the sale evidenced by the deed, becomes complete.
Specific provision is made for these in section 47 of the which reads: "A registered document shall operate from the time from which it would have commenced to operate if no registration thereof had been required or made, and not from the time of its registration.
" The principles underlying sections 61(2) and 47 are not divergent.
It is not as if, that any delay by the regis tering officer which might take place owing to the pressure of work in his office or for other reason, has any effect on the rights of parties, quod their property or the time from when the deed operates, or as regards the effectiveness of the transaction, or the priority of transactions inter se.
It is not as if, documents executed on different dates, the parties intending them to operate at different times, have their intentions modified, if not nullified by the action or inaction of the registering officer, or any delay that might take place in his office.
A contention that though the Muslim law of sale is superseded by the and the , but yet the provision contained in section 47 of the is inapplicable to determine when a sale effected by a registered instrument should be complete could not be sustained on any principle or logic, or of course on any rule of interpretation of statutes.
In our opinion no distinction is possible to be drawn between a sale which is effective and one which is complete since they are merely different forms of expressing the same concept and for the same reason between the time from when a sale becomes effective and when it should be held to be complete.
As under Muslim law the talabs have to be performed only immediately after the preemptor receives information of the sale, the view we take of the applicability of section 47 of the , introduces no element of hardship in the exercise of the option.
We are, therefore, clearly of the opinion that the time when the sale becomes complete so as to 484 entitle the preemptor to perform the talabs should be determined by the application of the principle of intention laid down in section 47 of the Which is as much a part of the positive law governing the right of preemption as the provision of section 54 of the which, requires a registered instrument to effect a sale which gives rise to a right of preemption.
If, therefore, B. 47 of the should apply to determine the time from which the registered document should have effect or, in other words, the time from which the sale should be held to be complete, the intention of the parties would be the crucial and only test.
That has to be gathered by reference to the document itself read in the light of the surrounding circumstances, with however a proviso that if the document were clear and its terms explicit, no evidence to contradict them would be admissible.
Paragraph 4 of this document of the sale deed exhibit 'A ' dated January 31, 1946 recites the consideration for the same.
This was to consist of Rs. 2,000.
Out of this, it states that the vendors had received Rs. 400 in cash at the time of the execution of the document, and that Rs. 200 had been left with the purchaser for payment to a previous possessory mortgagee.
In regard to the balance of Rs. 1,400 the recital reads: "and received the remaining sum of Rs. 1,400 in cash at the time of exchange of equivalents, (that is) at the time of handing over of the receipt of this deed.
In this manner we have received the entire amount of consideration money for this vended property from the claimant and brought the same to our possession and use.
" It is, no doubt, true that the sum of Rs. 1,400 had not been received on January 31, 1946, the date of the execution of the document and that it was agreed that sum would be paid in exchange for the delivery of the receipt obtained from the Registrar in respect of the sale deed presented for registration.
But the use of the past tense clearly indicates that the vendor agreed to the promise to pay the balance of Rs. 1,400 as the consideration for the execution of the 485 document on January 31, 1946, as tantamount to an actual payment.
In other words, in terms of section 54 of the it was a transaction under which the property in the house was to be transferred in exchange for a price "part paid and part promised".
Paragraph 4 and the recital there do not indicate any intention that the title to the property was to be conveyed only on the payment of Rs. 1,400 on the surrender of the registration receipt.
If, however, there was any doubt as to what the intention of the parties was, it is made clear by the other stipulations and recitals which follow.
Paragraph 5 opens with the words: "On receipt of the whole and entire amount of consideration money we have put the said claimant into possession and occupation of this vended property as absolute owner in place of us the executants and our heirs and representatives.
" The reference to the receipt here is obviously based upon treating the entire consideration of Rs. 2,000 as having been received on the day of the execution of the document.
In other words, part of the consideration was paid and part promised and the promise was treated as the consideration in respect of the balance unpaid.
Besides and as if to reinforce their intention the deed goes on to state after the words of conveyance "I have executed the deed of absolute sale and jointly received Rs. 2,000 as per recitals in the body.
" That the title of the vendee was not to be postponed to any date beyond the date of the execution of the document is made clear by the further words in para 5 "It is desired that the said claimant should enter into and remain in possession and occupation of the vended property as an absolute owner" which was to be from and after the date of the execution of the deed.
Turning next to paragraph 6, there is an express stipulation as regards when the transfer should be deemed effective.
It says: "This sale deed becomes operative from the date when we, the executants affixed our signatures thereon" a recital which is repeated and reinforced by paragraph 7 in which dealing 62 486 with the title of the vendors, it is stated that the said title with respect to the vended property "has become extinct, inoperative and null and void and the same has now been transferred to and acquired by the claimant".
In the face of these recitals, covenants and stipulations which clearly express the intention of the parties that the deed should have effect from the date of its execution it seems to us that the argument that it could be postponed to a later date either the date when the registration was complete under the terms of section 61 of the Indian or to February 7, 1947 when on the registration receipt having been handed over to the vendee, the vendor received the balance of Rs. 1,400 is hardly tenable.
If this were the true legal effect of the deed and if by virtue of the provisions of the read in conjunction with those of the Indian , the title to the property was transferred to the vendee immediately on the execution of the document on January 31, 1946 the performance of the two talabs by the appellant on February 2, 1946 would be in time, legal, proper and effective to clothe her with a right to demand a conveyance in her favour.
It is only necessary to add that learned Counsel for the respondent did not contest the position that if on a proper construction of the sale deed exhibit 'A ' read in the light of its recitals and the relative statutory provisions there was a sale effective on January '31, 1946 the talabs performed by the appellant would not suffice to clothe her with the right which she claimed in the suit out of which this appeal arises.
We would accordingly allow the appeal and decree her suit with costs throughout.
By COURT.
In accordance with the opinion of the majority, the appeal is dismissed with costs. | P executed a sale deed on January 31, 1946, in respect of a house in favour of D and presented it for registration on the same day.
On coming to know of the execution of the sale deed, the appellant who had a right of preemption, made the talab i mowasibat on February 2, 1946.
The deed was copied out in the Registrar 's books on February 9, 1946, and thereupon the registration became complete as provided in section 61 of the .
The appellant filed a suit for preemption.
D resisted the suit on the ground that the sale was completed on February 9, 1946, and the talab had been made prematurely.
The appellant contended that in view Of section 47 a registered document operated from the time it would have otherwise operated and the sale was completed on the date of its execution.
Held (per Sinha, C. J., Sarkar and Mudholkar, jj.) that the sale was completed only on February 9, 1946, when the registration was complete, that the talab was made prematurely and that the suit must fail.
Section 47 merely permitted a document when registered to operate from a date which may be earlier than the date on which it was registered, it did not say when the sale would be deemed to be complete.
A sale which was required to be registered was not completed until the registration of the deed was completed.
Tilakdhari Singh vs Gour Narain, A.I.R. (1921) Pat. 150, Nareshchandra Datta vs Gireeshchandra Das, Cal. 979, and Gobardhan Bar vs Guna Dhar Bar, I.L.R. (1940) II Cal.
270, approved.
Bindeshri vs Somnath Bhadry, A.I.R. (1916) All. 199 and Gopal Ram vs Lachmi Himir, A.I.R. (1926) All. 549, distin guished.
Per Das Gupta and Ayyangar, jj.
The sale was completed on the day of execution and the talab was made at the right time.
Section 61 had nothing to do with the time when the sale evidenced by the registered deed became complete; it refers merely to the fact that the registering officer had completed his duty.
Section 47 provided when a sale was deemed to be completed.
There was no difference between the time when a sale 475 became effective and the time it could be held to be completed.
Under section 47 the crucial test for determining the time from which the registered document was to have effect or be deemed to be completed was the intention of the parties.
The sale deed shows that the parties intended that the deed should be effective from the date of execution. |
N: Criminal Appeal No. 169 of 1978.
From the Judgment and order dated 10.11.1975 of the Gujarat High Court in Criminal Revision Application No. 273 of 1975.
V.C. Mahajan, Mrs. Indira Sawhney and Miss. A. Subhashini for the Appellants.
453 G.A. Shah, Anil K. Naurya, K.L. Hathi Miss Madhu Moolchandani, Vimal Dave and M.N. Shroff for the Respondents.
The Judgment of the Court was delivered by THAKKAR, J.
Does the acquittal of an accused charged with having committed an offence punishable under Section 111 read with Section 135 of the Customs Act, 1969 create a legal bar to the said accused subsequently being prosecuted under Section 85 of the Gold (Control) Act, 1968? The High Court having answered this question (in the affirmative) against the prosecution and having directed the dropping of the subsequent proceedings on the premises that the acquittal in the former proceedings operated as a legal bar to the prosecution of the accused in the latter proceedings, the State has approached this Court by way of the present appeal.
By certificate under Article 134(i)(c) of the Constitution of India.
Respondents 1 to 3 came to be prosecuted as a result of a raid at their house in which primary gold valued at Rs.84,770 at the material time was found along with some other articles.
They were prosecuted for an offence punishable under section 111 read with Section 135 of the Customs Act, 1969.
In that case present respondent No. 3 was convicted whereas present respondent Nos. 1 and 2 were acquitted.
The same alleged offenders were later on sought to be prosecuted under Section 85 of the Gold (Control) Act, 1968 relying on the find of primary gold from the very same premises at the time and on the occasion of the very same raid which gave rise to the prosecution under the Customs Act which had culminated in the conviction of respondent No. 3 and the acquittal of respondents 1 and 2.
A contention was thereupon raised on behalf of respondents 1 to 3 that the new trial was barred.
The Chief Judicial Magistrate accepted this plea and ordered that the prosecution be dropped.
The learned Sessions Judge confirmed the said order.
The appellant challenged the order passed by the learned trial Magistrate as confirmed by the learned Sessions Judge by way of a Revision Application Criminal Revision Application No. 273 of 1975 to the High Court.
The High Court affirmed the decision of the Courts below holding that the present trial was barred by virtue of Section 403(1) of the Code of Criminal Procedure, 1898 (Cr. P.C.).
Hence this appeal.
In order to determine this question it is necessary to identify the ingredients which will have to be established by the prosecution in order to bring home the guilt under the different provisions.
These ingredients may be catalogued as under: 454 Ingredients of the charge Ingredients of the charge for the offence under for the offence under Sec.
Section 111 read with Sec. 85 of the Gold (Control) 135 of the Customs Act, for which the in respect of which the respondents are sought respondents were acquitted.
to be prosecuted.
i) Inter alia being in posses The offender owns or has in sion of or being concerned his possession, custody, or in keeping or concealing of control any primary gold of goods which the offender not less than 9 carats in knows or has reason to purity in unfinished or believe are liable to semi finished from or in confiscation under blocks, bars etc.
Section 111.
ii) The goods in question, gold, was imported within the Indian Customs waters contrary to a prohibition contained under the Customs Act.
iii)There was a prohibition in respect of the import of gold at the material time as contemplated by Sec.
111 D of the Customs Act It is therefore evident that the ingredients required to be established in respect of the offence under the Customs Act are altogether different from the ones required to be established for an offence under the Gold (Control) Act.
In respect of the former, the prosecution has to establish that there was a prohibition against the import into Indian sea waters of goods which were found to be in the possession of the offender.
On the other hand in respect of the offence under the Gold (Control) Act, it is required to be established that the offender was in possession of primary gold meaning thereby gold of a purity of not less than 9 carats in any unfinished or semi finished form.
In regard to the latter offence it is not necessary to establish that there is any prohibition against the import of gold into Indian sea waters.
Mere possession of gold of purity not less than 9 carats in any 455 unfinished or semi finished form would be an offence under the Gold Control Act.
It is therefore stating the obvious to say that the ingredients of the two offences are altogether different.
Such being the case the question arises whether the acquittal for the offences under the Customs Act which requires the prosecution to establish altogether different ingredients operates as a bar to the prosecution of the same person in connection with the charge of having committed the offence under the Gold (Control) Act.
Reliance has been placed on Section 403(1) of the Code of Criminal Procedure, 1898 (Cr P.C.) in support of the plea that the prosecution under the Gold (Control) Act would be barred on the basis of the undermentioned facts: i) that the respondents had been tried by a competent Court for the offence of being in possession of gold under the Customs Act and had been acquitted; ii) they are sought to be prosecuted on the same facts for an offence under the Gold (Control) Act.
It is not in dispute that the respondents were tried and acquitted for the offence under the Customs Act in connection with the possession of a quantity of gold.
Their trial would be barred by Section 403(1) provided they are sought to be prosecuted on "same facts" for any offence for which a different charge from the one made against them might have been made under Section 236 ' and for which they might have been convicted under Section 2372 1.
"Section 403(1): A person who has once been tried by a Court of competent jurisdiction for an offence and convicted or acquitted of such offence shall, while such conviction or acquittal remains in force, not be liable to be tried again for the same offence, nor on the same facts for any other offence for which a different charge from the one made against him might have been made under Section 236, or for which he might have been convicted under section 237".
If a single act or series of acts is of such a nature that it is doubtful which of several offences of the facts which can be proved will constitute the accused may be charged with having committed all or any of such offences, and any number of such charges may be tried at once; or he may be charged in the alternative with having committed some one of the said offences.
Illustrations (a) xxxx (b) xxxx".
( 1) If in the case mentioned in section 236, the accused is charged with one offence, and it appears in evidence that he committed a different offence for which he might have been charged under the provisions of that section, he may be convicted of the offence which he is shown to have committed, although he was not charged with it.
" 456 In order to successfully establish their plea of bar under Section 403(1) the concerned respondents will therefore have to establish that: i) It was doubtful as to which of the several offences the facts which could be proved by the prosecution would constitute.
ii) And they could have been charged in the alternative with having committed one or other of the said offences.
In other words what they would be required to establish would be that (1) there must have been a 'doubt ' as to whether the offence under the 'Customs Act ' could be proved or whether the offence under the 'Gold (Control) Act ' would be proved and (2) that in the context of this doubt an alternative charge could have been framed under Section 236.
Now, on a. true interpretation of Section 236 it would appear that the Section would be attracted where the offence would fall either under one or the other of the two alternative charges.
It would not be attracted if an offence could fall under both of the alternative charges.
What is contemplated by Section 236 is framing of an alternative charge where on the facts of the case an offence would fall under one of the two alternative charges, but the act would not constitute an offence under both the charges.
This point is made clear by the illustrations to Section 236 viz: "(a) A is accused of an act which may amount to theft, or receiving stolen property, or criminal breach of trust of cheating.
He may be charged with theft, receiving stolen property, criminal breach of trust and cheating or he may be charged with having committed theft, or receiving stolen property, or criminal breach of trust or cheating.
(b) A states on oath before the Magistrate that he saw hit with a club.
Before the Sessions Court A states on oath that never hit C. A may be charged in the alternative and convicted of intentionally giving false evidence, although it cannot be proved which of these contradictory statements was false.
" Illustration (a) refers to framing of an alternative charge in respect of theft or receiving of stolen property or criminal breach of trust or cheating.
It will be seen that a person cannot be said to have committed the offence both of theft as also of 'receiving of stolen 457 property '.
A person who himself commits the theft, cannot be guilty of the charge of 'receiving stolen property ' whereas a person who may have nothing to do with commission of theft, but who may be found in possession of the stolen property, would be guilty of the offence of 'receiving stolen property '.
Now the prosecution cannot foresee whether the person from whose possession the stolen article was found was himself the thief or as merely a person who had received stolen property from the thief.
A person cannot be found guilty of both 'theft ' as also for 'receiving stolen property '.
And it is in such a case that an alternative charge under Section 236 could be framed.
In the present case the concerned respondents could be found guilty of both the offences in the context of the possession of gold.
If it was established that there was a prohibition against the import of gold and that he was found in possession of gold which he knew or had reason to believe was liable to confiscation he would be guilty of that offence.
He would also be guilty of an offence under the Gold (Control) Act provided the gold is of a purity of atleast 9 carats.
He would have violated the provisions of 'both ' the Customs Act and the Gold (Control) Act if the aforesaid ingredients were established.
It is not as if in case he was found guilty of an offence under the Customs Act, he could not have been found guilty under the Gold (Control) Act or vice versa.
Upon being found guilty of both the offences the Court may perhaps impose a concurrent sentence in respect of both the offences but the Court has also the power to direct that the sentence shall run consecutively.
There is therefore no question of framing of an alternative charge one, under the Customs Act, and the other, under the Gold (Control) Act.
If the ingredients of both the offences are satisfied the same act of possession of the gold would constitute an offence both under the Customs Act as also under the Gold (Control) Act.
Such being the position it cannot be said that they could have been tried on the same facts for an alternative charge in the context of Section 236 Cr.
P.C. at the time of the former proceedings.
The submission urged in the context of Section 403(1) cannot therefore succeed for it cannot be said that the persons who are sought to be tried in the subsequent proceedings could have been tried on the same facts at the former trial under Section 236.
Strong reliance has been placed on behalf of the respondents on Maqbool Hussain vs The State of Bombay & ors.
etc., [1953] S.C.R. Vol.
IV p. 730 in support of the submission that the second prosecution is barred.
In Maqbool 's case the central issue arose in the context of the fact that a person who had arrived at an Indian Airport from abroad on being searched was found in possession of gold in 458 contravention of the relevant notification, prohibiting the import of gold.
Action was taken against him by the Customs authorities and the gold seized from his possession was confiscated.
Later on a prosecution was launched against him in the criminal court at Bombay charging him with having committed the offence under Section 8 of the Foreign Exchange Regulation Act (Act 7 of 1947) read with the relevant notification.
In the background of these facts the plea of 'autrefois acquit ' was raised seeking protection under Article 20(2) of the Constitution of India.
This Court came to the conclusion that the proceedings before the Customs authority did not constitute the 'prosecution ' of the appellant.
The Court also took the view that the penalty imposed on him did not constitute a 'punishment ' by the judicial tribunal.
Under the circumstances the trial was not barred.
The ratio of the decision is altogether different and has no application in so far as the plea raised by the respondents is concerned.
However, reliance is placed on certain observations made in the course of the discussion, at p. 737.
To quote: " The test is whether the former offence and the offence now charged have the same ingredients in the sense that the facts constituting the one are sufficient to justify a conviction of the other, not that the facts relied on by the Crown, are the same in the two trials.
A plea of 'autrefois acquit ' is not proved unless it is shown that the verdict of acquittal of the previous charge necessarily involves an acquittal of the latter." (Vide Halsbury 's Laws of England, Hailsham Edition Vol.
9 pages 152 and 153, paragraph 212).
" (Emphasis added) We have already applied the very test indicated in this passage.
But we have reached the conclusion that in the present case this test does not support the respondents ' submission in asmuch as the ingredients of the two offences are different in scope and content.
The facts constituting the offence under Customs Act are different and are not sufficient to justify the conviction under the Gold Control Act.
It must also be realized that what is necessary is to analyze the ingredients of the two offences and not the allegations made in the two complaints as declared by this Court in State of Bombay vs S.L. Apte & Another, [1961] 3 S.C.R. p. 107.
We have also concluded that a separate charge could have been framed in respect of the distinct offence under Gold Control Act 459 Under the circumstances the plea raised by the defence cannot succeed.
The two conclusions reached by us brings the matter squarely within the parametres of the law settled by this Court decades ago in section L. Apte 's case (Supra).
In that case the element of 'dishonesty ' was required to be established under section 409 of Indian Penal Code whereas it was not required to be established under Section 105 of the Indian Insurance Act.
In this backdrop this Court has enunciated the law in the context of the plea based on Article 20(2) of the Constitution, Section 26 of General Clauses Act and section 403(2) of the Criminal Procedure Code in no uncertain terms: "If, therefore, the offences were distinct there is no question of the rule as to double jeopardy as embodied in article 20(2) of the Constitution, being applicable.
The next point to be considered is as regards the scope of section 26 of the General Clauses Act.
Though section 26 in its opening words refers to "the act or omission constituting an offence under two or more enactments", the emphasis is not on the facts alleged in the two complaints but rather on the ingredients which constitute the two offences with which a person is charged.
This is made clear by the concluding portion of the section which refers to "shall not be liable to be punished twice for the same offence".
If the offences are not the same but are distinct, the ban imposed by this provision also cannot be invoked.
It therefore follows that in the present case as the respondents are not being sought to be punished for "the same offence" twice but for two distinct offences constituted or made up of different ingredients the bar of the provision is inapplicable.
In passing, it may be pointed out that the construction we have placed on article 20(2) of the Constitution and section 26 of the General Clauses Act is precisely in line with the terms of section 403(2) of the Criminal Procedure Code which runs: 403(2) A person acquitted or convicted of any offence may be afterwards tried for any distinct offence for which a separate charge might have been made against him on the former trial under section 235, sub section ( 1)".
460 There is no manner of doubt that section 403(1) does not come to rescue of the respondents 1 to 3 whereas section 403(2) of the Code clearly concludes the matter against them.
The High Court was therefore in error in holding that subsequent trial was barred.
We accept the appeal on this point and reverse the decision of the Courts below and the High Court.
The appellant was understandably seriously aggrieved by the erroneous enunciation of law by the High Court as it would cause prejudice in other matters involving the same point which may have been pending or might arise in future.
With the position of law being now settled in the appellant 's favour the main objective of the appellant is achieved.
Learned counsel for the appellant indicated at the very commencement that the main purpose of the appeal was to have the true position in law settled.
That 20 years have elapsed since the date of the seizure (November 15, 1968) is, in our opinion, no ground for not proceeding further with the matter inasmuch as the offence in question is a serious economic offence, which undermines the entire economy of the Nation.
The delay occasioned in the working of the judicial system by the ever increasing workload cannot provide an alibi for upholding such a plea.
However in the present case the Sessions Court has quashed the proceedings not only on this ground but also on the basis of certain factual findings as well and the learned Counsel for the appellant himself found it difficult to assail these findings at this juncture.
The operative order passed by the High Court cannot therefore be disturbed in view of the facts and circumstances peculiar to this particular case.
We accordingly allow the appeal to this extent and reverse the finding of the Lower Courts and High Court on the question of maintainability of the subsequent prosecution but find ourselves unable to pass any further orders under the circumstances.
S.L. Appeal allowed. | % Respondents 1 to 3 were prosecuted for an offence punishable under section 111 read with section 135 of the Customs Act, 1969, on the basis of recovery of primary gold from their house.
Respondent No. 3 was convicted and respondents Nos. 1 & 2 were acquitted.
Later, the same persons were sought to be prosecuted under section 85 of the Gold (Control) Act, 1968 relying on the find of the primary gold from the very same premises at the time and on the occasion of the same raid at the house of the said respondents, which had given rise to the prosecution under the Customs Act, as stated above.
The respondents 1 to 3 contended that the new trial was barred.
The trial Magistrate accepted this plea and ordered the prosecution to be dropped.
The Sessions Judge confirmed the order of the trial court.
The High Court affirmed the decision of the Courts below, holding that the trial was barred by virtue of section 403 (1) of the Code of Criminal Procedure, 1898 (Cr. P.C.).
The State then approached this Court by this appeal.
Allowing the appeal in part, the Court, ^ HELD: The ingredients required to be established in respect of an offence under the Customs Act are altogether different from the ones required to be established for an offence under the Gold (Control) Act.
In respect of the former, the prosecution has to establish that there was a prohibition against the import into Indian sea waters of goods which were found to be in the possession of the offender.
In respect of the offence under the Gold (Control) Act, it is required to be established that the offender was in possession of primary gold.
In regard to the latter offence, it is not necessary to establish that there is any prohibition against the import of gold.
Mere possession of gold of purity not less than 9 carats in any unfinished or semi finished form would be an offence under the Gold Control Act.
[454F H; 455A] 451 The respondents were tried and acquitted for the offence under the Customs Act in connection with the possession of gold.
Their trial would be barred by section 403(1) of the Code of Criminal Procedure, provided they are sought to be prosecuted on the "same facts" for any offence for which a different charge from the one made against them might have been made under Section 236 and for which they might have been convicted under Section 237, Criminal Procedure Code.
[455D E] In order to establish their plea of bar under Section 403(1), the respondents have to establish that (1) there must have been a 'doubt ' as to whether the offence under the 'Customs Act ' could be proved or whether the offence under the 'Gold (Control) Act ' would be proved and (2) that in the context of this doubt an alternative charge could have been framed under Section 236.
[456C] On a true interpretation of Section 236, it would appear that the Section would be attracted where the offence would fall either under one or the other of the two alternative charges.
It would not be attracted if an offence could fall under both of the alternative charges.
What is contemplated by section 236 is framing of an alternative charge where on the facts of the case an offence would fall under one of the two alternative charges, but the act would not constitute an offence under both the charges.
This point is made clear by the illustrations to Section 236.
In this case, the respondents could be found guilty of both the offences in the context of the possession of gold.
If it is established that there was a prohibition against the import of gold and that the respondents were found in possession of gold which they knew or had reason to believe was liable to be confiscated, they would be guilty of that offence.
They would also be guilty of an offence under the Gold (Control) Act, provided the gold was of a purity of at least 9 carats.
They would have violated the provisions of 'both ' the Customs Act and the Gold (Control) Act if the aforesaid ingredients were established.
It is not as if in case they were found guilty of an offence under the Customs Act, they could not have been found guilty under the Gold (Control) Act or vice versa.
Upon being found guilty of both the offences, the Court may impose a concurrent sentence in respect of both the offences or the sentences could be ordered to run consecutively.
There was, therefore, no question of the framing of an alternative charge one under the Customs Act and the other, under the Gold (Control) Act.
If the ingredients of both the offences are satisfied, the same act of possession of gold would constitute an offence both under the Customs Act and also under Gold (Control) Act.
It could not, therefore, be said that they 452 could have been tried on the same facts for an alternative charge in the context of section 236 Cr.
P.C. at the time of the former proceedings.
The submission urged in the context of Section 403(1) could not succeed.
[456C H; 457D F] A separate charge could have been framed in respect of the distinct offence under the Gold Control Act.
The conclusions reached by the Court brought the matter squarely within the parameters of the law settled by this Court in the State of Bombay vs section L. Apte & Anr., [1961] 3 S.C.R. 107.
[459A B] Section 403(1) does not come to the rescue of the respondents 1 to 3; section 403(2) of the Code clearly concludes the matter against them.
The High Court was in error in holding that the subsequent trial was barred.
The appeal was accepted on this point and the decision of the Courts below and the High Court was reversed.
That 20 years has elapsed since the date of the seizure was no ground for not proceeding further with the matter as the offence in question was a serious economic offence which undermines the entire economy of the Nation.
But the Sessions Judge had quashed the proceedings not only on this ground but also on the basis of certain factual findings which counsel for the appellant himself found difficult to assail at this juncture.
The operative order of the High Court could not, therefore, be disturbed in the peculiar facts and circumstances of the case.
The finding of the lower courts and the High Court was reversed on the question of maintainability of the subsequent prosecution but no further order could be passed in the circumstances.
[460A F] Maqbool Hussain vs State of Bombay & Ors.
etc., [1953] SCR Vol.
IV P 730; State of Bombay vs S.L. Apte & Anr., [1961] 3 S.C.R. p. 107, referred to. |
TION: Civil Appeal Nos.
2606/80, 6944/83, 3779/88 and 3780/88.
PG NO 562 From the Judgments and Orders dated 23.1.80, 26.4.83, 22.11.82 and 1.8.1984 of the Allahabad High Court in C.M. Writ No. 549/1979 C.M.W.P. No. 6942/81, C.M.W.P. No. 8383 of 1989 and C.M.W.P. No. 11203/1980 respectively.
S.N. Kacker, B.D. Aggarwal R.K. Jain, Dalip Tandon, Rajiv Dutta, K.K. Patel, K.K. Mohan, P.K. Jain, R.K. Khanna and Pankaj Kalra for the Appellants.
Manoj Swarup, Ms. Lalita Kohli, Anil Kumar Gupta, S.K. Mehta, S.M. Sarin, Dhruv Mehta, Aman Vachher and R. Jagannath Goulay for the Respondents.
The Judgment of the Court was delivered by RANGANATHAN, J.
The civil appeals as well as the special leave petitions raise a common question as to whether the provisions of the Uttar Pradesh Urban Buildings (Regulation Of Letting, Rent and Eviction) Act, Act No. 13 of 1972, (hereinafter referred to as 'the Act) are applicable to cantonments situated in the State of Uttar Pradesh.
Since the two civil appeals are already pending on the issue, we grant special leave in the special leave petitions as well and proceed to dispose of all the four matters by this common judgment.
The main judgment of the High Court under consideration is that in the case of Brij Sunder Kapoor vs Additional District Judge & Ors., (reported in 1980 All India Rent Cases 319) which answered the question in the affirmative.
The Allahabad High Court has reiterated the same view i its latter decision in Lekh Raj vs 4th Addl.
Judge, Meerut, AIR 1982 All.
265, which, we are told, is also under appeal to this Court.
It is sufficient to set out certain brief facts in the matter of Brij Sunder Kapoor, (C.A. 2606 of 1980) in order to appreciate the question of law that arises for consideration.
Jhansi is a cantonment in Uttar Pradesh.
Brij Sunder Kapoor is a tenant of premises No. 103, Sadar Bazar, Jhansi of which respondent No. 3 Bhagwan Das GUpta is the landlord.
In 1975, the landlord Bhagwan Das Gupta filed an application before the prescribed authority under section 21 of the Act praying that he needed the above premises for his personal occupation and that the same may be released to him.
The tenant contested the application.
The application was dismissed by the prescribed authority but allowed, on appeal, by the Additional District Judge.
The tenant preferred a writ petition which has been dismissed by a learned single Judge of the Allahabad High Court and hence the present appeal.
We are not concerned with the factual PG NO 563 aspects of the controversy between the parties.
The short point urged by learned counsel before us, which is common to all these appeals and which was also argued unsucessfully before the High Court, was that the Act did not apply to cantonments in Uttar Pradesh and that, therefore, the order of release made by the appellate authority under section 21 of the said Act was a nullity.
In order to appreciate the point urged by the learned counsel for the appellants, it is necessary to set out at some length the history of tenancy legislation in the State of Uttar Pradesh.
In this State, rent and eviction control legislation was initiated by the United Provinces (Temporary) Control of Rent & Eviction Ordinance promulgated on 1.10.1946.
This Ordinance was followed by U.P. Act III of 1947 which was made retrospective with effect from 1.10.1946.
Both the Act and the Ordinance applied to cantonment areas as well as other parts of the State.
Subsequently, the above Act was amended by U.P. (Amendment) Act 44 of 1948.
By this Act, cantonment areas were excluded from the purview of Act III of 1947.
This amendment was introduced perhaps as it was felt that the cantonment areas were to be governed by the Cantonments (House Accommodation) Act, 1923 and that the simultaneous application of Act III of 1947 to cantonment areas may create problems.
It appears that, subsequently, a number of representations were made by residents of cantonments for extending the provisions of Act III of 1947 to cantonment areas as well.
Perhaps because of such representations, U.P. Ordinance 5 of 1949 was promulgated on 26th September, 1949.
But this ordinance was allowed to lapse.
In the meantime the Allahabad High Court in Smt.
Ahmedi Begam vs District Magistrate, Agra, took the view that the State Legislature was incompetent to regulate accommodation lying in cantonments since that was a subject on which Parliament alone was competent to legislate, a view which was subsequently been approved by this court in Indu Bhushan Bose vs Rama Sundri Devi, [1978] I S.C.R. 443.
Thereupon, Parliament enacted the U.P. Cantonments (Control of Rent and Eviction) Act, 1952 (Act 10 of 1952).
Though this was an Act of Parliament, its operation was confined to cantonments in Uttar Pradesh.
In 1957, Parliament enacted the (Act XLVI of 1957).
Act 22 of 1972 gave it retrospective effect from 26.1.1950.
It provided for the extension, to cantonments in each State, of PG NO 564 laws relating to the control of rent and regulation of house accommodation prevalent in the particular State in respect of areas other than cantonments.
The Statement of Objects and Reasons of this Act specifically states that the Act became necessary because the power to make laws with respect to rent control and house accommodation in cantonment areas is exclusively vested in Parliament.
Section 3 of this Act originally read thus: 'The Central Government may by notification in the official gazette, extend to any cantonment with such restrictions and modifications as it thinks fit, any enactment relating to the control of rent and regulation of house accommodation which is in force on the date of notification in the State in which the cantonment is situated.
The words "on the date of the notification" in the section were omitted by section 3 of Central Act 22 of 1972 with full retrospective effect.
The promulgation of this Act created a somewhat anomalous position so far as the State of U.P. was concerned.
As we have already mentioned, Act 10 of 1952 was already in force in the cantonment areas of the State and the issue of a notification by the Central Government purporting to apply Act III of ]947 also to the cantonments in U.P. would create complications.
If Act III of 1947 had to be extended to cantonment areas in U.P. in place of Act 10 of 1952, it was necessary that the provisions of Act 10 of 1952 should be repealed by a parliamentary enactment.
This was done by enacting the U.P. Cantonments (Control of Rent and Eviction) (Repeal) Act, 1971 (Act 68 of 1971).
The object of passing the Act, as given in its long title.
was to provide for the repeal of U.P. Act 10 of 1952.
Section 2 of this Act reads as under: "On and from the date on which the United Provinces (Temporary) Control of Rent and Eviction Act, 1947 is extended by notification under section 3 of the to the cantonments in the State of Uttar Pradesh, the , Act l0 of 1952 shall stand repealed.
" It was only on April 3, 1972 that a notification was issued by the Central Government under section 3 of Act XLVI of 1957 extending the provisions of U.P. Act III of 1947 to the cantonments in the State of Uttar Pradesh.
But soon PG NO 565 after the above notification was issued U.P. Act III of 1947 itself was repealed and replaced by U.P. Act 13 of 1972, which came into force on 15th July, 1972.
This necessitated the issue of another notification under section 3 of Act XLVI of 1957 extending the provisions of Act 13 of 1972 to the cantonments in Uttar Pradesh.
This notification dated 1.9.1973, and gazetted on 29.9.1973, reads as follows: "In exercise of the powers conferred by section 3 of the , (Act 46 of 1957), and in supersession of the notification of the Government of India in the Ministry of Defence, No. S.R.O. 8, dated 3rd April, 1972, the Central Government hereby extends to all the cantonments in the State of Uttar Pradesh the U.P. Urban Buildings (Regulation of Letting, Rent and Eviction) Act, 1972 (U.P. Act XIII of 1972 as in force on the date of this notification, in the State of Uttar Pradesh with the following modifications, namely, It was in view of the above notification that respondent No. 3 filed his application under section 21 of the said Act, which has given rise to the present proceedings.
Three questions were posed by Shri S.N. Kacker who opened arguments for the appellants (but unfortunately could not complete them due to his unexpected demise) and Shri Agarwal who followed him.
These were: (i) Does Act XLVI of 1957 apply to the State of U.P. at all in view of the fact that Act 10 of 1952, which was a detailed and elaborate enactment, contained special provisions applicable to cantonments in this State? (ii) Did not the power of the Central Government under section 3 of Act XLVI of 1957 get exhausted when the notification dated 3rd April, 1972 was issued, by which the provisions of Act III of 1947 were extended to cantonments in U.P.? If yes, was not the second notification dated 1.9.1973 purporting to extend the provisions of Act 13 of 1972 to cantonments in U.P. illegal and non est? iii) Does not section 3 of Act XLVI of 1957 suffer from the vice of excessive delegation of legislative powers and PG NO 566 is it not consequently void and inoperative? Apart from these principal questions, it was pointed out by Shri Tandon (appearing for the petitioner in SLP No. 6944 of 1983) that, in his case, the landlord was trying to resort to provisions of Act 13 of 1972 as amended by Act 28 of 1976.
It was submitted that, while Act 13 of 1972 as in force on 1.9.73 was extended to U.P. cantonments by the notification dated 1.9.1973, there was no further notification applying the provisions of the Acts amending the same to the cantonments till 17.2.1982.
It was therefore contended that in any event the amended provisions would not be applicable to the cantonment areas of U.P. So far as the first contention is concerned, we do not think there is any substance in it.
It is true that Act 1() of 1952 was a detailed statute, which was applicable to cantonments in the State of U.P.
It is also true that this enactment which was a Central enactment could not be rendered inoperative by the mere issue of a notification under section 3 of Act XLVI of 1957 and that it could be repealed or made inoperative only by an Act of Parliament.
But in this case there is a parliamentary legislation which terminates the applicability of Act 10 of 1952 in Uttar Pradesh Cantonments.
This is Act 68 of 1971.
Section 2 of this Act has already been reproduced.
It enacts that Act 10 of 1952 shall stand repealed in its application to the State of U.P. on and from the date on which Act III of 1947 was extended to the cantonment areas in the State by a notification under section 3 of Act XLVI of 1957.
As we have already mentioned, a notification was issued on 3.4.1972 under section 3 of Act XLVI of 1957, extending the provisions of Act III of 1947, with certain modifications set out therein, to cantonments in the State of Uttar Pradesh.
On and from 3rd April, 1972, therefore, Act 10 of 1952 ceased to apply to cantonments in the State of Uttar Pradesh.
In view of this, there was, at least on and after that date, no obstacle in the way of Act III of 1947 being operative in the cantonments of the State of U.P. as well.
Perhaps releasing this, a contention was put forward that Act XLVI of 1957, promulgated at a time when Act 10 of 1952 was in force in U.P., should be construed as an enactment applicable to all States in India other than the State of Uttar Pradesh.
It is not possible to accept this contention for two reasons.
In the first place the language of the Act does not justify any such restriction.
Secondly, since the Act has been given retrospective effect from 26.1.1950, it should be deemed to have been in force from that date.
On that date Act 10 of 1952 was not in force in the State of U.P. and so the terms of Act 46 of 1957 would be applicable to contonments in all States including U.P.
This takes away PG NO 567 the entire basis of the argument.
Again, there might have been some difficulty If, by a notification under section 3 of this Act, the Central Government had sought to apply Act III of 1947 to cantonments in the State of Uttar Pradesh, without there being a repeal of Act 10 of 1952.
But this possible repugnancy between two legislations operating in the State of Uttar Pradesh (one by virtue of the notification under section 3 of Act 46 of 1957 and the other by virtue of the provisions of Act 10 of 1952) has been obviated by the provisions of Act 68 of 1971.
These provisions have rendered Act 10 of 1952 inoperative as and from 3.4.1972 leaving the provisions of Act III of 1947 in the field only until it was replaced by Act 13 of 1972.
One more, somewhat different, argument which seems to have been addressed before the High Court on the basis of Act 68 of 1971 is that, on the issue of the notification dated 3.4.1972, the provisions of Act III of 1947, subject to the modifications mentioned in the notification, stood bodily lifted and incorporated in Act 68 of 1971 and that the repeal thereafter, of Act III of 1947 did not have any bearing in respect of cantonments in the State of Uttar Pradesh.
In other words, the argument is that Act Ill of 1947 continues, to be in operation in the cantonment areas even now.
The appellants obviously have in mind the principles of referential legislation by incorporation outlined in Mahindra & Mahindra vs Union, and other cases.
We, agree, however, with the High Court that section 2 of Act 68 of 1971 is not an instance of legislation by incorporation.
The only purpose of 1947 to cantonment areas was already there in Act XLVI of 1957.
But there was a hurdle in the issue of a notification under section 3 of that Act in that Act 10 of 1952 was already in force in such areas.
Act 68 of 1971 merely removed this obstacle and enacted that Act 10 of 1952 would stand repealed on the date of issue of the notification under section Once such a notification was issued, Act 68 of 1971 had served Its purpose out and had no further impact.
It did not have the further effect of incorporating within itself the provisions of the extended law.
If that had been the intention, section 2 of Act 68 of 1971, as pointed out by the High Court, would have read something like this: "On and from the date of commencement of this Act, the provisions of U.P. Act III of 1947 shall be applicable to be cantonments in the State of Uttar Pradesh and Act 10 of 1952 shall stand repealed.
" PG NO 568 It will be noticed that the above argument also overlooks the effect of later notifications under section 3 which have superseded the effect of the one dated 3.4.1972.
To get over this difficulty, it is argued that section 3 empowers the Government to issue a notification thereunder only once and that, once the notification dated 3.4.1972 was issued, the power got exhausted.
The further notifications dated 1.9.1973 and 17.2.1982 are, it is said, null and void.
The argument is based on a short passage in Lachmi Narain vs Union; , This case has a relevance on the third contention also to which we shall advert later.
So far as the aspect presently under discussion is concerned, its relevance arises in this way.
In that case, section 2 of the Part C States (Laws) Act, 1950 empowered the Central Government to extend, by notification in the official gazette, to any Part C State or part of it, any enactment in a Part A State.
The Central Government, in exercise of this power, issued a notification in 1951, extending the provisions of the Bengal Finance (Sales Tax) Act, l941 to the then Part C State of Delhi with certain modifications set out in section 6.
In 1957, the Central Government issued another notification, again in purported exercise of the powers conferred by section 2, by which an additional modification of section 6 of the Bengal Act was introduced in the 1951 notification as a result of which certain exemptions available to the petitioner were withdrawn at shorter notice than was permissible under the modifications notified in I951.
The notification of 1957 was held to be invalid and ineffective on several grounds, one of which was thus stated at page 801: "The power given by section 2 exhausts itself on extension of the enactment, it cannot be exercised be repeatedly or sub sequently to such extension.
It Can be exercised only once simultaneously with the extension of the enactment.
This is one dimension of the statutory limits which circumscribe the power.
" This was elaborated further by the learned Judge, Sarkaria, J. at p. 802, contrasting a clause of the kind under consideration with a "Removal of Difficulty Clause" which permits removal of difficulties felt in the operation of an Act from time to time.
The learned Judge observed: "Firstly, the power has not been exercised contemporaneously with the extension or for the purposes of the extension of the Bengal Act to Delhi.
The power given by section 2 of the Laws Act had exhausted itself when the Bengal Act was extended, with some alterations, to Delhi by PG NO 569 Notification dated 28.4.1951.
The impugned notification has been issued on 7.12.1957, more than six and a half years after the extension.
There is nothing in the opinion of this Court rendered in Re: Delhi Laws Act (supra) to support Mr. B. Sen 's contention that the power given by section 2 could be validly exercised within one year after the extension.
What appears in the opinion of Fazal Ali J. at page 850, is merely a quotation from the report of the Committee on Minister 's Powers which considered the propriety of the legislative practice of inserting a "Removal of Difficulty Clause" in Acts of British Parliament, empowering the executive to modify the Act itself so far as necessary for origining it into operation.
This device was adversely commented upon.
While some critics conceded that this device is "partly a draftsman 's insurance policy, in case he has overlooked something" (e.g. Sir Thomas Carr, page 44 of his book "concerning English Administrative Law"), others frowned upon it, and nicknamed it as "Henry VIII Clause" after the British Monarch who was a notorious personification of absolute despotism.
It was in this perspective that the Com mittee on Minister 's Powers examined this practice and recommended: " . . first, that the adoption of such a clause ought on each occasion when it is, on the initiative of the Minister in charge of the Bill, proposed to Parliament to be justified by him upto the essential.
It can only be essential for the limited purpose of bringing an Act into operation and it should accordingly be in most precise language restricted to those purely machinery arrangements vitally requisite for that purpose; and the clause should always contain a maximum time limit of one year after which the power should lapse.
" It may be seen that the time limit of one year within which the power under a Henry VIII Clause should be exercisable, was only a recommendation, and is not an inherent attribute of such power.
In one sense, the power of extension cum modification given under section 2 of the Laws Act and the power of modification and adaptation conferred under PG NO 570 a usual 'Henry VIII Clause ' are kindred powers of fractional legislation, delegated by the legislature within narrow circumscribed limits.
But there is one significant difference between the two.
While the power under section 2 can be exercised only once when the Act is extended, that under a 'Henry VIII Clause ' can be invoked, if there is nothing to the contrary in the clause more than once, on the arising of a difficulty when the Act is operative.
That is to say, the power under such a clause can be exercised whenever a difficulty arises in the working of the Act after its enforcement, subject of course to the time limit, if any, for its exercise specified in the statute.
Thus, anything said in Re: Delhi Laws Act, (supra), in regard to the time limit for the exercise of power under a 'Henry VIII Clause ', does not hold good in the case of the power given by section 2 of the Laws Act.
Fazl Ali J., did not say anything indicating that the power in question can be exercised within one year of the extension.
On the contrary, the learned Judge expressed in unequivocal terms, at page 849: 'Once the Act became operative any defect in its provision cannot be removed until amending legislation is passed '.
" Basing himself on this passage, learned counsel contended that, once the notification dated 3rd April, 1972 was issued, the power under section 3 had got exhausted, and the section could not have been invoked by the Central Government once again to issue the notification of Ist September, 1973 extending Act 13 of 1972 to the cantonments of U.P.
It will be at once clear that there is a basic difference between the situation in Lachmi Narain (supra) and that in the present case.
In both cases, the power conferred is to extend the provisions of another Act with modifications considered necessary.
In Lachmi Narain this had been done by the 1951 notification.
The Bengal Finance (Sales Tax) Act, had been extended to Delhi with certain modifications.
The object of the 1957 notification was not to extend a Part A legislation to Delhi; it was to modify the terms of an extension notified earlier.
This was held to be impermissive in as much as all that the section permitted was an extension of the laws of a part A State to Delhi, which, ex facie, had already been done in 1951.
Here the nature of the legislation in question is totally different.
As we shall explain later, the whole purpose of PG NO 571 Act XLVI of 1947 was to ensure that the cantonment areas in a State have the same rent laws as the other areas thereof.
This when Act III of 1947 ceased to be in force in the rest of the State, no purpose would be served by its continuing in force in the cantonment areas alone.
So also when the provisions of the law in force in the State got amended, there should be a power to extend the amended law in the cantonment.
This was, obviously, the reason why Act 22 of 1972 amended section 3 of Act XLVI of 1957 to omit the words "on the date of the notification" retrospectively.
The provisions of section 3 of the Act XLVI of 1957 should, in the circumstances be construed so as to achieve this purpose and as enabling the Central Government to issue notifications from time to time and not as exhausted by a single invocation as in the case of the statute considered in the Delhi Laws Act case, (supra).
section 3 could, therefore, be invoked from time to time as occasion arise and the notifications dated 1.9.1973 and 17.2.1982 are valid and intra vires.
In such a situation, we think, the limitation suggested in the above decision will not operate.
On the other hand, the provisions of section 14 and section 21 of the General Clauses Act will apply and it will be open to the Government to extend another legislation or further legislations to cantonments in place of the one that had been repealed.
The above conclusion can also be supported on the ratio of decision in Gurcharan Singh and Others vs V.K. Kaushal, ; , also a case concerned with notifications under section 3 of Act XLVI of 1957.
In exercise of this power the Central Government issued on 2 1.11.1969 a notification extending the East Punjab Rent Restriction Act, 1949, to cantonments in the State of Punjab & Haryana Subsequently, after the amendment of section 3 of Act XLVI of 1957 by Act 22 of 1972, another notification was issued, on 24.1 1974, superseding the earlier notification and extending the East Punjab Act afresh to cantonments in the State of Punjab & Haryana with a modification of section 1(3) of the said Act with retrospective effect from 26.1 1950.
Upholding the validity of this notification and repelling an argument similar to the one now advanced before us, the Court observed: "Two points are raised on behalf of the appellants against that conclusion.
The first is that the power under section 3 of the having been exercised once, that is to say, by the notification dated November 21, 1969, the power of extension stood exhausted and could not be availed of again, and therefore the Notification dated January 24, 1974 was with our statutory sanction and invalid We are referred to PG NO 572 Lachmi Narain vs Union of India, ; That was a case where this Court held that a notification under Section 2 States (Laws) Act, 1950 having been issued in 1951 by the Central Government extending the Bengal Finance (Sales Tax) Act, 1941 to the State of Delhi, the power given by section 2 exhausted itself on the extension of the enactment and could not be exercised again to enable the issue of a fresh notification modifying the terms in which the Bengal Act was extended.
The case is clearly distinguishable.
The power under which the notification dated January 24, 1974 has been issued is a separate and distinct power from that under which the notification dated November 21, 1969 was made.
The power now exercised passed into the when it was amended in 1972.
In its nature and quality it is not identifiable with the power vested under the unamended Act.
A power conferred by statute is distinguished by the character and content of its essential components.
If one or more material components characterising the power cannot be identified with the material components of another, they are two different and distinct powers.
Although broadly the power envisaged in section 3 of the amended is a power of extension even as it was under the unamended Act, there is a vital qualitative difference between the two.
The power under the unamended Act was a limited power.
It could operate prospectively only.
There was no choice in the matter.
After amendment, the Act provided for a power which could be exercised retrospectively.
The power extended to giving retrospective effect to an enactment in force in the State in the form in which that enactment was in force on the date on which the extension was made.
It was a power whose reach and cover extended far beyond what the power under the unamended Act could achieve.
We are of the view that in issuing the notification dated January 24, 1974 and thereby extending the East Punjab Urban Rent Restriction Act to the Ambala Cantonment retrospectively with effect from January 26, 1950, the Central Government exercised a power not available to it when it issued the notification dated November 21, 1969.
The contention that the issue of the notification of January 24, PG NO 573 1974 amounted to a further exercise of power conferred by section 3 of the , under which the earlier notification was issued is without force and must be rejected.
(underlining ours) This principle will also apply in the present case for, while the notification dated 3.4.1972 was issued in exercise of the power under the unamended section 3, the one dated 1.9.1973 was issued in exercise of the new power available after the amendment of Act 22 of 1972 which came into force on 2nd June, 1972, though there is a distinction between the two cases in that the latter notification, unlike the second notification in the other case, did not purport to give any retrospective effect to the extended legislation.
It should be mentioned here that notification dated 1.9.1973 extended to the cantonment areas only the provisions of Act XIII of 1972 as they stood on that date.
It was only on 17.2.1982 that a further notification was issued superseding the notification dated 1.9.1973 by which the provisions of Act XIII of 1972 as in force in the State of Uttar Pradesh were also extended to the cantonment areas.
The purpose of this notification obviously was that, since there had been amendments to Act XIII of 1972 in 1974 and again in i976, it was necessary and desirable That the amended provisions should also be extended to the cantonment areas.
The question raised above on behalf of the appellants regarding the validity of the notification dated 1.9.1973, has to be considered also in the context of this notification dated 17.12.1982.
For the reasons discussed above, we are of the opinion that the Central Government acted within its powers in issuing the subsequent notification dated 17.2.1982 as well.
This also is not a case like the one in Lachmi Narain vs Union, [ l976] 2 SCR 785, where the purpose of the second notification was to modify without any provocation the contents of the first notification issued for the purposes of extension.
Here the subsequent notification became necessary because subsequently the enactments had amended the provisions of the Act, which had been extended previously.
Moreover.
as the original Act l3 of 1972 has already been extended, the real purpose of this notification was to extend the provisions of Act 19 of 1974 and Act 28 of 1976 also to those areas.
In our view, the provisions of sections 14 and 21 of the , clearly apply for this reason as well as for the reason given in Gurcharan Singh 's case.
The validity of the notification dated 17.2.1982 is, therefore, upheld.
PG NO 574 Shri S.K. Mehta also contended that, even if the notification of l.9.1973 is left out of account, the notification of 3.4.
1972 was itself sufficient to achieve the present purpose.
He submitted that, since Act 13 of 1972 repealed and re enacted the provisions of Act Ill of 1947, all references in Act 28 of 1971 as well as in the notification dated 3.4.1972 to Act III of 1947 and its provisions should be construed as references to Act 13 of 1972 and its corresponding provisions as amended from time to time.
He relied on section 8 of the .
In the view we have taken above, we consider it unnecessary to deal with this contention or express any opinion thereon.
Now to turn to the principal contention in the case: the contention is that Act XLVI of 1957 does not itself enact any provisions in respect of house accommodation in the cantonment areas of U.P. Section 3 of Act XLVI of 1957 purports only to empower the Central Government to legislate for such areas.
It is true that the Central Government is not given carte blanche to do whatever it likes in this respect and that its power of notification is restricted to merely extending to cantonment areas the provisions of the corresponding laws in force in the other areas of the State of Uttar Pradesh.
But this itself amounts to excessive delegation of legislative power for three reasons: (a) On the date of the enactment of Act 46 of 1957, Parliament could not predicate what type of provisions will be in operation in the other areas of the States on some future date (s) on which the Central Government may issue notifications under section 3 in respect of various States.
section 3 thus authorises the introduction, on a Government notification, of, a law to the provisions of which Parliament has had no occasion to apply its mind at all; (b) There is a further vitiating element in that the Central Government under section 3 is empowered to direct not merely that the provisions of a State enactment, which may be in force in the State on the date of the such notification, should apply to the cantonment areas in the State as well.
The amendment to section 3 by Act 22 of 1972 goes one step further to make it clear that the Central Government can make a general notification that any State enactment in force in the State would apply to cantonments as well.
This means that, on a mere notification by the Central Government, not merely the provisions of an enactment which are in force on the date of the notification but also all future enactments on this topic that may come into force from time to time in the State would automatically apply to cantonment areas as well.
Thus, even PG NO 575 the notifying authority may not have had occasion to apply its mind at all to the provisions of the law that are to be made applicable to the cantonments.
Thus, for instance, the amendments in 1976 to Act 13 of 1972 can be sought to be made applicable though, on the date of issue of the notification under section 3, the Central Government could not at all have anticipated that there would be such an amendment; and (c) The Central Government has been empowered to apply such laws, with such restrictions and modifications, as it thinks fit.
Such an unrestricted power may well result in the notification modifying the State law in material respects and enacting a law of its own for cantonment areas, which is not permissible.
Learned Counsel submitted that there is not even a broad indication in the principal statute viz. Act XLVI of 1957 as to the nature of the provisions of the enactment which it would like to be applied to cantonments.
A mandate to the Government for a blind application, at its choice, of an enactment, existing or future, to cantonment areas within a State merely because such an enactment happens to be operative in respect of other areas in the State, it is said, amounts to a complete abdication of legislative Power by Parliament which is not permissible under our Constitution.
We may at once deal with limb (c) of the above contention, a direct answer to which is furnished by the decision in Lachmi Narain 's case; , already discussed.
Referring to the judgment in the Delhi Laws Act case; , and Rajnarain Singh 's case, on the scope of expressions such as "subject to such restrictions and modification as it thinks fit", Sarkaria, J. observed: "Bearing in mind the principles and the scope and meaning of the expression 'restrictions and modifications ' explained in Delhi Laws Act, let us now have a close look at section 2.
It will be clear that the primary power bestowed by the section on the Central Government, is one of extension, that is, bringing into operation and effect, in a Union Territory, an enactment already in force in a State.
The discretion conferred by the section to make 'restrictions and modification ' in the enactment sought to be extended, is not a separate and independent power.
It is an integral constituent of the powers of extension.
It cannot be exercised apart from the power of extension.
This is PG NO 576 indubitably clear from the preposition 'with ' which immediately precedes the phrase 'such restrictions and modifications ' and conjoins it to the principal clause of the section which gives the power of extension.
According to the Shorter Oxford Dictionary, one meaning of the word 'with ' (which accords here with the context), is 'part of the same whole '.
The power given by section 2 exhausts itself on extension of the enactment; it cannot be exercised repeatedly or sub sequently to such extension.
It can be exercised only once, simultaneously with the extension of the enactment.
This is one dimension of the statutory limits which circumscribe the power.
The second is that the power cannot be used for a purpose other than that of extension.
In the exercise of this power, only such 'restrictions and modifications ' can be validly engrafted in the enactment sought to be extended, which are necessary to bring it into operation and effect in the Union Territory.
Modifications ' which are not necessary for, or ancillary and subservient to the purpose of extension, are not permissible.
And, only such 'modifications ' can be legitimately necessary for such purpose as are required to adjust, adapt and make the enactment suitable to the peculiar local conditions of the Union Territory for carrying in into operation and effect.
In the context of the section, the words 'restrictions and modifications do not cover such alterations as involve a change in any essential feature.
of the enactment or the legislative policy built into it.
This is the third dimension of the limits that circumscribe the power.
It is true that the words 'such restrictions and modifications as it thinks fit ', if construed literally and in isolation, appear to give unfettered power of amending and modifying the enactment sought to be extended.
Such a wide construction must be eschewed lest the very validity of the section becomes vulnerable on account of the vice of excessive delegation.
Moreover, such a construction would be repugnant to the context and the content of the section, read as a whole, and the statutory limits and conditions attaching to the exercise of the power.
We must, therefore, confine the scope of the words 'restrictions and modifications ' to alterations of such a character which keep the inbuilt policy, essence and substance of the enactment PG NO 577 sought to be extended, in tact, and introduce only such peripheral or insubstantial changes which are appropriate and necessary to adapt and adjust it to the local conditions of the Union Territory.
" These observations make it clear that, though apparently wide in scope, the power of the Central Government for the extension of laws is a very limited one and cannot change the basic essential structure or the material provisions of the law sought to be extended to cantonment areas.
The principal decision on which counsel for the appellants placed reliance in support of the other limbs of his contention is the decision of this court in B. Shama Rao vs The Union Territory of Pondicherry, ; In that case the legislative assembly for the Union Territory of Pondicherry passed the Pondicherry General Sales Tax Act (10 of 1965) which was published on June 30, 1965.
Section 1(2) of the Act provided that it would come into force on such date as the Pondicherry Government may by notification appoint.
Section 2(1) of the Act provided that the Madras General Sales Tax Act, 1959, as in force in the State of Madras immediately before the commencement of the Pondicherry Act, shall be extended to Pondicherry subject to certain modifications.
The Pondicherry Government issued a notification under section 1(2) on Ist March, 1966, appointing April 1, 1966 as the date of commencement of the Act.
It so happened that, between 30th of June 1965 when the Pondicherry Act was published and the Ist April 1966, which was the notified date for its commencement, the Madras legislature had substantially amended the Madras Act.
It was the Madras Act, as amended upto Ist April 1966, which was brought into force in Pondicherry.
When the Act came into force the petitioner was called upon to register himself as a dealer under the Act.
He filed a writ petition challenging the validity of the Act.
After the petition was filed, the Pondicherry legislature passed an amendment Act whereby section 1(2) of the principal Act was amended to read that the principal Act shall come into force on the Ist April, 1966 and also contained a validating provision in respect of all proceedings taken in between.
The majority of the Constitution Bench, which heard the matter, held (Shah and Bhargava, JJ.
dissenting) that the Act of 1965 was void and still born and could not be revived even by the amendment Act passed in 1966.
The dissenting judges did not express any view on the contention th4t the principal Act was bad for excessive delegation of powers when it was enacted and published, as they were of the view that the subsequent PG NO 578 amendment Act passed by the Pondicherry Legislature had the effect of bringing into force in Pondicherry a valid Act under which the proceedings sought to be taken against the petitioner were fully justified.
We are here concerned with the majority view on the question of abdication of legislative functions.
After referring to certain earlier decisions of the court and in particular the decision in the case of Delhi Laws Act; , , Shelat, J., speaking for the Court observed as follows: "The question then is whether in extending the Madras Act in the manner and to the extent it did under sec.
2(1) of the principal Act the Pondicherry legislature abdicated its legislative power in favour of the Madras legislature.
It is manifest that the Assembly refused to perform its legislative function entrusted under the Act constituting it.
It may be that a mere refusal may not amount to abdication if the legislature instead of going through the full formality of legislation applies its mind to an existing statute enacted by another legislature for another jurisdiction, adopts such an Act and enacts to extend it to the territory under its jurisdiction.
In doing so, it may perhaps be said that it has laid down a policy to extend such an Act and directs the executive to apply and implement such an Act.
But when it not only adopts such an Act but also provides that the Act applicable to its territory shall be the Act amended in future by the other legislature, there is nothing for it to predicate what the amended Act would be.
Such a case would be clearly one of non application of mind and one of refusal to discharge the function entrusted to it by the Instrument constituting it.
It is difficult to how such a case in not of abdication or effacement in favour of another legislature at least in regard to that particular matter.
But Mr. Setalvad contended that the validity of such legislation has been accepted in Delhi Laws Act 's case ; and particularly in the matter of heading No. 4 as summarised by Bose, J. in Raj Narayan Singh 's case ; In respect of that heading the majority conclusion no doubt was that authorisation in favour of the executive to adopt laws passed by another legislature or legislatures including future laws would not be invalid.
So far as that conclusion goes Mr. Setalvad is right.
But as PG NO 579 already stated, in arriving at that conclusion each learned Judge adopted a different reasoning.
Whereas Patanjali Sastri and Das JJ. accepted the contention that the plenary legislative power includes power of delegation and held that since such a power means that the legislature can make laws in the manner it liked if it delegates that power short of an abdication there can be no objection.
On the other hand, Fazl Ali J. upheld the laws on the ground that they contained a complete and precise policy and the legislation being thus conditional the question of excessive delegation did not arise.
Mukherjea J. held that abdication need not be total but can be partial and even in respect of a particular matter and if so the impugned legislation would be bad.
Bose J. expressed in frank language his displeasure at such legislation but accepted its validity on the ground of practice recognised ever since Burah 's ease 5 I.A. 178 and thought that that practice was accepted by the Constitution makers and incorporated in the concept of legislative function There was thus no unanimity as regards the principles upon which those laws were upheld.
All of them however appear to agree on one principle, viz., that where there is abdication or effacement the legislature concerned in truth and in fact acts contrary to the Instrument which constituted it and the statute in question would be void and still born.
In the present case it is clear that the Pondicherry legislature not only adopted the Madras Act as it stood at the date when it passed the Principal Act but also enacted that if the Madras legislature were to amend its Act prior to the date when the Pondicherry government would issue its notification it would be the amended Act which would apply.
The legislature at that stage could not anticipate that the Madras Act would not be amended nor could it predicate what amendment or amendments would be carried out or whether they would be of a sweeping character or whether they would be suitable in Pondicherry.
In point of fact the Madras Act was amended and by reason of section 2(1) read with section 1(2) of the Principal Act it was the amended Act which was brought into operation in Pondicherry.
The result was that the Pondicherry legislature accepted the amended Act though it was not and could not be aware what the provisions of the PG NO 580 amended Act would be.
There was in these circumstances a total surrender in the matter of sales tax legislation by the Pondicherry Assembly in favour of the Madras legislature and for that reason we must agree with Mr. Desai that the Act was void or as is often said 'still born '.
It was however argued that the Act cannot be said to be still born as it contained certain provisions independent of the Madras Act, viz., the section which provides for the Appellate Tribunal and the said Schedule.
But the core of a taxing statute is in the charging section and the provisions levying such a tax and defining persons who are liable to pay such tax.
If that core disappears the remaining provisions have no efficacy.
In our view, Act l0 of 1965 was for the reasons aforesaid void and still born.
It may appear that there is a great similarity between1 the facts in Shama Rao (supra) and in the cases before us.
In each of them, the provisions of the enactment of one legislature enact that the provisions of an enactment of another legislature should apply within the territory subject to its jurisdiction, on the issue of a Government notification and the first legislature does not know the details of the provisions of the enactment of the second legislature that will become applicable in consequence of the Government notification.
We are not, however, able to accept the contention that the ratio of Shama Rao 's case will govern the situation in the present case also.
We say this for two reasons.
In the first place, the principles regarding delegation of legislative powers have been discussed in several decisions of this Court, the leading decision being the one in the case of Delhi Laws Act; , In the last mentioned authority separate judgments were delivered by the various learned judges of this Curt and, instead of referring to each of them individually, the best course would be to adopt the summary of Vivan Bose J. at page 298 in Raj Narain Singh 's case; , That case concerned a Bihar Act which permitcertain areas by notification .
The validity of this statutory provision was upheld but the notification issued was held to be ultra vires the provision.
In the course of the discussion, the learned Judge said: "The Court (in the Delhi Laws Act case) had before it the PG NO 581 following problems.
In each case, the Central Legislature had empowered an executive authority under its legislative control to apply, at its discretion, laws to an area which was also under the legislative sway of the Centre.
The variations occur in the type of laws which the executive authority was authorised to select and in the modifications which it was empowered to make in them.
The variations were as follows: (l) Where the executive authority was permitted, at its discretion, to apply without modification (save incidental changes such as name and place), the whole of any Central Act already in existence in any part of India under the legislative sway of the Centre to the new area: This was upheld by a majority of six to one.
(2) Where the executive authority was allowed to select and apply a Provincial Act in similar circumstances: This was also upheld, but this time by a majority of five to two.
(3) where the executive authority was permitted to select future Central laws and apply them in a similar way: This was upheld by five to two.
(4) Where the authorisation was to select future Provincial laws and apply them as above.
This was also upheld by five to two.
(5) Where the authorisation was to repeal laws already in force in the area and either substitute nothing in their places or substitute other laws, Central or Provincial, with or without modification.
This was held to be ultra vires by a majority of four to three.
(6) Where the authorisation was to apply existing laws, either Central or Provincial, with alterations and modifications; and PG NO 582 (7) Where the authorisation was to apply future laws under the same conditions: The views of the various members of the Bench were not as clear cut as in the first five cases, so it will be necessary to analyse what each Judge said.
" As to categories (6) and (7) mentioned above, Bose J., after referring to the opinion of each of the other learned Judges in the Delhi Laws Act case (supra), concluded with a reference to his own observations in the earlier decision: "Bose J. contented himself at page 1121 by saying that the delegation cannot extend to the "altering in essential particulars of laws which are already in force in the area in question.
" But he added at page 1124 "My answers are, however, subject to this qualification.
The power to 'restrict and modify ' does not import the power to make essential changes.
It is confined to alterations of a minor character such as are necessary to make an Act intended for one are applicable to another and to bring it into harmony with laws already in being in the State, or to delete portions which are meant solely for another area.
To alter the essential character of an Act or to change it in material particulars is to legislate, and that, namely the power to legislate, all authorities are agreed, cannot be delegated by a Legislature include a change of policy.
" In our opinion, the majority view was that an executive authority can be authorised to modify either existing or future laws but not in any essential feature.
Exactly what constitutes an essential feature cannot be enunciated in general terms, and there was some divergence of view about this in the former case, but this much is clear from the opinions set out above: it cannot include a change of policy" In other words, the delegation of a power to extend even future laws of another State will not be bad so long as they are laws which are already in force in the said area and so long as, in the process and under the guise of alteration and modification, an alteration of the essential character PG NO 583 of the law or a change of it in essential particulars is not permitted.
This interpretation of the Delhi Laws Act case (supra) was placed before the Bench which decided Shama Rao but, without dissenting from this approach, the learned Judges did not choose to apply it perhaps as they felt that the Pondicherry legislature, in the case before them, had completely abdicated its functions to the Madras Legislature.
There was also, it should be remembered, a substantial difference between the Madras Act to which the Pondicherry legislature had applied its mind and the Madras Act which actually became applicable by a deferment of the date of commencement.
Such a vast change, within a short time, could not at all have been in the contemplation of the Pondicherry legislature and this is perhaps what heavily weighed with the Judges.
This decision has been distinguished in the Gwalior Rayon 's case; , by Khanna J. and Mathew J. who delivered separate but concurring judgments.
Khanna J.observed: "It would appear from the above that the reason which prevailed with the majority in striking down the Pondicherry Act was the total surrender in the matter of sales tax legislation by the Pondicherry Legislature in favour of the Madras Legislature.
No such surrender is involved in the present case because of the Parliament having adopted in one particular respect the rate of local sales tax for the purpose of central sales tax.
Indeed, as mentioned earlier, the adoption of the local sales tax is in pursuance of a legislative policy induced by the desire to prevent evasion of the payment of central sales tax by discouraging inter State sales to unregistered dealers.
No such policy could be discerned in the Pondicherry Act which was struck down by this Court.
Another distinction, though not very material, is that in the Pondicherry case the provisions of the Madras Act along with the subsequent amendments were made applicable to an area which was within the Union Territory of Pondicherry and not in Madras State.
As against that, in the present case we find that the Parliament has adopted the rate of local sales tax for certain purposes of the Central Sales Tax Act only for the territory of the State for which the Legislature of that State had prescribed the rate of sales tax.
The central sales tax in respect of the territory of a State is ultimately assigned to that State under article 269 PG NO 584 of the Constitution and is imposed for the benefit of that State.
We would, therefore, hold that the appellants cannot derive much assistance from the above mentioned decision of this Court.
Mathew J. had this to say: "We think that the principle of the ruling in Shama Rao vs Pondicherry, (supra) must be confined to the facts of the case.
It is doubtful whether there is any general principle which precludes either Parliament or a State legislature from adopting a law and the future amendments to the law passed respectively by a State legislature or Parliament and incorporating them in its legislation.
At any rate, there can be no such prohibition when the adoption is not of the entire corpus of law on a subject but only of a provision and its future amendments and that for a special reason or purpose.
Secondly, we think that the facts of the present case are also distinguishable from those in Shama Rao, (supra).
Parliament was faced with the problems of enacting laws relating to house accommodation in cantonments in various States.
Earlier an attempt had been made to have a separate Act for U.P. Cantonments but it was then considered that it would be better to have a uniform policy of legislation in respect of all cantonments in India.
These cantonments were located in the heart of various cities in the different States and unlike the position that prevailed in early years, had ceased to be a separate and exclusive colony for army personnel.
It was, therefore, but natural for Parliament to decide, as a matter of policy.
that there should be no difference, in the matter of housing accommodation, between persons residing in cantonment areas of a State and those residing in other parts of the State and it is this policy that was given effect to by Act XLVI of 1957.
Having decided upon this policy, it was open to Parliament to do one of two things: pass a separate enactment in respect of the cantonment areas in each State or to merely extend the statutes prevalent in other parts of the respective States by a single enactment.
The second course was opted upon but there was one difficulty.
The enactments in force in the various States may need some modifications or changes before they could be fitted to the requirements of the cantonments.
We have already explained that the expression 'restrictions and modifications ' has a very limited connotation.
If this is borne in mind, it will be clear that the nature of modifications or restrictions PG NO 585 each statute would require can only be a matter of detail of drafting, of not much significance or importance, once the general policy was clear.
It is only this matter of detail that has been delegated to the Central Government to be attended to while passing appropriate notifications in each case.
As pointed out in Sita Ram Bishambher Dayal vs State of U.P., ; in the context of a tax legislation: "In a Cabinet form of Government, the Executive is expected to reflect the views of the Legislatures.
In fact in most matters it gives the lead to the Legislature.
However much one might deplore the "New Despotism" of the Executive, the very complexity of the modern society and the demand it makes on its Government have set in motion forces which have made it absolutely necessary for the Legislatures to entrust more and more powers to the Executive.
Textbook doctrines evolved in the Nineteenth Century have become out of date.
Present position as regards delegation of legislative power may not be ideal, but in the absence of any better alternative, there is no escape from it.
The Legislatures have neither the time, nor the required detailed information nor even the mobility to deal in detail with the innumerable problems arising time and again.
In certain matters they can only lay down the policy and guidelines in as clear a manner as possible.
" For the same reasons the scope of delegation in a measure like this should have a degree of flexibility to deal with minor variations and details of statutory adoption having regard to the situation differing from State to State.
The legislature hardly has the time to enter into this arena.
We, therefore, think that there was no infirmity in the delegation of power contained in section 3 of Act XLVI of 1957.
The further argument that, in any event, the 1976 amendments of Act 13 of 1972 will not get attracted has to be rejected on the same line of reasoning as has been indicated above.
Once it is the avowed policy of Parliament that cantonment areas in a State should be subject to the same tenancy legislation as the other areas therein, it follows that the decision involves also that future amendments in such State legislation should become effective in cantonment areas as well.
In some rare case where Parliament feels that such subsequent amendments need not apply to cantonment areas or should apply with more than the limited restrictions and modifications permitted by section 3, it is open to Parliament to legislate independently for such PG NO 586 cantonment areas.
But the decision that, in the main, such State legislation should apply is unexceptionable and cannot be said to constitute an abdication of its legislative function by Parliament.
But here the difficulty arises not so much because of the language of section 3 of Act XLVI of 1957 as on account of the language of the notification issued on Ist September, 1973.
The wording of this notification has been set out earlier.
It reads that, in supersession of the earlier notification of 3rd April, 1972, the Central Government extends to the cantonments in the State of Uttar Pradesh the "Uttar Pradesh Urban Buildings (Regulation of Letting, Rent and Eviction) Act, 1972 (U.P. Act XIII of 1972) as in force on the date of this notifications, in the State of Uttar Pradesh with the following modifications .
" It must be pointed out in this connection that this notification was issued after Act XLVI of 1957 had been amended by Act 22 of 1972 and a power had been conferred on the Central Government to issue the notification without the restriction previously contained in section 3(1) that the statute proposed to be extended should be as in force on the date of the notification.
In other words depsite the enlarged power conferred by amending Act 22 of 1972 the notification is couched in the same way as the earlier notification of 3rd April, 1972 and purports to extend to the cantonments only the provisions of Act 13 of 1972 as in force on the date of the notification, that is, as on 1.9.1973.
The restricted language of the notification, therefore, makes applicable to cantonments only the provisions of Act 13 of 1972 as they stood on 1.9.
1973 and not its subsequent amendments.
Act 13, of 1972, as initially enacted, required an application under section 21 to be made before the Prescribed Authority. "Prescribed Authority ' was defined by section 3(e) to mean: "a Magistrate of the first class, having 3 years experience as such, duly authorised by the District Magistrate to exercise, perform and discharge all or any of the powers, functions and duties of the Prescribed Authority under this Act Act 19 of 1974 amended this definition w.e.f. 20.7 1974 to mean: "an officer not less than three years experience as a Munsif Magistrate of the first class or as Executive Magistrate authorised as aforesaid by the State Government .
PG NO 587 Still later on 5.7.1976, Act 28 of 1976 substituted a new clause (e) for previous one.
Under the new clause, the definition read: "Prescribed Authority means a Civil Judicial Officer or Judicial Magistrate authorised by the District Judge to exercise, perform and discharge all or any of the powers, functions and duties of the Prescribed Authority under this Act .
As explained in the judgment of the District Judge in the case under appeal, different types of officers were contemplated under the different definitions.
Initially the Prescribed Authority had to be a Magistrate of the first class under the old Code of Criminal Procedure and had also to be a nominee of the District Magistrate.
This had to change because first class Magistrates subordinate to the District Magistrate had ceased to exist after 31.3.1974.
Thereafter there were only Executive Magistrates subordinate to the District Magistrates and Judicial Magistrates of the first and second class under the District Judges.
Therefore, the amended section gave power to the State Government to authorise Munsifs, Judicial Magistrates or Executive Magistrates to discharge duties of a Prescribed Authority.
This must have meant a very heavy load on the State Government and hence a third change was effected w.e.f. 5.7.1976.
Thereafter, a nominee and subordinate of the District Judge was to be the Prescribed Authority.
In Civil Appeal No. 6944 of 1983, to which we have made reterence earlier, the landlord had made his application under section 21 of Act XIII of 1972 before the Prescribed Authority on 20.12.1975.
It was made before Shri Khem Karan, who had been appointed as the Prescribed Authority on 11.9.1975.
However, when the definition was amended by Act 28 of 1976, Shri S.C. Srivastava was appointed as the Prescribed Authority and the application of the landlord was transferred to him and he disposed it off by his order dated 27.9.1977.
It may be mentioned that both Shri Khem Karan and Shri Srivastava were Munsifs.
While Shri Khem Karan was a Prescribed Authority appointed by the State Government under section 3(e) as amended in 1974, Shri Srivastava was a Prescribed Authority authorised by the District Judge after 5th of July, 1976.
In this state of facts the argument urged on behalf of the tenant before the High Court, in addition to the principal argument that Act 13 of 1972 was not at all applicable to cantonment areas, was that Sri Srivastava, PG NO 588 appointed in pursuance of the amendment Act 28 of 1976, was not the Prescribed Authority authorised in accordance with the provisions of the Act as they stood on Ist September, 1973, and therefore had no jurisdiction to entertain the application made by the landlord under section 21 of the Act.
Though the dates and facts of other cases were also similar, this point was taken only in this case at the earlier stages.
This argument was accepted by the learned District Judge, who set aside the order of the Prescribed Authority on 2.2.1981.
The High Court, in the writ petition filed by the tenant, did not, however, accept this argument.
The learned single Judge who heard the writ petition was of the opinion that the District Judge was in error and that the argument put forward on behalf of the tenant was not tenable.
He observed: "Section 3 of Act 22 of 1972 inter alia provided that section 3 of the Principal Act, namely, Act 46 of 1957 shall be renumbered as sub section I thereof, and in sub section I as so renumbered the words "on the date of the notification" shall be, and shall be deemed always to have been omitted.
The effect of the words "on the date of the notification" being omitted from section 3 of Act 46 of 1957 in the manner contemplated by section 3 of Act 22 of 1972 was that the aforesaid words would be deemed not to have been in existence in section 3 of the Act 46 of 1957 from the very inception.
As such section 3 of Act 46 of 1957 did not confer on the Central Government the power to issue a notification under that section to extend to any cantonment an enactment relating to the control of rent and regulation of house accommodation which was inforce "on the date of the notification" in the State in which the cantonment is situated.
The use of the words "on the date of this notification" after the words "as in force" and before the words "in the State of Uttar Pradesh" in the notification dated Ist September, 1973, were, therefore, beyond the power conferred on the Central Government by section 3 of Act 46 of 1957 and will accordingly be deemed to be not in existence in the aforesaid notification and have to be ignored." After referring lo the decision of the Supreme Court In Bajya vs Smt.
Gopikabai and another; , , the learned Judge observed: "Section 3 of Act 46 of 1957 after its amendment by Act 22 of 1972 as aforesaid on the face of it comes in the PG NO 589 latter category referred to in the decision of Bajya (supra).
Consequently, the definition of the term "Prescribed Authority" as it was subsequently amended by U.P. Act 28 of 1976 is applicable for finding out as to who is the Prescribed Authority to entertain an application under section 21 of the Act even in regard to those buildings which are situated within a cantonment area.
The view taken to the contrary by the District Judge in the impugned order suffers from a manifest error of law and deserves to be quashed.
" He, therefore, held that the application preferred by the landlord had rightly been dealt with by Sri Srivastava and therefore remanded the matter to the learned District Judge for disposing of the appeal filed before him by the tenant on its merits.
It is against the order of the learned single Judge that C.A. No. 6944 of 1983 has been preferred.
We are unable to support the line of reasoning adopted by the learned Judge to uphold the order passed by Sri Srivastava.
We have already expressed our opinion that amended section 3 of Act XLVI of 1957, on a proper construction, validly empowers the Central Government, by notification, to extend the provisions of Act 13 of 1972 to the cantonments in the State of Uttar Pradesh, not only in the form in which it stood on the date of the said notification but also along with its subsequent amendments.
But, for the Central Government to have such power is one thing and for the Central Government to exercise such power is a totally different thing.
Despite the fact that Act 22 of 1972 with full retrospective effect omitted the words "as on the date of the notification" from section 3 of Act 46 of 1957, the terms of the actual notification on 1.9.1973 purported to extend only the provisions of Act 13 of 1972 as on the date of such notification.
We are unable to agree with the learned single Judge that this restricted notification was ultra vires or travelled beyond the provisions of section 3 of Act XLVI of 1957.
What happened was that the section in the statute conferred a larger power on the Central Government but the Central Government utilised the said power in a limited manner.
That was perfectly within the scope of the power delegated to it under section 3.
We cannot uphold the view that the words "as on the date of this notification" in the notification dated Ist September, 1973 can be ignored or be deemed to have been omitted merely because those words had been omitted from the section.
Nonetheless, we are of the opinion that the conclusion reached by the learned single Judge has to be upheld.
For PG NO 590 this, there are two reasons.
The first is the effect of section 3 of Act XLVI of 1957 as amended by Act 22 of 1972.
This Act amended section 3 in more respects than one.
Apart from omitting the words "as on the date of the notification" in section 3 and re numbering section 3 as 3(1), it added to section 3 certain other sub sections so that after the amendment, section 3 read as follows: 3.
Power to extend to cantonments laws relating to control of rents and regulation of house accommodation (1) The Central Government may, by notification in the Official Gazette, extend to any cantonment with such restrictions and modifications as it thinks fit, any enactment relating to the control of rent and regulation of house accommodation which is in force in the State in which the cantonment is situated.
Provided that nothing contained in any enactment so extended shall apply to (a) any premises within the cantonment belonging to the Government; (b) any tenancy or other like relationship created by a grant from the Government in respect of premises within the cantonment taken on lease or requisitioned by the Government; or (2) The extension of any enactment under sub section (l) may be made from such earlier or future date as the Central Government may think fit: Provided that no such extension shall be made from a date earlier than (a) the commencement of such enactment, or (b) the establishment of the cantonment, or (c) the commencement of this Act, whichever is later: PG NO 591 (3) Where any enactment in force in any State relating to the control of rent and regulation of house accommodation is extended to a cantonment from a date earlier than the date on which such extension is made (hereafter referred to as the "earlier date"), such enactment, as in force on such earlier date, shall apply to such cantonment and, where any such enactment has been amended at any time after the earlier date but before the commencement of the Cantonments (Extension of Rent Control Laws) Amendment Act, 1972, such enactment, as amended shall apply to the cantonment on and from the date on which the enactment by which such amendment was made came into force.
(4) Where, before the extension to a cantonment of any enactment relating to the control of rent and regulation of house accommodation therein (hereafter referred to as the "Rent Control Act"), (i) any decree or order for the regulation of for eviction from, any house accommodation in that cantonment, or (ii) any order in the proceedings for the execution of such decree or order, or (iii) any order relating to the control of rent or other incident of such house accommodation, was made by any court, tribunal or other authority in accordance with any law for the control of rent and regulation of house accommodation for the time being in force in the State in which such cantonment is situated, such decree or order shall, on and from the date on which the Rent Control Act is extended to that cantonment, be deemed to have been made under the corresponding provisions of the Rent Control Act, as extended to that cantonment, as if the said Rent Control Act, as so extended, were in force in that cantonment, on the date on which such decree or order was made.
It has been mentioned earlier that, on 17.2.1982, the Central (Government issued a further notification under section 3 of Act 46 of 1957 in supersession of its earlier notification dated Ist September, 1973.
By this notification PG NO 592 the Central Government extended to all cantonments in the State of Uttar Pradesh provisions of Act 13 of 1972 as in force in the State of Uttar Pradesh with certain modifications.
Considering that Act 13 of 1972 had already been extended, this really meant the extension of Act 19 of 1974 and Act 28 of 1976 to cantonment areas.
If, in the light of this fact, we read section 3(4) of Act XLVI of 1957 it will be seen that the order of Sri Srivastava has to be upheld.
The provisions of Act 13 of 1972 as amended by Act 28 of 1976 have been extended to the cantonments in the State of Uttar Pradesh only with effect from 17.2.1982.
But notwithstanding this, the order passed by Sri Srivastava on 27.9.1977 was passed by an authority in accordance with the law which was, for the time being (i.e. as on 27.9.77), in force in the State of Uttar Pradesh.
Under section 3(4), it should, therefore, be deemed to have been made under the corresponding provision of the Rent Control Act (as extended by that notification i.e. as amended in 1976) as if the said amended Rent Control Act as so extended were in force in that cantonment on the date on which such order was made.
That this will be the position is clear from the decision of this court in the case of Jai Singh Jairam Tyagi etc.
vs Mamanchand Ratilal Agarwal and Ors., ; It is not necessary to refer to the decision in detail.
It is sufficient to refer to the following passage from the judgment: "Shri V.M. Tarkunde, learned counsel for the appellant urged that sub section 4 had to be read in the context of sub sections 2 and 3 and that it was to be applied only to cases where a notification issued under sub section 1 was given retrospective effect under the provisions of sub section 2.
We see no justification for confining the applicability of sub section 4 to cases where notifications are issued with retrospective effect under sub section 2, sub section 4 in terms is not as confined.
It applies to all cases of decrees or orders made before the extension of a State Legislation to a cantonment area irrespective of the question whether such extension is retrospective or not.
The essential condition to be fulfilled is that the decree or order must have been made as if the State Legislation was already in force, although, strictly speaking, it was not so in force.
In our view sub section 4 is wide enough to save all decrees and orders made by the wrong application of a State rent control and house accommodation legislation to a cantonment area, though such State Legislation could not in law have been applied to cantonment areas at the time of the PG NO 593 passing of the decrees or order.
We, therefore, hold that the decree obtained by the respondents is saved by the provisions of section 3, sub section 4 of the Cantonment (Extension of Rent Control Laws) Act of 1957, as amended by Act 22 of 1972.
" From the above decision it will be seen that sub section 4 is independent of sub sections 2 and 3 and has effect whether or not the extension of laws made to the cantonment is made retrospective.
Even though the extension of Act 22 of 1972 as amended by Act 28 of 1976 is not retrospective and will be effective only from 5.7.1976, the effect of section 3(4) of Act XLVI of 1957 is that even orders passed prior to such extension should be deemed to have been passed under the extended amended Act.
Judged by this test, the order passed by Sri Srivastava who was the Prescribed Authority after the amendment of Act 28 of 1976 will be valid.
We should also like to refer in this connection to the judgment of this Court in S.P. Jain vs Krishna Mohan Gupta and others; , In that case the landlord moved an application under section 24 C of Act 13 of 1972.
Section 24 C formed part of Chapter IV A, which had been inserted in Act 13 of 1972 only by the amendment Act 28 of 1976.
The application of the landlord was allowed no 17.8.1981 by what was then called the "Delegated Authority".
Revision application to the District Judge failed.
Thereupon the tenant filed a writ petition before the High Court and contended that since Chapter IV A of the Act had been made applicable to cantonment areas only by the notification dated 17.2.1982 that is, after the filing of the application under section 24 C by the landlord section 24 B and 24 C of the U.P. Rent Act were inapplicable.
This contention was rejected by a Bench of this Court (which included one of us).
After pointing out that on the date on which the application was filed as well as on the date on which the order was made.
the cantonment area did not come within the ambit of the Act in question and that it was only by the date on which the revisional order was passed by the Additional District Judge that the building in question came within the purview of the Act by reason of the notification dated 17.9.1982, the court observed: In view of the ratio of Jaisingh Jairam Tyagi vs Mamanchand Ratilal Agarwal; , , it must be held that the provisions of Chapter IV A of the Act would be applicable.
The amending Act was passed for the express PG NO 594 purpose of saving decrees which had already been passed.
Therefore action under section 24 C of the Act in this case was justified.
The High Court did not decide this point because it was of the opinion that the second point which we shall note presently, the High Court was in favour of the respondent.
We are, however, of the opinion that the first point urged on behalf of the respondent cannot be accepted in view of the position in law as discussed hereinbefore.
It was submitted on behalf of the respondent that section 24 B gave substantive rights to the appellant and section 24 C was the procedure for enforcing those substantive rights.
Therefore, these were not only procedural rights.
Therefore, there was no question of retrospective operation to take away vested right.
We are, however, of the opinion that it would be an exercise in futility if the application is dismissed on this ground, it can be filed again and in view of the subsequent legislation as noted hereinbefore it was bound to succeed on this point.
In exercise of our discretionary power under Article 136 of the Constitution, it would not be proper to interfere in the facts and circumstances of the case on this ground.
In the premises in view of the ratio of the decision of this Court in Jaisingh case and reason mentioned hereinbefore this contention urged on behalf of the respondent must be rejected.
" In our opinion the ratio of this case squarely applies to the facts of the case in C.A. No. 6944 of 1983.
We are therefore unable to accept any of the contentions urged on behalf of the appellants.
The appeals are, therefore, dismissed but in the circumstances we make no order as to costs.
Y. Lal Appeals dismissed. | In this group of cases a common question of law that falls for Determination by the Court is whether the provisions of the Uttar Pradesh Urban Buildings (Regulation of Letting, Rent and Eviction) Act, Act No. 13 of 1972 are applicable to cantonments situated in the State of U.P.
The High Court has answered this question in the affirmative.
Hence these appeals by tenants.
The main judgment under appeal is in the case of Brij, Sunder Kapoor vs Additional District Judge & Ors., [1980], All India Rent cases 3I9.
Brief facts of that case are therefore stated below showing how the said question arose.
It may be mentioned that the Allahabad High Court reiterated the same view later in the case of Lekh Raj vs 4th Addl.
Distt.
Judge, Meerut, AIR 1982 All 265.
Jhansi is a cantonment in Uttar Pradesh.
Brij Sunder Kapoor, the appellant is a tenant of Premises No. 103, Sadar Bazar, Jhansi of which Respondent No. 3 Bhagwan Das Gupta is the landlord.
In 1975, the landlord filed an application before the prescribed authority under Section 21 of the Act praying that he required the premises for his personal occupation and that the same be released to him.
The appellant tenant contested the application.
The application was dismissed by the prescribed authority but, on appeal by the landlord, it was allowed by the Additional District Judge.
The tenant thereupon filed a writ petition which was dismissed by a Single Judge of the High Court of Allahabad.
The appellant tenant has therefore filed this appeal.
In order to judge the legality of the point urged regarding applicability of the Act to cantonment area in PG NO 559 U.P., the Court first referred to the history of tenancy legislation in the State of U.P. where the Rent and Eviction Control Legislation was initiated by the United Provinces (Temporary) Control of Rent and Eviction Ordinance promulgated on 1.10.1946, followed by U.P. Act III of 1947 which was made retrospective w.e.f. 1.10.1946.
Both the Act and the Ordinance applied to cantonment area.
By a later Act U.P. (Amendment) Act 44 of 1948, cantonment areas were excluded from the purview of Act III of 1947 perhaps in view of Cantonments (House Accommodation) Act, 1923.
Consequent upon the receipt of various representations demanding the applicability of Act III of 1947 to cantonment area, the State promulgated Ordinance 5 of 1949, which, however, was allowed to lapse.
In the meantime the Allahabad High Court in Smt.
Ahmedi Begum vs Distt.
Magistrate, ruled that the State Legislature was in competent to regulate accommodation lying in cantonments since that was a subject in which Parliament alone was competent to legislate.
This view was later approved by this Court in Inder Bhushan Bose vs Rama Sundari Devi.
; Thereupon, Parliament enacted the U.P. Cantonments (Control of Rent and Eviction Act 1952) (Act 10 of 1952).
In 1957 Parliament enacted the cantonments (Extension of Rent Control Laws) Act, of 1972 gave it retrospective operation from 26.1.1950 which provided for extension to contonments of State law relating to control of rent and regulation of house accommodation.
As a consequence of this, Act III of 1947 became applicable to the cantonment area, even though Act 10 of 1952 was in force.
In order to avoid any complication U.P. Cantonments (Control of Rent and Eviction) Repeal Act 1971 was enacted.
A notification under Section 3 of Act 46 of 1957 extending Act III of 1947 to cantonments in U.P. was issued in 3.4.1972; but soon thereafter Act III of 1947 was repealed by U.P. Act 13 of 1972 which came into operation On 15.7.1972 which necessitated the issuance of another notification under Section 3 of Act 46 of 1957 extending the provisions of Act 13 of 1972.
Accordingly, a notification dated 1.9.1973 was issued.
It was in view of this notification that Respondent No. 3 filed his application under Section 21 of the Act, which has given rise to these proceedings.
Counsel for the appellants raised three principal contentions viz: (1) Whether Act 46 of 1957 applied at all to the State of U.P. in view of Act 10 of 1952 which contained special provisions applicable to cantonments in the State of U.P. (ii) Did not the power of the Central Government under Section 3 of Act 46 of 1957 get exhausted when the PG NO 560 notification dated 3rd April, 1972 was issued, by which provisions of Act III of 1947 were extended to cantonments in U.P.
If yes, was not the second notification dated 1.9.1973 illegal and non est on that account? (iii) Does not Section 3 of Act 46 of 1957 suffer from the vice of excessive delegation of legislative powers and is it not consequently void and inoperative? Dismissing the appeals, this Court, HELD: Once it is the avowed policy of Parliament that cantonment areas in a State should be subjected to the same tenancy legislation as the other areas therein, it follows that the decision involves also that future amendments in such State legislation should become effective in cantonment area as well.
In some rare cases where Parliament feels that such subsequent amendments need not apply to cantonment areas or should apply with more than the limited restrictions and modifications permitted by section 3, it is open to Parliament to legislate independently for such cantonment areas.
But the decision that in the main, such State legislation should apply is unexceptionable and cannot be said to constitute an abdication of its legislative function by Parliament.
[585G H; 586A] Amended section 3 of Act XLVI of 1957, on a proper construction, validly empowers the Central Government, by notification, to extend the provisions of Act 13 of 1972 to the cantonments in the State of Uttar Pradesh, not only in the form in which it stood on the date of the said notification but also along with its subsequent amendments.
[589D E] Act 10 of 1952 was a detailed statute, which was applicable to cantonments in the State of U.P. [566C] Parliamentary legislation Act 68 of 1971 terminates the applicability of Act 10 of 1952 in Uttar Pradesh cantonments.
[567B] It enacts that Act 10 of 1952 shall stand repealed in its application to the State of U.P. on and from the date on which Act III of 1947 was extended to the cantonment areas in the State by a notification under section 3 of Act XLVI of 1957.
[567E] A notification was issued on 3.4.1972 under section 3 of Act XLVI Of 1957, extending the provisions of Act III of 1947, with certain modification set out therein, to PG NO 561 cantonments in the State of Uttar Pradesh.
On and from 3rd April, 1972, therefore, Act 10 of 1952 ceased to apply to cantonments in the State of Uttar Pradesh.
[566E F] In view of this, there was, at least on and after that date, no obstacle in the way of Act III of 1947 being operative in the cantonments of the State of U.P. as well.
[566F] The provisions of Act 68 of 1971 have rendered Act 10 of 1952 inoperative as and from 3.4.1972 leaving the provisions of Act I11 of 1947 in the field only until it was replaced by Act 13 of 1972.
[567C] Notification dated 1.9.1973 extended to the cantonment areas only the provisions of Act XIII of 1972 as they stood in that date.
It was only 17.2.1982 that a further notification was issued superseding the notifi cation dated 1.9.1973 by which the provisions of Act XIII of 1972 as in force in the State of Uttar Pradesh were also extended to the cantonment areas.
The purpose of this notification obviously was that, since there had been amendments to Act XIII of 1972 in 1974 and again in 1976, it was necessary and desirable that the amended provisions should also be extended to the cantonment areas.
[573D E] Gurcharan Singh & Ors.
vs V. K. Kaushal, ; The delegation of a power to extend even future laws of another State will not be bad so long as they are laws which are already in force in the said areas and so long as, in the process and under the character of the law or a change of it in essential particulars is not permitted.
[582H;583A] Mahindra & Mahindra vs Union, ; ; Lachmi Narain vs Union, ; ; Delhi laws Act case; , ; Raj Narain Singh 's case [1955] I SCR 74; B. Shama Rao vs Union Territory of Pondicherry, ; ; Gwalior Rayon 's Case ; ; Sita Ram Bishambher Dayal vs State of U.P., ; ; Smt.
Bajya vs Smt.
Gopikabai & Another, ; ; Jai Singh Jairam Tyagi etc.
vs Mamanchand Ratilal Aggarwal & Ors., ; and S.P. Jain vs Krishna Menon Gupta |
Appeal No. 2560 of 1966.
Appeal from the judgment and order dated May 11, 1966 of the Calcutta High Court in Income tax Matter No. 98 of 1962.
section T. Desai, G. C. Sharma and R. N. Sachthey, for the appellants.
D. K. De, A. N. Sinha, Rathin Das for P. K. Mukherjee, for respondent.
The Judgment of the Court was delivered by Grover, J.
This is an appeal by special leave from a judg ment of the Calcutta High Court answering the following question which was referred to it by the Tribunal in the negative and in favour of the assessee.
"Whether on the facts and in the circumstances of the case, the Income tax authorities were justified in imposing a penalty on the assessee under Section, 28 (1) (c) of the Income tax Act ?" The assessee during the assessment year 1947 48, the corresponding previous year being the financial year ending on March 31, 947 was a partner in the firm of M/s. Haji Sk.
Md. Hussain Md. Jan of Calcutta.
The Income tax Officer while making the assessment discovered an undisclosed bank account of the assessee with the Central Bank of India Ltd. Bettiah, Bihar.
It was found that a cash deposit of Rs. 87,000 had been made by the assessee on November 21, 1946 in that Bank.
He was asked to explain the source, of the amount of deposit.
According to his explanation all his relations got panicky during the communal riots in Bihar in the year 1946 and entrusted him with whatever cash amounts they had with them at that time for safe custody.
448 It was stated that a sum of Rs. 87,000 had been received in the following manner Zahir Hussain alias Md. Zahir (Cousin)Rs.
18,500/ Mohammad Jan (deceased father)Rs.
1,000 Mohd. Haniff (cousin) Rs.1,750 Khairunnessa Bibi (mother)Rs.23,000 Safihan Bibi (Sister) Rs.13,000 Fatema Bibi (Wife) Rs.15,750 Hasuia Bibi (Brother 's wife)Rs.12,000 ___________ Rs.87,000 ____________ These amounts which were received by the assessee from his relations were deposited by him in a fixed deposit account in the joint name of himself and his minor sons in the Bank at Bettiah.
The Income tax Officer did not accept the explanation of the assessee and held that the sum of Rs. 87,000 represented income from undisclosed sources.
He added the amount to the total income of the assessee in his personal assessment.
This addition was maintained by the Appellate Assistant Commissioner in appeal.
The Appellate Tribunal also agreed with the decision of ,the Income tax Officer and the Appellate Assistant Commissioner.
Penalty proceedings were initiated after the assessment and in due course the Income tax Officer imposed a penalty amounting to Rs. 66,000 on the assessee under section 28 (1) (c) for concealing income and deliberately furnishing inaccurate particulars.
The Appellate Assistant Commissioner in appeal held that the case clearly called for a penal action but he reduced the amount of penalty by Rs. 22,000.
Subsequently he rectified his order under section 35 and confirmed the penalty of Rs. 66,000 imposed by the Income tax Officer.
The assessee went up to the Appellate Tribunal in appeal.
The Tribunal took the view that penalty proceedings were of a criminal nature.
The onus lay on the department to show by adequate evidence that the amount of the cash stated to have been concealed by the assessee was of a revenue nature and was assessable as income and that the assessee had concealed it or deliberately furnished false particulars in regard thereto.
This onus, in the opinion of the Tribunal, was not ,discharged by the Income tax authorities by showing merely that the explanation given by the assessee in the assessment proceedings was found to be unacceptable.
The Income tax Officer, according to the Tribunal, must find some material apart from he falsity of the assessee 's explanation to support his finding that the receipt from undisclosed sources was income.
As no satisfactory evidence had been produced by the department to establish 4 49 that the amount in question represented the income of the assessee the Tribunal held that no penalty could be imposed.
Now penalty can be imposed under section 28 (1) (c) if the Income tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal in the course of any proceedings under the Income tax Act 1922 is satisfied that any person "has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income".
In the judgment under appeal reference has been made to the decisions of the various High Courts on the true ambit and scope of this provision and the burden in the matter of establishing concealment of particulars of income or deliberately furnishing inaccurate particulars of such income.
The majority of High Courts, namely, Bombay in Commissioner of Income tax, Ahmedabad vs Gokuldas Harivallabhdas(1), Gujarat in Commissioner of Income tax Gujarat vs L. H. Vora (2 ) and Patna in Commissioner of Income tax Bihar & Orissa vs Mohan Mallah(3) had expressed the view that proceedings under section 28 ( 1 ) (c) were of a penal nature and it was for the department to establish that the assessee was guilty of concealment of, the particulars of income.
The mere fact that the assessee had given a false explanation did not prove that the receipt necessarily constituted income of the assessee.
Allahabad High Court, however, in Moman Rain Rant Kumar(1) vs Commissioner of Income tax U.P. observed that where the explanation offered by the assessee in respect of an item of income shown as capital receipt was deliberately false it was open to the Income tax authorities to impose a penalty under section 2 8 (1) (c).
In the earlier judgment in Lal Chand Gopal Das vs Commissioner of Income tax U.P.(5) the Allahabad court had said that if a receipt was income but was disguised in the account or in the return as a non assessable receipt it was clearly a case of concealment of the particulars or of furnishing inaccurate particulars of income and a penalty under section 2 8 (1) (c) should be imposed on the assessee.
The first point which falls 'for determination is whether the imposition of penalty is in the nature of a penal provision.
The determination of the question of burden of proof will depend largely on the penalty proceedings being penal in nature or being merely meant for imposition of an additional tax,, the liability to pay such tax having been designated as penalty under section 28.
One line of argument which has prevailed particularly with the Allahabad High Court in Lal Chand Gopal Das(5) cage is that there was no essential difference between tax and penalty because the liability for payment of both was imposed as a part of the (1) (2) 56 I.T.R. 126.
(3) (4) 59 ].T.
P. 135.
(5) , 450 machinery of assessment and the penalty was merely an additional tax imposed in certain circumstances on account of the assessee 's conduct.
The justification of this view was founded on certain observations in C. A. Abraham vs Income tax Officer, Kottayam & Anr.(1).
It is true that penalty proceedings under section 28 are included in the expression "assessment" and the true nature of penalty has been held to be additional tax.
But one of the principal objects in enacting section 28 is to provide a deterrent against recurrence of default on the part of the assessee.
The section is penal in the sense that its consequences are intended to be an effective deterrent which will put a Stop to practices which the legislature considers to be against the public interest.
It is significant that in C. A. Abraham 's(1) case this Court was not called upon to determine whether penalty proceedings were penal or of quasi penal nature and the observations made with regard to penalty being an additional tax were made in a different context and for a different purpose.
It appears to have been taken as settled by now in the sales tax law that an order imposing penalty is the result of a quasi criminal proceedings; (Hindustan Steel Ltd. vs The State of Orissa(1).
In England also it has never been doubted that such proceedings are penal; Fattorini (Thomas) (Lanchashire) (Ltd., vs Inland Revenue Commissioner (3).
The next question is that when proceedings under section 28 are penal in character what would be the nature of the burden upon the department for establishing that the assessee is liable to payment of penalty.
As has been rightly observed by Chagla C.J., in Commissioner of Income tax, Ahmedabad v, Gokuldas Harivallabhdas (4) the gist of the offence under section 2 8 ( 1 ) (c) is that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income and therefore the department must establish that the receipt of the amount in dispute ,constitutes income of the assessee.
If there is no evidence on the record except the explanation given by the assessee which ,explanation has been found to be false it does not follow that the receipt constitutes his taxable income.
Another point is whether a finding given in the assessment proceedings that a particular receipt is income after rejecting the explanation given by the assessee as false would prima facie be sufficient for establishing in proceedings under section 28 that the disputed amount was the assessee 's income.
It must be remembered that the proceedings under section 28 are of a penal nature and the burden is on the department to prove that a particular amount (1) 41 (3) 1943 (11) I.T.R. (Supp.)50.
(2) C.A.S. 883 392/66 dt.
4 8 1969.
(4) 451 is a revenue receipt.
It would be perfectly legitimate to say that the mere fact that the explanation of the assessee is false does not necessarily give rise to the inference that the disputed amount represents income.
It cannot be said that the finding given in the assessment proceedings for determining or computing the tax is conclusive.
However it is good evidence.
Before penalty can be imposed the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the particulars of his income or had deliberately furnished.
inaccurate particulars.
In the present case, it was neither suggested before the High Court nor has it been contended before us that apart from the falsity of the explanation given by the assessee there was cogent material or evidence from which it could be inferred that the assessee had concealed the particulars of his income or had deliberately furnished inaccurate particulars in respect of the same and that the disputed amount was a revenue receipt.
The question was, therefore, rightly answered by the High Court.
The appeal fails and it is dismissed with costs.
V.P.S. Appeal dismissed. | The Income tax Officer, while assessing the respondent to tax discovered an undisclosed bank account of the 'respondent for a large sum.
He did not accept the explanation of the respondent as to the source of the amount and held that it represented income from an undisclosed source.
Thereafter he initiated penalty proceedings under section 28 and imposed a penalty which was confirmed by the Appellate Assistant Commissioner.
In appeal, the Tribunal held that penalty proceedings were of a criminal nature and that the burden lay on the department to show that the amount concealed was of a revenue nature and was assessable as income and that the onus was not discharged in the present case by merely showing that the assessee 's explanation was not accepted in the assessment proceedings.
The High Court agreed with the Tribunal.
In appeal to this Court, HELD.
(1) Penalty proceedings are included in the expression "assessment" and the true nature of a penalty is the imposition of an additional tax.
But, one of the principal objects of section 28 is to provide a deterrent against recurrence of default on the part of the assessee.
There fore, the section is a penal provision and the proceedings were of a penal nature.
[450 B C] C. A. Abraham vs Income tax officer, , explained.
Commissioner of Income tax, Ahmedabad vs Gokuldas Harivallabhdas , Commissioner of Income tax Gujarat vs L. H. Vora, and Commissioner of Income Tax Bihar and Orissa vs Mohan Mallah, , approved.
Moman Rain Ram Kumar vs Commissioner of Income tax, U.P., and Lal Chand Gopal Das vs Commissioner of Income tax, U.P., , not approved.
Hindustan Steel Ltd. vs State of Orissa, C.As.
883 892/66 dt. 4 8 1969 and Fattorini (Thomas) (Lanchashire) Ltd. vs Inland Revenue Commissioner, (1943) (11) I.T.R. Supp. 50, referred to.
(2)The gist of the offence under section 28(1)(c) is that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income, and therefore, the department must establish that the receipt of the amount in dispute constitutes income of the assessee.
If there is no evidence on the record except the explanation has been found to be false, if does not follow that the receipt constitutes his taxable income.
[450 E G] 447 Commissioner of, Income tax, Ahmedabad vs
Gokuldas Harivallabhdas, , approved.
(3) 'Since the proceedings under section 28 are of a penal nature and the burden is on the department to prove that a particular amount is a revenue receipt, the finding given in the assessment proceedings that the assessee 's explanation is false and that the disputed amount represents income is evidence but is not conclusive.
Before penalty could be imposed the, entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assesses , had consciously.
concealed the particulars of his income or had deliberately furnished inaccurate particulars.
[450 451 A C] |
l Appeals No. 1760 of 1967.
Appeals from the judgment and order dated February 1, 2, 1966 of the Bombay High Court in Income tax Reference No. 60 of 1961.
B. Sen, section K. Aiyar and B. D. Sharma, for the appellant.
M. C. Chagla and A. K. Verma, for the respondent.
The Judgment of the Court was delivered by Grover, J.
This is an appeal by certificate from a judgment of the Bombay High Court in an Income tax reference.
The respondent Company which is the assessee carries on business of the manufacture and sale of yam and cloth in Bangalore.
In 1914 it started a Provident Fund for the benefit of the monthly rated employees and this fund was called "The Staff Provident Fund".
Subsequently another fund was started known as the "Work men Provident Funds".
These funds were, not recognised under the provisions of Chapter IXA of the Income tax Act, 1922 (hereinafter called the Act).
The employees,and the assessee made contributions to the two funds from time to time.
The Employees ' Provident Funds Act (to be referred to as the Provident Funds Act) came into force on 31st October, 1952.
The amounts standing to the credit of the two funds on that date so far as they are referable to the contributions by the Company stood as follows : (1) Staff Provident Fund: Company 's contributions upto 31 10 1952 89,605 9 2 Proportionate interest thereon 19,596 8 7 1,09,202 1 9 (2) Workmen 's Provident Fund : Company 's contribution upto 31 10 1952.
1,83,190 13 2 Proportionate interest thereon9,379 2 5 1,92,569 15 10 3,01,772 1 7 The assessee came within the first schedule to the Provident Fund Act and therefore it applied under section 17 for exemption from the operation of the provisions of that Act.
A provisional exemption was given on 1st July, 1953.
The assessee was, however, informed that pending the grant of exemption it need not make any payment of the accumulations to the Regional Provident Fund Commissioner, as was enjoined under the Provident 470 Fund Act.
Following some correspondence between the Com missioner and the assessee the latter sought cancellation of the exemption by, means of a letter dated 11th July, 1955.
The Provident Fund Commissioner cancelled the exemption granted under section 17, of the Provident Funds Act and required the assessee to comply with all its provisions and the Scheme framed thereunder and further to transfer all the provident fund 's accumulations to the Employees Provident Fund immediately.
In accordance with the communication from the Commissioner, the assessee transferred an amount which included a sum of Rs. 3,01,772 1 7 which represented the assessee 's contribution to the two funds upto 31st October, 1952.
The assessee claimed deduction in the assessment for the assessment year 1957 58 on account of the transfer of the amount of Rs. 3,01,772 1 7 to the Provident Fund Com missioner.
The Income Tax Officer disallowed this claim on the ground that the amount in question was allowable to be treated ,as capital expenditure ' under the provisions of section 58K of the Act.
An appeal was taken to the Appellant Assistant Commissioner but it failed.
The assessee appealed to the Appellate Tribunal.
The Tribunal held that there was a transfer of the fund to Trustees which came within the scope of Section 58K of the Act and therefore the amount was not deductible nor could the deductions be allowed under section 10(1) or Section 10(2 (xv).
The assessee sought reference and the following two questions were referred : (1) Whether the provisions of Section 58K of the Income tax Act apply to the transf er of the sum of Rs. 3,01,772 1 7 to the Regional Provident Fund Commissioner ? (2) If the answer to the above question is in the negative , whether the sum of Rs. 3,01,772 1 7 is allowable as a deduction in arriving at the commercial profits under section 10(1) or is an allowable deduction under section 10(2) (xv) of the Income tax Act in the computation of the assessable "business" profits.
The High Court examined in detail the provisions contained in Chapter IXA of the Act.
It was observed that the scheme of section 58K in that Chapter was that though an employer could not claim any allowance at the time he transferred his own accumulated contributions to the Provident Fund to the trustees,, he could claim exemption ' in respect thereof at the time his share of contributions was paid to the employee provided arrangements were made to deduct from those amounts the income tax payable by his employee.
The transfer of the fund contemplated under section 58K was a voluntary transfer by an employer of the Provident Fund maintained by him to the trustees to hold it in trust for 471 the benefit of his employees.
The High Court, however, proceeded to consider the matter even on the assumption that the transfer of the fund contemplated by section 58K(1) Would also include involuntary transfer.
According to the High Court the position that emerged on a consideration of the materials provisions of the Provident Funds Act and the Scheme framed thereunder was as follows : For the administration of the statutory Provident Fund which came into existence and stood constituted on the framing of the Scheme, a Board of trustees called the Central Board of Trustees was constituted.
On the framing of the Scheme and the constitution of the statutory Provident Fund the employers in the industries to which the Provident Funds Act applied were required to transfer the accumulated balances of the Provident Fund, if any, which had been maintained by them.
Similarly, trustees of the private Provident Fund constituted by an employer were also required to transfer the accumulated balances to the statutory Provident Fund.
Such employers were further required to make their own annual contributions according to the prescribed limit to that fund.
The Board of trustees and the Officers administering the fund were required to open a Provident Fund account and in that account a separate account was maintained of each member showing the balance to his credit containing the contributions of the employer.
The High Court was of the view that a trust in its true sense had not been constituted by the Provident Funds Act or the Scheme and that the transfer was not to the trustees but to the fund The first question was answered in the negative and in favour of the assessee.
The answer to the second question was given in the affirmative, it being held that the deduction claimed was allowable under section 10 (2) (xv) and that the provisions of section 10 (4) (c) did not 'operate as a bar to the claim made by the assessee for deduction of the amount in question.
Section 58K of the Act was in those terms "58K. TREATMENT OF FUND TRANSFERRED BY EMPLOYER TO TRUSTEE: (1) Where an employer who maintains a provident fund (whether recognised or not) for the benefit of his employees and has not transferred the fund or any portion of it, transfers such fund or portion to trustees in trust for the employees participating in the fund, the amount so transferred shall be deemed to be of the nature of capital expenditure; (2) When an employee participating in such fund is paid the accumulated balance due to him therefrom, any portion of such balance as repre 472 sents his share in the amount so transferred to the trustee (without addition of interest, and exclusive of the employee 's contributions and interest thereon) shall, (if the employer has made effective arrangements to secure that tax shall be deducted at source from the amount of such share when paid to the employee,) be deemed to be an expenditure by the employer within the meaning of [clause (xv)] of sub section (2) of section 10, incurred in the year in which the accumulated balance due, to the employee is paid.
For the application of sub section (1) the following conditions must be satisfied : (1) The employer should have maintained a Provident Fund for the benefit of his employees; (2) There should have been a transfer of such fund or portion thereof to trustees; (3) Such transfer should have been in trust for the employees participating in the fund.
It has not been shown that the view taken by the High Court that the transfer in the present case was not made to any trustees is unfounded.
But we need express no opinion on the point because in our judgment the third condition could not be regarded as having been satisfied.
The transfer was not made to trustees in trust for the employees participating in the fund.
The common statutory fund created under the Provident Funds Act is meant not for the employees of the assessee only but it is meant for employees of hundreds of other employers who are covered by that Act.
In other words the employees of the assessee alone did not participate in that fund.
It is very doubtful whether the Provident Funds Act and the Scheme thereunder can be said to create a trust in the sense in which that word is used in section 58K (1) merely because the Board managing the Scheme was called the Board of Trustees.
The members of the Board did not become trustees in the legal sense.
They were appointed to administer the fund which vested in them only for the purpose of administration.
It could well be said that the essential ingredient of a trust, namely, reposing of confidence by the author of the trust in the trustees for the purpose of carrying out his desires, wishes and directions and the acceptance of those obligations by the trustees was absent in the present case.
It is, however, not necessary to examine in detail this aspect of the matter because as observed before the fund under the Provident Funds Act, was not restricted to the employees of the assessee only and it could never 4 73 be said that they alone participated in that fund.
In such a situation section 58K could not be made applicable.
Hardly any argument was addressed on the decision of the High Court on the second question. ' The expenditure was in curred in the relevant accounting year.
It was something which had gone irretrievably.
The amount in question had been spent and paid out in the relevant year of 'accounting, and was therefore allowable as expenditure incurred exclusively for the purpose of the business.
It is not suggested that is was incurred for any other purpose.
The conditions, of section 10(2) (xv) had been fully satisfied in the present case.
In the result we concur in the answers given by the High Court.
The appeal fails and is dismissed with costs.
G.C. Appeal dismissed. | The assessee company respondent herein carried on the business of ,manufacture and sale of yarn and cloth.
It started in 1914 a Provident Fund for the benefit of its monthly rated employees.
Subsequently, another fund was started.
These funds were not recognised under the pro visions of Chapter IXA of the Income tax Act, 1922.
The employees and the company made contributions to the two funds from time to time.
The Employees Provident Funds Act 19 of 1952 came into force on 31st October, 1952.
Under directions given by the Provident Fund Commissioner the assessee company transferred to the statutory Employees Pro vidend Fund all the accumulations in the two private funds maintained by it including its own contributions thereto made upto October 31, 1952.
The said contributions amounted to Rs. 3,01,772 1 7.
In income tax proceedings for the assessment year 1957 58, the company claimed deduction of the above amount of Rs. 3,01,772 1 7 from its income.
The Income tax Officer, the Appellate Assistant Commissioner as well as Income tax Appellate Tribunal disallowed the claim.
In reference how ever the High Court decided in favour of the Company.
The Commissioner of Income tax appealed to this Court.
The questions that fell for considerations were : (i) whether the payment in question by the assessee company was capital expenditure within the meaning of section 58K(1) of Income tax Act and (ii) whether the said payment could be allowed as a deduction under section 10(2) (xv) of the Income tax Act? HELD : (i) For the application of sub section
(1) of section 58K the following conditions must be satisfied : '(1) The employer should have maintained a Provident Fund for the benefit of his employees; (2) There should have been a transfer of such fund or operation thereof to trustees; (3) Such transfer should have been in trust for the employees participating in the fund.
[472 C D] In the present case the third condition was not satisfied.
The common statutory fund created under the Provident Funds Act was meant not for the employees of the assessee only but also for employees of hundreds of other employers who were covered by the Act.
It was not restricted to the employees of the assessee and it could never be said that they alone participated in that fund.
In such a situation section 58K was not applicable.
[412 E; H 473 A] (ii)The expenditure was incurred in the relevant accounting year.
It was something which had gone irretrievably.
The amount in question had been spent and paid out in the year of accounting, and was, therefore, 469 allowable as expenditure incurred exclusively for the purpose of, the business.
The conditions of section 10(2)(xv) had, therefore, been fully satisfied in the present case.
[473 B C] |
Appeals Nos. 2483 and 2484 of 1969.
Appeals by special leave from the judgment and order dated April 11, 1969 of the Allahabad High Court in Sales Tax References Nos.
580 and 581 of 1966.
J. P. Goyal and Sobhagmal Jain, for the appellants (in both the appeals).
C. B. Agarwala and 0.
P. Rana, for the respondent (in both the appeals).
The Judgment of the, Court was delivered by Shah, J. The appellants who are dealers in food grains supplied to the Regional Food Controller diverse quantities of wheat in compliance with the provisions of the U.P. Wheat Procurement (Levy) Order, 1959.
The Sales Tax Officer levied tax under the U.P. Sales Tax Act on the aggregate of the price of wheat by the appellants, rejecting the contention raised,by the appellants that the wheat supplied was not sold by them to the Controller.
In appeal the Assistant Commissioner (Judicial) Sales Tax held that the turnover resulting from supplies of wheat was not taxable since there was no "sale" within the meaning of the U.P. Sales Tax Act, 1948.
The order was confirmed by the Additional Judge (Revisions) Sales Tax.
The Additional Judge (Revisions) Sales Tax referred the following questions to the High Court of Allahabad for opinion (1) Whether the sales made to the Regional Food Controller under the U.P. Wheat Procurement (Levy) Order, 1959, are sales within the meaning of "sale" under section 2(h) of the U.P. Sales Tax Act ? (2) Whether in the circumstances of the case, the assesses are liable to pay sales tax on the sales made to the Regional Food Controller under the provisions of the U.P. Wheat Procurement (Levy) Order, 1959 ?" The questions raised were defective in form.
The word "sales" when it first occurs in Question No. (1 ) should be "supplies".
The expression "sales made" in Question No. (2) should be "on the price for wheat supplied".
We modify the questions accordingly.
The High Court of Allahabad, following their earlier judgment in Commissioner of Sales Tax,, U.P. Lucknow vs ) an Bilas 673 Ram Gopal(1) answered the two questions in the affirmative.
The appellants have appealed to this Court with special leave.
The expression "sale" is defined in section 2(h) of the U.P. Sales Tax Act, 1948 as meaning any transfer of property in goods for cash, deferred payment or other valuable consideration, but not including a mortgage, hypothecation, charge or pledge.
Power of the Provincial Legislature by virtue of Entry 48 List 11 of the Government of India Act, 1935, was restricted.
The, Legislature was competent to legislate for levy of tax only on transactions which were "sales" within the meaning of the Indian : State of Madras vs Gannon Dunkerley and Co. (Madras) Ltd.( ') M/s. New India Sugar Mills Ltd. vs Commissioner of Sales Tax, Bihar( ').
It was observed in M/s. New India Sugar Mills ' case( ') : "In popular parlance 'sale ' means transfer of property from one person to another in consideration of price paid or promised or other valuable consideration.
But that is not the meaning of 'sale ' in the .
Section 4 of the provides by its first sub section that a contract of sale of goods is a contract where the seller agrees to transfer the property in goods to the buyer for a price.
"Price" by cl.
(10) of section 2 means the money consideration for sale of goods, ,and "where under a contract of sale property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the 'property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell" [sub section (3) section 4].
It is manifest that under the a transaction is called sale only where for money consideration property in goods is transferred under a contract of sale.
Section 4 of the was borrowed almost verbatim from section I of the English 56 & 57 Vict.
c. 71.
As observed by Benjamin in the 8th Edn. of his work on 'Sale ', "to constitute a valid sale there must be a concurrence of the following elements viz. (1) parties competent to contract; (2) mutual assent; (3) a thing, the absolute or general property in which is transferred from the seller to the buyer; and (4) a price in money paid or promised".
It was also observed that the expression "sale of goods" in the Constitution must be understood in the same sense in which it is (1) (1969) All L.J. 424.
(2) ; (3) [1963] Suppl.
2 S.C.R. 459.
13Sup.
C 1/70 14 674 used in the .
The U.P. Legislature could therefore legislate for levy of sales tax on a transaction which amounted to a sale within the meaning of the , and not on any other transaction which was deemed by fiction to be a sale.
It is necessary then to determine whether the stocks of wheat supplied by the appellants in compliance with the provisions of the U.P. Wheat Procurement (Levy) Order, 1959 to the Regional Food Controller were sold to that Officer within the meaning of the definition of the word 'sale ' in section 2(h) of the U.P. Sales Tax Act, 1948.
The relevant provisions of the U.P. Wheat Procurement (Levy) Order, 1959, may first be read.
The preamble to the Order states : "Whereas the State Government is of the opinion that it is necessary and expedient so to do for maintaining the supplies of wheat and for securing its equitable distribution and availability at fair prices Now, THEREFORE, in exercise of the powers conferred by clauses (e), (f), (h), (i) and (j) of sub section (2) of section 3 of the (10 of 1955), the Governor of the State of Uttar Pradesh is pleased to make the following order Clause 3 provides "(1) Every Licensed dealer shall sell to the State Government at the controlled prices (a) Fifty (50%) per cent if wheat held in.
stock by him at the commencement of this Order; and (b) Fifty (50%) per cent of wheat procured or purchased by him every day beginning with the date of commencement of this Order and until such time as the State Government otherwise directs.
(2) The wheat required to be sold to the State Government under sub clause (1) shall be delivered by the licensed dealer to the Controller or to such other person as may be authorised by the Controller to take delivery on his behalf.
" Clause 4 confers powers of entry, search, seizure upon Enforcement Officers : insofar as it is material it provides "(1) Any Enforcement Officer may, with a view to securing compliance with this Order or to satisfying himself that this order has been complied with 675 (i) enter with such assistance as may be necessary any premises where he has reason to believe that wheat is procured, purchased or stocked , (ii)ask of any person all necessary questions; (iii) examine any books or documents; (iv) search any premises, vehicles, 'vessels and aircraft and seize wheat in respect of which he has reasons to believe that a contravention of the order has been, is being, or is about to be committed and thereafter take or authorise the taking of all measures necessary for securing the production of stocks so seized in a court and for their sale custody, pending such production.
By cl. 3 of the Order every licensed, dealer is directed to "sell" to the State Government 50% of the wheat held in stock by him on the date of the commencement of the Order at the "controlled prices".
Again out of the stock of wheat procured or purchased by him every day beginning with the date of commencement of the Order he is directed to "sell" 50% of that stock.
The Order enjoins the licensed dealer to deliver the quantities specified in subcl.
(1) of cl. 3 either to the Controller or to such other person as may be authorised by the Controller to take delivery on his behalf.
To ensure that the licensed dealer carries out his obligation the Enforcement Officers may enter any premises where they have reason to believe that wheat is procured, purchased or stocked, and may make necessary enquiries, examine any books or documents and search any premises, vehicles, vessels and aircraft and seize wheat in respect of which they have reason to believe that a contravention of the Order has been, is being, or is about to be, committed.
Obligation to deliver wheat of the quantity specified arises out of the statute.
The Order takes no account of the volition of the licensed dealers and until the State Government directs otherwise, of the Controller or the authorised officer.
The Order imposes an obligation upon the licensed dealer who is defined in cl. 2(d) as meaning a person holding a valid licence under the U.P. Food grains Dealers Licensing Order, 1959, to deliver the quantities of wheat specified in the Order.
The State Government is directed by the Order to pay for the wheat supplied at the controlled rate.
The source of the obligations to deliver the specified quantities of wheat and to pay for them is not in any contract, but in the statutory order.
In our judgment cl.
3 sets up a machinery for compul 676 sory, acquisition by the State Government of stocks of wheat belonging to the licensed dealers.
The Order, it is true, makes no provision in respect of the place and manner of supply of wheat and payment of the controlled price.
It contains a bald injunction to supply wheat of the specified quantity day after day, and enacts that in default of compliance the dealer is liable to be punished; it does not envisage any consensual arrangement.
It does not require the State Government to enter into even an informal con tract.
A sale predicates a contract of sale of goods between persons competent to contract for a price paid or promised : a transaction in which an obligation to supply goods is imposed, and which does not involve an obligation to enter into a contract, cannot be called a 'sale ', even if the person supplying goods is declared entitled to the value of goods, which is determined or determinable in the manner prescribed.
Assuming that between the licensed dealer and the Controller, there may be some arrangements about the place and manner of delivery of wheat, and the payment of " controlled price", the operation of cl. 3 does not on that account become contractual.
The High Court relied upon the following observations in Ram Bilas Ram Gopal 's case( ') "Analysing clause 3 of the Levy Order it is clear that a licensed dealer is obliged to sell to the State Government fifty, per cent of the wheat held in stock by him at the commencement of the Order, and thereafter fifty per cent of the wheat daily procured or purchased by him beginning with the date of commencement of the Order until such time as the State Government otherwise directs.
The price at which the wheat is sold is the maxi mum price fixed in the Wheat (Uttar Pradesh) Price Control Order, 1959 as notified by the Government of India.
Delivery of the wheat has to be given by the dealer to the Regional Food Controller or a person authorised by him in that behalf.
The dealer has no option but to sell the specified percentage of wheat to the State Government.
The State Government has also no option but to purchase fifty per cent of the wheat held in stock by the dealer at the commencement of the Levy Order.
As regards the wheat procured or purchased daily by the dealer thereafter, it is open to the State Government to say that from any particular date it will not purchase any or all of the specified percentage of wheat.
Therefore, as regards that wheat the Levy Order leaves it open to one of the parties, namely the State Government to decide when it will stop purchasing wheat from the dealer.
That in substance is clause 3 of (1961) All.
L.J. 424 677 the Levy Order and it embodies the total sum of obligations imposed on the dealer and the State Government.
All other details of the transaction are left open to negotiation.
It leaves it open to the parties to negotiate in respect of the time and the mode of payment of the price, the time and mode of delivery of wheat, and other conditions of the contract.
" Clause 3 of the Order compels the licensed dealer to deliver to the Controller or his authorised agent every day 50% of the wheat procured or purchased by him.
There is no scope for negotiations there.
Assuming that the Controller may designate the place of delivery and the place of payment of price at the controlled rate, and the licensed dealer acquiesces therein, or even when in respect of those two matters there is some consensual arrangement, in our judgment, supply of wheat pursuant to cl. 3 of the Order and acceptance thereof do not result in a contract of sale.
The High Court observed that ". .whatever compulsive or coercive force is used to bring about a transaction under clause 3 of the Levy Order, it must be traced to legislation.
It cannot be attributed to the State Government as a party to the transaction.
This, then, is clear.
There is nothing in the Levy Order which can be accused of vitiating the free consent of the parties as defined under Sec.
14 of the Indian Contract Act, when entering into the contract of sale.
" But these observations assume a contract of sale which the Order does not contemplate.
If there be a contract, the restrictions imposed by statute may not vitiate the consent.
But the contract cannot be assumed.
We may refer to certain decisions of this Court on which reliance was placed at the Bar.
In M/s. New India Sugar Mills ' case( ') under the Sugar and Sugar Products Control Order, 1946, a scheme was devised for equitable distribution of sugar.
The consuming States intimated to the Sugar Controller of India their requirements of sugar and the factory owners sent statements of stocks of sugar held by them.
The Controller made allotments to various States and addressed orders to the factory owners directing them to supply sugar to the States in question in accordance with the despatch instructions from the State Governments.
Under the allotment orders, M/s. New India Sugar Mills Ltd., in Bihar despatched stocks of sugar to the State of Madras.
The State of Bihar treated the transaction as a sale and levied tax thereon under the (1) [1963] Supp. 2 S.C.R. 459.
678 Bihar Sales Tax Act, 1947.
The tax payer contended that the supplies of sugar; pursuant to the directions of the Controller, did not result in sales, and that no tax was exigible on such transactions.
A majority of the Court observed that despatches of sugar pursuant to the directions of the Controller were not made in pursuance of any contract of sale.
There was no offer by the tax payer to the State of Madras, and no acceptance by the latter; the tax payer was under the Control Order compelled to carry out the directions of the Controller and it had no volition in the matter.
Intimation by the State of its requirements of sugar to the controller or communication of the allotment order to the assessee did not amount to an offer.
Nor did the mere compliance with despatch instructions issued by the Controller, which the assessee had not the option to refuse to comply with, amount to acceptance of an offer Or to making of an offer.
A contract of sale of goods postulates a voluntary arrangement regarding goods between the contracting parties.
It was held that in the case before the Court there was no such voluntary arrangement.
In two later decisions of this Court the true character of transactions in which supplies of commodities were made pursuant to Control Orders was examined.
In Indian Steel & Wire Products Ltd. vs State of Madras( ') the tax payer supplied certain steel products to various persons in the State of Madras pursuant to the directions given by the Steel Controller exercising powers under the Iron and Steel (Control of Production and Distribution) Order, 1941.
The authorities of the State of Madras assessed the turnover of the tax payer resulting from those transactions to sales tax under the Madras General Sales Tax Act.
The tax payer contended that the transactions of supply did not result in sales and were on that account not exposed to sales tax, because steel products were supplied pursuant to the directions of the Iron and Steel Controller made under cl.
10B of the Order there being no mutual assent between the parties to the transaction.
This Court held that the supplies were made pursuant to the directions issued under cl. 5 of the Order and not pursuant to the directions issued under cl.
10B of the Order.
It was observed that the Orders were in respect of goods not yet manufactured, whereas under cl.
10B directions could be given only in respect of goods already in stock, and since cl. 5 did not require the Controller to regulate or control every facet of a transaction between a producer and the person to whom the taxpayer supplied iron and steel products the transactions were consensual.
Clause 5 of the Order read as follows "No producer or stock holder shall dispose of or agree to dispose of or export or agree to export from British India any iron or steel, except in accordance with (1) ; 679 the conditions contained or incorporated in a general or special written order of the Controller.
" Clause 10B provided "The Controller may, by a written order require any person holding stock of iron and steel, acquired by him otherwise than in accordance with the provisions of clause 4 to sell the whole or any part of the stock to such person or class of persons and on such terms and conditions as may be specified in the Order." Comparing the terms of cl. 5 with the terms of cl. 10, the Court observed that liberty of contract in large measure was reserved to the producer or stockholder and to the purchaser in the matter of disposal of iron & steel.
The obligation imposed by cl. 5 was, it was said, not to dispose of or agree to dispose of or export or agree to export any iron or steel except in accordance with the conditions contained or incorporated in the order of the Controller and that since there was liberty of contract between the parties but subject to restrictions, the transaction could be regarded as a sale.
It was observed at p. 489 : "But under clause 5 he can authorise a producer or a stockholder to dispose of any iron or steel whether the same is in stock or not in accordance with the conditions contained or incorporated in a sp ecial or general written order issued by him.
In the instant case, as can be gathered from the correspondence already referred to, the order issued by the Controller could be complied with only after manufacturing the required material.
Hence, the order issued by the Controller could not have been issued under clause 10B." The Court then observed : ". . the area within which there can be bargaining between a prospective buyer and PA intending seller of steel products, is greatly reduced.
Both of them have to conform to the requirements of the order and to comply with the terms and conditions contained in the order of the Controller.
Therefore they could negotiate only in respect of matters not controlled by the order or prescribed by the Controller.
" The Court also observed : "It would be incorrect to contend that because law imposes some restrictions on freedom to contract, there is no contract at all.
So long as mutual assent is not completely excluded in any dealing, in law it is a con tract.
On the facts of this case for the reasons already 680 mentioned, it is not possible to accept the contention of the learned counsel for the appellant that nothing was left to be decided by mutual assent.
" The Court in that case distinguished the case in M/s. New India Sugar Mills ' case( ') and expressly reserved their opinion on the question whether supplies of goods pursuant to the directions issued under cl.
10B of the Order may be regarded as sales.
The decision in Indian Steel & Wire Products Ltd. 's case( ') does not justify the view that even if the liberty of contract in relation to the fundamentals of the transaction is completely excluded a transaction of supply of goods pursuant to directions issued under a Con trol Order may be regarded as a sale.
In Andhra Sugars Ltd. & Anr.
vs State of Andhra Pradesh & Ors.(3) again, in the view of the Court liberty of contract between parties to transactions relating to supply of sugarcane was not ruled out.
Under the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1961, the occupier of a sugar factory had to buy sugarcane from cane growers in conformity with the directions of the Cane Commissioner.
Under section 21 of the Act the State Government had power to tax purchases of sugarcane for use, consumption or sale in a sugar factory.
Certain owners of sugar factories contended that "section 21 was invalid." They contended that they were compelled by law to buy cane from the cane growers, and since purchases made by them were not under agreements, the price paid for sugarcane could not be taxed under a statute enacted in exercise of the power in Entry 54 List II of the Seventh Schedule to the Constitution.
This Court held that under Act 45 of 1961 and the rules framed thereunder, the cane grower in the factory zone was free to make or not to make an offer of sale of cane to the occupier of the factory; if the cane grower made an offer, the occupier of the factory was bound to accept it, and the agreement resulting therefrom was recorded in writing and was signed by the parties.
,, The consent of the occupier of the factory was free as defined in section 14 of the Indian Contract Act.
The compulsion of law is it was said not coercion as defined in section 15 of the Act.
The agreements were enforceable by law and were regarded as contracts of sale as defined in section 4 of the Indian .
In a later decision of this Court, State of Rajasthan & Anr.
vs M/s. Karam Chand `happar & Bros. Ltd., (4) the assessee who had acquired monopoly rights to supply coal in Rajasthan and sold coal to the State of Rajasthan.
The Sales Tax Officer sought to (1) [1963] Supp. 2 S.C.R. 459.
(3) ; , (2) ; (4) , 681 tax the turnover from supplies of coal made to the State of Rajasthan.
It was held by this Court that the colliery Control Order super imposed upon the agreement between the parties the rate fixed by the Control Order and by reason of such super imposition of the rate fixed by the Control Order the mutual assent of the parties and the voluntary character of the transactions were not affected.
The decision of this Court ' in M/s. New India Sugar Mills ' case( ') was distinguished on the ground that there was in the case then in hand mutual assent between the parties, to the transaction of supply of coal.
The decision of the House of Lords in Kirkness (Inspector of Taxes) vs John Hudson & Co. Ltd.( ') is instructive.
In that case liability to pay income tax on the difference between the compensation received for requisition of certain wagons by the Minister of Transport was in issue.
A majority of the House held that there was no sale of the wagons and no income tax was payable.
Viscount Simonds observed ". the taxpayers ' wagons were not sold, and it would be a grave misuse of language to say that they were sold.
To say of a man who has had his property taken from him against his will and been awarded compensation in the settlement of which he has had no voice, to say of such a man that he has sold his property appears to me to be as far from the truth as to say of a man who has been deprived of his property without compensation that he has given it away.
Alike in the ordinary use of language and in its legal concept, a sale connotes the mutual assent of two parties.
So far as the ordinary use of language is concerned, it is difficult to avoid being dogmatic but, for my part, I can only echo what Singleton, L.J., said in his admirably clear judgment (1954)1 All E.R. at page 32): "What would any one accustomed to the use of the words 'sale ' or 'sold ' answer ? It seems to me that every one must say 'the taxpayer did not sell '." " On the date of the commencement of the U.P. Wheat Procure ment (Levy) Order, upon the licensed dealer was imposed a liability to deliver half the quantity of wheat on hand, and he had also to supply to the State Government 50% of the quantity of wheat procured or purchased by him every day beginning with the date of commencement of the Order.
If he failed to carry out the obligation he was liable to be penalized.
To ensure that he carried out his obligation his premises were liable to be searched and (1) [1963] Supp. 2 S.C.R. 459.
(2) 682 his property sequestered.
The order ignored the volition of the dealer.
We are unable to hold that there was any contract between the assessee and the State pursuant to which the goods were sold within the meaning of the U.P. Sales Tax Act.
The appeals are allowed.
The order passed by the High Court is set aside.
The answer to the two questions as reframed by us will be in the negative.
The appellants will be entitled to their costs in this Court and in the High Court.
One hearing fee.
Y.P. Appeals allowed. | The, assesses who were dealers in food grains supplied to the Regional Food Controller diverse quantities of wheat in compliance with the provisions of the U.P. Wheat Procurement (Levy) Order, 1959.
The Sales tax Officer levied tax under the U.P. Sales tax Act on the aggregate of the price of wheat supplied by the assesses, rejecting the assesses ' contention that the wheat supplied was not sold to the Controller.
In appeal, the Assistant Commissioner (Judicial) Sales Tax held the supply was not taxable since there was no "sale" within the U.P. Sales tax Act.
This order was confirmed by the Additional Judge (Revision) Sales Tax.
On reference, the High Court answered the question against the assesses.
Allowing the assesses ' appeal by special leave, this Court.
HELD : The supply, pursuant to cf. 3 of the U.P. Wheat Procurement (Levy) Order, 1959 and acceptance thereof, does not result in a contract of sale.
Clause 3 of the order sets up a machinery for compulsory acquisition by the State Government of stocks of wheat belonging to the licensed dealers.
The Order contains a bald injunction to supply wheat of the specified quantity day after day, and enacts that in default of compliance the dealer is liable to be punished; it does not envisage any consensual arrangement.
To ensure, that the dealer carries out his obligation his premises are liable to be searched and his property sequestered.
The order does not require the State Government to enter into even an informal contract.
Sale of goods predicates a contract of sale between persons competentto contract for a price paid or promised : a transaction.
in which an obligation to supply goods is imposed, and which does not involve an obligation to enter into a contract, cannot be called a 'sale ', even if the person supplying goods is declared entitled to the value of goods, which is determined or determinable in the manner prescribed.
Assuming that between the licensed dealer and the Controller, there may be some arrangement about the place and manner of delivery of wheat, and the payment of "controlled price," the operation of cl. 3 does not on that account become contractual.
[675 H 676 D] Commissioner of Sales Tax, U.P. Lucknow vs Ram Bilas Ram Gopal, [1969] All.
L.J. 424; State of Madras vs Gannon Dunkerlev and Co.,(Madras) Ltd; [1959]S.C.R. 379 M/s.
New India Sugar Mills Ltd. vs
Commissioner of Sales Tax, Bihar, [1963] Suppl.
2 S.C.R. 459; Indian Steel & Wire Products Ltd., vs State of Madras, ; ;Andhra Sugars Ltd. &Anr.
vs State of Andhra Pradesh & Ors.
; ; State ofRajasthan & Anr.
vs M/s. Karan Chand Thappar & Bros. Ltd. [1969] IS.C.R. 861, Kirkness (inspector of Taxes) vs john Hudson & Co. Ltd., [1955] A.C. 696 referred to. 672 |
iminal Appeal Nos. 211 & 212 of 1969 and Review Petition No. 37 of 1970.
Appeals by Special leave from the judgment of the Calcutta 7 High Court dated August 18, 1969 in Criminal Appeal No. 183 of 1961.
C. K. Daphtary and section K. Dholakia, for the petitioner.
V. A. Seyid Muhammad and section P. Nayar for the respondents.
The Judgment of the Court on August 18, 1970 was delivered by Sikri, J.
These appeals, by special leave, are directed against the judgment of the High Court at Calcutta whereby the High Court (A. K. Das and K. K. Mitra, JJ.) set aside the order of acuittal and convicted the appellants before us under section 23(1A) of the Foreign Exchange Regulation Act (VII of 1947) hereinafter refered to as the Act.
The appellant Girdharilal Gupta, and the appellant Puranmall Jain, were sentenced to rigorous imprisonment for six months each and to pay 750 a fine of Rs. 2,000/ each, in default, to rigorous imprisonment ' for a further period of three months each.
The appellant, Bhagwandeo Tewari was sentenced to rigorous imprisonment for three months and to pay a fine of Rs. 1,000/ , in default, to rigorous imprisonment for two months.
The firm was sentenced to pay a fine of Rs. 2,000/ .
It does not appear that any special leave was obtained on behalf of the firm.
In order to appreciate the contentions made before us it is ncessary to state the relevant facts.
On October 25, 1958, Customs Preventive Officer B. Roy examined a parcel (wooden case) which purported to contain Rasogolla, Achar, papar and dried vegetable, booked for Hongkong, to be taken by the Swiss Air of which the Indian Airlines Corporation was the ,cargo handling agent.
The articles had been declared to be worth Rs. 20/ but the freight which had been paid came to Rs. 127.73 nP.
This excited the suspicion of the Customs Preventive Officer, B. Roy, and on opening the parcel and breaking down the case, five hundred ten currency notes of the denomination of hundred rupees each, valuing Rs. 51,0001 , were found.
The name of the consignor was Ramghawan Singh at Karnani Mansion, Park Street, Calcutta, but on enquiry no trace could be found of this Ramghawan Singh at Karnani Mansion.
In the course of further investigation suspicion fell ,on M/s. Agarwala Trading Corporation of which the appellants Girdharilal Gupta and Fumanmall Jain were the partners and the appellant Bhagwandeo Tewri was an employee.
On January 22, 1959, the office of the firm at 191, Mahatma Gandhi Road and the alleged residence of the partners at 11 B Jatindra Mohan Avenue was searched.
The appellant, Bhagwandeo Tewari, on being identified by the Traffic Assistant of the Indian Airlines Corporation, Ambar Nath Sen, P.W. 4, and one loader of Thai Airways, section K. Battu, P.W. 26, was arrested.
Certain incriminating documents, including account slips and cash books of the firm were seized.
On June 3, 1959, a complaint was lodged at the instance of the Assistant Collector of Customs, Calcutta.
After stating the above facts it was alleged, in the complaint that sending out money in Indian currency was prohibited under section 8(2) of the Act and any attempt to do the same was punishable under section 23B of the, Act.
At the trial a number of witnesses were examined.
B. Roy, Customs Preventive Officer, gave evidence regarding the dis covery of Rs. 51,0001 in Indian currency notes, apart from Rasogollas, pickles, etc.
on October 25, 1958.
No cross examination was directed to show that this did not happen on October 25, 1958.
751 section A. D. Moira, Traffic Assistant of the Indian Airlines Corporation, P.W. 2, who checks freight and does other transshipment work in course of his duties at Dum Dum airport, deposed that he received the relevant documents on October 25, 1958, from Calcutta office.
H. , said that the documents were in the handwriting of N. Sen of the Freight Section of the Calcutta Office.
Armed with the letter of authority, he took the parcel to the Customs Officer and P.W. 1, B. Roy, asked him to open the parcel and currency notes of the value of Rs. 51,000/ , along, with other things were discovered.
R. R. Mukherjee, Traffic Officer of the Indian Airlines Corporation, P.W. 3, is another witness to the recovery of the currency notes.
P.W. 4, Ambare Nath Sen, was the Traffic Assistant in the Indian Airlines Corporation, who had typed out the consignment note in respect of this parcel after seeing the shipping bill (Ext. 1).
He identified the appellant, Bhagwandeo Tewari, as the, person who had handed over the shipping bill to him and the letter of authority, Ext. 11 He said that he .calculated the freight and received the freight, from this appellant.
He further said that this appellant signed the consignment notes in Hindi in his presence and he remembered having seen this appellant writing a postcard on the adjoining table while he was preparing the consignment notes.
He further stated that his immediate superior officer, P. K. Chatterjee, was also present at the time this consignment was being booked.
Apparently this is not the first time that hiss appellant had gone to the Indian Airlines Corporation because P.W. 4 says that seven days ahead of October 24, 1958, this appellant had called on him with another shipment although that consignment was booked by P. K. Chatterji.
Some days after October 25, 1958, this witness P.W. 4was taken by the Customs Officer to some place to find the man who is alleged to have booked the Parcel.
Two or three months thereafter he was again taken by the Customs Officers to another place in Burrabazar area, which was the place of Agarwal Trading Corporation, and he said that he Pointed out the appellant, Bhagwandeo Tiwari, as the one who had taken the Parcel to him on October 24, 1958.
He was cross examined in order to show that he could not remember customers.
He admitted that it was not always possible for him to remember all the men who came in contact with him in the course of his work, but 'he said that he had told C. R. Basu who wag investigating the case that the person who brought the parcel was an oldish man and lean one, and had also described his nose.
He further admitted that at the place he identified appellant Bhagwandeo Tiwari, he was the only oldish man there.
He 4 Ll 100SupCI/71 752 said that he did not think that he committed a mistake unless the man he identified had a double in the shape of a twin brother and the like.
He further admitted that he had been trying to recollect the appearance of the man to reconstruct in his mind the outline of his appearance as far as he could.
The evidence of P.W. 4 impresses us and there is no reason why we should not place reliance on his evidence.
P. K. Chatterjee, P.W. 5, speaks of the earlier visit of the appellant Bhagwandeo Tiwari as the person who called on him with the shipping bill on October 17, 1958.
C. R. Basu, P.W. 6, Officer of the Customs who investigated the case, said that after making enquiries he applied for the issue of search warrant to search the premises No. 191, Mahatama Gandhi Road.
He also applied for a search warrant to search the premises of the partners of the firm at 11 B, Jatindra Mohan Avenue.
He did not himself search 11 B, Jatindra Mohan Avenue, but went to execute the search warrant at 191, Mahatma Gandhi Road, where on the identification of P.W.4 he arrested the appellant Bhagwandeo Tiwari.
He then conducted the search of the premises in the presence of the witnesses and took into possession one Rokar, one khata bahi, one nakal bahi, the attendance register and three account slips which he marked 8, 9 and 10 (Ext.
9 and 9/1 and 9/2 respectively).
We may reproduce his evidence regarding the discovery of these account slips because a great deal of argument has been addressed to us on the recovery of these slips.
He stated "The three slips, about which I have spoken just now, are in the same condition to day as I found them on the day when they were seized.
The witnesses to the search I conducted are Radhesyam Gupta and Lalit Kumar Chandu Lal Parekh.
Here is the search list over my signature and the signature of the witnesses.
(Ext. 10).
" In his cross examined he stated "You are right that Exhibits 9, 9/1 and 9/2 are included in Serial No. 38 of the search list.
The search list does not mention the slips separately but only mentions loose sheets in 'a sealed parcel.
It has been urged that there is no evidence to show when the seal was opened.
It is suggested that these slips have been fabricated and planted.
No such question was put to the witnesses and we are 753 unable 'to presume that the investigating officer would go about fabricating account slips in order to rope in the appellants.
The prosecution produced two witnesses who had signed the recovery list.
The evidence of Radheshyam Gupta, P.W. 7, must be discarded because although he was examined before the Chief Presidency Magistrate he was not made available for cross examination.
The learned counsel, Mr. Bhattacharya, suggested that if this witness had been produced for cross examination he would have deposed against the prosecution.
We are unable to draw any such presumption.
The other witness was Lalit C. L. Parekh, P.W. 8.
He had signed the search list but on cross examination he stated that "Basu had taken slips of paper from the 'Agal Bagal ' of the guddy, by which I mean from underneath the Takia on the bed".
He further said that "bits of paper Basu found from a wooden case as well." He further stated as follows "You are right that Basu placed all these bits of papers at one and the same place.
How many pieces ? I cannot say.
I did not count.
By guess I can say that the number of bits of paper would run to 50 or 60. 1 signed all the pieces of paper which were found so.
" The learned counsel fastens on the last line and says that these slips do not bear the signature of Lalit C. L. Parekh, and therefore it is clear that these have been fabricated later.
We are unable to sustain this contention.
The witness had signed a number of documents including the search list and he pay well have thought that he had signed every piece of paper which was seized.
No such question was put to the investigating officer.
P.W. 11, N. R. Paul, who was the assistant attached to the Appraising Department of the Calcutta Customs deposed re garding the preparation of the shipping bill.
It appears that the shipping bill bore the words "Thai Airways Co." and these words were scored out and "Swiss Air" written in hand.
He could not say who corrected the entry but nothing turns on this because it may be that the original idea was to send the parcel by Thai Airways but later on for some reasons it was not possible to send that parcel through this airways.
The prosecution led evidence to show that as a matter of fact appellant Bhagwandeo Tiwari had approached some body in Thai Airways but we need not dwell on, this part of the case.
754 The prosecution also produced Shridhar Chatterjee, hand writing expert, who examined the signature reading as "Ram Chandra" writing in Hindi and in pencil in the two way bills, Ext. 3 and 4, and the specimen writing, He was of the opinion that the writer of the specimen writing was the writer of the signature "Ram Chandra" appearing in the airway bill.
We may mention that Bhagwandeo Tiwari is alleged to have signed as "Ram Chandra".
The expert also gave the opinion that.
the type written papers, Exts. 11 and IX had been typed on the same machine.
Exhibit 9/2, 'one of the seized account slips, is a very im portant document.
The official translation is printed in the records and reads: "Translation of EXT.9/2 dated 24 10 58. . . 2/8/ 4 cases Godown A/C 1 . . . /8/ 3 "opened below and goods brought.
In Cash (Paper Torn) cases bound (Pettis)(?). . . /4/ Case I ' (Illegible) /2/ Illegible (Paper tom) Cases (Pettis)(Illegi ble) 2 R.B. /151 for coming and going to I.A.C. Rs.223/8/. 4/51 127/73 HongkongShanghai (torn & illegible)" The High Court had to translate it again and the last line was translated into "Hongkong Lagaya" in, place of "Hongkong Shanghai".
In the account books of M/s. Agarwala Trading Corporation (Exts. 21 and 21/1) under the entries dated October 24, 1958, on which date the booking is alleged by the prosecution to have been done, on entry appears as follows: "Rs. 415/ Through Bhagwan Deo /8/ Colli (Janka) 115/ Rickshaw fare 2/ 14/ Cart Charge Rs. 1/8/ Through Ghanshyam & Pandey /4/ Bus fair 1/4/ Bus fair 1/4 Bus Tarm" It will be noticed that the same items appear in Ext.
The breakup in exhibit 9(2) is slightly different but in the account book 755 the four annas and two annas entries have been added to Rs. 2/8/to make Rs. 2/14/ as cart charge.
Again the entries in Ext.
9/1 are as follows "/1/ But hire for going home.
1/4/ Caine from home to Thai (?) Taxi /12/ Riksha hire from Thai /1/ Coolie /4/ Thai Office Colie ______________________ 2/6/ Rs. 147/10/ In Cash" The corresponding entry in the account books are as follows "Rs. 2/6/ (Bus fare /1/Taxi fare Rs. 1/4/ Rickshaw Rs. /12/ Cooli 151 " It is true that the entry of Rs. 127/73 which exists in Ext.
9/2 has not been carried over into the account books but perhaps that would have been even too much for an accountant to do.
He never dreamt that these entries, of Rs. 4/5/ and Rs. 2/6/ in the account books would be seized upon by the prosecution to complete the case against the appellants.
Be that as it may, the entries in the account books demolish the case of defence that these slips were fabricated and that they had nothing to do with the firm.
exhibit 9/2, on the other hand, clearly shows that somebody had gone to the I.A.C. office and paid /15/ for going and coming to the I.A.C. office and paid the incidental charges.
Mr. Bhattacharya, who followed Mr. Chagla for the appellants, contends that a serious question of law is involved, the question being that if an investigating officer conducts a search his evidence cannot be relied on unless it is corroborated.
It is a novel proposition and he has not been able to cite any authority or principle in support of it.
It all depends on the facts in each, case.
At any rate here we have the corroborative evidence of P.W. 8, who signed the search document and also the entries themselves in the account books and their tallying with the slips.
It was urged on behalf of the defence counsel that these slips could not be taken into consideration at all because they are not evidence.
We are unable to appreciate why they are not evidence.
These are part of the things discovered during search and 756 if the entries therein are carried into the account books there is no reason why these things could not be looked at.
The learned counsel has taken us through the judgments of the Chief Presidency Magistrate and the High Court.
We are in agreement with the conclusions arrived at by the High Court.
We have ourselves gone into the evidence as the High Court had reversed the order of acquittal and in one or two places made minor mistakes.
Mr. Chagla, while arguing on behalf of the partners, said that there was evidence that one, partner was not in Calcutta on the 24th or 25th October, 1958,as he was in Japan.
But even if we take this fact into consideration, which fact was not brought to the notice of the Chief Presidency Magistrate or the High Court, it does not help him at all.
Entries were made in the account books and it was the firm 's money which was spent and he being an active partner is clearly liable under section 23C(1) of the Act which reads : "23C(1) If the person committing a contravention is a company, every person who, at the time the contravention was committed, was in charge of, and, was responsible to, the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly; Provided that nothing contained in this sub section shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to pre vent such contravention.
" This sub section deems the appellant Girdhari Lal Gupta guilty.
The question is : Has he proved that the contravention took place without his knowledge and he exercised due diligence to prevent such contravention ? What he said in his statement under section 342, Cr P.C., was that he alone looks after the affairs of the firm.
There is also no evidence to show that the contravention took place without his knowledge or that he exercised due diligence to prevent such contravention.
The entries were there in his account books and the only thing that, he had to say about these entries in his account books is that they pertain to the routine work of the firm.
Under the circumstances we are unable to exonerate him of the charge.
As far as the other partner, Puramnall Jain, is concerned ' he stated that he does not look after the affairs of the firm and further 757 that he stays all along at Sriganganagar in Rajasthan and does not stay in Calcutta.
The prosecution has not led any reliable evidence to prove that he took any active part in the conduct of the business of the firm.
In these circumstances we are inclined to give him the benefit of doubt and acquit him.
In the result the appeal of Puranmall Jain is allowed and he is acquitted of the charge.
Ms bail bond shall stand cancelled.
The appeals of Girdhari Lal and Bhagwandeo Tewari are dismissed.
[After the above judgment was delivered Review Petition No. 37 of 1970 was filed.
The judgment of the Court thereon was delivered on February 18, 1971 by] Sikri, C.J. We disposed of Criminal Appeals Nos. 211 and 212 of 1959 by our judgment dated August 18, 1970, whereby the appeals of Girdharilal Gupta, and Bhagwandeo Tewari against.
their convictions were dismissed.
Girdharilal Gupta put in this review petition stating that the counsel had omitted to bring to our notice the provisions of section 23C(2) of the Foreign Exchange Regulation Act, 1947 hereinafter referred to as the Act which has a vital bearing on the case.
The judgment in Criminal Appeal No. 211 of 1959 has, therefore, been re opened.
We may mention that Bhagwandeo Tiwari has not filed a review petition against his conviction, upheld by this Court.
Mr. Daphtary contends that on the facts, as found by us, the appellant, Girdhari Lal Gupta, does not come within the purview of section 23C(1) or section 23C(2) of the Act.
Sections 23C(1) and 23C(2) read as follows "23C. (1) If the person committing a contravention is a company, every person who, at the time the contravention was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly : Provided that nothing contained in this subsection shall render any such person liable to punishment if he proves that the contravention took place, without his knowledge or that he exercised all due diligence to prevent such contravention.
23C. (2) Notwithstanding anything contained in sub section (1), where a contravention under this Act has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the 758 part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation.
For the purposes of this section, (a) " company" means any body corporate and includes a firm or other association of individuals; and (b) "director", in relation to a firm, means a partner in the firm.
Mr. Daphtary contends that there is no evidence to show that the appellant was in charge of the conduct of the business of the firm at the relevant time and therefore, section 23C(1) does not apply.
He further says that as the appellant was abroad, the contravention took place without his knowledge.
We may mention, however, that the defence that he was abroad at the relevant time was not taken in the courts below.
At the time of the last hearing learned counsel produced the passport of the appellant before us from which it appears that he was abroad at that time and came back a few days after the alleged contravention.
Mr. Daphtary further contends that section 23C(2.) also does not apply because there is no evidence that the contravention took place with the consent or connivance of, or was attributable to any neglect on the part of, the appellant.
He referred to us a number of authorities of the High Courts in India which have interpreted similar provisions and we shall refer to them later.
It seems to us quite clear that section 23C(1) is a highly penal section as it makes a person who was in charge and responsible to the company for the conduct of its business vicariously liable, for an offence committed by the company.
Therefore, in accordance with well settled principles this section should be construed strictly.
What then does the expression "a person in charge and responsible for the conduct of the affairs of a company mean ' ? It will be noticed that the word 'company" includes a firm or other association and the same test must apply to a director in charge and a partner of a firm in charge of a business.
It seems to us that in the context a person 'in charge ' must mean that the person should be in over all control of the day to day business of the company or firm.
This inference follows from the wording of section 23C(2).
It mentions director, who may be a party to the policy being followed by a company and yet not be in charge of the business of the company.
Further it mentions manager, who 75 9 usually is in charge of the business but not in over all charge.
Similarly the other officers may be in charge of only some part of business.
In State vs section P. Bhadani(1), Kanhaiya Singh, J., in construing a similar provision of the Employees Provident Fund Act (1952).
Section 14A held that the first sub section would be confined only to officers in the immediate charge of the management of the company.
Later he observed that "it is, therefore, manifest that all the officers of the company not in direct charge of the management of the business are immune from the liability for the offence, unless they have contributed to its commission by consent, connivance or neglect." In R. K. Khandelwal vs State (2 D. section Mathur, J., in construing section 27 of the Drugs Act, 1940, a provision similar to the one we are concerned with, observed : "There can in directors who merely lay down the policy and are not concerned with the day to day working of the Company.
Consequently, the mere fact that the accused person is a partner or director of the Company, shall not make him criminally liable for the offences committed by the Company unless the other ingredients are established which make him criminally liable.
" In The Public Prosecutor vs R. Karuppian(3), Somasundaram J., while dealing with a case arising under the (section 17(1)) observed that the Secretary of the Co operative Milk Society, on the facts of the case, could not be held to be a person in charge of the Society.
On the facts of that case the business of selling milk was done by the clerk of the Society and the Secretary was only an honorary Secretary and was not coming to.
the Society daily.
The only evidence led by the prosecution on this part of the case was of one Sohan Lal Gupta who is a broker.
He stated in examination in chief : "Who exactly the proprietors of the said firm are, I cannot say.
But I can say this much that whenever I had been there I was referred to Girdharilal Gupta (accused No. 2) and Puranmal Jain (accused No. 3) as the Maliks of the firm.
I see accused No. 2 Girdharilal Gupta in court (identified him).
I know that Bhagwandeo Tewari (accused No. 4) is the Cashier of that firm.
I see him here in court (identifies accused No. 4).
(1) A.I.R. [1959] Pat.9.
(2) (3) A.I.R. [1958] Mad.
760 .lm15
I know of another employee of the firm the manager, Jagdish Prasad.
I know another employee of the firm the accountant, Shyamlal.
" The appellant in 'his statement under section 342, Cr.
P.C. stated thus "You ask me, Sir, if I have to say anything about the evidence led in this case to the effect that I happen, to be a partner of accused No. 1 firm.
To that, Sir, my answer is that I am. " The evidence to that end is correct.
I shall only add that I alone look after the affairs of _this firm." Mr. Daphtary says that on this evidence it cannot be held that the appellant was in charge of the conduct of the business.
We are unable to agree with him on this point.
The appellant has himself stated that he alone, looked after the affairs of the firm.
This means that the is in charge of the business of the firm within the meaning of the section though there may be a Manager working under him.
The question then arises whether the appellant was in charge of the conduct of the business of the firm at the time the contravention was committed.
He was not physically present, in Calcutta at the time of the commission of the offence and the prosecution evidence shows that one Jagdish Prasad.
was the manager of the firm.
It is true that the onus of proving that the appellant was in charge of the conduct of the business of the company at the time the contravention took place lies on the Prosecution, but when a partner in charge of a business proceeds abroad it does not mean that he ceases to be charge, unless there is evidence that he gave up charge in favour of another person ' Therefore, we must hold that the appellant was in charge of the business of the firm within the meaning of sec.
23C(1).
But while imposing sentence a Court might take notice of the fact that a person is being vicariously punished for an offence and if he shows that it is possible that the contravention of the Act took place without his knowledge or neglect a sentence of imprisonment may not be imposed.
In this case he was abroad at the time of contravention and it is possible that the contravention took place without his knowledge or because of lack of diligence.
It seems to us that on the facts of this case a sentence of fine of Rs. 2,000/ will meet the ends of justice.
The learned counsel for the respondent State urges that this is not a case fit for review because it is only a case of mistaken judgment.
But we are unable to agree with this submission 761 because at the time of the arguments our attention was not drawn.
, specifically to sub section 23C(2) and the light it throws on the interpretation of sub section
In the result the review petition is partly allowed and the judgment of this Court in Criminal Appeal No. 211 of 1969 modified to the extent that the sentence of six months ' rigorous.
imprisonment imposed on Girdharilal is set aside.
The sentence , of fine of Rs. 2,000/ shall, however, stand.
G.C. Ordered accordingly. | An air parcel declared by the consigner to contain rasogollas and other edibles was found to contain Rs. 51,000 worth of Indian currency notes.
The parcel was booked to be sent from Calcutta to Hong Kong.
The consignor 's name as given.
on the parcel was found to be false and on investigation the suspicion of the customs authorities fell on the appellants two of whom were partners in a firm, the third being an employee of the firm.
The office of the firm was searched.
Certain incriminating documents including account slips and cash books of the firm were seized.
In a complaint filed by the Assistant Collector of Customs against the appellants and their firm it was alleged that sending out money in Indian currency was prohibited by section 8(2) of the Foreign Exchange Regulation 7 of 1947 and any attempt to do the same was punishable under section 23B of the Act.
The trial court acquitted the appellants but the High Court in appeal convicted them under section 23(1A).
By special leave appeals were filed in this Court.
Judgment was delivered on August 18, 1970.
Thereafter review petition No. 37 of 1970, was filed.
A further judgment in respect of the contention raised therein as to the interpretation of section 23C(i) was delivered on February 18, 1971.
HELD : (i) The proposition that if an investigating officer conducts a search his evidence cannot be relied on unless it is corroborated is a novel one with no principle or authority to support it.
It all depends on the facts of each case.
In the present case there was the corroborative evidence of P.W. 8 who signed the search document and also the entries themselves in the account books and their tallying with the slips.
[755 G] (ii) There was no substance in the argument that the account slips could not be taken into consideration because they were not evidence.
These were part of the things discovered during search and if the entries therein were carried into the account books there was no reason why they could not be looked at [755 H] (iii) In the context of section 23C(1) a person 'in charge ' must mean that the person should be in over all control of the day to day business of the company or firm.
The inference follows from the wording of section 23C(2).
It mentions director who may be a. party to the policy being followed by 749 a company and yet not be in charge of the business of the company.
Further it mentions manager who usually is in charge of the business not in over all charge.
Similarly the other officers may be in charge of only some part of the business.
[758 G 759 A] State vs section P. Bhadani, A.I.R. 1959 Pat. 9, R. K. Khandelwal vs State and Public Prosecutor vs R. K. Karuppian, A.I.R. 1958 Mad.
183, referred to.
In the present case the appellant G had himself stated that he alone looked after the affairs of the firm.
This meant that he was in charge within the meaning of the section though there may be a manager working under him [760 C D] When a partner in charge of a business proceeds abroad it does not mean that he ceased to be in charge, unless there is evidence that he gave up charge in favour of another person.
Therefore it must be held that the appellant was in charge of the business of the firm within the meaning of section 23C(1).
[760 E F].
In view of the fact that G was abroad at the time of contravention it was possible that the contravention took place without his knowledge or lack of diligence.
He was being vicariously punished.
In such a case a. sentence of imprisonment may not be imposed but a sentence of fine only would meet the ends of justice.
[760 G] (iv) As regards appellant P the prosecution had been unable to prove by any reliable evidence that he took any active part in the conduct of the business of the firm.
He must therefore be given the benefit of doubt and acquitted.
[757 A] (v) The case was fit for review because at the time of arguments the attention of the court was not drawn specifically to sub section 23C(2) and the light it throws on the interpretation of sub s.(1).
[761 A] |
No. 2351 of 1970.
(Application for stay by notice of motion) and Civil Appeal No. 1196 of 1970.
Appeal from the judgment and order dated October 29, 1969 of the Orissa High Court in Misc.
Appeal No. 28 of 1967.
R. K. Agarwal, for the appellants.
Santosh Chatterjee and G. section Chatterjee, for the respondent.
The Order of the Court was delivered by Hidayatullah, CJ.
The appellants before us who come by way of certificate from the High Court seek stay of a suit which has been restored to file by the High Court.
At the very start we put to the counsel how certificate could have been granted in this case when the judgment and order of the High Court were not final.
The counsel brought to our notice the case of Ramesh and another vs Gendalal Motilal Ratni and others(1) and says that his, case is covered by this ruling.
This was a case in which the only question to be considered was whether article 133 of the Constitution was applicable in the two case , decided when the claim in the original suit or appeal to this Court was above Rs. 20,000/ .
This particular question was not before the court at all.
Indeed, them Constitution contemplates the filing of an appeal by certificate only (1) ; 406 against a judgment decree or final order of the High Court it does not contemplate bringing an appeal in a suit which is still a live suit and in which further proceedings are to be taken.
This has been the consistent view not only of this Court but also of the Privy Council. 'Me leading case from the Privy Council is V. M. Abdul Rahman and others vs V. D. K. Cassim and Sons and another(1).
There is a catena of cases in the High Courts and also in this Court that the judgment, decree or order from which appeal is brought to this Court must put an end to the litigation between the parties.
This was reaffirmed in M/s. Jethanand and Sons vs The State of Uttar Pradesh (2 ) approving the view of the Privy Council referred to.
Indeed, we could cite on this aspect of the case quite a large number of precedents from various courts in India.
In the present matter, the suit was decreed in the absence of the defendant who applied to have the decree set aside and gave reasons for it.
The trial court did not accede to the prayer but the High Court held that the matter was governed by O. 9 r. 9 of the Code of Civil Procedure and that there were valid reasons for setting aside the ex parte decree.
As a result of the setting aside of the decree the suit is very much alive today and this cannot be treated as a final adjudication of the suit itself.
The certificate granted by the High Court in such circumstances was premature and was not competent.
We accordingly set aside the certificate and dismiss the appeal.
There shall be no order as to costs.
Y.P. Appeal dismissed.
(1) (1933) L. R. 60 I.A. 76. | The High Court granted certificate for leave to appeal to this Court in a case where it set aside the ex parte decree in the suit and restored the suit to the Me of the trial court.
HELD: The certificate granted by the High Court was premature and was not competent.
As a result of the setting aside of the decree the suit was very much alive, and it could not be treated as a final adjudication of the suit itself.
The Constitution contemplates the filing of an appeal by certificate only against a judgment, decree of final order of the High Court.
It does not contemplate bringing an appeal in a suit which is still a live suit and in which further proceedings are to be taken.
[405 H] Ramesh & Anr.
vs Gendalal Motilal Ratni & Ors.
A.I.R. , V. M. Abdul Rahman & Ors.
vs D. K. Cassim Sons vs The State of Uttar Pradesh, ; , referred to. |
Appeal No. 1908 of 1968.
Appeal from the judgment and decree dated August 9, 1966 of the Patna High Court in Misc.
Judicial Case No. 1665 of 1964.
M. C. Chagla, Kailash Mehta and, A. K. Nag, for the appel lants.
Jagadish Swarup, Solicitor General and R. C. Prasad, for respondents Nos. 1, 3 and 4.
V. A. Seyid Muhammad and section P. Nayar, for respondent No. 2.
The Judgment of the Court was delivered by Hegde, J.
On June 24, 1959, the Deputy Commissioner Santal Parganas caused a notice dated June 20, 1959 published in the Bihar Gazette in accordance with the provisions of Rule 67 of the Mineral Concession Rules, 1949, of the availability for regrant of mining rights in respect of fireclay over the whole of village Palasthali No. 39, situate in Thana Nala, Block Kasta, Sub Division Jamtara in the District of Santal Parganas.
He announced in that notice that the said area will be available for regrant with effect from August 1, 1959 and invited applications for grant of mining lease in respect of that area in accordance with the provisions of Mineral Concession Rules, 1949.
The appellant, a partnership firm applied for that lease on June 24, 1959 itself.
Thereafter other persons including the 5th respondent Nankhu Singh also applied for obtaining the lease in question.
The State Government of Bihar granted the lease to the appellant on March 31, 1962.
In pursuance of that grant a written agreement was entered into between the State Government and the appellant and the same was duly registered.
The State Government rejected the applications of the other applicants.
Even during the pendency of the applications before the State Government, the 5th respondent moved the Central Government under rule 54 of the Mineral Concession Rules, 1960 which had replaced the 1949 Rules.
Therein he prayed that the grant of the lease in favour of the appellant, if it had been made, should be cancelled and that he should be granted the mineral lease in question.
The Central Government served a copy of that petition on the appellant and called for its comments.
At the same time it called for the comments of the State Government as well.
After 5 24 receiving the comments of the State Government, the same were passed on to the appellant as well as to the 5th respondent and their further comments were called for.
After examining the representation made by the parties and the comments offered by the State Government, the Central Government dismissed the petition made by the 5th respondent on September 30, 1964.
The Order of the Central Government reads thus "GOVERNMENT OF INDIA MINISTRY OF STEEL & MINES, (Department of Mines and Metals), No. MV 1(569)/61 New Delhi, the 30th September, 1964 From Shri A. Nabar, Under Secretary to the Government of India.
To Shri Nankhu Singh, P.O. Churulia, Distt.
Burdwan (West Bengal) Subject : Application under rule 54 of the Mineral Concession Rules, 1960 in respect of Mining lease for fire clay over 248 acres in Mouza Palasthali, P.S. Nala, Distt.
Santal, Parganas.
Sir, I am directed to refer to your application dated 17 10 1961 on the above subject and to say that after careful consideration the Central Government hereby reject your revision application as being time barred.
Yours faithfully, Sd./ A. Nabar, Under Secretary to the Government of India.
" Thereafter the Central Government passed a further order on November 5, 1964 and that order reads thus : Registered A/D D. N. ROY V. BIHAR (.Hegde, J.) 5 2 5 "GOVERNMENT OF INDIA MINISTRY OF STEEL AND MINES (Department of Mines and Metals) No. MV 1(569)/61 New Delhi, the 5th November, 1964.
From Shri H. section Sahni, Under Secretary to the Government of India.
TO The Secretary to the Government of Bihar, Department of Mines and Geology, Patna.
Subject : Revision application under rule 54 of the Mineral Concession Rules, 1960 from Shri Nankoo Singh relating to Mining lease for Fire clay over 248 acres in Santal Pargana District.
Sir, In continuation of this Ministry 's letter of even number dated 30 9 1964 on the above subject, I am directed to say that since no entry in the standard register was made as required under former rule 67 of the Mineral Concession Rules, 1949, the area could not have been held to be available and the four applications (referred to in para 2 of the State Government 's letter No. 3181/ M, dated 9 6 1962) would be deemed to be premature and should have been rejected on that ground alone.
Even assuming that the notification was valid, the first two applications were premature under rule 68 and on that ground should have been rejected.
Apart from this the application of M/s. D. N. Roy and section K. Bannerjee was deemed to be rejected on the expiry of 9 months from the date of receipt of application i.e., 24 3 1960.
The party did not come up in revision.
The application, therefore, ceased to exist and the order of the State Government granting the lease to this party on 31 3 1962 was without jurisdiction.
The grant and consequent execution of the Mining lease are therefore, void.
In view of the position explained above the Central Govern ment in exercise of their revisionary power conferred by Rule 55 of Mineral Concession Rules, 1960 and all other powers enabling in this behalf hereby set aside the order of the State Government contained in their letter No. A/MM/4031/62 1789M, dated 5 2 6 31 3 1962 (mentioned in State Government 's letter No. A/MM 4031./62 3181/M, dated 9 6 1962) granting Mining lease to M/s. D. N. Roy and section K. Banerjee and further direct them to through open the area again under Rule 58(1) of Mineral Concession Rule 1960 for regrant.
The notification should clearly indicate the date from which the area could be available for regrant and the date by.
which the petitioners should submit their applications for mineral concession.
M/s. D. N. Roy and section K. Banerjee are being informed.
Yours, faithfully, Sd./ H. section Sahni Under Secretary to the Government of India.
Copy forwarded to M/s. D. N. Roy and section K. Banerjee village and P. O. Churulia, Distt.
Burdwan (West Bengal) with reference to their letter dated 12 6 1963.
Sd./ H. section Sahni Under Secretary to the Government of India.
" Aggrieved by this order the appellant moved the Patna High Court under article 226 of the Constitution to quash the order of the Central Government dated November 5, 1964 (which will hereinafter be referred to as the 'impugned order ').
The High Court dismissed its petition.
As against the order of the High Court the appellant has brought this appeal after obtaining Certificate of fitness from the High Court.
It was urged before the High Court that the Government having passed the final order on September 30, 1964, it had no power to review its own order and make any further order.
Admittedly there is no provision under the or under the Mineral Concession Rules, 1960 empowering the Central Government to review its order.
The High Court did not hold that the Central Government had any power to review its own order either under the Mines and Mineral (Regulation and Development) Act, 1957 or under the Mineral Concession Rules.
It upheld the Central Government 's order on two grounds namely that the order dated September 30, 1964 is not a complete order as it did not dispose of the application made by the 5th respondent completely and secondly the Central Government had suo moto power to review the order of the State Government under section 30 of the .
These conclusions of the High Court were assailed before us.
527 In his application under rule 54 of the Mineral Concession Rules, 1960, the 5th respondent prayed for (i) setting aside the grant made in favour of the appellant and (ii) grant the area in question, on lease to him.
The High Court thought that these are two independent prayers.
In its view the Central Government by its order dated September 30, 1964 had disposed of only the prayer of the 5th respondent to grant the area on lease to him but it had not disposed of his first prayer namely to cancel the grant in favour of the appellant.
In our opinion this is an incorrect approach.
The two reliefs asked for by the 5th respondent were inter connected reliefs.
In the context in which they were made, they cannot be considered as independent prayers.
No grant in his favour could have been made without first setting aside the grant made in favour of the appellant.
Therefore the first relief asked for by the 5th respondent is a necessary condition precedent for a grant in his favour.
Further by its order dated September 30, 1964, the Central Government dismissed the entire application of the 5th respondent on the ground that the same was time barred.
If his application in respect of one part of Ms prayer was time barred, it was equally time barred in respect of the other part.
The impugned order of the Central Government does not show that it was made in the exercise of its suo moto power.
It is purpoted to have been made on the basis of the application made by the 5th respondent under rule 54 of the Mineral Concession Rules, 1960.
In paragraph 3 of that order it says "in view of the position explained above the Central Government in exercise of their revisionary power conferred by Rule 55 of Mineral Concession Rules, 1960 and all other powers enabling in this behalf hereby set aside the order of the State Government contained in their letter No. A/MM/4031/62 1789M, dated March 31, 1962".
It is true that the order in question also refers to "all other powers enabling in this behalf".
But in its return to the writ petition the Central Government did not plead that the impugned order was passed in exercise of its suo moto powers.
We agree that if the exercise of a power can be traced to an existing power even though that power was not purported to have been exercised, under certain circumstances, the exercise of the power can be upheld on the strength of an undisclosed but undoubted power.
But in this case the difficulty is that at no stage the Central Government intimated to the appellant that it was exercising its suo moto power.
At all stages it purported to act under rules 54 and 55 of the Mineral Concession Rules, 1960.
If the Central Government wanted to exercise its suo moto power it should have intimated that fact as well as the grounds on which it proposed to 5 28 exercise that power to the appellant and given him an opportunity 'to show cause against the exercise of suo moto power as well as against the grounds on which it wanted to exercise its power.
Quite clearly the Central Government had not given him that opportunity.
The High Court thought that as the Central Government had not only intimated to the appellant the grounds mentioned in the application made by the 5th respondent but also the comments of the State Government, the appellant had adequate opportunity to put forward his case.
This conclusion in our judgment is untenable.
At no stage, the appellant was informed that the Central Government proposed to exercise its suo moto power and asked him to show cause against the exercise of such a power.
Failure of the Central Government to do so, in our opinion, vitiates the impugned order.
For the reasons mentioned above we allow this appeal as well as the writ petition and set aside the impugned order.
Central 'Government shall pay the costs of the appellant in this Court as well as in the High Court.
Y.P. Appeal and petition allowed. | The respondent State granted a mining lease to the appellant.
The 5th respondent, whose application was rejected moved the Central Government under rule 54 of the, Mineral Concession Rules, 1960, praying (i) for setting aside the grant in favour of the appellant, and (ii) for grant of the area on lease to him.
The Central Government asked for the comments of the appellant and the State Government and after receipt of these comments, they were passed to the parties for further comments.
The Central Government by an order passed on Sept. 30, 1964 rejected the application of 5th respondent as time barred.
Thereafter, the Central Government on Nov. 5, 1964, under the revisionary powers conferred by r, 55, of the Rules and "all the powers enabling in this behalf," set aside the order granting the lease to the appellant, and further directed regrant after issuing fresh notification.
The appellant, moved the High Court under article 226 of the Constitution for quashing the order of November, 1964, The High Court dismissed the petition.
HELD : The appeal as well as the Writ Petition must be allowed and the order of the Central Government Nov. 5, 1964 must be set aside.
The High Court erred in its approach that the two prayers in the application of the 5th respondent were independent, and that the Central Government by its order of Sept. 30, 1964 had disposed of only the prayer of 5th respondent to grant the area on lease to him, but it had not disposed of his other prayer to cancel the grant in favour of the appellant.
The two reliefs asked for by the 5th respondent were inter connected reliefs.
In the context in which they were mad, they could not be considered as independent prayers.
Further by its order dated September 30, 1964, the Central Government dismissed the entire application of the 5th res pondent on the ground that the same was time barred.
If his application in respect of one part of his prayer was time barred, it was equally, time barred in respect of the other part.
[527 B D] The order of Nov. 5, 1964 of the Central Government does not show that it was made in the exercise of its suo motu powers.
It is purported to have been made on the basis of the application made by the 5th respondent.
[527 E] If the Central Government wanted to exercise its suo motu power it should have intimated that fact as well as the grounds on which it proposed to exercise that power to the appellant and given him an opportunity to show cause against the exercise of suo motu power as well as 5 2 3 against the grounds on which it wanted to exercise its power.
The Central Government had not given him that opportunity.
Failure of the Central Government to do so, vitiates the impugned order.
[527 H] |
iminal Appeal No. 74 of 1961.
Appeal by special leave from the judgment and order dated May 7, 1957, of the Allahabad High Court in Criminal Misc.
No. 2006 of 1953.
Veda Vyas, section K. Kapur and Ganpat Rai, for the appellant.
G.C. Mathur and C. P. Lal, for the respondent.
April 27.
The Judgment of Gajendragadkar, Sarkar, Wanchoo and Ayyangar, JJ., was delivered by Sarkar, J. Das Gupta, J., delivered a separate Judgment.
SARKAR, J.
The only question that was argued in this appeal is substantially one of construction of section 99D of the Code of Criminal Procedure.
The appellant was the author of two books in Hindi called Sikh Mat Khandan Part 1 and Bhoomika Nazam Sikh Mat Khandan which he had published in April 1953.
On July 30, 1953, the Government of Uttar Pradesh, the respondent in this appeal, made an order under section 99A of that Code forfeiting these books which were thereupon seized and taken away.
That order, so far as material, was in the following terms: "In exercise of its powers conferred by section 99A of the Code of Criminal Procedure. . the 489 Government is pleased to declare the books forfeited to Government on the ground that the said books contain matter, the publication of which is punishable under section 153 A and 295 A of the Indian Penal Code.
" It is the validity of this order that is challenged in the present appeal.
Section 99A under which the order was made, so far as relevant, is in these terms: "Where any newspaper, or book or any document appears to the State Government to contain any seditious matter or any matter which promotes or is intended to promote feelings of enmity or hatred between different classes of the citizens of India or which is deliberately and maliciously intended to outrage the religious feelings of any such class by insulting the religion or the religious belief of that class, that is to say, any matter the publication of which is punishable under section 124A or section 153A or section 295A of the Indian Penal Code, the State Government may, by notification in the Official Gazette stating the grounds of its opinion, declare every copy of such book to be forfeited to Government Two things appear clearly from the terms of this section.
The first thing is that an order under it can be made only when the Government forms a certain opinion.
That opinion is that the document concerning which the order is proposed to be made, contains "any matter the publication of which is punishable under section 124A or section 153A or section 295A of the Penal Code.
" Section 124A deals with seditious matters, section 153A with matters prompting enmity between different classes of Indian citizens and section 295A with matters insulting the religion or religious beliefs of any class of such citizens.
The other thing that appears from the section is that the Government has to state the grounds of its opinion.
The order made in this case, no doubt, stated that in the Government 's opinion the books contained matters the publication of which was punishable under sections 153A and 295A of the Penal Code.
It did not, however, state, as it should have, the grounds of that opinion.
So it is 490 not known which communities were alienated from each other or whose religious beliefs had been wounded according to the Government, nor why the Government thought that such alienation or offence to religion had been caused.
Now section 99B gives the person interested in the books, or documents forfeited, a right to apply to the High Court to set aside the order made under section 99A, and section 99D specifies the High Court 's duty on such an application being made to it.
These two sections will have to be especially considered in this case and so they along with section 99C, are set out below.
section 99B.
Any person having any interest in any newspaper, book or other document, in respect of which an order of forfeiture has been made under section 99A, may, within two months from the date of such order, apply to the High Court to set aside such order on the ground that the issue of the newspaper, or the book or other document, in respect of which the order was made, did not contain any seditious or other matter of such a nature as is referred to in sub section (1) of section 99A. section 99C.
Every such application shall be heard and determined by a Special Bench of the High Court composed of three Judges.
section 99D. (1) On receipt of the application, the Special Bench shall, if it is not satisfied that the issue of the newspaper, or the book or other document, in respect of which the application has been made, contained seditious or other matter of such a nature as is referred to in sub section (1) of section 99A, set aside the order of forfeiture.
We think it fairly clear from these sections that the ground on which an application can be made under section 99B is the ground which, if established, would require the High Court to set aside the order under section 99D.
The appellant bad moved the High Court.
at Allahabad under section 99B to set aside the order of forfeiture of his books.
It seems to have been contended in the High Court that the order of forfeiture should be set aside on the ground that the grounds of the 491 Government 's opinion had not been stated.
With regard to this contention, the High Court observed, "The requirement to state the ground is mandatory.
A mere citation of words of the section will not do.
But as has been held by a Special Bench of this Court in Baijnath vs Emperor (A.I.R. 1925 All. 195), with which we respectfully agree, the High Court in view of the provisions of section 99D of the Code of Criminal 'Procedure is precluded from considering any other point than the question whether in fact the document comes within the mischief of the offence charged.
" In this view of the matter the High Court refused to set aside the order on account of the omission to state the grounds of the opinion.
The High Court then proceeded to examine the books for itself and found that their contents were "obnoxious and highly objectionable" and dismissed the application observing that the appellant had "entirely failed to show that the books did not contain matters which promoted feelings of enmity and hatred between different classes, or which did not (sic) insult or attempt to insult the religion or religious beliefs of the Sikhs".
The present appeal arises out of this order of the High Court.
The High Court was of the view that its duty under section 99D was only to see "whether in fact the document comes within the mischief of the offence charged".
It thought that a document would be within the mischief of the offence charged if, in its own opinion, it contained matters the publication of which would be punishable under either section 124A, or section 153A or section 295A of the Penal Code as mentioned in the order of forfeiture, irrespective of the Government 's opinion on the matter.
Otherwise, it seems to us, the High Court could not uphold the order for the reason that in its view the books offended the Sikhs and the Sikh religion in spite of the fact that there is nothing to show that the Government thought that the books had that effect.
The same view appears to have been taken in certain other cases, namely, Premi Khem Raj vs Chief Secretary (1), N. Veerabrahmam vs State of Andhra Pradesh (2) and Baba Khalil Ahmed vs State of U.P. (3).
(1) A.I.R. (1951) Raj.
(2) A.I.R (1959) A.P. 572.
(3) A.I.R. (1960) All. 715.
492 Apparently, it was thought in these cases that the words "if it is not satisfied that. . the book. . contained seditious or other matter of such a nature as is referred to in sub section (1) of section 99A" in section 99D meant, not so satisfied for any reason whatsoever irrespective of the reasons on which the Government formed its opinion about it.
We are unable to accept this construction of section 99D.
The question is what do the words "matter of such a nature as is referred to in sub section (1) of section 99A" appearing in section 99D mean? Do they mean any matter of that nature as the High Court thought? Or do they mean only those on which the order of forfeiture was based, that is, those which for the reasons stated by it, the Government thought were punishable under one or more of sections 124A, 153A and 295A of the Penal Code mentioned by it?.
It seems to us that the latter is the correct view and follows inevitably if sections 99A, 99B and 99D are read together, as they must.
Now section 99D is concerned with setting aside an order.
That order is one made under section 99A.
An order under that section can be made only when certain things have appeared to the Government and the Government has formed a certain opinion.
The section further requires the Government to state the grounds of its opinion.
It is this order, that is, the order based on the grounds stated, which the party affected has been given by section 99B the, right to move the High Court to set aside.
It would follow that all that section 99B can require the party.
to do is to show that order was improper.
Whether that order was proper or not would, of course, depend onlyon the merits of the grounds on which it was based; whether another order to the same effect could have been made on other grounds is irrelevant, for that would not show the validity of the order actually made; that order would be bad if the grounds on which it is made do not support it.
Two orders, though both saying that a pub lication contains matter which offends the same section of the Penal Code cannot be the same or an identical order if the reasons why they are considered so to 493 offend the section of the Penal Code concerned are different.
Now section 99B says that a person affected by the order may move the High Court to set it aside on the ground that the book "did not contain any seditious or other matter of such a nature as is referred to in sub section (1) of section 99A".
The matter men tioned here must, for the reasons stated, refer only to such matter on which for the grounds stated by it, the Government 's opinion has been based.
We proceed now to a. 99D.
It is concerned with the same order of forfeiture.
An order contemplated by section 99D is made on an application under section 99B.
That order must therefore accept or reject the grounds on which the application under section 99B was made.
These grounds, as we have seen, are confined to challenging the propriety of the grounds on which the Government 's opinion resulting in the order, was based.
The words which we have earlier quoted from section 99B occur substantially in the same form in section 99D.
The scope of the two sections is identical.
The common words occurring in them must, therefore, have the same meaning in both.
They must hence, in section 99D also mean such matters on which for the grounds stated by it the Government 's opinion was based.
They cannot mean, as the High Court thought, any matter whatsoever, irrespective of the Government 's reasons for making the order, which in the High Court 's opinion would have justified it.
This view of the matter also explains why section 99A requires the Government to state the grounds of its opinion.
The reason was to enable the High Court to set aside the order of forfeiture if it was not satisfied of the propriety of those grounds.
If it were not so, the grounds of the Government 's opinion would serve no purpose at all.
This would specially be so as section 99G provides that an order of forfeiture cannot be called in question except in accordance with the provisions of section 99B.
If the order could be upheld, as the High Court seems to have thought, on grounds other than those on which the Government based its opinion, there would have been no need to provide 63 494 that the grounds of the Government 's opinion should be stated; such grounds would then have been wholly irrelevant in judging the validity of the order.
The acceptance of the interpretation put by the High Court would lead to a result which, in our view, would be wholly anomalous.
The order of forfeiture with which section 99D is concerned is indisputably an order under section 99A.
Now, an order under that section is essentially an order of the Government and of no one else.
Take a case where the Government making the order states the grounds of its opinion on which the order is based.
Suppose the Government says that the expression of view A in the book concerned offends the religious beliefs of community X.
Now assume that in an application made to set it aside, the High Court was not satisfied that view A could offend community X but thought that another expression of view in the same book which we will call B, offended the religious beliefs of a different community, say community Y.
If in such a case the High Court upheld the order, which, if the view of the Court below is right, it could do, there would really be an order of forfeiture made by the High Court and not by the Government, because the Government in stating the grounds of its opinion had not, since it did not say so, thought that view B could offend the religious beliefs of community Y.
We think it impossible that the sections concerned contemplated such a result; the Code nowhere provides for an order of forfeiture being made by the High Court.
We are, therefore, of opinion that under section 99D it is the duty of the High Court to set aside an order of forfeiture if it is not satisfied that the grounds on which the Government formed its opinion that the books contained matters the publication of which would be punishable under any one or more of sections 124A, 153A or 295A of the Penal Code could justify that opinion.
It is not its duty to do more and to find for itself whether the book contained any such matter whatsoever.
What then is to happen when the Government did not state the grounds of its opinion? In such a case 495 if the High Court upheld the order, it may be that it would have done so for reasons which the Government did not have in contemplation at all.
If the High Court did that, it would really have made an order of forfeiture itself and not upheld such an order made by the Government.
This, as already stated, the High Court has no power to do under section 99D.
It seems clear to us, therefore, that in such a case the High Court must set aside the order under section 99D, for it cannot then be satisfied that the grounds given by the Government justified the order.
You cannot be satisfied about a thing which you do not know.
This is the view that was taken in Arun Ranjan Ghose vs State of West Bengal (1) and we are in complete agreement with it.
The present is a case of this kind.
We think that it was the duty of the High Court under section 99D to set aside the order of forfeiture made in this case.
We accordingly allow the appeal and set aside the Government 's order of forfeiture dated July 30, 1953.
The appellant will be entitled to a return of all books, documents and things seized under that order.
DAS GUPTA, J.
By a notification dated July 30, 1953 the Uttar Pradesh Government acting under section 99A of the Code of Criminal Procedure declared the books "Sikh Mat Khandan, Part 1" and "Bhoomika Nazam Sikh Mat Khandan" which had been published by the appellant Harnam Das in April 1953, forfeited to government on the ground that these books contained matters the publication of which was punishable under section 153A and 295A of the Indian Penal Code.
The High Court held on an examination of the books that they clearly came within the mischief of section 153A and section 295A of the Indian Penal Code.
Accordingly it held that the order of the State Government forfeiting the two books was eminently just and proper and in that view dismissed the application.
One argument appears to have been raised that the order of forfeiture should be set aside as the notification by which the government made the declaration (1) 496 of forfeiture did not state the grounds of the government 's opinion as required by section 99A.
The High Court rejected this argument being of opinion that in view of the provisions of section 99D of the Code of Criminal Procedure the High Court was "precluded from consideration of any other point than the question whether in fact the document comes within the mischief of the offence charged.
" It is quite clear that the government notification did not state the grounds of the opinion formed by the government that these documents contained matters the publication of which was punishable under section 153A and section 295A of the Indian Penal Code.
The question raised before us is whether the High Court was right in rejecting the argument that the order of forfeiture should be set aside on the ground that grounds of the government 's opinion were not stated in the government notification as required by section 99A.
The view which prevailed with the learned judges in respect of this question was in accord with what had been held by the same High Court in an earlier case of Baijnath vs Emperor (1) and by the Rajasthan High Court in Premi Khem Raj vs Chief Secretary (2).
The same view has later on been taken by the Andhra Pradesh High Court in N. Veerabrahmam vs State Of Andhra Pradesh (3) and by the Allahabad High Court in a later decision in Baba Khalil Ahmad vs State of U. P. (4).
A contrary view appears to have been taken by the Calcutta High Court in Arun Ranjan Ghose vs The State of West Bengal (5).
The material portion of section 99A is in these words: "Where any newspaper, or book. or any document. appears to the Government to contain any seditious matter or any matter which promotes or is intended to promote feelings of enmity or hatred between different classes of the citizens of India or which is deliberately and maliciously intended to outrage the religious feelings of any such class by insulting the religion or the religious belief of that (1) A.I.R. (1925) All. 195.
(2) A.I.R. (1951) Raj.
(3) A.I.R. (1950) An.
(4) A.I.R. (1960) All, 715.
(5) 497 class, that is to say, any matter the publication of which is punishable under section 124A or section 153A or section 295A of the Indian Penal Code, the State Government may, by notification in the Official Gazette stating the grounds of its opinion, declare . every copy of such book. to be forfeited to the government.
" It is clear therefore that before any government makes a declaration forfeiting a book under the provisions of this section it has first to be of opinion that the book does contain a matter the publication of which is punishable under section 124A or section 153A or section 295A of the Indian Penal Code.
Once it forms such an opinion the government has the power to declare the book forfeited.
The section requires that this must be done by a notification in the official gazette and in that notification the government is required to state the grounds on which it formed the opinion.
The legislature however did not make such an order made by the government immune from any attack.
In section 99B it has provided the means by which the aggrieved person may obtain relief against the order if in fact the government was wrong in its opinion and the book did not contain a matter the publication of which is punishable under section 124A, or section 153A or section 295A of the Indian Penal Code.
Section 99B runs thus: "Any person having any interest in any news paper, book or other document, in respect of which an order of forfeiture has been made under section 99A, may, within two months from the date of such order, apply to the High Court to set aside such order on the ground that the issue of the newspaper, or the book or other document, in respect of which the order 'wa s made, did not contain any seditious or other matter of such a nature as is referred to in sub section (1) of section 99A." Section 99D provides that if after hearing the application the High Court is not satisfied that the issue of the document in question contains any seditious matter or any other matter referred to in section 99A, that is to say, any matter the publication of which is 498 punishable under section 124A or section 153A or section 295A of the Indian Penal Code the High Court shall set aside the order of forfeiture.
The necessary result of the provision also is that if the High Court is satisfied that the book in question contains matter the publication of which is punishable under section 124A or section 153A or section 295A of the Indian Penal Code, the High Court will refuse to set aside the order of forfeiture.
It has to be noticed that section 99B in providing for relief to a person aggrieved by an order of forfeiture has limited the grounds on which relief can be applied for to one and one only, viz., that the issue of the newspaper, or the book or other document, in respect of which the order was made, does not contain any seditious matter or other matter of such a nature as is referred to in sub section (1) of section 99A.
The appellant 's contention that the High Court should also examine the notification to find out whether the government had stated the grounds of its own opinion as required by section 99A and set aside the order of forfeiture if it finds that this requirement has note been fulfilled seeks to add an additional ground on which an application can be made under section 99B and relief can be given by the High Court under section 99D.
The question is: Can that be done? It is well to recognise that just as a right of appeal is a creature of statute the right to apply for setting aside an order which is really in the nature of an appeal is equally a creature of statute and when the legislature creates such a right by a statute it may at its option make the right unlimited or may limit it in any manner it likes.
It is settled law that no Court can add to or enlarge the grounds for appeal as laid down in the statute creating the appeal.
The position is exactly the same when the statute creates a right to seek relief by way of application and no court can add to the grounds on which relief can be sought if the statute creating the right to obtain relief is limited to one or more specified grounds.
It is interesting to remember in this connection the right to apply for review granted by O. 47 r. 1 of the Code of Civil Procedure.
After specifying 499 some grounds on which a review can be applied for, the legislature added a further ground in the words "for any other sufficient reason".
The proper interpretation of these words "for any other sufficient reason" has engaged the anxious consideration of the courts and in 1922 the Privy Council after a review of the numerous cases laid down, the rule that "for any other sufficient reason" means a reason sufficient on grounds at least analogous to those specified immediately previously.
If the correct position had been that the court might add to the ground for a review whenever it thought fit, all the discussion as regards the interpretation of "for any other sufficient reason" would have been meaningless and unnecessary.
Indeed the position in law that the courts cannot add to the grounds to which the legislature has limited the right of relief is so very clear and unassailable that the learned counsel for the appellant did not like to suggest that a ground can be added.
To overcome this difficulty that the courts cannot add to the grounds of relief specified in section 99B and section 99D, an ingenious argument has been put forward that in order that the High Court can give proper relief on the very ground mentioned in section 99B and section 99D it is essential that the government 's order should state the grounds of its opinion.
The steps of the argument may shortly be stated thus: The government has formed an opinion.
The High Court has to see that opinion is correct.
In order to do this the High Court must know what weighed with the government in coming to its opinion.
Therefore, without the grounds of the Government 's opinion the High Court cannot be satisfied within the meaning of section 99D that the issue of the newspaper contained the matter complained of.
The fallacy of this syllogistic process is in the un soundness of the premises that in order to determine whether the government 's opinion is correct or not the High Court must know what weighed with the government.
When the application is heard by the High Court and it has to come to a conclusion whether it is or it is not satisfied that the issue of the newspaper, 500 or the book or other document does contain a matter mentioned in section 99A, the one and only way of coming to a conclusion appears to me to be to read the newspaper, or the book or other document.
Arguments of counsel might be of assistance; if the government has stated its grounds for coming to its opinion, that would also help; but the ultimate responsibility of deciding whether or not to be satisfied that the issue of newspaper contains matters as mentioned in section 99A can only be discharged by the High Court by reading the document in question.
It has been suggested that when section 99B and section 99D uses the words "any seditious or other matter of such a nature as is referred to in sub section
(1) of section 99A", they mean only those matters on which the Government based the order of forfeiture; so it is urged, unless the Government stated the ground of its opinion, it will be impossible for the Court to decide the question under section 99D.
I confess I do not think it reasonably possible to conceive of a case, where an order under section 99A will not mention the particular matter referred to in section 99A. (1) The mention of the particular matter out of the several matters referred to in section 99A which in its opinion is contained in the document does not however involve the statement of reasons for forming the opinion.
Suppose a Government states that in its opinion the document contains seditious matters.
It does not cease to be a complete statement on this point merely because the reason for forming the opinion are not also stated.
The formation of the opinion that one or more of the matter,% referred to in the section are contained in a document and the statement that such an opinion has been formed are quite distinct from the statement of the reasons for forming the opinion.
It appears to me clear that where, as in the present case the Government order contains a statement of the particular matter or matters out of the several matters, referred to in section 99A, viz., any seditious matter or any matter which promotes or is intended to promote feelings of enmity or hatred between different classes of the citizens of India or 501 which is deliberately and maliciously intended to outrage the religious feelings of any such class by insulting the religion or the religious beliefs of that class, that is to say, any matter the publication of which is punishable under section 124A or section 153A or section 295A of the Indian Penal Code" which in its opinion the document contains, no difficulty can possibly arise from the fact that the Court has not got before it Government 's grounds for forming such opinion.
But, asks the appellant, why was it necessary then for the legislature to require in section 99A that the Government should state the grounds of its opinion when notifying the order of forfeiture? The real reason, it is urged, was to enable the High Court to set aside the order of forfeiture if it was not satisfied of the propriety of those grounds, and necessarily also when no grounds were stated.
If that were correct, it was reasonable to expect the legislature to make the necessary provision in a. 99B that an order could be challenged on the ground that the grounds of the opinion were not stated, and consequential provisions in section 99D.
I can see no justification for reading into these sections section 99A and section 99D words which are not there, in an attempt to understand why section 99A contains such a requirement for statement of grounds of the opinion.
There can be no doubt that this is a very salutary provision that Government should record the grounds of its opinion.
Such a provision diminishes the risk of government making an arbitrary order of forfeiture.
It was therefore a question of legislative policy for the legislature to require that the government should state its opinion.
To say that there could have been no reason for including such a requirement in section 99A unless the legislature intended the High Court to interfere if grounds of the opinion were not stated, is, in my opinion, wholly unjustified.
It seems clear to me that the duty cast by section 99D on the judges of the High Court is not to see whether in a particular case the grounds stated by 64 502 the government for forming its opinion are correct, but to see whether the opinion formed was correct.
To perform this duty the one and the only way is to examine the document which in the Government 's opinion contains the matter complained of.
The argument that the High Court is not in a position to perform this duty under section 99D satisfactorily in the absence of a statement by the government of the grounds of its opinion appears to me therefore wholly unsound.
In this very case, the learned judges of the High Court of Allahabad felt no difficulty in coming to a conclusion on the question before them even though the government had not stated the grounds of its opinion.
I fail to see any justification for imagining difficulties where there are none.
I have therefore come to the conclusion that the High Court was right in rejecting the argument that the order of forfeiture should be set aside on the ground that the notification did not state government 's grounds for forming the opinion.
The appeal should therefore be dismissed.
By COURT In view of the opinion of the majority, this appeal will be allowed and the order of the High Court, set aside.
The appellant will be entitled to the return of all the books, documents and other things seized from him under the order now set aside.
He will also be entitled to the refund of expenses and costs that he had to pay under the order of the High Court. | The respondent passed an order under section 99A of the Code of Criminal Procedure forfeiting two books written by the appellant as in its opinion they contained matter the publication of which was punishable under section 153A and 295A of the Indian Penal Code.
The order did not state the grounds on which the respondent had formed this opinion as was required by section 99A.
The appellant applied to the High Court under section 99B of the Code to set aside the order.
Section 99D of the Code provided that the High Court shall set aside the order of forfeiture if it was not satisfied that the book contained seditious or other matter of such a nature as was referred to in sub section
(1) of section 99A.
The High Court was of the view that it could not set aside the order under section 99D for the reason that the order did not set out the grounds on which the Government had formed its opinion and that its duty was only to see whether the books in fact came within the mischief of the offence charged.
Upon examining the books for itself the High Court came to the conclusion that their contents were obnoxious and highly objectionable and dismissed the application.
Held (Per Gajendragadkar, Sarkar, Wanchoo and Ayyangar, jj.
Das Gupta, J. contra) that on the failure of the respondent to set out the grounds of its opinion as required by section 99A of the Code the High Court should have set aside the order under section 99D.
It is the duty of the High Court under that section to set aside the order of forfeiture if it is not satisfied that the grounds on which the Government formed its opinion could justify that opinion.
Where no grounds of its opinion are given at all the High Court must set aside the order for it cannot then be satisfied that the grounds given by the Government justified the order.
Arun Ranjan Ghose vs State of West Benaal, (1955) 59 C.W.N. 495, approved.
Premi Khem Rai vs Chief Secretary, A.I.R. (1951) Raj.
II3, N. Veerabrahmam vs State of Andhra Pradesh, A.I.R. (1959) A. Pr.
572 and Baba Khalil Ahmed vs State of U. P., A.I.R. (1960) All. 715, disapproved.
488 Per Das Gupta, J. The High Court had no power to set aside the order on the ground of failure of the Government to set out the grounds of its opinion in the order.
The duty cast on the High Court is not to see whether the grounds stated by the Government for forming its opinion are correct but to see whether the opinion formed is correct; this can only be done by examining the books.
Section 99B has limited the grounds on which relief can be asked for to one and one only, viz., that the books do not contain any objectionable matter.
It was not permissible for courts to add to that ground.
Baijnath vs Emperor A.I.R. (1925) All. 195, Premi Khem Raj vs Chief Secretary, A.I.R. (1951) Raj. 113, N. Veerabrahmam vs State of Andhra Pradesh, A.I. R. 1959 A. Pr.
572 and Baba Khalil Ahmed vs State of U. P., A.I.R. (1960) All. 715, approved.
Arun Ranjan Ghose vs The State of West Bengal, , disapproved. |
Appeal No. 2003 of 1966.
Appeal from the judgment and order dated December 18, 1964 of the Calcutta High Court in Appeal No. 254 of 1963.
Ram Janiavani and section P. Nayar for the appellants.
The respondent did not a pear.
The Judgment of the Court was delivered by Shah, J.
On March 31, 1959 the Ministry of Commerce and Industry, Government of India, granted to the respondents a licence permitting them to import from West Germany certain machinery described therein of the maximum C.I.F. value of Rs. 45,000/ .
Condition No. 1 of the licence provided that: "The .
application is accepted and import licence is hereby granted having quantity and value as the limiting factors and is not valid for clearance if the actual value of any item exceeds the C.I.F. value indicated in the licence by more than 5%.
" The respondents submitted a bill of entry dated July 1, 1960, disclosing the C.I.F. value of the consignment as Rs. 45,179 92 inclusive of landing charges, and cleared the consignment after paying duty assessed by the Customs authorities on the real value of the goods as disclosed in the bill of entry.
On June 20, 1961 the Customs authorities issued a notice requiring the respondents to show cause why penal action should not be taken against them under section 167(8) of 'the , as being persons concerned in the unauthorised importation of the goods.
This notice was amended by notice ,dated September 21, 1961, whereby the respondents were charged with having committed offences under section 167(8) read with section 3(2) of the Imports and Exports (Control) Act, 1947, for 683 illegally importing the machinery.
The respondents claimed that no breach of the conditions of the licence was committed.
The Additional Collector of Customs, Calcutta, by order dated March 17, 1962, directed confiscation of the machinery under section 167(8) of the read with section 3 (2) of the Imports and Exports (Control) Act, 1947, and permitted the respondents to pay a fine of Rs. 20,000/ in lieu of confiscation.
A personal penalty of Rs. 25,000/ was also imposed on the respondents.
The respondents then moved a petition before the High Court of Calcutta under article 226 of the Constitution praying for a writ quashing the adjudication order dated March 17, 1962.
A Single Judge of the Calcutta High Court dismissed the petition, but in appeal under the Letters Patent the High Court reversed the decision and issued a Writ of certiorari quashing the order dated March 17, 1962.
The Additional Collector of Customs, Calcutta, has appealed to this Court with certificate granted by the High Court.
The only question which falls to be determined is whether for breach of a condition of the licence penalty may be imposed under section 5 of the Imports and Exports (Control) Act, 1947, read with the .
The relevant statutory provisions may first be noticed.
Under section 167 of the , the offences mentioned in the first column of the Schedule are punishable to the extent mentioned in the third column of the same with reference to such offences respectively: Section of this Act to which offence Offences.
has reference.
Penalties 8.
If any goods, the importation or 18 & 19 such goods shall be liable to be exportation of which is for the confiscated ; and any person con time being prohibited or resting herded in any such offence, shall acted by or under Chapter IV of be liable to a penalty not exceed this Act, be imported into or axing three times the value of the ported from India contrary to goods, or not exceeding one such prohibition or restriction; or thousand rupees, Chapter IV of the , contains three sec tions : sections 1 8, 19 & 19A.
By section 18 an absolute prohibition is unposed in respect of importation of goods by land or by sea specified therein.
Section 19 provides that the Central Government may from time to time, by notification in the Official Gazette prohibit or restrict the bringing or taking by ' sea or by 684 land goods of any specified description into or our of India across any customs frontier as defined by the Central Government.
The Central Legislature enacted the Imports and Exports (Control) Act, 1947, with the object of authorising prohibition and control on imports and exports.
By section 3 of that Act it was provided.
"(1) The Central Government may, by order pub lished in the Official Gazette, make provisions for prohibiting, restricting or otherwise controlling in all cases or in specified classes of cases, and subject to such exceptions if any, as may be made by or under the order (a) the import, export, carriage coastwise or shipment as ships stores of goods of any specified description; (b) the bringing into any port or place in India or goods of any specified description intended to be taken out of India without being removed from the ship or conveyance in which they are being carried.
(2) All goods to which any order under sub section (1) applies shall be deemed to be goods of which the import or export has been prohibited under section 19 of the , and all the provisions of that Act shall have effect accordingly, except that section 183 thereof shall have effect as if for the word "shall" therein the word "may" were substituted.
(3) Section 5 of the Imports and Exports (Control) Act, 1947, as originally enacted, provided : "If any person contravenes any order made or deemed to have been made under this Act, he shall, without prejudice to any confiscation or penalty to which he may be liable under the provisions of the , as applied by sub section (2) of section 3, be punishable with imprisonment for a term which may extend to one year, or with fine, or with both" 6 85 In exercise of the power conferred by sections 3 and 4 A of the Imports and Exports (Control) Act, 1947, the Central Govern ment issued the Imports (Control) Order, 1955.
Clause 3 of the Imports (Control) Order prevented importation of any goods of the description specified in Sch.
I, except under, and in accordance with, a licence or a customs clearance permit granted by the Central Government or by any officer specified in Sch.
By sub cl.
(2) of cl. 3 it was provided that if in any case, it was found that the goods imported under a licence did 'not conform to the description given in the licence or were shipped prior to the date of issue of the licence under which they were claimed to have been imported, then, without prejudice to any action that may be taken against the licensee under the , in respect of the said importation, the licence may be treated as having been utilised for importing the said goods.
By cl. 5 certain conditions could be imposed by the Licensing Authority issuing a licence.
It may be recalled that one of the conditions of the licence issued by the respondent was that the value of any item shall not exceed the C.I.F. value indicated in the licence by more than 5 %.
It was the, case of the Customs I authorities that the real value of the machinery imported exceeded the declared value, and on that account the respondents had infringed the conditions of the licence.
In East India Commercial Company Ltd., Calcutta & Anr.
vs The Collector of Customs, Calcutta(") this Court held that section 167 cl. 8 of the , read with section 3(2) of the Imports and Exports (Control) Act, 1947, authorised the imposition of penalty, if goods were imported in con travention of any order under the Imports and Exports (Control) Act, 1947 : but the section did not, expressly or by implication authorise confiscation of goods imported under a valid licence on the ground that a condition of the licence not imposed by the order was ' infringed.
This view was reiterated by this Court in Boothalinga Agencies vs T. C. Poriaswami Nadar (2).
These cases were decided on the interpretation of section 5, of the Imports and Exports (Control) Act, 1947, as it stood before it was amended by Act 4 of 1960.
By the Imports and Exports (Control) Amendment Act 4 of 1960, in section 5, after the words ',any order made or deemed to have been made under this Act," the words "or any condition of a licence granted under any such order" were inserted.
Contravention of any condition of a licence granted under any order was therefore liable to be punished under section 5 as amended.
(1) L196313S.C.R.338.
(2) 19591 1 S.C.R. 65. 686 In the present case the Customs authorities did not direct section for contravention of any condition of a licence directed confiscation of the machinery and imposed penalty lieu thereof.
But on the terms of section 5 as amended, the right impose penalty for contravention of any condition of a may be exercised under the , and under the Imports and Exports (Control) Act, 1947.
For are of any condition of a licence, it is open to the authorities direct prosecution, but no order confiscating goods and ring penalty in lieu thereof could be made.
The order of fiscal could only be made under section 167 cl. 8 of the Sea atoms Act, 1878 : in terms cl. 8 of section 167 provides for action of the goods importation or exportation of which is the time being prohibited or restricted by or under Ch.
IV the .
The notification of which contravention is said to have began made, is not issued under 19 of the , but under the Imports and (Control) Act, 1947.
It has not been urged before us, a rightly, that penalty of confiscation is incurred under the pro sons of the , for breach of the con lions of the licence.
In our judgment, the High Court was right in holding the scope of power under the was not enlarged by the amendment to section 5 of the Imports and Exports (Control) Act, and there is nothing in the amended section 5 of the Imports and Exports (Control) Act which warrants the view that provisions of the , may be invoked punish the breach of a condition of a licence granted under Imports and Exports (Control) Act, 1947.
The appeal fails and is dismissed.
There will be no order as to costs. | Under section 3 of Imports & Exports Control Act 18 of 1947 all goods to which any order under sub section
(1) applied shall be deemed to be goods of which the Import & Export has been prohibited under section 19 of the Sea.
Customs Act 8 of 1878, and all the provisions of.that Act shall have effect accordingly.
In exercise of power conferred by sections 3 and 4A of the Act 18 of 1947 the Central Government issued the Imports control) Order 1955.
Clause 3 of the Order prevented the importation of any goods of the description specified in Schedule except under and in accordance with a licence or a customs clearance permit granted by the Central Government or by any officer specified in Sch.
Section 5 of Act 18 of 1947 as originally enacted provided : "If any person contravenes any order made or deemed to have been made under the Act, he shall without any prejudice to any confiscation or penalty to which he may be liable under the provisions of the , as applied by sub section
2@ of section 3 be punishable with imprisonment for a term which may extend to one year, or with fine, or with both.
" By the Imports & Exports (Control) Amendment Act 4 of 1960 contravention of any conditions of a licence ranted in accordance with The terms of any order passed under the Act was also made punishable under section 5.
The respondents imported certain goods from West Germany under licence granted by the Ministry of Commerce.
According to the Government the goods imported were in excess of the terms of the licence and accordingly the respondents were charged with having committed ' offences under section 167(8) 'read with section 3(2) of Act 18 of 1947 and the a good s imported by them were confiscated.
In lieu of the confiscation, however, a fine of Rs. 20,000/ was imposed an the respondents.
A personal penalty of Rs. 25000/ was also imposed.
The respondents filed ' a writ petition in the High Court which was dismissed by the Single Judge but 'allowed by the Division Bench.
With certificate the Collector of Customs appealed.
The only question for consideration was whether for breach of a condition of the licence penalty may be imposed under section 5 of Act 18 of 1947 read with section 167(8) of Act 8 of 1878.
HELD: The appeal must be dismissed.
For breach of any condition of a licence it is open to the authorities.
under section 5 of Act 18 of 1947 as amended, to direct prosecution but no, 682 order confiscating goods and imposing penalty in lieu thereof could be made.
The order of confiscation could only be made under section 167 cl. 8 ,of Act 8 of 1878 : in terms cl. 8 of section 167 provides for confiscation of the goods importation or exportation of which is for the time being prohibited or restricted by or under Ch.
IV of the .
The notification of which the contravention was alleged was not issued under section 19 of the but under the Imports & Exports (Control) Act 1947.
The High Court was therefore right in holding that the scope of power under the was not enlarged by the amendment to section 5 of the Imports & Exports (Control) Act.
There is nothing in the amended section 5 of the imports & Exports (Control) Act which warrants the view that the provisions of the , may be invoked to punish the breach of a condition of a licence granted under the Imports & Export , (Control) Act, 1947.
[686 B C] |
Appeal No.2402 of 1966.
1 2 L694SupCI/71 850 Appeal by special leave from the judgment and order dated May 4, 1966 of the Patna High Court in Misc.
Judicial Case No. 284 of 1962.
A. K. Sen and U. P. Singh, for the appellants.
N. A. Palkhivala, section B. Mehta, B. Datta, for the respondent.
Hegde, J. This is an appeal by special leave.
It arises from the judgment of the High Court of Patna in a Reference under section 25(3) of the Bihar Sales Tax Act, 1947.
That reference was called for by the High Court at the instance of the assessee company (the respondent herein.
The questions referred for the opinion of the High Court by the Board of Revenue were : "(1) With regard to the sales which took place in the period from 1st of April, 1955 to the 6th September 1955, whether the assessee is entitled, upon the facts found by the Board of Revenue with regard to these categories of sales, to exemption from liability under the Bihar Sales Tax Act because of the provision of Article 286(1) (a) of the Constitution as it stood at the relevant date read with the explanation to that article.
(2) With regard to the sales which took place in the period from 7th September, 1955, to 31st March, 1956 whether the assessee is entitled, upon the facts found by the Board of Revenue with regard to these categories of sales, to exemption from liability under the Bihar Sales tax Act on the ground that the sales took place in the course of inter State trade or commerce under article 286(2) of the Constitution as it stood at the relevant period.
" The High Court answered the first question in the negative and against the assessee.
It answered the second question in the affirmative and in favour of the assessee.
The assessee has not come up in appeal.
This appeal has been brought by the State of Bihar contesting the correctness of the opinion given by the High Court on the second of the two questions referred to earlier.
The assessee is, a Public Limited Co., incorporated under the Indian Companies Act, 1913.
It carries on business of manufacturing and selling inter alia trucks and bus chassis and spare parts thereof to their appointed dealers, State Transport Organizations and individual buyers throughout India.
The registered office of 851 the assessee is at Bombay but its factory where manufacturing proCess. is being carried on is at Jamshedpur in Bihar.
The assessee has appointed several dealers all over India for the sale of its trucks, bus chassis and spare parts.
Those dealers are appointed under agreements entered into between the in and the assessee.
The turnover in dispute relates to the sales made by the assessee to its dealers of trucks, bus chassis and spare parts for being sold in the territories assigned to them under the dealership agreements.
The agreements between the assessee and its dealers appear to be similar.
Under the agreements, each dealer is assigned a territory .in, which alone he can sell the trucks, bus chassis and other spare parts purchased by him from the assessee company.
He is forbidden from selling anyone of those articles to any purchaser outside his territory.
As per the agreements, dealers will have to place their indents, pay the price of the goods to be purchased and obtain delivery orders from the Bombay office of the assessee.
In pursuance of those delivery orders, trucks, bus chassis and other spare parts were delivered in Bihar to be taken over to the territories assigned to them.
Under the contracts of sale, the dealers, were required to remove the trucks, bus chassis and the spare parts, delivered to them.
in the State of Bihar to place outside Bihar.
These are facts found by the Board of Revenue and affirmed by the High Court.
On the basis of these facts, we have whether the sales with which we are concerned in this appeal are sales that took place in the course of inter State trade and commerce as contemplated by article 286(2) of the Constitution as it stood at, the relevant time.
In other words the question for decision is, whether the sales in question were sales for the purpose of inter State trade or commerce or whether they were sales in the course of inter State trade or commerce.
As seen earlier, the High Court has held that, those sales took place in the course of interState trade or commerce.
The expression "in the course of" appearing in article 286(1)(b) came up for consideration in State of Travancore Cochin and Ors.
vs The Bombay Co. Ltd. (1) Therein in this Court held that whether else may or may not fall within article 1286(1)(b) of the Constitution,.
sales and purchases which themselves occasion the export or import of the goods as the case may be out of or into, the territory of India come within the exemption.
In that case this Court further observed that a sale by export involves, a series of integrated activities commencing from the agreement of sale with a foreign buyer and ending with the delivery of the goods to a common carrier for transport out of the country by land or sea.
Such a sale cannot be dissociated from,the export without which it cannot be effectuated and the sale and the resultant export form parts of a single transaction.
Of these two integrated activities which to (1) ; 852 gather constitute an export sale, whichever first occurs can well be regarded as taking place in the course of the other.
Even in cases where the property in the goods passed to the foreign buyers and the sales were thus completed, within the State before the goods commenced their journey from the State, the sales must be regarded as having taken place in the course of the export and therefore exempt under article 286(1)(b).
The same exposition of the law is true of cl.
(2) of article 286 as it stood prior to its amendment on September 11, 1956.
The next decision in which article 286(1)(a), 1(b) and (2) came to be considered by this Court is State of Travancore Cochin and Ors.
vs Shanmugha Vilas Cashew Nut Factory and Ors.
(1) Therein this Court observed that the word "course ' etymologically denoties movement from one point to another and the expression "in the course of" in article 286(1)(b) not only implies a period of time during which the movement is in progress but postulates also a connected relation.
Consequently, a sale in the course of export out of the country should be understood in the context of article 286(1) (b) as meaning a sale taking place not only during the activities directed to the end of exportation of the goods out of the country, but also as part of or connected with such activities.
But a purchase of goods for the purpose of export is only an act preparatory :to their export and.
not an act done in the course of the export of ,the goods.
In The Bangal Immunity Company Ltd. vs The State of Bihar and Ors.
(2) Venkatarama Ayyar, J. observed that a sale could be a sale in the course of inter State trade only if two conditions concur : (1) a sale of goods and (2) a transport of those goods from one State to another under the contract of sale.
In Endupuri Narasimham and son vs The State of Orissa and Ors.
(3), this Court held that in order that a sale or purchase might be inter State, it is essential that there must be a transport of goods from one State to another under the contract of sale or purchase.
IA purchase made inside a State for sale outside the State cannot itself be, held to be in the course of inter State and the imposition of tax thereon is not repugnant to article 286(2) of the Constitution.
In Tata Iron and Steel Co. Ltd. vs section R. Sarkar and ors.
(4) this Court held that within cl.
(b) of section 3 of the , are included sales in which property in the goods passes during the movement of the goods from one State to another by transfer of documents of title thereto and also covers sales in which movement of goods from one State to another is the result of a covenant or incident of the contract of sale and property in (1) ; (2) [1955] 2 S.C.R.603.
(3) ; (4) ; 853 the goods passes in either State.
Clause (b) of section 3 of the says : "That no law of a State shall impose or authorise the imposition of,.
a tax on the sale or purchase of goods where such sale or purchase takes place in the course of the import of goods into, or export of the goods out of,.
the territory of India.
" In The Cement Marketing Co. of India (private Ltd. and anr.
vs The State of Mysore and anr.(1), this Court held that where the goods were transported outside the State as required by the contract of sale, they are inter State sales and hence exempt from sales tax.
On the facts of that case it was held that the sales transactions themselves involved movement of goods across the border.
In Ben Gorm Nilgiri Plantations Co. Coonoor and ors.
vs Sales Tax Officer, Special Circle, Ernakulam and ors.(2) this Court had to consider what sales are sales in the course of export and what sales are for the purpose of export.
In the course of the judgment Shah, J. (one of us) observed : "A sale in the course of export predicates a connection between the sale and export, the two activities being so integrated that the connection between the two cannot be voluntarily interrupted, without a breach of the contract or the compulsion arising from the nature of the transaction.
In this sense to constitute a sale in the course of export it may be said that there must be an intention on the part of both the buyer and the seller to export, there must be obligation to export,.
and there must be an actual export.
The obligation may arise by reason of statute, contract between the parties, or from mutual understanding or agreement between them.
, or even from the nature of the transaction which links the sale to export.
A transaction of sale which is a preliminary to export of the commodity sold may be regarded as a sale for export, but is not necessarily to be regarded as one in the course of export, unless the sale occasions export." In K. G. Khosla and Co. (P) Ltd. vs Deputy Commissioner of Commercial Taxes, Madras(3 ) this Court held that before a sale could be said to have occasioned the import, the movement of goods must have incidental to the contract or in pursuance of the conditions of the contract and there should be no possibility (1) 14, S.T.C. 175 (S.C.) (2) 117 S.T.C. 473.
(S.C.) (3) 854 the goods being diverted by the assessee for any other purpose.
meaning thereby that there should be no possibility of diversion according to law or contract and not in breach of them. ' In Tata Engineering and Locomotive Co. Ltd. vs The Asstt.
Commissioner of Commercial Taxes and anr.(1), this Court after referring to the earlier decisions observed : "It has been laid down that the sale in the course of export, predicated connection between the sale and export, the two activities being so integrated that the connection between the two cannot be voluntarily interrupted without a breach of the contract or the compulsion arising from the nature of the transaction.
To occasion export there must exist such a bond between the contract of sale and the actual exportation that each link is inextricably connected with the one immediately preceding it.
The principle thus admits of no doubt.
according to the decisions of this Court, that the sales to be exigible to tax under the Act (Central Sales Tax Act, 1956) must be shown to have occasioned the movement of the goods or articles from one State to another.
The movement must be the result of a covenant or incident of the contract of sale.
" If we apply the principles enunciated by this Court in the decisions referred to above to the facts of this case, it is obvious that the sales with which we are concerned in this case are sales in the course of inter State trade.
The dealers were required to move the trucks, buses, chassis and other spare parts purchased by them from the State of Bihar to places outside Bihar.
They are so required by the terms of the contracts entered into by them with the assessee.
They would have committed breach of their contracts and incurred the penalty prescribed in their dealership agreements, if they had failed to abide by the term requiring them to move the goods outside the State of Bihar.
The decided cases establish that sales will be considered as sales in the course of export or import or sales in the course of inter State trade and commerce under the following circumstances: (1) When goods which are in export or import stream are sold; (2) When the contract of sale or law under which goods are sold require those goods to be exported or imported to a foreign country or from a foreign country as the case may be or are required to be transported to a State other (1) [1970] 1 S.C.C.622.
855 than the State in which the delivery of goods takes place and (3) Where as a necessary incident of the contract of sale goods sold are required to be exported or imported.
or transported out of the State in which the delivery of goods takes place.
But Mr. A. K. Sen, learned Counsel for the State of Bihar contended that this Court has taken a different view of the law in Coffee Board, Bangalore vs Joint Commercial Tax Officer, Madras and anr.(1).
According to him the ratio of that decision is that whenever goods are delivered in a State in pursuance of a contract of sale, the sale in question becomes exigible to tax in the State in which the goods are delivered unless they are taken out of the State for purposes of consumption and not resale, or the same is taken out of the State in pursuance of an already existing agreement to resell in the State to which it is taken.
The decision in Coffee Board case (supra) does not, in our opinion, afford any basis for these contentions.
We have earlier noticed that this Court in a series of decisions has pronounced in unambiguous terms that where under the terms of a contract of sale, the buyer is required to remove the goods from the State in which he purchased those goods to another State and when the goods are so moved, the sale in question must be considered as a sale in the course of inter State trade or commerce.
This is a well established position in law.
In the Coffee Board case this Court did not deviate from this position nor could it deviate as the earlier decisions were binding on it.
Fur ther in the course of his judgment, the learned Chief Justice who spoke for the Court referred with approval to the earlier decisions of this Court where distinction between the sales in the course of inter State trade or commerce and sales for the purpose of interState trade and commerce were explained.
On the basis of the facts in that case, his Lordship came to the conclusion that the export of the coffee in question was, not integrated with the sales with which the Court was concerned and that there was no direct bond between the export and the sales.
In the course of his judgment his Lordship observed : "Here there are two independent sales involved in the export programme.
The first is a sale between the Coffee Board as seller to the export promoter.
Men there is the sale by the export promoter to a foreign buyer.
Of the latter sale, the Coffee Board does not have any inkling when the first sale takes place.
The Coffee Board 's sale is not in any way related to the second sale.
Therefore, the first sale has no connec (1) 25 S.T.C. 528 (S.C.) 856 tion with the second sale which is in the course of export, that is to say, movement of goods between an exporter and an importer.
" This finding clearly brings out the distinction between the facts of the Coffee Board 's case (supra) and the facts of the cases wherein this Court held that the sales in question were sales in the course of export or import.
In the Coffee Board 's case this Court found that what was insisted on by the Coffee Board was that the coffee set apart for the purpose of the export must be exported; it was not incumbent for the purchasers at the auction to export that coffee themselves; they may do it themselves or they may sell it to somebody who may export it outside India.
On that basis, this Court came to the conclusion that the sales effected by the Coffee Board are not sales in the course of export; they are only sales for, the purpose of export.
The ratio of that decision does not bear on the facts before us.
Herein, under the terms of the contracts of sale, the purchasers were required to remove the goods from the State of Bihar to other States.
Hence the sales with which we are concerned in this case must be held to be sales in the course of inter State trade or commerce.
For the reasons mentioned above, we agree with the findings of the High Court.
In the result this appeal fails and the same is dismissed with costs. | The assessee, having its registered office in Bombay and its factory in Bihar, was carrying on the business of manufacturing and selling trucks, bus chassis and spare parts to their appointed dealers and others.
Agreements were entered into between the assessee and the appointed dealers, under which, each dealer was assigned a territory in which alone the dealer could shell.
The dealers had to place the indents, pay the price of goods to be purchased and obtain delivery orders from the Bombay office.
In pursuance of the delivery orders the trucks etc.
were delivered in Bihar to be taken to the territories assigned to them for sale there.
If the dealers failed to abide by the term requiring them to move the goods outside the State of Bihar they would have committed breach of their contracts, On the question whether the turnover relating to the sales made by the assessee to its dealers for sale by them in their respective territories outside the State of Bihar, during the period 7th September 1955 to 31st March 1956, was exempt from liability to pay sales tax under the Bihar Sales Tax Act, on the ground that the sales took place in the course of inter State trade or commerce, under article 286(2) as it, then stood, HELD : Where under the terms of a contract of sale, the buyer is required, as a necessary incident of the contracts to remove the goods from the State in which he purchased the goods to another State and when the goods are so removed, the sale must be considered as a sale in the course of inter State trade or commerce.
[854 G H; 858 A 13] State of Travancore Cochin vs The Bombay Co. Ltd. ; , State of Travancore Cochin vs Shanmugha Visal Cashew Nut Factory, ; , Bengal Immunity Co. Ltd. vs State of Bihar, , Endupuri Narasimham & Son vs State of Orissa, ; , Tata Iron & Steel Co. Ltd. vs section R. Sarkar, [1961] ] S.C.R. 379, The Cement Marketing Co. of India (P) Ltd. vs State of Mysore, 14 S.T.C. 175, Ben Gorm Nilgiri Plantations Co. vs Sales Tax, Officer, Special Circle, Ernakulam; , , K. G. Khosla & Co. (P) Ltd. vs Dy.
Commissioner of Commercial Taxes, Madras, 17 S.T.C. 473 and Tata Engineering & Locomotive Co. Ltd. vs Asstt.
Commissioner of Commercial Taxes & Anr. ; , applied.
Coffee Board, Bangalore vs Joint Commercial Tax Officer, Madras, 25 S.T.C. 528, explained. |
iminal Appeal No. 55 of 1970.
Appeal by special leave from the judgment and order dated September 26, 1969 of the Allahabad High Court in Criminal Appeal No. 1037 of 1969 and Referred No. 82 of 1969.
Yogeshwar Prasad, section K. Bagga and Sureshta Bagga, for the appellants.
O. P. Rana, for the respondent.
Sikri, J.
This appeal by special leave is directed against the judgment of the High Court of Judicature at AllAhabad confirming conviction of the two appellants by the Sessions Judge, Mainpuri, under section 302/34 of the Indian Panel Code.
Appellant Jadunath Singh was sentenced to death by the Sessions Judge and appellant Girand Singh was sentenced to undergo imprisonment for life.
In order to appreciate the points raised before us by the learned counsel for the appellants it is necessary to state a few facts.
It is alleged against the appellants that on February 26, 1968, at about 7.30 a.m., in furtherance of their common intention, they murdered one Ram Swarup Pandey by repeatedly stabbing him to death, when he was passing on the Grand Trunk road in the town of Bewar to catch a truck.
As many as 34 injuries were found on the deceased at the postmortem conducted on his body on the same day at about 3 p.m.
The prosecution case in brief is as follows : It is common ground that there was great enmity between the deceased and Laturi Ahir and his sons, the two appellants.
The deceased apprehended danger to his life from them, and on November 23, 1967, be sent an application to the Superintendent of Police, Mainpuri, ;alleging that Laturi and his son, Jadunath, Brahma, Panna Lal and Anokhey, et&. were terrorising the weaker and poorer sections of the village community and declaring openly that they would kill the deceased to silence his opposition for ever.
He prayed that an enquiry may be made and suitable action taken against them.
(On February 25, 1968 ( the deceased came to Bewar in the evening to meet the A.D.O. in connection with an enquiry on a complaint made against Munshi Lal Pradhan of the village.
He could not meet the A.D.O. as he was out of station.
He stayed during the 919 night with Prem Narain, P.W. 1, who happened to be a brother inlaw of his cousin Gulati Ram.
According to Prem Narain, both of them got up in the morning at 6.45 a.m. and since it was Shivratri that day the deceased did not take any food and they left for the bus stand at Bewar.
When they reached the bus stand at about 7.10 a.m. they found that the bus for Etah via Sultanganj had already left.
The next bus was due to go at 9.30 a.m. but, as the deceased thought that he could get a seat in some truck near the Prem Hotel and the Octroi barrier, they left the bus stand for the Octroi barrier.
When they reached the house of Kotwal Singh on the way, both the accused attacked the deceased with chhuri and knife, respectively; Jadunath had the chhuri and Girand Singh had the knife.
Both the deceased and Prem Narain were unarmed.
On hearing the, cries of the deceased Prem Narain asked the appellants why they were attacking the deceased.
Then Girand Singh, appellant, advanced towards him and gave a knife cut at his right wrist.
On the deceased falling down both accused persons attacked him with their respective weapons.
On his raising the alarm Mahesh Chandra and Dwarka Prasad who were coming along the same road came and they shouted at the appellants.
On hearing their shouts the accused ran away.
The deceased died on the spot.
The First Information Report was lodged at 8 a.m., the Police Station being only two furlongs from the scene of occurrence.
In the First Information Report, in the second column, under the heading "Name and residence of accused", it was stated as follows "1.
Jadu Nath Singh, father 's name not known and 2.
Girand Singh father 's name not known.
Ahirs by caste, residents of Garhia Kishunpur P.S. Bewar, Distt.
Mainpuri.
" The accused surrendered on March 12, 1968, and it appears that an application was filed by the advocate on their behalf that they be kept ba pardah as they might claim identification.
Another application was put in on March 25, 1968, in which it was stated that the witnesses other than Prem Narain were strangers and they applied that there should be an identification parade.
On April 19, 1968, the then Public Prosecutor submitted a report to the Additional District Magistrate as under "Accused Jadu Nath Singh and Girand Singh in case Cr. No. 24 under Section 302 I.P.C., P.S. Bewar, have applied for identification, vide application herewith attached.
It may be submitted that they are named in the F.I.R. and charge sheet against them has also been received.
The applications are moved to delay this case.
Submitted for n.a.
" 920 The Additional District Magistrate (Judicial) passed the following order on the application, on April 20, 1968 : "As charge sheet has already been received and the accused have been named by P.Ws., there appears to be no justification for ordering test identification.
Accused be informed accordingly.
The jail authorities be informed not to keep them ba parda.
" We have set out these facts in detail because, as will presently appear, one of the points raised by the learned counsel is that failure to put up the accused for identification either vitiated the trial or, in any case, rendered the evidence of, P.W. 2, Mahesh Chandra, and P.W. 3, Dwarka Prasad, useless.
We may here notice that portion of the evidence of Dr. N. K. Mital, who conducted the postmortem examination and on which one other point is sought to be founded.
He found that the stomach was empty and the small intestines were half full and the large intestines were also half full.
In cross examination he stated that since the stomach was empty, the deceased should have taken his last meal about 4 to 6 hours before the infliction of the injuries.
" He was asked: " 'The evidence is that the deceased took puris and vegetable at 8 p.m. on 25 2 68; and according to the case for the prosecution his murder took place at 7.30 a.m. on 26 2 68.
At the time of post mortem the stomach was found empty and both the small and large intestines were found half full.
Does it not indicate that in all likelihood the man was murdered between 3 and 4 a.m. ?" To this question Dr. Mital answered "No. It is not an indication of this fact.
After finishing his meal at about 8 or 8.30 p.m. on 25 2 68 the stomach could have got empty by 2 or 2.30 a.m.
The digested food material should have come in the small intestine by about 2 or 2.30 a.m. Complete digestion takes place in the small intestine.
And if he had answered the call of nature the preceding evening fully and completely, even then the small and large in testines might be half full and stomach empty if he had taken puries with vegetable at 8 p.m. on 25 2 68." ' The learned Sessions Judge believed the evidence of Prem Narain, corroborated as it was by the injuries sustained by him in the course of the occurrence at the hands of one of the assailants, namely, Girand Singh.
He also believed the evidence of Mahesh Chandra, P.W. 2, and Dwaraka Prasad, P.W. 3.
He relied on the fact that the appellants had absconded immediately after the crime and had only appeared before the Court as late as March 12, 921 1968, after proceedings under sections 87 and 88 of the Code of Criminal Procedure had been taken against them.
Regarding the claim of the appellants for identification the learned Sessions Judge observed that during the course of investigation both Mahesh Chandra and Dwarka Prasad had named the accused persons, and it would indeed have been surprising if the Additional District Magistrate (Judicial) had directed the accused to be paraded at a test identification parade in the jail.
He observed that the evidence indicated that the accused persons were not strangers even to Mahesh Chandra and Dwarka Prasad at the time of the occurrence.
Mahesh Chandra had stated in his evidence that he had known the accused persons for about 4 years and that they were living at village Garhiya lying at a distance of three furlongs from Bewar, and that Girand Singh was reading at the Amar Shaheed Inter College, Bewar.
Dwarka Prasad had stated that he had seen Girand visiting Bewar before that day.
He had also seen Jadu Nath Singh at Bewar but only once or twice before that.
For all these reasons the learned Sessions Judge held that the applications claiming identification were not bona fide and were intended to protract the proceedings, and accordingly he was unable to draw any adverse inference against the prosecution for the omission to parade the accused persons at a test identification parade in the jail.
The High Court believed the three eyewitnesses, Prem Narain, Mahesh Chandra and Dwarka Prasad.
The High Court held that "Mahesh and Dwarka Prasad are wholly independent witnesses having no affinity with the deceased and entertaining no animosity towards the appellants.
" The High Court observed that these ' witnesses had claimed to have known the appellants for the last six or seven years as they had been frequently visiting the town of Bewar, and the appellant, Girand Singh, was a student in a college at Bewar.
The learned counsel for the appellants raised two principal points before us (1) Since the accused were denied identification the trial was vitiated; (2) The medical evidence is in conflict with the prosecution case about the time of the assault.
The learned counsel further urged that the number and nature of injuries belie the prosecution story, and that the application by the deceased to the Superintendent of Police was nothing but a peshbandi.
He urged that the eye witnesses were not reliable and the courts below had missed the point that the appellants could not have anticipated that the deceased would be at this particular spot at that time.
922 The learned counsel relied on the following observations of the Lahore High Court in Sajjan Singh vs Emperor(1) "If an accused person is already well known to the witnesses, an identification parade would, of course, be only a waste of time.
If, however, the witnesses claim to have known the accused previously, while the accused himself denies this, it is difficult to see how the claim made by the witnesses can be used as a reason for re using to allow their claim to be put to the only practical test.
Even if the denial of the accused is false, no harm is done, and the value of the evidence given by the witnesses may be increased.
It is true that it is by no means uncommon for persons who have been absconding for a long time to.
claim an identification parade in the hope that their appearance may have changed suffi ciently for them to escape recognition.
Even so, this is not in itself a good ground for refusing to allow any sort of test to be carried out.
It may be that the witnesses may not be able to identify a person whom they knew by sight owing to some change of appearance or even to weakness of memory, but this is only one of the facts along with many others, such as the length of time that has elapsed, which will have to be taken into consideration in determining whether the witnesses are telling the truth or not.
" State of U.P. vs Jagnoo (2 ) refers to Sajjan Singh vs Emperor(1) with approval.
In re Sangiah(3) the decision of the Lahore High Court in Sajjan Singh vs Emperor (Supra) was dissented from Rajamannar, J., observed : "I am unable to find any provision in the Code which entitles an accused to demand that an identification parade should be held at or before the enquiry or the trial.
An identification parade belongs to the stage of investigation by the police.
The, question whether a witness has or has not identified the accused during the investigation is not one which is in itself relevant at the trial.
The actual evidence regarding identification is that which is given by the witness in Court.
The fact that a particular witness has been able to identify the accused at an identification trade is only a circumstance corroborative of the identification in Court.
If a witness has (1) A.I.R. 1945 Lab. 48, 50.
(2) A.I.R. 1968 All. 333, (3) A.T.R. , 923 not identified the accused at a parade or otherwise during the investigation the fact may be relied on by the accused, but I find nothing in the provisions of the Code which confers a right on the accused to demand that the investigation should be conducted in a particular way.
" In Perkash Chand Sogani vs The State of Rajasthan (1) (an unreported decision of this Court) in connection with the point regarding identification, it was observed : "Much is sought to be made out of the fact that no identification parade was held at the earliest opportunity in order to find out whether P.W. 7 Shiv Lal could have identified the appellant as the person who was at the wheel of the car and drove it and reliance is placed upon Awadh Singh & Others vs The Patna State(2) Provash Kumar Bose and Another vs The King(3) and also Phipson on the Law of Evidence, 9th Ed., p. 415 to justify the contention that in criminal cases it is not sufficient to identify the prisoner in the dock but the police should have held an identification parade at the earliest possible opportunity to show that the accused person had been connected with the crime.
It is also the defence case that Shiv Lal did not know the appellant.
But on a reading of the evidence of P.W. 7 it seems to us clear that Shiv Lal knew the appellant by sight.
Though he made a mistake about his name by referring to him as Kailash Chandra, it was within the knowledge of Shiv Lal that the appellant was a brother of Manak Chand and he identified him as such.
These circumstances are quite enough to show that the absence of the identification parade would riot vitiate the evidence.
A person, who is well known by sight as the brother of Manak Chand, even before, the commission of the occurrence, need not be put before an identification parade in order to be marked out.
We do not think that there is any justification for the contention that the absence of the identification parade or a mistake made as to his name, would be necessarily fatal to the prosecution case in the circumstances." In Awadh Singh vs The State(2) it was held that "the accused person may or may not have legal right to claim for test identification and the holding of test identification may or may not be a rule of law, but it is a rule of prudence.
Test identification parade should be held especially when the accused persons definitely as (1) Criminal Appeal No. 92 of 1956, decided on January 15, 1957.
(2) A.I.R. 1954 Patna 483, (3) A.I.R. 1951 Cal.
475, 924 sert that they were unknown to the prosecution witnesses either by name or by face and they requested the authorities concerned to have the test identification parade held." In Provesh Kumar Bose vs The King(1), a Division Bench of the Calcutta High (Harries C.J., & Das Gupta, J.) held: "The fact that the witnesses have identified in Court the accused is of very little consequence in a prosecution under section 384, Penal Code, when none of the witnesses knew the accused from before. . the cor roborative evidence which one is entitled to expect in cases of this nature is the evidence of the witnesses having pointed the accused whom they identified in Court from the midst of other persons with whom they were mixed up at a test identification parade.
The evidence of their having identified such persons at a test identification parade has no substantive value, but is very important corroboration of their evidence in Court.
" In Kanta Prasad vs Delhi Administration ( 3 ) a point was made regarding non holding of test identification parade by the police and this Court observed : "As for the test identification parade, it is true that no test identification parade was held.
The appellants were known to the police officials who had deposed against the appellants and the only persons who did not know them before were the persons who gave evidence of association, to which the High Court did not attach much importance.
It would no doubt have been prudent to hold a test identification parade with respect to witnesses who did not know the accused before the occurrence, but failure to hold such a parade would not make inadmissible the evidence of identification in court.
The weight to be attached to such identification would be a matter for the courts of fact and it is not for this Court to reassess the evidence unless exceptional grounds were established necessitating such a course.
" It seems to us that, it has been clearly laid down by this Court in Perkash Chand Sogani vs The State of Rajasthan(3) that the absence of test identification in all cases is not fatal and if the accused person is well known by sight it would be waste of time to put him up for identification.
Of course if the prosecution fails to hold an identification on the plea that the witnesses already knew the accused well and it transpires in the course of the trial (1) A.I.R. 1951 Cal.
(2) ; ,1221.
(3) G.A. No. 92 of 1956 decided on 15 1 1957.
925 hat the witnesses did not know the accused previously, the prosecution would run the risk of losing its case.
It seems to us that if there is any doubt in the matter the prosecution should hold an identification parade specially if an accused says that the alleged eyewitnesses did not know him previously.
It may be that there is no express provision in the Code of Criminal Procedure enabling an accused to insist.
on an identification parade but if the accused does make an application and that application is turned down and it transpires during the course of the trial that the witnesses did not know the accused previously, as pointed out above the prosecution will, unless there is some other evidence, run the risk of losing the, case on this point.
In the present case, however, it is clear that P.W. Mahesh Chandra knew the accused persons for about four years and said : "I know the accused persons, Jadunath Singh and Girand Singh for about 4 years.
They live at village Garhiya lying at a distance of three furlongs from Bewar.
Girand Singh is reading at the Amar Shaheed Inter College, Bewar.
" No cross examination was directed on this point.
P.W. 3, Dwarika Prasad, stated "I had seen Girand visiting Bewar before that but I had seen Jadunath at Bewar only once or twice before that day.
Identifies both the accused persons in the dock.
Lays hand correctly on Jadunath; and also lays hands correctly on Girand in the, dock.
" In cross examination he stated "I had seen Jadunath accused at Bewar at the shop of one Chhakku once or twice before the occurrence.
I had seen him two or 2 1/2 years back.
" It seems to us that the reason given by the Public Prosecutor in the report and the reason given by the Additional District Magistrate (Judicial) in the order directing that identification requested for be not held were not valid.
The fact that a charge sheet had been received and the accused had been named by P.W.s was no justification for not having ordered the test identification.
But on the facts of this case it is clear that P.W. 2 at least knew the accused from before.
As regards P.W. 3, although he claims to have known the accused, it is clear that his knowledge of the accused was very scant and if it had not been for the evidence of P.W. 2 we would not have placed reliance on the 926 evidence of P.W. 3 in view of the fact that the police did not ask him to identify the appellant.
It is stated in Phipson on the Law of Evidence, 9th Ed., p. 415, as follows : "In criminal cases it is improper to identify the accused only when in the dock; the police should place him, before hand, with others, and ask the witness to pick him out.
Nor should the witness be guided in any way nor asked "Is that the man We consider that the same is the law in India, if the identity is in doubt.
Accordingly on the facts of this case we are of the opinion that the trial was not vitiated because the accused persons were denied identification.
Regarding the second point, we have already extracted the evidence of the doctor, and it is quite clear to us that the evidence is not in conflict with the prosecution case.
If the occurrence took place at about 7.30 a.m. and the deceased had not taken any food in the morning, his stomach would still be empty at 7.30 a.m.
If anything the medical evidence destroys the case of the defence that the murder took place at about 3 in the morning.
We are unable to think that the deceased would leave with Prem Narain at 3 a.m. to catch a bus which was supposed to leave at about 7 a.m.
This appeal is by special leave and this Court does not reappropriation the evidence.
The, other points raised by the learned counsel are of that nature, and at any rate there is no substance in those points.
The appeal accordingly fails and is dismissed.
G.C. Appeal dismissed.
L694SupCI/70 2500 29 4 72 GIPF. | The appellants were accused of an offence under, section 302 read with section 34 of the Indian Penal Code.
Apart from P who was injured in the incident there were, according to the prosecution, two other eye witnesses M and D who.
knew the appellants from before.
The names of the appellants were mentioned in the First Information Report but not their parentage.
The appellants, at the stage of inquiry, made an application to the Additional District Magistrate (Judicial) requesting that a test identification parade be held.
According to the appellants P knew them from before but not the other two alleged eye witnesses.
The Magistrate rejected the application on the ground that the charge sheet had, already been filed.
The same request made at the trial stage to the Sessions Judge was again rejected on the ground it was not bona fide.
The trial court, believing the eye witnesses, convicted the appellants.
The High Court upheld their conviction and did not accept their plea that the trial had been vitiated because they had been denied a test identification parade.
In appeal to this Court by special leave, HELD: As laid down by this Court in Perkash Chand Sogani 's case the absenceof test identification in all cases is not fatal, andif the accused person is well known by sight it would be waste of time to put him up for identification.
But if there is any doubt in the matter the prosecution should hold an identification parade specially if an accused says that the alleged eyewitnesses did not know him previously.
It may be that there is no express provision in the Code of Criminal Procedure enabling an accused to insist on an identification parade but if the accused ' does make an application and that application is turned down and it transpires during the course of the trial that the witnesses did not know the accused previously, the prosecution will, unless there is some evidence,, run the risk of losing the case on this point.
[924 G 925 C] Perkash Chand Sogani vs State of Rajasthan, Cr.
92/1956 dt.
15 1 1957, applied.
Sajjan Singh vs Emperor, A.I.R. 1945 Laj. 48, State of U.P. vs Jagnoo, A.I.R. 1962 All.
333, In re Sangish, A.I.R. 1948 Mad. 113, Awadh Singh & Ors.
vs Patna State, A.I.R. 1954 Pat 483, Provash Kumar Bose vs The King, A.I.R. 1951 Cal.
475, Kanta Prasad vs Delhi Administration ; 1221, referred to.
In the present case it could be said about D that his knowledge of the accused was very scant.
The claim of the other witness M that he had known the accused for about four years was not challenged in crossexamination.
Therefore on the facts of the case the trial of the appellants.
918 Could not be held to be vitiated because of the denial of test identification although the reason given by the Magistrate for refusing it, namely, that the cbarge sheet had already been filed, was wrong.
[925 G 926 C] |
ivil Appeal No. 4031 of 1988.
From the Judgment and Order dated 14.4.1988 of the Patna High PG NO 867 PG NO 868 Court in C.W.J.C. No. 1923 of 1988.
R.K. Jain, R.P.Singh and Y.D.Chandrachud for the Appellant.
U.S. Prasad for the Respondents.
The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J.
Special leave granted.
The order dated 25th March, 1988 of the Collector is under challenge in this appeal.
The same reads as follows: "Shri Raghu Nath Thakur S/o Late Gorakh Thakur, Village Repura, P.S. Puksha, District Samastipur had bid for Rs.11,900 (Rupees eleven thousands only) per month Dak in an auction of Beni Country liquor shop held on 27.3.88 and he as given the shop of Beni Country liquor but after signing in Bandobasti Register he did not deposit dak amount.
The name of Shri Raghu Nath Thakur S/o Late Gorakh Nath Village Repura, P.S. Pusa, Distt.
Samastipur is therefore placed in the black list for future under the orders passed by the Collector, Samastipur.
" This order was passed pursuant to the order of the Collector.
The letter dated 25th March, 1988, states as follows: "The Collector of the district after perusal of the said office note passed order on 25.3.88 which is produced in verbatim below: Ist bidder chunki defaulter hai atah security prapt kar len tatha bhavishya ke liae Black list karen.
" Indisputably, no notice had been given to the appellant of the proposal of black listing the appellant.
It was contended on behalf of the State Government that there was no requirement in the rule of giving any prior notice before black listing any person.
In so far as the contention that there is no requirement specifically of giving any notice is concerned, the respondent is right.
But it is an implied principle of the rule of law that any order having civil consequence should be passed only after following the PG NO 869 principles of natural justice.
It has to be realised that black listing any person in respect of business ventures has civil consequence for the future business of the person concerned in any event.
Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order.
In that view of the matter, the last portion of the order in so far as it directs black listing of the appellant in respect of future contracts, cannot be sustained in law.
In the premises, that portion of the order directing that the appellant be placed in the black list in respect of future contracts under the Collector is set aside.
So far as the cancellation of the bid of the appellant is concerned, that is not affected.
This order will, however, not prevent the State Government or the appropriate authorities from taking any future steps for blacklisting the appellant if the Government is so entitled to do so in accordance with law, i.e. giving the appellant due notice and an opportunity of making representation.
After hearing the appellant, the State Government will be at liberty to pass any order in accordance with law indicating the reasons therefor.
We, however, make it quite clear that we are not expressing any opinion on the correctness or otherwise of the allegations made against the appellant.
The appeal is thus disposed of.
Appeal disposed of. | The appellant has bid in an auction of Beni Country Liquor Shop in the District of Samastipur and was given the shop being the highest bidder but he failed to deposit the bid money in time.
The Collector, Samastipur by an order cancelled the bid and black listed the appellant.
He then moved the High Court against the order of the Collector.
The High Court upheld the order of the Collector.
The appellant appealed to this Court by special leave.
Disposing of the appeal, the Court, HELD: 1.
It is an implied principle of the rule of law that any order having civil consequences should be passed only after following the principles of natural justice.
Black listing any person in respect of business ventures has civil consequences for the future business of the person concerned in any event.
[868H; 869A] 2.
Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order.
[869B] In the instant case, that portion of the order directing that the appellant be placed in the black list in respect of future contracts under the Collector is set aside.
So far as the cancellation of the bid of the appellant is concerned, that is not affected.
[869B C] |
minal Appeal No. 834 of 1965.
Appeal by special leave from the judgment and order dated October 19, 24, 1964 of the Bombay High Court in Criminal Appeal No. 1330 of 1964.
A. section R. Chari, R. Nagaratnam, Vineet Kumar and Shyamala Pappu, for the appellant.
Debabrata Mukherjee, H. R. Khanna and section P. Nayar, for the respondent.
The Judgment of the Court was delivered by Sikri, J.
This is an appeal by special leave against the judgment and order of the High Court of Judicature at Bombay dismissing the appeal of the appellant against the conviction recorded by the Special Judge for Greater Bombay.
The appellant was convicted by the Special Judge under section 5(2), read with section 5 1 (1 ) (a) X (d) and section 5 (3 ), of the Prevention of Corruption Act, 1947 (11 of 1947) hereinafter referred to as the Act and sentenced to suffer rigorous imprisonment for three years and to pay a fine of Rs. 1,25,000/ , in default of payment of fine to suffer further rigorous imprisonment for one year.
The Special Judge further directed that the amount of fine be recovered from the properties seized.
The following charge was framed against the appellant: " That you, while functioning as (a) Income tax Officer, from about 1st April 1947 to November 1954 at Jalgaon Dhulia, Godhra and Mahansa (b) as Inspector of Income tax from November 1954 to January 1958 at Surat and Broach, (c) as Incometax Officer from January 1958 to the end of November 1961 at Bhavnagar, Dhulia, Amraoti and Ratnagiri, habitually accepted or obtained and habitually agreed to accept or attempted to obtain gratification other than legal remuneration and obtained for yourself pecuniary advantage by corrupt and illegal means or by otherwise abusing your position as a public servant, with the result that, during the said period you came in possession of assets of the value of about Rs. 2,01,080/ which were disproportionate to your known sources of income for which you could not satisfactorily account and you thereby committed the offence of criminal misconduct punishable under subs.
(2) read with section (1) (a), (d) & (3) of section 5 of Act IT of 1947, the Prevention of Corruption Act, 1947, and within the cognizance of this Court.
" 238 The case of the prosecution before the Special Judge was that the appellant was habitually corrupt, and wherever he was posted he used to develop personal contacts with the assessees, whose cases were pending before him and in his talk with them he tried to impress upon them that they were likely to be heavily taxed; he used to create a favourable psychological background and taking advantage of the same tried to screw out money from them; if the assessee did not accept his proposal or proved to be smarter, he used to harass him by various methods.
The prosecution sought to establish the charge against him under section 5(1)(a) of the Act by leading evidence of five instances: (i) He obtained from the witness Gopaldas an amount of Rs. 3,000/ as a loan and subsequently converted it as his personal gratification for finalising income tax cases of his firm.
(ii) He demanded an illegal gratification ( Rs. 10,000/ from the witness Gopaldas to show him were pending before him.
(iii) He attempted to obtain bribe from P.W. 7 Motilal Bansgopal, whose income tax proceedings were pending before him.
(iv) He atempted to obtain bribe from the assessee P.W. 9, Somchand Khimji, whose income tax proceedings were pending before him.
(v) He also made a demand of bribe of Rs. 400/ to Rs. 500/ from P.W. 93 Gulabdas Kisondas Bhatia of Dharanyaon.
Before the Special Judge the prosecution also relied on the presumption arising under section 5(3) of the Act as the accused was found to be in possession of assets worth about Rs. 2,01,080 which were disproportionate to his known sources of income.
The learned Special Judge, in a very detailed and lengthy judgment, held that it was not proved that the appellant had obtained Rs. 3000/ from Gopaldas representing that he wanted the amount as a hand loan for taking delivery of the car.
He further held that it was not proved that the appellant demanded bribe of Rs. 10,000/ from him as a motive for doing him favour in the disposal of his wealth tax cases.
Regarding P.W. 7.
Motilat Bansgopal.
the Special Judge held that the accused had entertained a corrupt motive in asking the assessee P.W. 7to see him at his residence, and this circumstance could be considered against him in considering the charge for the offence of 239 habitually being corrupt.
Regarding Somchand, P.W. 9, the Special Judge held that the appellant had made an implied demand of bribe and had a guilty conscience.
Regarding Gulabdas, he held that the allegation regarding demand of bribe from P.W. 93, Gulabdas, had not been proved.
He summarised.
the findings thus "Thus out of specific instances the prosecution has established only two and it has been proved that the accused had made an implied demand of bribe from P.W. 9, Somchand and he had also asked P.W. 7, Motilal to come to his residence in connection with the delay in filing the return.
The second instance though does not establish any demand of bribe as such, it does prove the proclivity of the mind of the accused and a corrupt tendency and would support the prosecution version." He further held that "the two instances proved will not themselves be sufficient to prove habit of bribe taking and the question is whether considering all the matters before the court it can be held that the accused is guilty of criminal misconduct and if yes, of what category." He further held that the appellant could be convicted on the strength of presumption arising under section 5 (3).
The High Court repelled the contention of the appellant that no presumption arose under section 5 (3) of the Act because no specific instances had been held to be proved and, at any rate, they did not amount to an offence.
The High Court distinguished the cases of R. section Pandit vs State of Bihar,(1) and Surajpal Singh vs The State of Uttar Pradesh(2).
The High Court further observed that the trial Judge had accepted the evidence regarding two instances while it was prepared to accept the instance involving Gopaldas also.
The High Court generally agreed with the finding regarding disproportionate assets and disbelieved the explanation offered by the appellant.
Before we deal with the merits of the case, we shall taker up two preliminary points raised by the learned counsel for the appellant, Mr. Chari.
He urged that as sanction had not been given for prosecuting the appellant the whole trial was bad.
He said that the search of the appellant 's house took place on November 4, 1961, and on June 27, 1962, he was dismissed ' from service by the Commissioner of Income tax.
On July 30, 1962, charge sheet was filed in the court of Special Judge.
On (1) [1963] Suppl.
2 S.C.R. 652.
(2) ; 240 "September 21, 1962, the appellant submitted an appeal to the President of India and the President was pleased to, convert the order of dismissal into one of the removal.
The learned counsel contends that I pending the appeal the appellant should have been deemed to be in service and, therefore deemed to be in service on July 30, 1962.
A similar point was raised before the Special Judge and he repelled the contention in the following terms . "For requiring a sanction to be taken before taking cognizance of an offence against a person, he must be in actual employment of the State.
A mere right of appeal will not invest him with that status.
Moreover, a person may have right of appeal, but he may not exercise the same and may not file the appeal.
It is purely within his discretion and the act of taking cognizance which is the course of law would not be made dependent upon such arbitrary and discretionary alternatives held by a person.
" The Special Judge also referred to rule 23 of the Central Civil Services (Classification, Control and Appeal) Rules, 1957, and the explanation thereto in which it is stated : "In this rule the expression 'member of a Central Civil Service ' includes a person who has ceased to be a member of the service.
" This explanation was also relied on before us.
Regarding the explanation the learned Special Judge came to the conclusion that the explanation was restricted to that particular rule for giving the dismissed servant a right to prefer an appeal.
We agree with the conclusion of the learned Special Judge.
Section 6 of the Act reads as follows : "Previous sanction necessary for prosecution.
(1) No Court shall take cognizance of an offence punishable under section 161 or section 164 or section 165 of the Indian Penal Code (Act 45 of 1860), or under sub section (2) of section 5 this Act, alleged to have been committed by a public servant, except with the previous sanction, (a) in the case of a person who is employed in connection with the affairs of the Union and is not removable from his office save, by or with the sanction of the Central Government, of the Central Government.
241 (b) in the case of a person who is employed in connection with the affairs of a State and is not removable from the office save by or with the sanction of the State Government, of the State Government; (c) in the case of any other person, of the authority competent to remove him from his office.
(2) Where for any reason whatsoever any doubt arises whether the previous sanction as required under sub section (1) should be given by the Central or State Government or any other authority, such sanction shall be given by that Government or authority which would have been competent to remove the public ser vant from his office at the time when the offence was alleged to have been committed.
" It seems to us that the person must be employed in connection with the affairs of the Union in sub cl.
(a) and with the affairs of the State in sub cl.
(b) The case of the appellant would be covered in sub cl.
(a) because he had been employed in connection with the affairs of the Union.
But the sub section contemplates that the person must be employed in connection with the affairs of the Union and not that he was employed with the affairs of the Union.
The policy underlying section 6, and similar sections, is that there should not be unnecessary harassment of public servants.
But if a person ceases to be a public servant the question of harassment does not arise.
The fact that an appeal is pending does not make him A public servant.
The appellant ceased to be a public servant when the order of dismissal was passed.
There is no force in the contention of the learned counsel and the trial cannot be held to be bad for lack of sanction under section 6 of the Act.
The other preliminary point which the learned counsel raised was that the charge was defective.
We have already set out the charge.
It is true that there are no instances given in the charge.
But as the charge is of habitually accepting the.
bribe it is no,, necessary that the various instances should have been mentioned.
It was expressly so held by this Court in Biswabhusan Naik vs The State of Orissa(1).
This Court overruled a similar point in the following words: "But no particulars need be set out in the charge in such a case because the offence under section 5(1) (a) does not consist of individual acts of bribe as in section 161 of the Indian Penal Code but is of a general character.
Individual instances may be useful to prove (1) [1955]1 S.C.R.92.
2 807 Sup CI/71 242 the general averment in particular cases but it is by no means necessary because of the presumption which section 5(3) requires the Court to draw.
" This Court accordingly held in that case that there was no illegality in the charge.
We accordingly hold that the charge in this case was not illegal.
We may now deal with the merits of the case.
This is an appeal by special leave, and as there are concurrent findings of fact we do not ordinarily go into questions of fact.
But we allowed Mr. Chari to take us through the relevant evidence, both oral and documentary, in order to show whether the concurrent findings were vitiated in any respect.
He has not been able to point out any circumstances which may lead us to differ from the concur rent findings.
It is true that as far as the case of Gopaldas is concerned the High Court differed from the Special Judge and held that the allegations were proved.
The learned counsel has taken us in detail through the material relevant to this witness and we are inclined to agree with the conclusion arrived at by the High Court.
But apart from that the concurrent findings regarding P.W. 7, Motilal, and P.W. 9, Somchand, and the presumption arising under section 5(3) are sufficient to sustain the conviction recorded against the appellant.
The learned counsel urged before us that if the prosecution fails to establish any of the offences mentioned in section 5 (1) (a) to 5 (1) (d), the question of assets being found disproportionate to the known sources of the accused becomes irrelevant.
A number of cases were referred to us but we are unable to agree with this proposition because we are bound by the ruling to the ,contrary given by this Court.
In Biswabhusan Naik vs State of Orissa(1), after referring to section 5(1)(a) and section 5(3), Bose, J., speaking for the Court, observed : "Therefore, all that the prosecution has to do is to show that the accused, or some person on his behalf, is in possession of pecuniary resources or property disproportionate to his known sources of income and for which the accused cannot satisfactorily account.
Once that is established then the Court has to presume, unless the contrary is proved, that the accused is guilty of the new offence created by section 5, namely criminal misconduct in the discharge of his official duty." (1) [19551] 1 S.C.R. 92.
243 Then the Court proceeded to deal with the facts thus "Now the accused was found in possession of Rs. 3,148/ .
He accounted for Rs. 430/ of that sum by showing that it was paid to him at the, time as a trap.
He has been acquitted of that offence, so all he had to account for was the balance Rs. 2,698/ .
This is a large sum for a touring officer to carry with him in cash while on tour.
His explanation was not considered satisfactory and that is a question of fact with which we are not concerned in this Court.
Therefore, all that remains to be seen is whether this was disproportionate to his known sources of income.
" Then the Court referred to the findings regarding his total emoluments drawn and the small piece of land owned by him, and observed "Once the facts set out above were found to exist and the explanation of the accused rejected as unsatisfactory, section 5(3) was at once attracted and the Court was bound to presume (the word used in the section is 'shall ' and not 'may ') that the accused was guilty under section 5(2), especially as this part of the section goes on to say 'and his conviction 'therefor shall not be invalid by reason only that it is based solely on such presumption." These facts alone are enough to sustain the conviction and we need not consider the other matters.
" The conviction, therefore, of Biswabhushan Naik, in that case, solely proceeded on the presumption as in the earlier part of the judgment it was observed that he was separately charged and separately prosecuted under section 161 of the Indian Penal Code for three specific offences of bribe taking but was acquitted on all the counts and his conviction was only under section 5 (2) alone.
Similarly in C.S.D. Swamy vs The State, Swamy 's conviction was sustained only on the presumption.
The appellant, Swamy, in that case was put up on trial on charges under sections 5(1) (a) and 5 (1) (d) of the Act.
Payments of particular sums by way of bribe were not proved against him.
But the High Court, holding that the appellant 's bare statements from the dock un supported by any other acceptable evidence could not satisfactorily account for the large deposits standing to his credit in (1) ; 244 his bank accounts raised the presumption under section 5 (3) of the ,Act and held him guilty of criminal misconduct in the discharge of his official duty under section 5 (1) (d) of the Act.
It was contended before this Court that the charge relating to specific instances of bribery having failed the contrary presumption under section 5(3) of the Act should have been established.
This Court repelled the argument in the following words : "The finding of the High Court and the court below is that the prosecution had failed to adduce sufficient evidence to prove those particular facts and circumstances of criminal misconduct within the meaning of section 5 (1 ) (a) of the Act, but the failure to bring the charge home to the accused under section 5 (1 ) (a) does not necessarily lead to the legal effect contended for.
As soon as the requirements of sub section (3) of section 5 have been fulfilled, the Court will not only be justified in making, but is called upon to make the presumption that the accused person is guilty of criminal misconduct within the meaning of section 5 (1) (d).
If there is evidence forthcoming to satisfy the requirements of the earlier part of sub section
(3) of section 5, conviction for criminal misconduct can be had on the basis of the presumption which is a legal pre sumption to be drawn from the proof of ' facts in the earlier part of the sub section
(3) aforesaid.
That is what has been found by the courts below against the accused person.
Hence, the failure of the charge under cl.
(a) of sub section
(1) of section 5 does not necesarily mean the failure of the charge tinder section 5(1)(d).
" It will be noticed that while Bose, J., in Biswabhushan Naik vs State of Orissa(1), held that once the presumption applies the accused was guilty of the new offence created by section 5, namely.
criminal misconduct in the discharge of his official duties, without specifying any of the sub clauses,Sinha, J,, as he then was.
held that the offence under ' section 5 (1) (d) 'was made out.
It is not necessary to decide in this case which is the correct way of putting the matter because, whichever reasoning is adopted the case of the appellant fails.
The case of Surajpal Singh vs State of Uttar Pradesh(2) does not assist the appellant.
It is true that, as laid down by this Court, section 5(3) does not create a new offence.
But this does not mean that if the prosecution fails to prove the specific (1) ; (2) [1961] 2 S.C.R.971.
245 charges the presumption under section 5(3) cannot be applied.
in Surajpal 's case what, happened was that the only charge against Surajpal was of 'criminal misconduct under section 5(1)(c) of the Act.
But since he was acquitted of the charge it was held that he could not be convicted.
of criminal misconduct referred to in cls.
(a), (b) or (d) of section 5(1) of the Act for which he had not been charged.
R. section Pandit vs State of Bihar(1) also does not assist 'the appellant.
It is true that it was held in that case section 5(3) does not create a separate offence but lays down only a rule of evidence and marks a departure from the well established principle of criminal jurisprudence that onus is always on the prosecution to bring home the guilt to the accused.
But it does not follow from this that if the prosecution has failed to prove specific instances it cannot rely on the presumption.
The learned counsel contended that if this is the law, the prosecution need not allege any specific instance at all and could come to Court only alleging that the accused had assets disproportionate to his known sources of income.
This point does not arise in this case and is not likely to arise again because the Act has since been amended and the act of possessing pecuniary resources or property disproportionate to known sources of income, for which the public servant cannot satisfactorily account, has been made into a separate offence.
Therefore we need not consider this example given by the learned counsel.
Accordingly we hold that the, appellant in this case had pecuniary resources and property disproportionate to his known sources of income, and that both the High Court and the learned Special Judge rightly held that the presumption arose under section 5 (3).
We may mention that the learned counsel tried to show that the assets were not too disproportionate but nothing has been shown which would entitle us to set 'aside the concurrent findings on this aspect of the case.
The learned counsel then said that a fine of Rs. 1,25,000/ has been levied and the appellant has already undergone sen tence of about four months.
He said that the appellant is now on bail and it would be hard on him if we send him back to jail.
He further said that the investigation began somewhere in 1961, the trial began in 1963, and the expenses of the,trail and the printing of the records has cost the appellant a great deal, (1) [1963] Supp. 2 S.C.R. 652. 246 and further that the State has kept Rs. 1,25,000/ out of the seized amount for recovery of the fine.
The learned council for the respondent drew our attention to section 5(2) which provides that any public, servant who commits criminal miscounduct in the discharge of his duty shall be punishable with imprisonment which shall not be less than one year but which may extend to seven Years and shall also be liable to fine, provided that the court may, for any special reasons recorded in writing impose a sentence of imprisonment of less than one year.
It seems to us that in view of the facts mentioned by the learned counsel for the appellant it will meet the ends of justice if the sentence is reduced to one already undergone, maintaining the sentence of fine.
In the result the appeal is allowed to the extent that sentence of three year 's rigorous imprisonment is altered to imprisonment already undergone.
His bail bonds shall stand cancelled.
V.P.S. Sentence modified. | The appellant, who was an income tax Officer, was, dismissed from service and against the order of dismissal he filed an appeal to the President of India.
Meanwhile, he was charged under the Prevention of Corruption Act, 1947, with the offence of habitually accepting bribes.
Five instances were offered by the prosecution in evidence against him to prove the charge.
The trial court accepted the evidence regarding two instances, and convicted the appellant under section 5(2) read with sections 5(1)(d) and 5(3) of the Act drawing the presumption under section 5.(3) (before its amendment in 1964) against him on the ground that he was in possession of assets disproportionate to his known sources of income.
He was sentenced to rigorous imprisonment for three years and to pay a fine of Rs. 1,25,000/ , to be recovered from the properties siezed from him.
The High Court accepted the evidence regarding one more instance and confirmed the conviction and sentence.
In appeal to this Court, HELD : (1) The trial is not bad for lack of santcion under section 6 of the Act.
The appellant ceased to be a public servant when the order of dismissal was passed.
The fact that an appeal was pending would not make him a public servant.
Sanction is necessary only when the person is employed in connection with the affairs of the Union and not when he was employed.
[241 D F] (2)Since the charge was one of habitually accepting bribes it was not necessary that specific instances of taking bribe should be given in the charge.
[241 G] Biswabhusan Naik vs State of Orissa, ; , followed.
(3) The appellant had property disproportionate to his known sources of income and the presumption under section 5(3) of the Act was rightly drawn against him.
Failure to establish any of the offences in section 5(1) (a) to (d) is irrelevant for sustaining a conviction based on the presumption.
Biswabhusan Naik vs State of Orissa, ; and C. S.D. Swamy vs State, ; , followed.
Surajmal Singh vs State of Uttar Pradesh, [1961] 2 S.C.R. 971 and R. section Pandit vs State of Bihar, [1963] Supp.
2 S.C.R., 652, referred to and explained.
[245 C] (4) In view of the fact that the appellant had undergone the sentence for about four months and a large fine was imposed on him, the ends of justice would be met if the sentence is reduced to one already undergone while maintaining the sentence of fine.
[246 B C] 237 |
Appeal No. 595 of 1967.
Appeal from the judgment and order dated July 28, 1966, of the Assam and Nagaland High Court in Civil Rule No. 242 of 1964.
Naunit Lal, for the appellants.
D. N. Mukherjee, for the respondent.
299 The Judgment of the Court was delivered by Shah, C.J.
The Divisional Forest Officer, Kamrup Division, Assam invited tenders for the purchase of monopoly rights to quarry stone from certain areas, including Harengi Stone Quarry Mahal, for the period July 1, 1963 to June 30, 1964.
Mool Chand Sarougi hereinafter called 'the respondent ' submitted a tender accompanied by the requisite deposit of Rs. 100/ as earnest money, and offered the rate of Rs. 5.25 per rupee of royalty.
The tender, submitted by the respondent was accepted and for the minimum quantity of 1,25,000 c. ft. of stone allotted to the respondent out of the quarry he was to pay Rs. 31,250/ .
Intimation of acceptance of the tender was given to the respondent on July 13, 1963.
One Baputi Ram, a member of a scheduled tribe, appealed ' against the order of the Divisional Forest Officer accepting the, tender, to the Government of Assam and obtained a stay order.
After about three months he declined to prosecute the appeal and ' his appeal was dismissed.
The respondent then declined to, accept the settlement of the quarry.
The Divisional Forest Officer invited fresh tenders.
The offers made were not however accepted and tenders were invited again.
On January 10, 1964 a settlement was made for a minimum quantity of 50,000 c. ft. for the period from January 25, 1964 to June 30, 1964 for Rs. 10,000/ The Divisional Forest Officer, thereafter, sought to recover the amount of Rs. 31,250/ for which the tender of the respondent was accepted as arrears of land revenue in the manner provided by section 75 of the Assam Forest Regulation VII of 1891.
The respondent then moved a petition in the High Court of Assam for an order quashing the proceeding for recovery of the amount demanded.
The High Court held that the amount claimed was, not recoverable under the provisions of the Assam Forest Regulation, VII of 1891 and passed an order quashing the proceeding for recovery and issued a mandamus to the Divisional Forest Officer, Kamrup Division not to proceed with the recovery.
The State of Assam has appealed to this Court with certificate granted by the High Court.
Section 75 of the Assam Forest Regulation VII of 1891 pro vides : "All money, other than fines, payable to Crown under this Regulation, or under any rule made thereunder, or on account of the price of any forest produce, or of expenses incurred in the execution of this Regulation 300 in respect of any forest produce, may, if not paid when due, be recovered under the law for the time, being in force as if it were an arrear of land revenue.
" The amount claimed to be due from the respondent is not on account of the price of any forest produce, or of expenses incurred in the execution for recovery of any forest produce.
The amount is also not due in the execution of the Regulation.
So far there is common ground.
It was claimed, however, that the amount was due under rule 10 promulgated in exercise of power under the Regulation and on that account it was recoverable as an arrear of land revnue.
Rule 10 provides "No lease for any fixed period giving the right of removing India rubber, cane, kutcha or cutch, lac, agar, ivory, or any other forests produce shall be given otherwise than in accordance with the general or special orders of the Conservator who is empowered to authorise sales in respect of such leases, by auction, tender or any other method at such rates as he may decide in his discretion.
" The Rule in our judgment does not apply to recovery of the amount alleged to be due for failure to carry out the obligations ,of the tender by proceedings under the Assam Forest Regulation 1891.
It is again difficult to hold that stone is forest produce within the meaning of the Act.
In any event the Rule does not give rise to any liability to pay a sum of money.
It merely imposes a limitation upon the power of the officers of the Forest Department to grant leases in respect of certain forest produce.
Ile lease may not be granted except in accordance with the general or special orders of the Conservator who alone As empowered to authorise a sale in respect of such a lease.
It is a rule relating to the exercise of power to grant leases.
The High Court was, in our judgment, right in observing that the amount of damages for breach of the terms of the sale notice is not an amount due under the Regulation, or rule 10 made thereunder.
The appeal accordingly fails and is dismissed with costs.
G.C. Appeal dismissed. | The Divisional Forest Officer Kamrup Division Assam invited tenders for the purchase of monopoly rights to quarry stone for the period July 1, 1963 to June 30, 1964.
The tender submitted by the respondent was accepted and for the minimum quantity of 1,25,000 c.ft. of stone allotted to the res pondent he was to pay Rs. 31,250/ On appeal being filed against the order accepting the tender the Government of Assam granted stay of the order.
When three months later the appeal was dismissed for non prosecution the respondent declined to accept settlement of the quarry.
Thereafter tenders had to be invited again and it was only on January 10, 1964 that a settlement was made for a minimum quantity of 5000 c.ft.
for the period from January 25, 1964 to June 30, 1964 for Rs. 10,000.
The Divisional Forest Officer then sought to recover the amount of Rs. 31,250/ for which the tender of the respondent was accepted as arrears of land revenue in the manner provided by section 75 of the Assam Forest Regulation VII of 1891.
The respondent moved a petition in the High Court for an order quashing the proceeding for recovery of the amount demanded.
The High Court allowed the petition.
holding that the amount claimed was not recoverable under the aforesaid Regulation.
The State of Assam appealed to this Court with certificate.
It was conceded that the amount was not 'recoverable under section 75 of the Regulation but reliance was placed on Rule 10 of the rules made under the Regulation, HELD The appeal must fail.
Rule 10 does not apply to recovery of the amount alleged to be due for failure to carry out the obligations of the tender by proceedings under the Assam Forest Regulation 1891.
It is again difficult to hold that 'stone ' is forest produce within the meaning of the Act.
In any event the Rule does not give rise to any liability to pay a sum of money.
It merely imposes a limitation upon the power of the officers of the Forest Department to grant leases in respect of certain forest produce.
The lease may not be granted except in accordance with the general or special order of the conservator who alone is empowered to authorise sale in respect of such a lease.
[300 E F] |
Appeal No. 1311 of 1967.
Appeal by special leave from the judgment and order dated January 17, 1967 of the Patna High Court in C.W.J.C. No. 952 of 1966.
M. C. Chagla, N. D. Karkhanis, section P. Chowdhury, Bhuvanesh Kumari, for the appellant.
section C. Manchanda, R. N. Sachthey and B. D. Sharma, for the respondent.
The Judgment of the Court was delivered by Hegde, J.
This is an assessee 's, appeal by special leave against the judgment of the High Court of Patna dismissing in limini its writ petition under Arts 226 and 227 of the Constitution of India.
The assessee is having construction contracts under the Railways as well as the Government.
It is a partnership firm.
For the assessment year 1960 61, relevant to the accounting year 1959 60, after the assessee submitted its income tax return, it was asked by the Income tax Officer during the income tax assessment proceedings to produce before him its books of account and the other relevant papers.
The assessee also produced before him a statement showing various creditors from whom it had borrowed on Hundis during the accounting year in question.
In that statement it gave the lull names and address of the alleged creditors.
After enquiry, the assessee 's total income was assessed at Rs. 69,886/ .
On June 3, 1966, the 1st respondent (Income tax Officer Ward 'A ',, Muzaffarpur) issued to the assessee a notice under section 148 of the Indian Income tax Act, 1961.
The material portion of that notice reads as follows "Notice under section 148 of the Income tax Act, 1961.
Income Tax Officer, Muzaffarpur Dated, the 3 6 1966.
TO M/s. Chugamal Rajpal, Muzaffarpur.
Whereas (1) have reason to believe that your income chargeable the income of 1960 1961 in respect of which you are assessable to tax for the assessment year 19 19 has escaped assessment within the 444 meaning of section 147 of the Income Tax Act, 1961.
I therefore propose to re assess the income for the said assessment year and I hereby require you to deliver to me within 30 days from the date of service of this notice a return in the prescribed form of your income The income assessable relevant to the assessment year 1960 61 of in respect of which you are assessable for the said assessment year.
The notice is being issued after obtaining the necessary satisfaction of the Commissioner of IncomeTax, Bihar and Orissa, Patna.
Sd/ section P. Chaliha Income Tax Officer, Ward A, Muzaffarpur.
" The assessee challenged the validity of that notice as well as proceedings taken on the strength of that notice on various grounds.
As we are accepting the contention of the assessee that the impugned notice is invalid inasmuch as it did not comply with the requirements of section 151(2) of the Act, we have not thought it necessary to examine the other contentions advanced on behalf of the assessee.
In this case the notice was issued after four years but before eight years of the date of the original assessment.
Section 151 (2) of the Act reads "No notice shall be issued under Section 148 after the expiry of four years from the end of the relevant assessment year, unless the Commissioner is satisfied on the reasons recorded by the Income tax Officer that it is a fit case for the issue of such notice." Section 148 prescribes : "(1) Before making the assessment, re assessment or re computation under Section 147, the Income tax Officer shall serve on the assesee a notice containing all or any of the requirements which may be included in a notice under sub section (2) of Section 139 and 445 the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub section.
(2) The Income tax Officer shall, before issuing any notice under this section, record his reasons for doing so.
" Section 147 deals with income escaping assessment.
At this stage we need not refer to that section : We shall refer to that provision at a later stage.
Section 139(2) says : "In the case of any person who, in the incometax Officer 's opinion, assessable under this Act, whether on his own total income or, on the total income of any other person during the previous year, the Income tax Officer may, before the end of the relevant assessment year, serve a notice upon him requiring him to furnish, within thirty days from the date of service of the notice, a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed." (proviso is not necessary for our present purpose) When this appeal came up for hearing on the last occasion, as we found the affidavit filed by the Income tax Officer to 'be vague and indefinite, we directed the learned Counsel for the Department to produce before us the records of the Incometax Officer to show that the, Income tax Officer had complied with the requirements of section 148 and section 151(2) of the Act.
When the appeal was taken up for hearing on the 18th January 1971, only the report submitted by the Income tax Officer to the Commissioner and the order of the Commissioner was produced.
The order sheet recording the reasons of the Income tax Officer as required by section 148(2) was not produced.
Hereinbelow we have sent out the report of the Income tax Officer as well as the order of the Commissioner: Report in Connection with the starting of proceeding" under Section 147 of the Income tax Act, 1951.
Name of District Ward of Circle A Ward, Muzaffarpur G. I.R. No. 303 C. 1.1.
Name and address of the assessee M/S. Chugamal Rajpal, Muzaffarpur.
R.F. 2.Status 3.
Assessment year for which notice under section 1 48 is proposed to be issued 1960 61.
446 4.
Whether it is a new case or one in which re assessment (or recomputation) has to be made Re assessment 5.
If a case of reassessment (or recomputation) the income (or loss or depreciation allowance) originally assessed/determined.
Rs. 73,604/ 6.
Whether the case falls under cl.
(a) or (b) of section 147 147(a) 7.
Brief reasons for starting proceedings under Kindly see section 147 (indicate the items which are Sd/ section P. Chaliha.
I.T.O. 30 4 66 believed to have escaped assessment) A Ward, Muzaffarpur.
8.Whether the Commissioner is satisfied that Yes it is a fit case for the issue of notice under Sd/ K. Narain section 148.
13 5 66 Commissioner of Income tax, Bihar and Orissa, Patna 9.
Whether the Board is satisfied that it is aSecretary, Board of Revenue.fit case for the issue of notice under section 148.
During the year the assessee hasshown to have taken loans from various parties of Calcutta.
From D.I.s Inv.
No. A/P/ Misc.(5)D.I./63 64/5623 dated 13 8 65, forwarded to this office under C.I.T. Bihar and Orissa, Patna 's letter No. Inv.
(Inv.)15/ 65 66/1953 2017 dated Patna 24 9 65, it appears that these persons are name lenders and the transactions are bogus.
Hence proper investigation regarding these loans is necessary.
The name of some of the persons from whom money is alleged to have taken on loan on Hundis are: 1.
Seth Bhagwan Singh Sricharan.
Lakha Singh Lal Singh.
Radhakissen Shyam Sunder.
The amount of escapement involved amounts to Rs. 100,000/ .
Sd/ section P. Chaliha, 30 4 66.
Income tax Officer, A Ward, Muzaffarpur.
" In his report the Income tax Officer does not set out any reason for coming to the conclusion that this is a fit case to issue notice under section 148.
The material that he had before him for issuing notice under section 148 is not mentioned in the report.
In his report he vaguely refers to certain communications received by him from the C.I.T., Bihar and Orissa.
He does not mention the facts contained in those communications.
All that he says is that from those communications "it appears that these persons (alleged creditors) are name lenders and the transactions are bogus".
He has not even come to a prima facie conclusion 447 that the transactions to which he referred are not genuine transactions.
He appears to have had only a vague feeling that they may be bogus transactions.
Such a conclusion 'does not fulfil the requirements of section 151(2).
What that provision requires is that he must give reasons for issuing a notice under section 148.
In other words he must have some prima facie grounds before him for taking action under section 148.
Further his report mentions : "Hence proper investigation regarding these loans is necessary In other words his conclusion is that there is a case for investigating as to the truth of the alleged transactions.
That is not the same thing as saying that there are reasons to issue, notice under section 148.
Before issuing a notice under section 148, the Income tax Officer must have either reasons to believe that by reason of the omission or failure on the part of these assessee to, make a return under section 139 for any assessment year to the Income tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year or alternatively not withstanding that there has been no omission or failure as mentioned above on the part of the assessee, the Income tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year.
Unless the requirements of clause (a) or (b) of section 147 are satisfied, the Income tax Officer has no jurisdiction to issue a notice under section 148.
From the report submitted by the Income tax Officer to the Commissioner, it is clear that he could not have had reasons to believe that by reason of the assessee 's omission to disclose fully and truly all material ' facts necessary for his assessment for the accounting year in question, income chargeable to tax has escaped assessment for that year; nor could it be said that he as a consequence of information in his possession, had reasons to believe that the income chargeable to tax has escaped assessment for that year.
We are not satisfied that the Income tax Officer had any material before him which could satisfy the requirements of either cl.
(a) or cl.
(b) of section 147.
Therefore he could not have issued a notice under section 148.
Further the report submitted by him under section 151(2) does not mention any reason for coming to the conclusion that it is a fit case for the issue of a notice under section 148.
We are also of the opinion that the Commissioner has mechanically accorded permission.
He did not himself record that he was satisfied that this was a fit case for the issue of a notice under section 148.
To Question No. 8 in the report which reads "Whether the, Commissioner is satisfied that it is a case for the I issue of notice under section 148", he just noted the word "yes" and affixed his signatures thereunder.
We are of the opinion .that if only he had read the report carefully, he could never have 448 come to the conclusion on the material before him that this is a fit case to issue notice under section 148.
The important safeguards provided in sections 147 and 151 were lightly treated by the Income tax Officer as well as by the Commissioner.
Both of them, appear to have taken the duty imposed on them under those provisions as of little importance.
They have substituted the form for the substance.
In the result this appeal is allowed, the order of the High Court is set aside and the impugned notice quashed.
The Respondent No. 2 shall pay the costs of the appellant both in this Court and in the High Court.
G.C. Appeal allowed. | The appellant, a partnership firm, filed its return of income for the assessment year i960 61 and subsequently produced before the Incometax Officer its relevant books of accounts and papers.
It also produced before him the statement showing various creditors from whom it had borrowed on Hundis during the accounting year in question, giving full names and addresses of the alleged creditors.
After enquiry the Incometax Officer made an assessment.
On June 3, 1966 the Income tax Officer issued to the appellant a notice under section 148 of the Income tax Act, 1961.
The notice was issued after four years but before 8 years of the end of the original assessment year.
The appellant challenged the validity of the notice as well as the proceedings taken on the strength of that notice in a writ petition under articles 226 and 227 of the Constitution.
The High Court dismissed the petition.
By special leave appeal was filed in this Court.
On direction given by the Court the report submitted by the Income tax Officer to the Commissioner and the Commissioner 's order thereon were produced.
In the report it was said that it appeared that the alleged creditors of the appellant were name lenders and transactions were bogus; hence proper investigation regarding those loans was necessary.
Question No. 8 on the report was whether the Commissioner was satisfied that the case was fit for the issue of notice under section 148.
Against this the commissioner had noted 'yes '.
On these facts this Court, HELD : Under section 148 and section 151(2) the Income tax Officer Must record his reasons for issuing the notice under section 148.
There must be prima facie grounds for taking action under section 148 Further before issuing such a notice the provisions of cis.
(a) and (b) of section 147 must be satisfied.
[447 B, E] In this case the Income tax Officer appears to have had a vague feeling that the transactions were bogus and that the alleged creditors were only name lenders.
According to him proper investigation regarding the loans was necessary.
That is not the same thing as saying that there ,are reasons to issue notice under section 148.
[447 A C] In these circumstances it could not be held that the Income tax Officer had any material before him which could satisfy the requirements of either cl.
(a) or cl.
(b) of section 147.
Therefore he could not have issued a notice under section 148.
Further the report submitted by him under section 151(2) did not mention any reason for coming to the conclusion that it was a fit case for the issue of the notice under section 148.
The Commissioner also mechanically accorded permission.
Thus the important safeguards provided in sections 147 and 151 were lightly treated by the income tax Officer as well as by the Commissioner.
[447 F 448 B] The appeal must accordingly be allowed. |
Appeal No. 1223 of 1967.
Appeal from the judgment and decree dated March 5, 1964 of the Allahabad High Court in Income tax Reference No. 71 of 1959.
section K. Mitra, B. B. Ahuja, R. N. Sachthey and B. D. Sharma, for the appellant.
Ram Lal and A. T. M. Sampat, for the respondent.
The Judgment of the Court was delivered by Shah, C.J.
The respondent who is the Karta of a Hindu Un divided Family entered on behalf of the family into a partnership with one Devi Sharan Garg to carry on the business of 407 manufacturing and selling pharmaceutical products and literature relating thereto.
On July 27, 1946 the partnership was dissolved .
The assets of the firm which included goodwill, Machinery, furniture, medicines, library and copyright in respect of certain publications were valued at the date of dissolution at Rs. 2,50,000/ .
The respondent was paid a sum of Rs. 1,25,000/ in lieu of his share and the business together with the goodwill was taken over by Devi Sharan Garg.
In proceedings for assessment of the respondent for the year 1947 48 the Income tax Officer sought to bring an amount of Rs. 70,000/ to tax as capital gains.
The contention raised by the respondent that no part of the amount of Rs. 1,25,000/received by the respondent represented capital gains was rejected by the Income tax Officer, Appellate Assistant Commissioner and the Income tax Appellate Tribunal.
The Tribunal however reduced the amounts capital gains brought to tax to Rs. 65,000/ .
The Tribunal referred the following question to the High Court of Allahabad under section 66(1) of the Indian Income tax Act, 1922 "Whether on a true interpretation of sub section (1) of section 12 B of the Income tax Act, the sum of Rs. 65,000/ has been correctly taxed as capital gains".
The High Court answered the question in the negative.
Against that order, with certificate granted by the High, Court, this appeal has been preferred.
Section 12 B(1), insofar as it is relevant provides "The tax shall be payable by an assessee under the head "Capital gains" in respect of any profits or gains arising from the sale, exchange or transfer of a capital asset effected after the 31st day of March 1946 .
and such profits and gains shall be deemed to be income of the previous year in which the sale, exchange or transfer took place Provided.
Provided further.
Provided further that any transfer of capital assets . .
on the dissolution of a firm or other association of persons. . . shall not for the purposes of this section, be treated as sale, exchange or transfer of the capital assets; 408 Liability to pay capital gains arises under section 12 B(1) if there be a sale, exchange or transfer of capital assets.
There was no sale or exchange of his share in the capital assets of the firm by the respondent to Shri Devi Sharan Garg.
Nor did he transfer his share in the capital assets.
The assets of the firm included the goodwill, machinery, furniture, medicines library and the copyright in respect of certain publications.
A large majority of the assets were incapable of physical division, and the partners agreed that the assets be taken over by Devi Sharan Garg at a valuation, and the respondent be paid his share of the value in money.
Such an arrangement, in our judgment, amounted to a distribution of the assets of the firm on dissolution.
There is no clause in the partnership agreement providing for the method of dissolution of the firm or for winding up of its affairs.
In the course of dissolution the assets of a firm may be valued and the assets divided between the partners according to their respective shares by allotting the individual assets or paying the money value equivalent thereof.
This is a recognized method of making up the accounts of a dissolved firm.
In that case the receipt of money by a partner is nothing but a receipt of his share in the distributed assets of the firm.
The respondent received the money value of his share in the assets of the firm; he did not agree to sell, exchange or transfer his share in the assets of the firm.
Payment of the amount agreed to be paid to the respondent under the arrangement of his share was therefore not in consequence of any sale exchange or transfer of assets.
To persuade us to take a different view, reliance was placed on behalf of the Revenue upon James Anderson vs Commissioner of Income tax Bombay City(1).
In that case the assessee held a power of attorney from the executor of a deceased person, in the course of the administration of his estate.
He sold certain shares and securities belonging to the deceased for distribution among the legatees.
The excess realized by sale was treated by the Income tax Department as Capital gains.
The contention of the assessee that since the sale of the shares and securities fell within the purview of the third proviso to section 12 B (1) it could not be treated as a sale of capital assets within the meaning of section 12 B(1) was rejected by this Court.
This Court observed that the object of the third proviso to section 12 B(1), in providing that "any distribution of capital assets under a will" shall not be treated as sale, exchange or transfer of capital assets for the purpose of section 12 B was that as long as there was distribution of capital assets in specie and no sale, there was no transfer for the purposes of that section, but if, there was a sale of the capital assets and profits or gains arose therefrom, the liability to tax (1) 409 arose, whether the sale was by the administrator or executor or a legatee, and that the expression "distribution of capital assets" in the third proviso to section 12 B(1) meant distribution in specie and not distribution of sale proceeds.
That case has no application.
There was no distribution of capital assets between the legatees : the assessee had pursuant to the authority reserved to him from the executor of the deceased person sold the shares and securities, and from the sale of shares and securities capital gains resulted.
In the case in hand there is no sale and payment of price, but payment of the value of share under an arrangement for dissolution of the partnership and distribution the assets.
The rights of the parties were adjusted by handing over to one of the partners the entire assets and to the other partner the money value of his share.
Such a transaction is not in our judgment a sale, exchange or transfer of assets of the firm.
In Commissioner of Income tax, Madhya Pradesh, Nagpur & Bhandara vs Dewas Cine Corporation(1) in dealing with the meaning of the expressions "Sale" and "sold" as used in section (10) (2) (vii) of the Income tax Act, 1922, this Court observed that the expression "sale" in its ordinary meaning is a transfer of property for a price, and adjustment of the rights of the partners in a dissolved firm by allotment of its assets is not a transfer for a price.
In that case the assets were distributed among the partners and it was contended that the assets must in law be deemed to be sold by the partners to the individual partners in consideration of their respective shares, and the difference between the written down value and the price realised should be included in the total income of the partnership under the second proviso to section 10(2) (vii).
This Court observed that a partner may, it is true, in an action for dissolution insist that the assets of the partnership be realised by sale of its assets, but property allotted to a family in satisfaction of his claim to his share, cannot be deemed in law to be sold to him.
We therefore agree with the High Court that the question referred must be answered in the negative.
The appeal fails and is dismissed with costs.
G.C. Appeal dismissed. | The respondent who was the karta of his Hindu undivided family entered into partnership with one D to carry on the business of manufacturing and selling pharmaceutical products etc.
On July 27, 1946 the partnership was dissolved.
The assets of the firm which included goodwill, machinery, furniture etc. were valued on the date of dissolution at Rs. 2,50,000 and the respondent was paid the sum of Rs. 1,25,000 in lieu of his share and the business together with the goodwill was taken over by D.
The question in income tax proceedings was whether the transaction was one of sale liable to capital gains tax under section 12B(1) of the Income tax Act.
The assessing and appellate authorities held against the respondent.
The High Court in reference, however, held in his favour.
The revenue appealed.
HELD : There was no clause in the partnership agreement providing for the method of dissolution of the firm or for winding up of its affairs.
In the course of dissolution the assets of the firm may be valued and the assets divided between the partners according to their respective shares by allotting the individual assets or paying money value equivalent thereof.
This is a recognised method of making up the accounts of the dissolved firm.
In that case the receipt of money by a partner is nothing but a receipt of his share in the distributed assets of the firm.
The respondent received the money value of his share in the assets of the firm; he did not agree to sell, exchange on transfer his share in the assets of the firm.
Payment of the amount agreed to be paid to the respondent under the arrangement of his share was therefore not consequence of any sale, exchange or transfer of assets.
[408 C E] James Anderson vs Commissioner of Income tax, Bombay City, and Commissioner of Income tax, Madhya Pradesh and Nagpur & Bhandara vs Dewas Cine Corporation, 68 I.T.R. 240, distinguished. |
iminal Appeal No. 137 of 1970.
Appeal by special leave from the judgment and order dated February 6, 1970 of the Calcutta High Court in Criminal Appeal No. 5 of 1964.
O. P. Rana, for the appellant.
section P. Mitra and Sukumar Basu, for the respondent.
The Judgment of the Court was delivered by Sikri, C.J.
In this case special leave was limited to the question of sentence only The relevant facts for determining this point are as follows : The appellant, Vivian Rodrick, was tried by the High Court of Calcutta, in exercise of its original jurisdiction, having been committed to stand his trial by the Presidency Magistrate as early as July 31, 1963.
The substance of the charges against the appellant were as follows : 547 (i) that on January 13, 1963 the appellant was a member of an unlawful assembly guilty of rioting, being armed with deadly weapons and as such punishable under section 148, I.P.C.; (ii)that on January 13, 1963 the appellant committed the murder of one Vincent D 'Rozaric and thereby committed an offence punishable under section 302, I.P.C.; and (iii)that on January 13, 1963 the appellant was in possession of explosive substances for unlawful object and thereby committed an offence under section 5 of the Explosive Substances Act.
Four other persons, Stanley Rodrick, Ranjit Mandal, Simon Das and Ranjit Biswas were also tried jointly with the appellant and ,convicted under section 302 read with section 149, and also under section 148, I.P.C. The jury returned a unanimous verdict of guilty against the appellant and on September 4, 1964 the Presiding Judge convicted the appellant under section 302, I.P.C., and sentenced him to death.
At the trial the appellant was also convicted for offences under section 148, I.P.C., and section 5 of the Explosive Substances Act, and sentenced to, rigorous imprisonment for two years and three years respectively.
The terms of imprisonment were directed to run concurrently.
The appellant filed a petition of appeal under section 411A, Cr.
P.C., on September 7, 1964, challenging his conviction and the sentences imposed on him.
The High Court, by its judgment dated September 19, 1967 in Criminal Appeal No. 5 of 1964, confirmed the conviction and sentences imposed on the appellant.
In considering the question of sentence the High Court observed that "the murder was a premeditated and cold blooded one.
There was not the slightest provocation from the side of the deceased.
This is undoubtedly a fit case for capital punishment.
No question of showing any leniency on the ground of tenderness of age arises as the appellant is now aged about 35 years.
" It was urged before the High Court that the sentence of death should be reduced to rigorous imprisonment for life on account of the long delay that had taken place in hearing the appeal.
Although the High Court regretted the delay and the consequent mental suffering undergone by the condemned prisoner, it felt that the "delay in executing the death sentence was not by itself a sufficient ground for which the court should exercise its jurisdiction to commute the death sentence to one of imprisonment for life.
" The appellant sought leave to appeal to this Court against the judgment of the High Court on October 21, 1967, and the same 548 was refused on January 8, 1968.
Having obtained special leave, the appellant filed an appeal to this Court (Criminal Appeal No. 190 of 1968).
By its judgment dated April 30, 1969, this Court set aside the the judgment and order of the High Court, dated September 19, 1967, and remanded the appeal to the High Court for fresh disposal and hearing in accordance with law and in the light of the observations contained in this Court 's judgment.
This Court in its judgment in Cr.
No. 190 of 1968 observed, regarding the four other co accused, as follows "Though the conviction was for an offence under section 302 read with section 149, I.P.C., curiously they were sentenced to varying terms of imprisonment, and none of them challenged their conviction in appeals.
" On remand the appeal was again dismissed by the High Court on February 6, 1970.
Chakrabarti, J., with Whom Amaresh Chandra Roy, J., agreed, again considered the question of Sentence and held that although there had been a delay of more than five years in executing the death sentence that was not by its, If sufficient ground for commuting the death sentence.
The High Court referred to Nawab Singh vs The State of Uttar Pradesh(") and Piare Dusadh vs King EMperor(2).
As the High Court did not find any extenuating circumstances whatsoever that 'would .justify its taking a lenient view in the matter, it left to the State Government to take a decision as to whether it should, on account of inordinate delay in executing the sentence, exercise its powers under section 402, Cr.
The learned counsel for the appellant contends that the matter should not have been left to the State Government.
In Nawab Singh vs The State of Uttar Pradesh("), which has been referred to by the High Court in its judgment dated February 6, 1970, it is observed "It is true that in proper cases an inordinate delay in the execution of the death sentence may be regarded as a ground for commuting it, but we desire to point out that this is no rule of law and is a matter primarily for consideration of the local Government.
If the Court has to exercise a discretion in such matter, the other facts of such case would have to be taken into consideration.
In the case before us, we find that the murder was a cruel and deliberate one and there was no extenuatin circumstance whatsoever which would justify using ordering a commutation of the death sentence.
" (1) A.I.R. 1954 S.C. 278.
(2) 549 It seems to us that the extremely excessive delay in the disposal of the case of the appellant would by itself be sufficient for imposing a lesser sentence of imprisonment for life under section 302.
Section 302, I.P.C., prescribes two alternate sentences, namely, death sentence or imprisonment for life, and when there has been inordinate delay in the disposal of the appeal by the High Court it seems to us that it is a relevant factor for the High Court to take into consideration for imposing the lesser sentence.
In this particular case, as pointed out above, the appellant was committed to trial by the Presidency Magistrate as early as July, 31, 1963, and he was convicted by the Trial Judge on September 4, 1964.
It is now January 1971, and the appellant has been ' for more than six years under the fear of sentence of death.
This must have caused him unimaginable mental agony.
In our opinion it would be inhuman to make him suffer till the Government decides the matter on a mercy petition.
We consider that this is now a fit case for awarding the sentence of imprisonment for life.
Accordingly we accept the appeal, set aside the order of the High Court awarding death sentence and award a sentence of imprisonment for life.
The sentences under section 148, I.P.C., and section 5 of the Explosive Substances Act and under section 302, I.P.C., shall run concurrently.
V.P.S. Sentence modified. | The accused was committed to trial in July 1963 and was convicted and sentenced to death on September 4, 1964.
The appeal to the High Court under section 411A, Cr.
P.C., was finally dismissed on February 6, 1970.
The High Court left it to the State Government whether it should reduce the sentence on account of inordinate delay.
In appeal to this Court on the question of sentence, HELD : Section 302, I.P.C., prescribes two alternate sentences, namely, death sentence or imprisonment for life.
When there has been inordinate delay in the disposal of the appeal by the High Court, it is a relevant factor for the High Court to take into consideration for imposing the lesser sentence.
[549 A B] In the present case, the appellant has been for 6 years under the fear of sentence of death, which must have caused him unimaginable mental agony.
In view of the excessive delay it is a fit case for awarding the lesser sentence instead of leaving it to the Government to decide the matter on a mercy petition.
[549 B D] Nawab Singh vs State of U.P., A.I.R. 1954 S.C. 278, referred to. |
Appeal No. 1467 of 1967.
Appeal from the judgment and order dated July 1, 2, 1965 of the Bombay High Court in Appeal No. 69 of 1963.
V. A. Seyid Muhammad and section P. Nayar, for the appellants.
C. K. Daphtary, Anil B. Diwan, Suresh A. Shroff, Ravinder Narain and O. C. Mathur, for the respondent.
section J. Sorabjee and O. C. Mathur, for the intervener.
The circumstances leading up to the filing of the writ petition may be mentioned. ', The respondents own a textile mill at 508 Elphinstone Road, Parel, Bombay where they manufacture, inter alia, grey cloth.
They also have a factory situated at Tulsi Pipe Lane Road, Bombay for processing grey cloth into various other .goods like leather cloth, book binding cloth and other coated fabrics.
Under section 3 of the Central Excise and Salt Act, 1944 (hereinafter to be referred as the Act) duty is Imposed on all ,excisable goods produced or manufactured in India at the rates set forth in the First Schedule to the Act.
Item 19 of the First Schedule includes cotton fabrics.
Section 3 of the Act provides that excise duty is to be collected in such manner as may be prescribed by rules made under the Act.
On cotton fabrics additional excise duty called handloom cess is also imposed under the additional Duties of Excise (Goods of Special Importance) Act, 1957 and Khadi and other Handloom Industries Development (Additional Excise Duty on Cloth) Act, 1953, respectively.
Under :section 37 of the Act, the Central Government has made rules called the Central Excise Rules, 1944 (hereinafter to be referred as the ,Rules).
Rule 8 gives power to the Central Government to exempt by notification subject to such conditions as may be specified therein any excisable goods from whole or any part of duty leviable on such goods.
Accordingly the Central Government issued a notification exhibit A dated January 5, 1957 exempting cotton fabrics mentioned therein wholly from excise duty.
hem No. 2, related to 'leather cloth and inferior or imitation leather cloth ordinarily .Used in book binding '.
The exemption granted in respect of this item and another item was withdrawn by the Central Government with effect from July 30, 1960 by notification exhibit D dated July 29, 1960.
There does not appear to have been any controversy before the High Court that the two notices dated November 3, 1961 and the notice dated December 2, 1961 related only to goods falling under item No. 2. of the notification exhibit A. The respondents between July 4, 1958 and July 30, 1960 manufactured grey cloth in the textile mill and sent some of those items to their factory for being processed and manufactured into leather cloth and imitation leather cloth.
During the material period the company used to manufacture grey, cloth and used to store them in a bonded godown.
Periodically they used to send to the factory such quan tities of grey cloth as were required after filling in the necessary forms prescribed by the rules and after obtaining the necessary permission in the manner prescribed by the rules from the Excise Inspector Incharge of the textile mill.
The respondents had, however, not obtained the requisite licence and so they paid excise duty on grey cloth manufactured in their mill during the period July 4, 1958 and July 30, 1960 manufactured grey cloth in the manufacturing leather cloth and imitation cloth.
The respondents later on obtained the necessary licence with the result that 509 they became entitled to remove the grey cloth manufactured at their textile mill to their factory without paying excise duty on the grey cloth at the time when the goods were removed.
The grey cloth so removed after September 30, 1959 and before July 30, 1960 used to be kept in the bonded godown.
Those goods were removed to the factory after filling up the necessary forms and obtaining the permission of the Excise Inspector Incharge of the factory.
The grey cloth after it was processed and made into leather cloth or imitation leather cloth was again stored in another bonded godown in the factory and they were removed by the company as finished products after filling in form A.R.I. prescribed by the rules.
There is again no dispute that in each of these A.R.I. forms the company had shown and made a declara tion that the excise duty payable on the goods governed by the forms was 'nil '.
Under the heading 'Assessment Memorandum. ' in the said form the particulars regarding rate of duty and amount of total duty payable on the goods referred to in the form had to be filled up and signed by the Excise Inspector.
There is no controversy that in each of the A.O.1.
forms filed by the respondents during the period July 4, 1958 and July 30, 1960, the Excise Inspector Incharge, Leather Cloth Division has made an assessment in the appropriate portion of those forms showing the rate of duty and the amount of total duty payable as "nil ' and has affixed his signature under such 'Assessment Memorandum '.
Therefore, it will be seen that all the goods removed by the, respondents during the said period were shown by them as not liable to pay any excise duty and were also assessed by the Excise Inspector as not liable to pay any duty.
Later on, the excise authorities appear to have entertained some doubt whether the goods covered by these A.R.I. forms were of the description exempted under item No. 2 of the notification exhibit A.
Some correspondence took place between the department and the respondents.
On November 3, 1961, the second appellant issued two notices marked exhibit G.
The first notice issued under rule 10A required the respondents to pay a sum of Rs. 1,07,146,39.
In the particulars of demand it was stated that the amount represented duty on leather cloth manufactured out of (i) non duty paid cloth and (ii) duty paid cloth cleared without payment of duty from October 1, 1959 to March 31, 1960.
The second notice of the same day issued under rule 9 called upon the respondents to pay a sum of Rs. 1,502,24 representing the extra processing duty on leather cloth manufactured out of duty paid cloth from July 4, 1958 to September 30, 1959.
These two notices were followed by the first appellant by issuing a letter of demand dated December 2, 1961, exhibit H, calling 510 upon the respondents to pay up the amount as per the notice issued by the second appellant.
The respondents were advised that if they are aggrieved with the decision they may go up in appeal to the Collector of Central Excise, Bombay.
The respondents sent a reply dated December 28, 1961 exhibit I, contesting validity of the notices dated November 3, 1961 and December 2, 1961.
They objected to the demand on the ground that the notices were illegal and neither rule 9 nor rule 10A gave power to the authorities to issue such notices.
They further contended that the demands were barred by time.
The respondents also addressed a letter on the same lines to the Central Board of Revenue.
As there was no favourable response from the appellants they, filed the writ petition, out of which these proceedings arise, in the High Court to quash Exhibits G and H. The respondents contended before the High Court that neither rule 9 nor rule 10A gave power to the appellants to issue the demand notices.
Their stand was that if at all it was rule 10 that applied and as the demands have been made long after the period of three months prescribed in the said rule, the notices were illegal and void.
On behalf of the appellants it was urged that rule 10 has no application as that rule will apply only when duties and charges have been 'short levied '.
As initially no amount has been levied in this case, rule 10 has no application.
According to the appellants the rule applicable was rule 10A.
Alternatively it was contended that if rule I OA did not apply, the demands made by them were amply covered by rule 9(2).
The learned Single Judge accepted the contention of the res pondents and held that rule 10 applied and as the demand notices had been issued long after the expiry of three months, exhibit G and H, the notices, were illegal and void.
In this view the learned Single Judge quashed the said notices.
On appeal the Division Bench confirmed the order of the learned Single Judge.
This is a convenient stage to refer to the relevant rules.
They are rules 7, 9, 10, 10A, 52 and 52A(1).
We have already referred to the fact that the rules have been made by the Central Government under section 37 of the Act.
Those rules, referred to above, are as follows : "(7) Recovery of Duty : Every person who produces, cures, or manufactures any excisable goods, or who stores, such goods in a warehouse, shall pay the duty or duties leviable on such goods, at such time and place and to such person as may be designated, in or 511 under the authority of these Rules whether the payment of such duty or duties is secured by bond or otherwise.
(9) Time and manner of payment of duty: (1) No excisable goods shall be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto, which may be specified by the Collector in this behalf, whether for consumption, export, or manufacture of any other commodity in or outside such place, until the excise duty leviable thereon has been paid at such place and in such manner as is prescribed in these Rules or as the Collector may require and except on presentation of an application in the proper form and on obtaining the permission of the proper officer on the form; Provided that such goods may be deposited without payment of duty in a store room or other place of storage approved by the Collector under rule 27 or rule 47 or in a warehouse appointed or licensed under rule 140 or may be exported under bond as provided in rule 13; Provided further that such 'goods may be removed on part payment of duty leviable thereon if the Central Government, by notification in the Official Gazette, allow the goods to be so removed under rule 49; Provided also that the Collector may, if he fit instead of requiring payment of duty in respect of each separate consignment of goods removed from the place or premises specified in this behalf, or from a store room or warehouse duly approved, appointed or licensed by him keep with any person dealing in such goods an account current of the duties payable thereon and such account shall be settled at internal, not exceeding one month and the account holder shall periodically make deposit therein sufficient in the opinion of the Collector to cover the duty due on the goods intended to be removed from the place of production, curing, manufacture or storage.
(2) If any excisable goods are, in contravention of sub rule (i) deposited in, or removed from, any place specified therein, the producer or manufacturer thereof shall pay the duty leviable on such goods upon written demand made by the proper officer, whether such demand is delivered personally to him, or is left at his dwelling house, and shall also be liable to a penalty which 512 may extend to two thousand rupees, and such goods shall be liable to confiscation.
(10) Recovery of duties or charges short levied, or erroneously refunded When duties or charges have been short levied through inadvertence, error, collusion or mis construction on the part of an officer, or through misstatement as to the quantity, description or value of such goods on the part of the owner, or when any such duty or charge, after having been levied, has been owing to any such cause, erroneously refunded, the person chargeable with the duty or charge, so short levied, or to whom such refund has been erroneously made, shall pay the deficiency or pay the amount paid to him in excess, as the case may be, on written demand by the proper officer being made within three months from the date on which the duty or charge was paid or adjusted in the owners account current, if any, or from the date of making the refund.
(10 A) Residuary powers for recovery of sums due to Government Where these Rules do not make any specific provision for the collection of any duty, or of any deficiency in duty if the duty has for any reason been short levied, or of any other sum of any kind payable to the Central Government under the Act or these Rules, such duty, deficiency in duty or sum shall, on a written demand made by the proper officer, be paid to such person and at such time and place, as the proper officer may specify.
(52) Clearance on payment duty When the manufacturer desires to remove goods on payment of duty, either from the place or a premise specified under rule 9 or from a store room or other place of storage approved by the Collector under rule 47, he shall make application in triplicate (unless otherwise by rule or order required) to the proper officer in the proper Form and shall deliver it to the officer at least twelve hours (or such other period as may be elsewhere prescribed or as the Collector may in any particular case require or allow) before it is intended to remove the goods.
The officer, shall, thereupon, assess the amount of duty due on the goods and on production of evidence 513 that this sum has been paid into the Treasury or paid in the account of the Collector in the Reserve Bank of India or the State Bank of India, or has been despatched to the Treasury by money order shall allow the goods to be cleared.
52A (1) Goods to be delivered on a Gatepass No excisable goods shall be delivered from a factory except under a gatepass in the proper Form or in such other form as the Collector may in any particular case or class of cases prescribe signed by the owner of the factory and countersigned by the proper officer. " Dr. Syed Mohammad, learned counsel for the appellants urged that going by a plain reading of rule 10, it is clear that the said rule will apply only to cases : (1) when an assessment has been made that same amount is due as duty and(2) when the said amount so assessed has been paid by the party concerned.
In this case, he pointed out, there has been, no doubt, an order of assessment passed when the goods were cleared by the party, but that order of assessment was not one making the party liable to pay any duty, on the other hand, it was an order of 'nil assessment ' under which the party was to pay no duty whatsoever.
In consequence of such assessment, no duty having been paid, it cannot be stated that there has been a short levy for any of the reasons mentioned in rule 10.
According to the learned counsel rule 10 will apply only when there has been an assessment making the party liable to pay some ,duty and that amount so assessed has also been actually paid or adjusted by the party, as the case may be.
When later on it is found that the amount so levied and paid falls short of the correct amount that ought to have been levied and paid by the ,party, rule 10 will stand attracted.
In this connection he placed very great reliance on the concluding part of rule 10 where a period of three months by way of limitation has been provided for calling upon the party to pay the deficiency and the period of three months is to be calculated "from the date on which the duty or charge was paid.
He stressed that the use of the expression "paid" clearly indicates that some duty must have been actually paid by a party on a particular date and if that were not so, it would be difficult to calculate the period of three months within which a party can be called upon to make good the deficiency.
The counsel also urged that the word 'levy ' in rule 1 0 means actual collection and that short levy, therefore, denotes that full duty has not been collected.
He also urged that rule 10A covers all cases of short levy or non levy for any reason whatsoever and the notices issued by the appellants in this case are legal and valid.
He finally urged that even if it is held that rule 10A does not 514 apply , the notices could be sustained under rule 9(2) in as much the respondents have removed the goods without payment of duty in contravention of rule 9(1).
The mere fact that one of the notices issued on November 3, 1961 refers to rule 10A is not ,on that ground invalid when the authorities have ample.
, power to issue, such notices under rule 9(2).
Mr. Daphtary, learned Counsel for the respondents and Mr. Sorabjee, learned counsel for an intervener, have both contended that the notices issued by the appellants squarely come under rule 10 and as they have been issued beyond the period of three months, they have been rightly held to be invalid and illegal. 'Though the words used in rule 10 "duty or charge so paid", reading the rule as a whole it is clear that the rule does not contemplate that any amount should have been levied as a duty and that the said amount should have been paid. 'Me word "paid" has only been used to provide a starting point of limitation of three months.
Though the ordinary meaning of the expression "paid" is that some amount should have been actually paid as such, both the counsel pointed out, that the said word should be construed in the context in which it appears.
So read, it is pointed out that the proper interpretation to be placed on the word "paid" is that it has been used to denote the stage or time when the duty or ,charge ought to have been paid.
Such a reading will not do any violence to the language of rule 10.
It is further pointed out that the expression "short levied" in rule 10 will cover cases not only levy of smaller amount that what is due but also of making the party not liable to pay any duty.
In one case the short levy will 'be the difference of the amount actually levied and the correct amount due; and in the other case the short levy will be the entire amount of duty that is found to be actually due by a party.
Ile counsel further pointed out that rule 10A will apply only to those ,cases where no specific provision for collection of duty or any deficiency in duty has been made by the rules and that will apply also to any other sum of.
any other kind payable to the Central Government under the Act or the Rules.
In this case, as the party admittedly has been assessed to 'nil duty ' by the officers concerned and allowed to remove the goods, the specific provision for recovery of any short levy is specifically provided for by rule 10, which will exclude rule 10A.
On these grounds, both the ,counsel urged, that the High Court was right in holding that rule 10 applies and that the notices having been issued beyond the period of three months are illegal and invalid.
We are not inclined to accept the contention of Dr. Syed Mohammad that the expression 'levy ' in rule 10 means actual collection of some amount.
The charging provision section 3(i) specifically says "There shall be levied and collected in such, a 515 manner as may be prescribed 'the duty of excise.
It is to be noted that sub section (i) uses both the expressions ,levied and collected" and that clearly show that the expression "levy" has not been used in the Act or the Rules as meaning actual collection.
Dr. Syed.
Mohammad is, no doubt, well founded in his contention that if the appellants have power to issue notice either under rule 10A or rule 9(2), the fact that the notice refers specifically to a particular rule, which may not be applicable, will not make the notice invalid on that ground as has be held by this Court in J. K. Steel Ltd. vs Union of India(1) : If the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under a different power does not vitiate the exercise, of the power in question.
This is a well settled proposition of law.
In this connection reference may usefully be made to the decisions of this Court in B. Balakotaiah vs The Union of India and ors (2 ) and Afzal Ullah vs State of U.P.(3).
In this case, the officer who issued the two notices is competent to make demands under both rules 9(2) and rule 10 A.
But in order to sustain the validity of the demand either under rule 9(2) or rule 10 A, the appellants will have to go further and establish that the demands can be justified under either of the rules.
Before we deal with the contentions of the learned counsel we may state that rule 10 A was incorporated because of the decision of the Nagpur High Court in Messrs Chhotabhai Jethabhai Patel vs Union of India(4).
The assessees in that case were a firm of tobacco merchants and manufacturers of bidis holding licence under the Central Excise Rules.
On the introduction in Parliament of Bill No. 13 of 1951 on February 28, 1951, the assessees paid the requisite duty on tobacco stored by them under the declared provision read with sections 3 and 4 of the Provincial Collection of Taxes Act, 1931.
The assessees cleared tobacco from the warehouse between March 1, 1951 and April 28, 1951, after obtaining clearance certificates from the Range Officer, Central Excise.
The rate of duty payable on un manufactured tobacco was increased by the Finance Act of 1951.
On June 4, 1951 a demand was made by the Range Officer, Central Excise at the increased rate and the assessees therein were asked to pay the said increase.
The assessees challenged the demand before the High Court under article 226 of the Constitution on various grounds.
The Nagpur High Court held that rule 10 did not apply and that the demand was invalid.
(1) [1969] 2 S.C.R.481.
(3) ; (2) ; (4) I.L.R. 516 After the decision of the Nagpur High Court, the Central Government by a notification dated December 8, 1951 amended the Central Excise Rules, 1944 by the addition of a new rule 10 A.
On the basis of this rule in respect of the same assessees a further and fresh demand was made for payment of duty as per ' the Finance Act, 1951.
The assessees challenged the validity of the demand on the same ground as before.
The Full Bench of the Nagpur High Court rejected the assessees ' contention and held that rule 10A covers a case for increased levy on the basis of a change of law.
This decision was sought to be challenged before this Court but without any success.
In fact this Court in Chhotabhai Jethabhai Patel and Co. vs The Union of India and another(1) specifically rejected the assessees ' claim regarding non applicability of rule 10A stating that it had been specifically designed "for the enforcement of a demand like the one arising in the circumstances of the case".
The decision of this Court is an illustration of certain types of cases to which rule 10 A will apply.
This now takes us to the question of proper interpretation to be placed on the expression "short levied" and "paid" in rule 10.
Does the expression "short levied" mean that some amount should have been levied as duty as contended by Dr. Syed Mohammad or will that expression cover even cases where the assessment is of 'nil duty ', as contended by Mr. Daphtary.
What is the meaning of the word "paid" in rule 10 ? It is contended on behalf of the appellants that it means "actually paid", whereas, according to the respondents ', it means "ought to have been paid".
Taken literally, the word "paid" does mean actually paid in cash.
That means that a party or an assessee must have paid some amount of duty whatever may be the quantum.
If this literal interpretation is placed on the expression "paid" in rule it is needless to state that it will support in a large measure the contention of Dr. Syed Mohmmad that rule 10 contemplates a short levy in the sense ,that the amount which falls short of the correct amount has been assessed and actually paid.
In our opinion, the expression "paid" should not be read in a vacuum and it will not be right to construe the said word literally, which means actually paid.
That word will have to be understood and interpretted in the context in which it appears in order to discover its appropriate meaning.
If this is appreciated and the context is considered it is apparent that there is an ambiguity in the meaning of the word "paid".
It must be remembered that rule 10 deals with recovery of duties or charges short levied or erroneously refunded.
The expression "paid" has been used to denote the starting point of limitation of three months for the issue of a written demand.
The Act and the (1) [1962] Supp.
[2] S.C.R. 1.
517 Rules provide in great detail the stage at which and the time when the excise duty is to be paid by a party.
If the literal construction that the amount should have been actually paid is accepted, then in case like the present one on hand when no duty has been levied, the Department will not be able to take any action under rule 10.
Rule 10 A cannot apply when a short levy is made.
through error or misconstruction on the part of an officer, as such a case is specifically provided by rule 10, Therefore, in our opinion, the proper interpretation to be placed on the expression " 'paid" is "ought to have been paid".
Such an interpretation has been placed on the expression "paid" occuring in certain otherenactments as in Gursahai Saigal vs Commissioner of Income tax, Punjab(") and in Allen vs Thorn Electrical Industries Ltd. (2 .
In Gursahai Saigal vs The Commissioner of Income tax, Punjab(1), the question arose as follows : In certain assessment proceedings under the Indian Income tax Act, 1922, an assessee was charged with interest under subsection (8) of section 18A of that Act.
Under that sub section interest calculated in the manner laid down in sub section (6) of section 18A was to be added to the tax assessed.
Sub section 3 of section 18A dealt with cases of a person who has not been assessed before and he was required to make his own estimate of the tax payable by him and pay accordingly.
Sub section (3) of section 18A was applicable to the assessee in that case.
However, he neither submitted any estimate nor did he pay any advance tax.
Under sub section ' (6) of section 18A it was provided : "Where in any year an assessee has paid tax under sub section (2) or sub section (3) on the basis of his own estimate, and the tax so paid is less than eighty Per cent of the tax determined on the basis of regular assessment simple interest at the rate of six per cent per annum from the 1st day of January in the financial year in ' which the tax was paid up to the date of the said regular assessment shall be payable by the assessee upon the amount by which the tax so paid falls short of the said eighty per cent." This sub section is to apply to cases where tax has been paid ' by an assessee according to his own estimate but that estimate was on regular assessment found to be deficient.
Further, interest has to be calculated from 1st January of the Financial Year in which tax mentioned therein was paid and calculation has to be made on the short fall between the amount paid and eighty.
per cent of ' the tax which was found payable on regular assessment.
Subsection (8) of section 18A provided : (1) ; (2) 1968 1 .Q.B. 487.
518 .lm15 "where, on making the regular assessment the Income tax Officer finds that no payment of tax has been made in accordance with the foregoing provisions of this section, interest calculated in the manner laid down in sub section (6) shall be added to the tax as determined on the basis of the regular assessment.
" The assessee in that case did not dispute that sub section(3) ,of section 18A applied to him and that he should have made an estimate and paid advance tax.
He also admitted that he never made an estimate nor did he pay any advance tax whatsoever.
While admitting that sub section (8) of section 18 A applied to him, the assessee contended before this Court that since he had not paid any tax at all, it is not possible to calculate interest in the manner laid down in sub section (6).
According to the assessee 'there was no 1st day of January of a financial year in which the tax was paid and there was no question of a short fall between eighty per cent of the tax payable on regular assessment and the ,amount paid because he. had paid nothing.
While rejecting the said contention this Court held : "The proper way to deal with such a provision is to give it an interpretation which, to use the words of the Privy Council in Mahairam Kamjidas 's (case) (1) makes the machinery workable utres valeat potius quam pereat".
We, therefore, think that we should read sub section (6) according to the provision of which interest has to be calculated as provided in subsection (8) in a manner which makes it workable and thereby prevent the clear intention of sub section (8) being defeated.
Now, how is that best done? As we have earlier said sub section (6) deals with a case in which tax has been paid and therefore it says that interest would, be calculated "from the 1st day of January in the financial year in which the tax was paid".
This obviously cannot literally be applied to a case where no tax has been paid.
If however the portion of subsection (6) which we have quoted above is read as "from the 1 st day of January in the financial year in which the tax ought to have beep paid", the provision becomes workable.
It would not be doing too much violence to the words used to read them in this way.
The tax ought to have been paid on one or other of the dates earlier mentioned.
The intention was that interest should be charged from January 1, of the financial year in which the tax ought to have been paid.
Those, 519 who paid the tax but a smaller amount and those who did not pay tax at all would then be put in the same position substantially which is obviously fair and was clearly intended.
" Regarding the further contention that there was no short fall, as no tax has been paid it was observed : "With regard to the other question about there being no shortfall between eighty per cent of the amount of tax found payable on the regular assessment and the amount of tax paid in a case where no tax was paid, it seems to us the position is much simpler.
If no tax is paid, the amount of such shortfall will naturally be the entire eighty per cent.
We also think that the case before us is very near to Allen 's case.(1)" The above decision establishes two propositions : (1) though the expression used was "paid" it is open to read it as "ought to have been paid" having regard to the context in which it appears and to make the provision of law in which that expression appears workable; and (2) the short fall will be the entire eighty per cent referred to subsection (6) of section 18A.
Applying the above principles to the case on hand, the expression "paid" in rule 10 can be reasonably read as "ought to have been paid".
Similarly even in cases where there has been a nil assessment due to one or other of the circumstances mentioned in, rule 10 and if subsequently it is found that duty is payable, then the entire amount of duty should be considered to have been short levied.
The literal meaning of the expression "paid" as actually paid in cash has again not been adopted by the Court of Appeal in Allen vs Thorn Electrical Industries Ltd.(2).
Having regard to the context in which the said expression appeared in the particular provision which came up for interpretation, the Court of Appeal construed the expression to mean "contracted to be paid".
Therefore, the contention of Mr. Daphtary that the expression "Paid" should be construed as "ought to have been paid" and even when no duty has been assessed, the entire duty when subsequently assessed will be a short levy, which is also supported by the decision of this Court in Gursahai Saigal vs Commissioner of Income tax, Puniab(3) has to be accepted.
It follows that in order to attract rule 10, it is not necessary that some amount of ' duty should have been assessed and that the said amount should have also been actually paid.
That provision will apply even to cases where there has been a nil assessment in which case the entire duty later on assessed must be considered to be the duty (1) , 16, 17.
(2) (3) ; 520 originally short levied.
There is also no difficulty in calculating the period of three months.
As pointed out above, the Act and the Rules provide very elaborately the stage and the time when the duty is to be paid and if that is so that must be considered to be the stage or time when the duty ought to have been paid and if so the period of three months will run from the time when the duty ought to have been paid.
Dr. Syed Mohammad referred us to certain decisions of the High Courts where a demand has been sustained under rule 10 or rule 10A.
We have considered those decisions.
In some of those decisions there has been a short levy due to the reasons mentioned in rule 10 and the demand also has been issued within the period of three months and hence the notice had been sustained under rule 10.
In other cases, it was specifically held that the demand covered by the notice issued under rule 10A has not been specifically provided for by any other rule and the demand therefore, was valid.
These decisions, in our opinion, do not in any manner advance the case of the appellants and we do not think it necessary to deal with them individually.
We may point out that if the contention of Dr. Syed Moham mad that in order to constitute short Levy, some amount should have been assessed as payable by way of duty so as to make rule 10 applicable, is accented the result will be rather anamolous.
For instance if due to collusion (which means collusion between a party and an officer of the Department) a sum of Rs. 2/ is managed to be assessed by way of duty when really more than thousand times that amount is payable anD if the smaller amount of duty so assessed has been paid, the Department will have to take action within three months for payment of the proper amount of duty.
On the other hand, if due to collusion again an order of nil assessment is passed, in which case no duty would have been paid, according to the appellants rule 10A will apply.
We do not see any reason to distinguish the above two cases one ' 'from the other.
Both are cases of collusion and if an assessee in collusion manages to have a petty amount of duty assessed and paid he can effectively plead limitation of three months under rule 10.
Whereas in the same case of collusion where no duty has been levied there will be no period of limitation.
In our opinion, that will not be a proper interpretation to be placed on rule 10A by us.
By the interpretation placed by us on rule 10, the position will be that an assessee who has been assessed to a smaller amount as well as an assessee who has been assessed to nil duty will all be put on a par and that is what is intended by rule 10.
The above reasoning leads to the conclusion that rule 10A ,does not apply to the case on hand.
Then the question is whether 521 the demands could be justified under rule 9(2).
Even here we find considerable, difficulty in sustaining the notice under this rule.
Sub rule (1) of rule 9 provides for the time and the manner of payment of duty.
In this case there is no controversy that whenever goods were cleared by the respondents, necessary applications had been made to the officer concerned and the latter had passed orders of assessment to nil duty.
To attract sub rule 2 of rule 9, the goods should have been removed in contravention of sub rule (1).
It is not the case of the appellants that the respondents have not complied with the provisions of sub rule 1.
We are of the opinion that in order to attract sub rule 2, the goods should have been removed clandestinely and without assessment.
In this case there is no such clandestine removal without assessment.
On the other hand, goods had been removed with the express permission of the Excise authorities and after order of assessment was made.
No doubt the duty payable under the assessment order was nil.
That, in our opinion, will not bring the case under sub rule (2).
That sub rule (2) is a penal provision is shown from the fact that apart from the duty payable, the party is also made liable to a penalty and he also incurs the risk of the goods being confiscated.
That rule 9(2) applies only to cases where there has been an evasion from payment of duty is clear from the decision of this Court in J. K. Steel Ltd. vs Union of India(1).
Though on certain other aspects there was a difference of view amongst the learned Judges, on this aspect the decision is unanimous.
There is absolutely no material placed before us by the appellants which would justify the issue, of the notice under rule 9(2).
To conclude rule 10A does not apply as the specific provision for collection of duty to cases like the one before us is specifically provided by rule 10 nor does rule 9(2) apply to the case on hand.
The proper provision under which action should have been taken if at all is rule 10.
The demands having admittedly been made long after the expiry of the period of three months, referred to in the said rule, it follows that the demands were not valid.
The High Court was justified in striking down the notices dated November 3, 1961 exhibit G as well as the demand dated December 2, 1961 under Et.
The appeal fails and is dismissed with costs.
V.P.S. Appeal dismissed. | Under r. 8 of the Central Excise Rules, 1944, made under the Central Excise and Salt Act, 1944 the Central Government issued a notification exempting cotton fabrics from excise duty.
The respondents owned a textile mill and factory.
They manufactured grey cloth which was removed from the mill and kept in a godown and later removed to the factory for being processed into leather cloth which was stored in another godown in the factory, from where it was taken Out as finished product.
The removal at each stage was done after filling the prescribed forms and with the permission of the Excise Inspector Incharge.
In each of the forms filled by the respondents upto July 30, 1960.
the Excise Inspector had made an assessment showing the rate of duty and the amount of total duty payable as 'nil '.
Later, the excise authorities thought the goods were not of the description exempted under the notification and on November 3, 1961, two notices were issued calling upon the respon dents to make certain payments, one under r. 10A and the other under r. 9 of the Rules.
The respondents protested and filed a writ petition in the High Court.
The High Court held that the proper rule applicable was r. 10 but that as the demand notices were not issued within 3 months .Is required by that rule, the notices were illegal and void.
In appeal to this Court, HELD : (1) Rule 10A cannot apply when a short levy is made ,through error or misconstruction on the part of an officer as such a case is specifically provided for by r. 10, because, r. 10A deals with residuary powers and does not apply when specific provision for collection of duty is provided or by other rules.
[516 H; 517 A: 521 D] (2) The proper provision under which action should have been taken, if at all, is r. 10.
Under r. 10, when duties or charges have been shortlevied through inadvertence, error, collusion or Misconstruction on the part of an officer, the person chargeable with the duty or charge shall pay the deficiency on written demand being made within three month from the date on which the duty or charge was paid.
Though the words used are 'short levied ' and paid, in order to attract r. 10 it is not necessary that some amount of duty Should have been assessed and that the said amount should also have been actually paid.
It will apply even duty later on assessed must be considered to be the duty originally short levied.
1519 F G; 520 E F; 521 D E] (a) The expression 'levy ' is not used in the Act or the Rules as meaning actual collection, because, section 3(1) of ' the Act use.
,,, both the 'levied ' and 'collected '.
1514 G H] 507 (b) The expression 'paid ' in r. 10 should not be read in a vacuum and it will not be right to construe it literally as 'actually paid '.
The word will have to be understood and interpreted in the context in which it appears.
If the literal construction is accepted, then in a case where an assessee, in collusion, manages to have a very petty amount of duty assessed, he can, if he paid the amount, effectively plead limitation of three months, but, when no duty has been levied there would, be no period of limitation, a result which would be anomalous.
Therefore, the proper interpretation to be placed on the expression 'paid ' is 'sought to have been paid. ' (c) This interpretation will not cause any difficulty in calculating the period of three months.
The Act and the Rules provide very elaborately the stage and the time when the duty is to 'be paid and that must be considered to be the stage,or time when the duty 'ought to have been paid ', and the period of three months will be counted from that time.
[519 G H] Gursahai Saigal vs C.I.T. Punjab, ; followed, Allen vs Thorn Electrical Industries Ltd. , referred to.
(3) Rule 9 does not also apply to the facts of the case.
Rule 9(1) provides for the time and manner of payment of duty.
To attract r. 9(2) the goods should have been removed in contravention of sub r.
(1), that is, clandestinely and without assessment; but in this case there is no such clandestine removal without assessment.
Moreover, sub r.
(2) is a penal provision applicable where there is evasion of payment of duty, since the party is also made liable to a penalty and confiscation.
[520 G H; 521 A C] J. K. Steel vs Union. ; , followed.
Therefore, the demands having been made long after the expiry of the period of three months referred to in r. 10, the demands are not valid, |
l Appeals Nos.
280 and 281 of 1960.
Appeal from the judgment and order dated April 20, 1956, of the Madras High Court, in T. R. C. Nos. 101 and 102 of 1956.
B. Ganapathy Iyer and G. Gopalakrishnan, for the appellant.
M. M. Ismail and T. M. Sen, for the respondent.
572 D. V. Sastri and T. M. Sen, for Intervener No. 1.
Naunit Lal, for Intervener No. 2.
section M. Sikri, Advocate General, Punjab and D. Gupta, for Intervener No. 3.
section M. Sikri, Advocate General, Punjab, N. section Bindra and D. Gupta, for Intervener No. 4.
G. C. Kasliwal, Advocate General, Rajasthan, section K. Kapur and D. Gupta, for Intervener No. 5. 1961.
April 28.
The Judgment of the Court was delivered by section K. DAS, J.
These are two appeals on certificates granted by the High Court of Madras and consolidated by its orders dated March 22, 1957.
They are from the judgment and orders of the said High Court dated April 20, 1956 and July 30, 1956 in two Tax Revision Cases, by which the High Court dismissed two petitions filed by the appellants under section 12 B of the Madras General Sales Tax Act (Madras Act IX of 1939), hereinafter called the principal Act, in the fol lowing circumstances.
Messrs. George Oakes (Private) Limited, appellants herein, are dealers in Ford motor cars, spare parts and accessories.
For the two years 1951 52 and 1952 53 the appellants submitted their returns under the relevant provisions of the principal Act and claimed exemption from tax with regard to certain amount realised on transactions of sales which the appellants contended were inter State sales and hence exempt from tax under article 286 of the Constitution as it stood at the relevant time.
The Deputy Commercial Tax Officer, Madras, not only rejected the claim of exemption, but added to the turnover certain amounts which the appellants had collected by way of tax.
The amounts so added for 1951 52 were (a) Rs. 8,000 to the net turnover assessable at 3 pies per rupee, and (b) Rs. 4,30,000 to the turnover assessable at 9 pies per rupee.
For 1952 53 the amounts so added were (a) Rs. 30,132 odd and (b) Rs. 2,92,257 odd res pectively.
Aggrieved by the orders of the Deputy Commercial 573 Tax Officer, the appellants preferred two appeals to the Special Commercial Tax Officer, Appeals, Madras City.
These appeals were dismissed.
The matter was then taken to the Sales Tax Appellate Tribunal by means of two appeals.
By this time the Madras Legislature had passed the Madras General Sales (Definition of Turnover and Validation of Assessments) Act, 1954, being Madras Act No. XVII of 1954.
This Act we shall refer to as the impugned Act in this judgment, because its constitutional validity is now the only question for decision in these appeals.
The Tribunal negatived the claim of the appellants arising out of the contention that some of the sale transactions in the relevant years were in effect interState sales and therefore exempt from tax; the tribunal declined to go into the second question of the constitutional validity of the impugned Act.
We may state here, though nothing now turns upon this, that the Tribunal held that when sales tax was included in the turnover, it was proper to tax the amounts so included at the minimum rate only, viz., 3 pies in the rupee under section 3(1) of the principal Act.
Thereafter the appellants filed two revision petitions to the High Court under section 12 B of the principal Act.
These were dismissed in limine.
By the orders dated April 20, 1956 the High Court held that the contention as to some of the transactions being inter State sales was concluded by one of its earlier decisions, which came before us in Ashok Leyland Ltd. vs The State of Madras, Civil Appeal No. 446 of 1958.
In that appeal we delivered judgment on March 28, 1961 and held that the Sales Tax Laws (Validation) Act, 1956 applied and it was unnecessary to consider the true nature of the transactions which the appellants contended were inter State sales.
Learned Counsel for the appellants has conceded before us that decision governs the present appeals, and the first question no longer survives.
As to the second question, the High Court by oversight did not deal with it in its orders dated April 20, 1956.
When the matter was brought to the notice of 73 574 the High Court, it said in its orders dated July 30, 1956 that the second question was also concluded by its decision in Sri Sundararajan and Co., Ltd. vs The State of Madras( ') where the validity of the impugned Act was upheld.
When we heard these appeals along with Ashok Leyland Ltd. vs The State of Madras, Civil Appeal No. 446 of 1958, we expressed the view that there was some divergence of opinion in the High Courts on the second question and the substantial point for consideration before us was whether the impugned Act was validly made under entry 54 of the State List in the Seventh Schedule to the Constitution: thus the question raised was one of legislative competence and affected all the States.
The State of Madras was already a party respondent to these appeals.
Accordingly, we directed the issue of notices to the Advocates General of all other States also.
In pursuance of the said notices the Advocates General of Andhra Pradesh, Assam, West Bengal, Gujarat, Maharashtra, Punjab and Rajasthan have appeared before us.
They have unanimously supported the State of Madras in its submission that the impugned Act is valid; some of them have added supplementary arguments in support of that submission.
For convenience and brevity we shall refer in this judgment to the main arguments as representing two differing points of view; firstly, there is the argument on behalf of the appellants that the several provisions of the principal Act as also section 2 of the impugned Act make a distinction between the sale price of goods sold and the amount collected by way of tax and in view of that distinction made, What the impugned Act seeks to impose is a 'tax on Sales tax ' a subject which does not come within the ambit of entry 54 of List II which at the relevant time read as "Taxes on the sale or purchase of goods other than newspapers.
" On the other side, the argument is that what the impugned Act seeks to do is to enlarge the scope of the definition of 'turnover ' so as to include the amount collected by way of tax in the turnover by a deeming (1) (1956) 7 S.T.C. 105.
575 provision, and this the State Legislature was competent to enact under entry 54 of the State List.
These are the main arguments on two sides; but there are several subsidiary points in support of the main argument on each side, and it would be an over simplification to ignore these altogether.
We shall, therefore, consider them also when dealing with the main argument on each side.
We shall first refer to the relevant provisions of the principal Act and of the impugned Act, in so far as they bear on the points debated before us.
Under section 3 of the principal Act which is the charging section, every dealer is liable to pay, subject to the provisions of the Act, for each year a tax on his total turnover for that year calculated at a particular percentage of such turnover.
What is 'turnover ' is defined in section 2(i).
The definition substantially states " 'turnover ' means the aggregate amount for which goods are either bought or sold by a dealer whether for cash or for deferred payment or other valuable consideration. . 'Sale ' is defined in section 2(h) and means (we are reading so much of the definition only as is material for our purpose) "every transfer of property in goods by one person to another in the course of trade or business for cash or deferred payment or other valuable consideration.
" It is worthy of note here that the tax imposed by the principal Act is a tax on total turnover, and turnover means the aggregate amount for which goods are either bought or sold by a dealer.
Therefore, one of the questions which fall for consideration is whether the State Legislature went beyond its legislative competence in enacting by the impugned Act that the amounts collected by the dealer by way of tax shall be deemed to have formed part of his turnover.
This brings us to section 8B of the principal Act, which provides in sub section
(1) that no person who is not a registered dealer shall collect any amount by way of tax; nor shall a registered dealer make any such collection except in accordance with such conditions and restrictions, if any, as may be prescribed; sub section
(2) provides inter alia that every person who has collected or collects by way of tax any amounts shall pay 576 over the same to the State Government.
Section 15 provides for penalties for a, contravention of some of the provisions of the principal Act including the provisions of section 8B.
In The Deputy Commissioner of Commercial Taxes, Coimbatore Division vs M. Krighnaswami Mudaliar & Sons (1) the Madras High Court held that the amount collected by a registered dealer from the consumer by way of sales tax and paid over to Government should not be included in the turnover of the registered dealer as part of the sale price of the goods sold and it was not liable to be taxed again.
This decision was given on January 7, 1954.
In July 1954 was enacted the impugned Act sections 2 and 3 whereof need only be set out here.
"section 2.
Sales Tax Collections by dealers to be deemed part of turnover.
In the case of sales made by a dealer before the 1st April 1954, amounts collected by him by way of tax under the Madras General Sales Tax Act, 1939 (Madras Act IX of 1939) (hereinafter referred to as the principal Act), shall be deemed to have formed part of his turnover.
Validation of certain assessment and collections. (1) All assessments, and collections made, all orders passed, all actions taken by any officer in the exercise or purported exercise of jurisdiction or power conferred by the principal Act, and all judgments, decrees or orders pronounced by any Tribunal or Court in the exercise of its jurisdiction or powers with respect to matters in the principal Act, on the basis that amounts collected by a dealer by way of tax under the principal Act before the 1st April 1954, formed part of the turnover of the dealer are hereby declared to have been validly made, passed, taken or pronounced, as the case may be; and any finding recorded by any officer, Tribunal or Court to a contrary effect and any order, judgment or decree in so far as such order, judgment or decree embodied or is based on any such finding and does not relate merely to the costs of the proceeding which result in the judgment, decree or order shall be void and of no effect: (2) [1954] 5 S.T.C. 88.
577 Provided that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable if this Act had not been passed.
(2) Nothing in sub section (1) shall be construed as authorising any officer, in assessing any dealer in s the exercise or purported exercise of jurisdiction or powers conferred by the principal Act, to include in the turnover of the dealer amounts collected by him after the 1st April 1954 by way of tax under the principal Act.
" The validity of the impugned Act was then questioned in the Madras High Court and in Sri Sundararajan and Co., Ltd. vs The State of Madras (1) it was held that the impugned Act was valid.
The High Court pointed out that the earlier decision in Krishnaswami Mudaliar 's case (2) was not that the State Legislature could not make the amounts collected by a registered dealer by way of tax under section 8B part of the assessable turnover, but that the principal Act as it stood at the relevant time did not make such amounts part of the assessable turnover.
It held that in pith and substance the impugned Act validated the assessments already made before April 1, 1954 and that even where the registered dealer collected any amount by way of tax under the authority of section 8B, the payment by the purchaser was on the occasion of the sale by the dealer and vis a vis the latter it was in reality part of the price the purchaser paid the seller for purchasing the goods.
The same view was also expressed by the Patna High Court in Ashoka Marketing Company Ltd. vs The State of Bihar (3) with regard to the Bihar Sales Tax (Definition of Turnover and Validation of Assessments) Act, 1958.
The question before us is whether the aforesaid view is correct.
The relevant legislative entry, as we have said earlier, is entry 54 of List II "Taxes on the sale or purchase of goods other than newspapers.
" A similar entry (No. 48) in List 11 of Schedule VII to the Government of India Act, 1935 read as "Taxes on the (1) [1956] 7 S.T.C. 105.
(2) [1954] 5 S.T.C. 88.
(3) [1959] 10 S.T.C. 110, 578 sale of goods." The true scope and effect of that entry was considered by this Court in the State of Madras vs Gannon Dunkerley and Co. (Madras) Ltd. (1) and on a review of several decisions bearing on the subject it held that the expression "sale of goods" was a term of well recognised legal import in the general law relating to sale of goods and in the, legislative practice relating to that topic and must be interpreted as having the same meaning as in the ; in other words, it was held that sales contemplated by entry 48 of the Government of India Act, 1935 were transactions in which title to the goods passed from the seller to the buyer, and in The Sales Tax Officer, Pilibhit vs Messrs. Budh Prakash Jai Prakash (2) it was held that a mere executory agreement was not a sale within the meaning of that entry.
We think that the same meaning must be given to entry 54 of List 11 of the Seventh Schedule to the Constitution.
The question before us is that giving that meaning to the entry, is the impugned Act a valid piece of legislation by a competent Legislature? Now, learned Counsel for the appellants has not raised before us the extreme contention that in no case could the State Legislature validly make a law which would include the amount collected by way of tax as part of the turnover of the dealer.
He has submitted that it is unnecessary for him in this case to press into service any such wide proposition.
His argument is that the principal Act by sections 8B and 15 and the impugned Act by section 2 thereof having made a distinction between what he calls the sale price and what is collected by way of tax by the dealer, the question of the validity of the impugned Act must be determined on the basis of that distinction and so determined, what the impugned Act does is to impose what learned Counsel calls "a tax on tax" and therefore not covered by the relevant legislative entry.
His submission further is that what is collected by way of tax being distinct from sale price and therefore from turnover, it must be necessarily held that the amount collected by way of tax is not essentially (1) ; (2) ; 579 connected with the transaction of sale and therefore the imposition of "a tax on tax" has no necessary connexion with the transaction of sale as understood in the general law relating to sale of goods.
We are unable to accept this argument as correct.
First of all, we do not think that either the principal Act or the impugned Act proceeds,on any immutable distinction between sale price and tax such as learned Counsel for the appellants has suggested.
The principal Act does not contain any separate definition of sale price.
We have already referred to the definitions of 'sale ' and 'turnover '; those definitions do not show any such distinction.
On the contrary, the expression 'turnover ' means the aggregate amount for which goods are bought or sold, whether for cash or for deferred payment or other valuable consideration, and when a sale attracts purchase tax and the tax is passed on to the consumer, what the buyer has to pay for the goods includes the tax as well and the aggregate amount so paid would fall within the definition of turnover.
In Paprika Ltd. and Another vs Board of Trade (1) Lawrence, J. said "Whenever a sale attracts purchase tax, that tax presumably affects the price which the seller who is liable to pay the tax demands but it does not cease to be the price which the buyer has to pay even if the price is expressed as x plus purchase tax." The same view was again expressed in Love vs Norman Wright (Builders), Ltd. (2) when Goddard, L. J. said: "Where an article is taxed, whether by purchase tax, customs duty, or excise duty, the tax becomes part of the price which ordinarily the buyer will have to pay.
The price of an ounce of tobacco is what it is because of the rate of tax, but on a sale there is only one consideration though made up of cost plus profit plus tax.
So, if a seller offers goods for sale, it is for him to quote a price which includes the tax if he desires to pass it on to the buyer.
If the buyer agrees to the price, it is not for him to consider how it is made up or whether the seller has included tax or not.
" (1) (2) 580 We think that these observations are apposite even in the context of the provisions of the Acts we are considering now, and there is nothing in those provisions which would indicate that when the dealer Collects any amount by way of tax, that cannot be part of the sale price.
So far as the purchaser is concerned, he pays for the goods what the seller demands, viz., price even though it may include tax.
That is the whole consideration for the sale and there is no reason why the whole amount paid to the seller by the purchaser should not be treated as the consideration for the sale and included in the turnover.
But, argues learned Counsel for the appellants, section 8 B of the principal Act and Turnover and Assessment Rules made under section 19 show that under the scheme of the principal Act a distinction is drawn between the amount collected by way of tax and the amount of purchase price.
It is indeed true that in section 8 B the amount collected by way of tax is separa tely mentioned, and while sub section
(1) thereof is merely enabling in the sense that a registered dealer may pass on the tax, sub section
(2) imposes an obligation on the registered dealer to pay over the amount of tax collected by him to Government.
The position under the Turnover and Assessment Rules is correctly summarised in the following extract from the judgment in Krishnaswamy Mudaliar 's case (1): "Rule 4 provides that the gross turnover of a dealer for the purposes of the rules is the amount for which goods are sold by the dealer.
Provision is made in rule 5 for certain deductions, and the mode or manner in which the tax to be levied has to be arrived at.
The object of these rules is to assess.
, the net turnover on which the tax is to be levied under the charging section.
It is therefore clear that under the charging section, tax is to be paid on the turnover which is assessed according to the rules.
Rule 11 requires that every dealer should submit a return under rule 6 every year to the assessing authority in Form A in which he has to show the actual gross and net turnover for the preceding (1) [1954] 5 S.T.C. 88.
581 year and the amounts by way of tax or taxes actually collected during that year.
In Form A columns 1 to 10 relate to the gross turnover and the deductions to be made from the gross turnover; column 10 requires the net turnover liable to tax to be shown.
In column 11 the amount actually collected by way of tax or taxes under section 8 B has to be shown.
" The question however still remains do the aforesaid provisions show such a distinction under the scheme of the two Acts that the amount collected by way of tax cannot be part of the turnover of the dealer and if the impugned Act makes it a part of the turnover by a deeming provision, it must be struck down as being outside the legislative competence of the State Legislature? It is necessary to emphasise here that no question of legislative competence arose in Krishnaswamy Mudaliar 's case( ') the decision being based on a construction of section 8 B and the Turnover and Assessment Rules only.
We do not think that the distinction drawn in Krishnaswamy Mudaliar 's case( ') whether right or wrong on a question of construction only, is material to the question of legislative competence.
In The Tata Iron & Steel Co., Ltd. vs The State of Bihar (2) this Court dealt with a provision in the Bihar Sales Tax Act, 1947 similar to section 8 B of the principal Act.
Das, C. J., delivering the majority opinion said: "The circumstance that the 1947 Act, after the amendment, permitted the seller who was a registered dealer to collect the sales tax as a tax from the purchaser does not do away with the primary liability of the seller to pay the sales tax.
This is further made clear by the fact that the registered dealer need not, if he so pleases or chooses, collect the tax from the purchaser and sometimes by reason of competition with other registered dealers he may find it profitable to sell his goods and to retain his old customers even at the sacrifice of the sales tax.
This also makes it clear that the sales tax need not (1) [1954] 5 S.T.C. 88.
(2) ; 74 582 be passed on to the purchasers and this fact does not alter the real nature of the tax which, by the express provisions of the law, is cast upon the seller.
The buyer is under no liability to pay sales tax in addition to the agreed sale price unless the contract specifically provides otherwise.
See Love, vs Norman Wright (Builders), Ltd. L. R.
These observations show that when the seller passes on the tax and the buyer agrees to pay sales tax in addition to the price, the tax is really part of the entire consideration and the distinction between the two amounts tax and price loses all significance from the point of view of legislative competence.
The matter is not in any way different under the Turnover and Assessment Rules.
It is true that in column 11 of Form A the amount collected by way of tax under section 8 B has to be shown; that does not, however, mean that an immutable distinction such as will go to the root of legislative competence has been drawn and must be always maintained.
It appears to us that the true effect of section 8 B and the Turnover and Assessment Rules is that (a) a registered dealer is enabled to pass on the tax, (b) an unregistered dealer cannot do so, and (c) the amount collected by way of tax is to be shown separately, for it has to be paid over to Government.
This does not mean that it is incompetent to the legislature enacting legislation pursuant to entry 54 in List 11 by suitable provision to make the tax paid by the purchaser to the dealer together with the sale price in consideration of the goods sold, a part of the turnover of the dealer; nor does it mean that in law the tax as imposed by Government is a tax on the buyer making the dealer a mere collecting agency so that the tax must always remain outside the sale price.
There is another aspect from which the question may be considered.
We shall assume that under the ,scheme of the principal Act a distinction is drawn between the amount collected by way tax and the sale price other than the tax.
Is such a distinction continued and maintained by the impugned Act? Learned Counsel for the appellants has referred us to 583 section 2 of the impugned Act where the expression "collected by him by way of tax under the Madras General Sales Tax Act, 1939" occurs.
It is argued that the aforesaid expression in the impugned Act has to be read with the provisions of the principal Act and so read, B. 2 maintains and continues the distinction made under the principal Act.
Again, we are unable to agree.
The expression "collected by him by way of tax etc." is merely descriptive of the "amounts" so collected; the essential and operative part of section 2 says that the amounts so collected shall be deemed to have formed part of the turnover of the dealer.
Therefore, in express terms section 2 states that the tax shall be deemed to have formed part of the turnover and obliterates the distinction, if any, between 'tax ' and 'turnover ' for the limited period during which the impugned Act operates.
To hold that the distinction is maintained and continued under the impugned Act is to go against the express terms of section 2.
This aspect of the question was adverted to in The Government of Andhra vs East India Commercial Co. Ltd. (1) where the Andhra High Court had occasion to consider the question from a somewhat different point of view, namely, an amendment made by the Andhra Pradesh Legislature in the definition of the expression 'turnover ' in the principal Act.
Section 2 of the amending Act substituted the following definition of 'turn over ': Turnover means the total amount set out in the bill of sale (or if there is no bill of sale, the total amount charged) as the consideration for the sale or purchase of goods . including any sums charged by the dealer for anything done in respect of the goods sold at the time of or before the delivery of the goods and any other sums charged by the dealer, whatever be the description, name or object thereof.
" Section 4 of the amending Act repeated sections 8 B and 8 C of the principal Act.
Dealing with the effect of these amendments, the High Court of Andhra Pradesh said, (1) [1957] 8 S.T.C. 114.
584 "The ultimate economic incidence of the sales tax is on the consumer or the last purchaser and whatever he pays for the goods is paid only as price, that is to say, as consideration for the purchase.
The statutory liability, however, for payment of sales tax is laid on the dealer on his total 'turnover ' whether or not he realises the tax from the purchasers.
Generally speaking, the price charged by the dealer would be inclusive of sales tax, for, it is to his interest to pass the burden of the tax to the purchaser.
So far as the dealer is concerned, the payment of a sum covering the tax made by a purebaser on the occasion of sale, is really part of the price which the purchasers pay for the goods.
" Later, it referred with approval to the decision in Sri Sundararajan and Co., Ltd. vs The State of Madras (1).
In this latter decision the validity of the impugned Act was questioned and dealing with section 2 of the impugned Act, the High Court said: "Section 2 only enacted that such amount shall be deemed ' to be part of the turnover and for a limited period.
It may not be necessary to set out authorities for the well settled principle of what the effect is of the use of the expression 'deemed ' in a statute.
Was the legislature competent to enact section 2 including the deeming provision, is the real question.
If the validity of section 2 of the impugned Act is established there should be little difficulty in upholding the validity of section 3, which gave effect to the legal fiction enacted by section 2.
Obviously, it is not the name the legislature accords to a payment by a purchaser to a seller, who is a dealer as defined by the Act, that determines the question of the legislative competence.
No doubt section 8B called the payment as amount (collected) by way of tax.
It is equally true that the statutory liability to pay the sales tax is laid on the dealer.
What is taxable is not each transaction of sale but the total turnover of the dealer, computed in accordance with the provisions of the (1) (1956) 7 S.T.C. 105.
585 Act and the Rules.
But it is well recognised that whatever be the form of the statutory provisions, the ultimate economic incidence of the tax is on the consumer, the purchaser.
It was that well settled principle that was re stated in Bengal Immunity Co. Ltd. vs State, of Bihar (1).
Even if the registered dealer collects the amount by way of tax under the authority of section 8B of the Act, the payment is by the purchaser on the occasion of the sale by the dealer.
Vis a vis the dealer it is in reality part of the price the purchaser has to pay the seller for purchasing the goods.
A tax on such a payment, in our opinion, is well within the ambit of Entry 54 of List 11, Schedule VII, read with Article 246(3) of the Constitution.
" We are of the view that the aforesaid observations correctly give the true effect of section 2 of the impugned Act, and section 3 of the impugned Act is merely consequential.
Mr. Sikri appearing on behalf of.
the States of Maharashtra and Punjab has drawn our attention to certain American decisions which show that treating tax as part of the sale price in cases where the tax is passed on to the buyer, is well recognised and is not unknown to law (see Lash 's Products Company vs United States, 73 L. Edn. 251; Pure Oil Company vs State Of Alabama, 148 American Law Reports 260).
We consider it unnecessary to examine these decisions, because the validity of the impugned Act must be determined on its own terms in the context of the provisions of the principal Act.
Reading the impugned Act in the light of the provisions of the principal Act, it seems clear to us that the impugned Act cannot be held to be bad on the ground of legislative incompetence.
Under the definition of turnover the aggregate amount for which goods are bought or sold is taxable.
This aggregate amount includes the tax as part of the price paid by the buyer.
The amount goes into the common till of the dealer till he pays the tax.
It is money which he keeps using for his business till he pays it over to Government.
Indeed, (1) 586 he may turn it over again and again till he finally hands it to Government.
There is thus nothing anomalous in the law treating it as part of the amount on which tax must be paid by him.
This conception of a turnover is not new.
It is found in England and America and there is no reason to think that when the legislatures in India defined 'turnover ' to include tax also, they were striking out into something quite unknown and unheard of before.
The only question which has been raised in these appeals is regarding the validity of the impugned Act.
That question having been decided against the appellants, the appeals fail and are dismissed with costs.
One hearing fee.
Appeals dismissed. | Certain amounts collected by the appellants as sales tax were included in their turnover by the sales tax authorities.
They contested the constitutional validity of the Madras General Sales (Definition of Turnover and Validation of Assessments) Act, 1954, on the ground inter alia that the Sate Legislature went beyond its legislative competence under entry 54 of List If of the Constitution in enacting by the impugned Act that the amounts collected by the dealer by way of tax shall be deemed to have formed part of his turnover.
Held, that entry 54 of List II of the Seventh Schedule of the Constitution is similar to entry 48 of List 11 of Sch.
Vil of the Government of India Act, 1935 sales under which have been held to be transactions passing title to the Goods from the seller to the buyer and that a mere executory agreement was not a sale within the meaning of that entry.
The same meaning must be given to entry 54.
571 State of Madras vs Gannon Dunkerly & Co., Ltd., ; and Sales Tax Officer vs M/s. Budh Prakash jai Prakash; , , referred to.
Under sections 2(i) and 2(h) of the Madras General Sales Tax Act, 1939, the expression "turnover" means the aggregate amount for which goods are sold either for cash or deferred payment or other Valuable consideration, and when a sale attracts purchase tax which is passed on to the consumer what the buyer has to pay includes the tax and the aggregate amount to be paid would fall under the definition of turnover.
When the seller passes on the tax and the buyer agrees to pay sales tax in addition to the price, the tax is really part of the entitle considerations.
Papreka Ltd. vs Board of Trade, , Love vs Norman Wright (Builders) Ltd., , followed.
Asoka Marketing Co. Ltd. vs The State of Bihar, [1959] IO S.T.C. 110 and Tata Iron and Steel Co. vs The State of Bihar, ; , referred to.
Although section 8B of the Madras General Sales Tax Act, 1939 and the Turnover and Assessment Rules separately mentioned the amounts collected as tax for the purpose of paying such amounts to the Government, no immutable distinction was drawn between the sale price and the tax nor was any such distinction maintained under section 2 of the impugned Act.
Assuming that such a distinction did exist the Legislature was competent to enact under entry 54 in List II of the Constitution that the tax shall be deemed to have formed part of the turnover and obliterate the distinction for the limited period during which the impugned Act operated.
The impugned Act was therefore valid.
The Deputy Commissioner of Commercial Taxes vs M. Kyishna swami Mudaliar, [1954] 5 S.T.C. 88, held not applicable.
Sri Sundararajan & Co. vs The State of Madras, [1956] 7 S.T.C. 105, approved.
The Government of Andhya vs East India Commercial Co., Ltd., [1957] 8 S.T.C. 114 and Bengal Immunity Co., Ltd. vs State Of Bihar,[1955] 2 S.C.R. 603, referred to. |
iminal Appeals Nos. 248 to 251 of 1968.
Appeals from the judgment an order dated August 13, 1968 of the Calcutta High Court in Criminal Appeals Nos.
425 to 428 of 1968.
L.M. Singhvi and section P. Nayar, for the appepant (in all the appears).
The respondent did not appear.
The Judgment of the Court was delivered by Ray, J.
These appeals are by certificate from the, judgment dated 13 August, 1968 of the High Court at Calcutta holding that 8 60 the memorandum of appeals from an order of, acquittal were barred by Article 114 of the .
The appeals were directed against orders of acquittal passed by the Presidency Magistrate, Calcutta on 4 April, 1968.
The four petitions of appeal were presented in the High Court on 1 July, 1968 by the learned Advocate authorised by the, Vakalatnama executed by the Assistant Registrar of Companies, West Bengal described as the appellant in all the_ petitions.
The Assistant Registrar of Companies, West Bengal filed petitions of complaint before the Chief.
Presidency Magistrate, Calcutta alleging that the certain officers/directors of the Standard Paint Works (P) Ltd. of 44 Beadon Row, Calcutta mentioned therein were guilty of offence for non compliance with provisions contained in the by reason of default in filing Annual Return of the Company together with the Annual Accounts and Balance sheet.
Section 210 of the requires annual accounts and balance, sheet of the company to be filed within the time mentioned in the section.
If any person being a director of the company fails to take all reasonable steps to comply with the provisions of section 210, he shall, in respect of each offence.
be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both.
The complainant in filing the petitions of complaint prayed for exemption of personal appearance under proviso to section 247 of the Code of Criminal Procedure read with section 621(1)A of the .
The Presidency Magistrate passed the orders of acquittal in all the cases.
Section 417 of the Code of Criminal Procedure speaks of appeal in case of acquittal.
Sub section (3) of that:section is as follows "If such an order of acquittal is passed in any case instituted upon complaint and the.
High Court, on an.
application made to it by the complainant.
in this behalf, grants special leave to appeal from the order of acquittal, the complainant may present such an appeal to the High Court".
Section 417 (4) of the Code of Criminal, Procedure states that no application under sub section (3) for the grant of special leave to appeal from an order of acquittal shall be entertained by the High Court after the expiry of 60 days from the date of the order of acquittal.
No 8 application was made to the High Court in cornpiance with section 417 (3) of the Code of Criminal Procedure.
861 On behalf of the appellant it was contended both in the High, Court and in this Court that the appeals were preferred under section 624B of the .
Section 624B is as follows "Notwithstanding anything contained in the Code of Criminal Procedure, 1898, the Central Government may, in any case arising out of this Act, direct any company prosecutor or authorise any other person either by name or by virtue of his office, to present an appeal from an order of acquittal passed by any Court other than a High Court and an appeal presented by such prosecutor or other person shall be deemed to have been validly presented to the appellate Court.".
The contention on behalf of the appellant that the right of appeal is conferred by section 624B of the is unacceptable.
Section 624B only speaks of the Central Government directing or authorising any person to present an appeal from the order of acquittal.
Section 417(1) of the Code of Criminal Procedure enacts that in case of acquittal the State Government may direct the Public Prosecutor to present an appeal to the High Court.
Section 624B of the empowers the Central Government to present appeals through persons mentioned in that section.
Presentation of appeal by the Central Government is a similar provision to section 417(1) of the Code of Criminal Procedure.
Chapter XXXI of the Code of Criminal Procedure relates to, appeals.
Appeal is a creature of statute.
The right to appeal is governed by the Code of Criminal Procedure. , Section 404 of the Code of Criminal Procedure states that no appeal shall lie from any judgment or order of a Criminal Court except as provided for by the Code of Criminal Procedure or by any other law for the time being in force.
Section 624B of the does not confer any right of appeal from any order passed by a Criminal Court in respect of any offence under the provisions of the .
The right to appeal to the High Court in the present cases of acquittal is governed by section 417 of the Code of Criminal Procedure.
Article 114 of the requires appeal under sub section (3) of section 417 of the Code of Criminal Procedure to be filed within 30 days from the date of the grant of special leave.
No application for the grant of special leave to appeal from an order of acquittal was made within 60 days from that order of acquittal.
The orders of acquittal were passed on 4 April, 1968.
862 The petitions of appeal were presented on 1 July, 1968.
The appeals were rightly not entertained by the High Court because first there was no application for grant of special leave under section 417(3) of the Code of Criminal Procedure; secondly, the appeals were incompetent without grant of special leave, and thirdly these were barred by limitation.
An appeal under section 417(3) against acquittal is competent only when there is special 'leave granted by the High Court.
On obtaining special leave the appeal is thereafter filed within 30 days of the grant of leave to escape the mischief of the period of limitation under Article 114 ,.of the .
A provision in the which confers right of appeal is section 483.
It speaks of appeals from orders made and the decisions given in the matter of winding up of the companies by the Court and it enacts that such appeals shall lie to the same Court to which, in the same manner in which, and subject to the same ,conditions under which, appeals lie from any order or decision of the Court in cases within its ordinary jurisdiction.
Section 624B is not such a section which can be said to be conferring a right of appeal.
Section 624B only mentions as to the person through whom appeal is presented.
The appeals therefore fail and are dismissed.
V.P.S. Appeals dismissed. | The appellant filed complaints before the Chief Presidency Magistrate alleging that the officers of the respondent had committed an offence under the .
They were acquitted on April 4, 1968.
On July 1, 1968, appeals were filed in the High Court by the appellant (cornplainant) but the High Court held that they were barred by article 114 of the .
In appeal to this Court, it was contended that the appeals were filed not under section 417 Cr.P.C, but under section 624B of the .
HELD:(1) Section 404, Cr.P.C., provides that no appeal shall lie from any order of a criminal court except as provided by the Code or by any other law for the time being in force.
But section 624B does not confer any right of appeal from an order of acquittal passed by a criminal court in respect of an offence under the .
It only em powersthe Central Government to present appeals through persons mentioned in that section.
[1861 E G] (2) Section 417, Cr.
P.C. provides right of appeal in cases of acquittal and if the order of acquittal is passed in a case instituted upon complaint, an application for special leave to appeal from such order should be filed within 60 days from the date of the order of acquittal, and under article 114 of the , the appeal should be filed within 30 days from the date of the grant of special leave.
The appeals were not rightly entertained in the present case, because (a) there was no application for grant of special leave under section 417(3), Cr.
P.C., (b) the appeals were incompetent without grant of special leave; and (c) they were barred by limitation.
[860 G H; 861 H; 862 A D] |
iminal Appeal No. 83 of 1953.
Appeal under article 132(1) of the Constitution of India from the Judgment and Order dated the 25th August 1953 of the High Court of Judicature at Patna in Criminal Appeal No. 410 of 1951.
B. K. Saran and M. M. Sinha, for the appellants.
M. C. Setalvad, Attorney General for India (R.C.prqsad, with him) for the respondent.
1047 1954.
December 2.
The Judgment of the Court was delivered by DAS J.
This is an appeal from a judgment of the High Court of Judicature at Patna which raises a substantial question of law as to the interpretation of the Constitution of India.
The appeal arises out of a criminal trial held in the district of Hazaribagh in the State of Bihar.
The case against the appellants was investigated by the local police and on the 4th June, 1951 a challan was submitted before the Sub Divisional Magistrate.
The Sub Divisional Magistrate passed the following order in the order sbeet: "Let the record be sent to the Dy.
Commr., Hazaribagh for.
transferring it to the file of the Spl.
Magistrate for trial".
On the record being placed before the Deputy Commissioner, the latter passed following order: "Perused S.D.0 's order sheet.
Withdrawn and transferred to the file of Mr. section F. Azam, Magte.
with powers u/s 30, Cr. P. C. for favour of disposal".
The appellants were then tried by Mr. section F. Azam, Magistrate of the first class exercising powers under section 30 of the Code of Criminal Procedure on charges under sections 366 and 143 of the Indian Penal Code and each of them was convicted under both the sections and sentenced to rigorous imprison ment for five years under section 366, Indian Penal Code, no separate sentence having been passed under section 143.The appellants preferred an appeal to the High Court of Judicature at Patna.
The appeal was heard by a Bench consisting of section K. Das and C. P. Sinha, JJ.
There was a difference of opinion between the two learned Judges as to the constitutionality of section 30 of the Code of Criminal Procedure.
section K. Das, J., took the view that the impugned section did not bring about any discrimination or inequality between persons similarly circumstanced and consequently did not offend the equal protection clause of the Constitution, while C. P. Sinha, J., was of the opinion that 1048 the section was hit by article 14.
The appeal was thereupon placed before Reuben, C. J., who in agreement with section K. Das, J., held that section 30 did not violate the inhibition of article 14.
The learned Chief Justice upheld the conviction but reduced the sentence.
On application by the appellants the High Court granted them a certificate under article 132(1) and the present appeal has been filed accordingly.
The learned Advocate appearing in support of the appeal contends before us, as was done before the High Court, that there had been an infraction of the fundamental rights guaranteed to the appellants under article 14 of the Constitution of India.
The complaint is that the appellants had been tried by a section 30 Magistrate and not by a Court of Session.
A section 30 Magistrate is enjoined by that section to try the case brought before him as a Magistrate and accordingly in cases like the present case he will follow the warrant procedure which is different from the procedure followed by a Court of Session.
The substance of the grievance is that a trial before the Sessions Judge is much more advantageous to the accused person in that he gets the benefit of the commitment proceedings before a Magistrate and then a trial before the Sessions Judge with the aid of the jury or assessors.
It has not been seriously questioned before us that in spite of the risk of imposition of a punishment heavier than what a section 30 Magistrate can inflict, a trial by a Sessions Judge is of greater advantage to the accused than a trial before a Magistrate under the warrant procedure.
We have, therefore, to see whether this apparent discrimination offends against the equal protection clause of our Constitution.
The provisions of article 14 of the Constitution have come up for discussion before this Court in a number of cases.
, namely, Chiranjit Lal Chowdhuri vs The Union of India(1), The State of Bombay vs F. N. Balsara(2), The State of West Bengal vs Anwar Ali Sarkar(3), Kathi Raning Rawat vs The State of Sau (1) ; (2) ; (3) ; 1049 rashtra(1), Lachmandas Kewalram Ahuja vs The State of Bombay(2) and Qasim Razvi vs The State of Hyderabad(3) and Habeeb Mohamad vs The State of Hyderabad(4).
It is, therefore, not necessary to enter upon any lengthy discussion as to the meaning, scope and effect of the article in question.
It is now well established that while article 14 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation.
In order, however, to pass the test of permissible classification two conditions must be fulfilled, namely, (i) that the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped togetber from others left out of the group and (ii) that differentia must have a rational relation to the object sought to be achieved by the statute in question.
The classification may be founded on different bases; namely, geographical, or according to objects or occupations or the like.
What is necessary is that there must be a nexus between the basis of classification and the object of the Act under consideration.
It is also well established by the decisions of this Court that article 14 condemns discrimination not only by a substantive law but also by a law of procedure.
The contention now put forward as to the invalidity of the trial of the appellants has, therefore to be tested in the light of the principles so laid down in the decisions of this Court.
There are no less than four modes of trial prescribed by the Code of Criminal Procedure, namely,(i) trial of sessions cases, (ii) trial of warrant cases, (iii)summary trials and (iv) trials before a High Court and a Court of Session and the procedure in each of these trials is different.
Section 28 of the Code of Criminal Procedure which is to be found in Chapter III which deals with "Powers of Courts" reads as follows: "28.
Subject to the other provisions of this Code, any offence under the Indian Penal Code may be tried (1) ; (3) ; (2) [1952] S C R. 710.
(4) ; 1050 (a) by the High Court, or (b) by the Court of Session, or (c) by any other Court by which such offence is shown in the eighth column of the second schedule to be triable".
Section 30, as it now stands, provides: "30.
In Assam, Madhya Pradesh, Punjab, Oudh, Madhya Bharat, Hyderabad, Mysore, Patiala and East Punjab States Union and Rajasthan, in all Part C States and in those parts of the other States in which there are Deputy Commissioners or Assistant Commissioners the State Government may, not withstanding anything contained in section 28 or section 29, invest the District Magistrate or any Magistrate of the first class, with power to try as a Magistrate all offences not punishable with death".
Section 34 puts a limit to the power of punishment of a section 30 Magistrate in terms following: "34.
The Court of a Magistrate, specially empowered under section 30, may pass any sentence authorised by law, except a sentence of death or of transportation for a term exceeding seven years or imprisonment for a term exceeding seven years".
It will be noticed that section 28 begins with the clause "subject to the other provisions of this Code".
This means that the section and the second schedule referred to therein are controlled by the other provisions of the Code including the provisions of section 30.
Further, the text of section 30 itself quite clearly says that its provisions will operate "notwithstanding anything contained in section 28 or section 29".
Therefore, the provisions of section 28 and the second schedule must give way to the provisions of section 30.
It is not, however, claimed by the learned Attorney General that section 30 abrogates or overrides altogether the provisions of section 28 and the second schedule in the sense that in the specified territories Magistrates empowered under section 30 become the only tribunal competent to try all offences not punishable with death to the exclusion of all other Courts mentioned in the 8th column of the second schedule.
1051 If that had been the position, then there could be no question of discrimination, for, in that situation, section 30 Magistrate 's Court would be the only Court in which all offences not punishable with death would become triable.
As already stated, this extreme claim is not made by the learned Attorney General.
The effect of the State Government investing the District Magistrate or any Magistrate of the first class with power under section 30 is to bring into being an additional court in which all offences not punishable with death become triable.
In other words, the effect of the exercise of authority by the State Government under section 30 is, as it were, to add in the 8th column of the second schedule the Magistrate so em powered as a Court before whom all offences not punishable with death will also be triable.
The question is whether this result brings about any inequality before the law and militates against the guarantee of article 14.
Section 30, however, empowers the State Government in certain areas to invest the District Magistrate or any Magistrate of the first class with power to try as a Magistrate all offences not punishable with death.
There is an obvious classification on which this section is based, namely, that such power may be conferred on specified Magistrates in certain localities only and in respect of some offences only, namely, all offences other than those punishable with death.
The Legislature understands and correctly appreciates the needs of its own people which may vary from place to place.
As already observed, a classification may be based on geographical or territorial considerations.
An instance of such territorial classification is to be found in the which came up for discussion before this Court and was upheld as valid in The State of Punjab vs Ajaib Singh(1).
section K. Das, J., and the learned Chief Justice have in their respective judgments referred to certain circumstances, e.g. the distance between the place of occurrence and the headquarters where (1) ; 135 1052 the Court of Session functions at considerable intervals, the inconvenience of bringing up witnesses from the interior, the difficulty of finding in the backward or out of the way places sufficient number of suitable persons to act as jurors or assessors, all of which make this classification quite a reasonable one.
In this sense, the section itself does not bring about any discrimination whatever.
The section only authorises the State Government to invest certain 'Magistrates with power to try all offences not punishable with death and this authority the State can exercise only in the specified places.
If the State invests any Magistrate with powers under section 30 anybody who commits any offence not punishable with death and triable by a Court of Session under section 28 read with the second schedule is also liable to be tried by the section 30 Magistrate.
The risk of such liability falls alike upon all persons committing such an offence.
Therefore, there is no discrimination in the section itself.
The learned counsel for the appellants, however, contends, on the strength of the decision of the Supreme Court of America in Yick, Wo vs Peter Hopkins(1) that "though a law be fair on its face and impartial in operation, yet, if it is administered by public authority with an evil eye and an unequal hand so as practically to make illegal discrimination between persons in similar circumstances materially to their rights, the denial of equal justice is still within the prohibition of the Constitution".
The contention is that although the section itself may not be discriminatory, it may lend itself to abuse bringing about a discrimination between persons accused of offences of the same kind, for the police may send up a person accused of an offence under section 366 to a section 30 Magistrate and the police may send another person accused of an offence under the same section to a Magistrate who can commit the accused to the Court of Session.
It is necessary to examine this contention with close scrutiny.
When a case under section 366, Indian Penal (1)[1886] 118 u.s. L.Ed. 220.
1053 Code., which is a case triable by a Court of Session under the second schedule, is put up before a section 30 Magistrate, the section 30 Magistrate is not necessarily bound to try the case himself.
Section 34 limits the power of the section 30 Magistrate in the matter of punishment.
If the section 30 Magistrate after recording the evidence and before framing a charge feels that in the facts and circumstances of the case the maximum sentence which he can inflict will not meet the ends of justice he may, instead of disposing of the case himself, act under section 347 and commit the accused to the Court of Session.
Here, whether the accused person shall be tried by the section 30 Magistrate or by the Court of Session is decided not by the executive but is decided according to the discretion judicially exercised by the section 30 Magistrate himself.
Take the case of another person accused of an affence under section 366 which is sent up by the police to a Magistrate who is not empowered under section 30.
Such Magistrate after perusing the challan and other relevant papers may, if he thinks that the ends of justice will be met if the case is tried by a section 30 Magistrate, submit the case to the District Magistrate with his own recommendations for such action as the latter may think fit to take under section 528 of the Code of Criminal Procedure.
That is what was done in the instant case.
On the other hand, he may take evidence under section 208 and after the evidence has been taken, make up his mind judicially whether he should proceed under section 209 or section 210.
He may consider that in the facts and circumstances of the case disclosed in the evidence the ends of justice require that the accused person should be committed to the Court of Session and in that event he will proceed to frame a charge and follow the provisions of sections 210 to 213.
If, however, the Magistrate is satisfied on the facts of the case that the ends of justice will be sufficiently met if the accused is tried by a section 30 Magistrate having jurisdiction in the matter, the Magistrate may report to the District Magistrate and the latter may, in his discretion, withdraw the case under section 528 of the 1054 Code of Criminal Procedure to himself and may enquire into or try such case himself or refer it for enquiry or trial to any other Magistrate competent to try the same.
In such a case there is exercise of judicial discretion at two stages, namely, under section 209 by the Magistrate before whom the accused was sent up for enquiry and also by the District Magistrate acting under section 528 of the Code of Criminal Procedure.
It is thus clear that the ultimate decision as to whether a person charged under section 366 should be tried by the Court of Session or by a section 30 Magistrate does not depend merely on the whim or idiosyncrasies of the police or the executive Government but depends ultimately on the proper exercise of judicial discretion by the Magistrate concerned.
It is suggested that discrimination may be brought about either by the Legislature or the Executive or even the Judiciary and the inhibition of article 14 extends to all actions of the State denying equal protection of the laws whether it be the action of anyone of the three limbs of the State.
It has, however, to be remembered that, in the language of Frankfurter, J., in Snowden vs Hughes(1), "the Constitution does not assure uniformity of decisions or immunity from merely erroneous action, whether by the Courts or the executive agencies of a State".
The judicial decision must of necessity depend on the facts and circumstances of each particular case and what may superficially appear to be an unequal application of the law may not necessarily amount to a denial of equal protection of law unless there is shown to be present in it an element of intentional and purposeful discrimination (See per Stone, C.J., in Snowden vs
Hughes (supra).
It may be mentioned at once that in the present case there is no suggestion whatever that there has been at any stage any intentional or purposeful discrimination as against the appellants by the Sab Divisional Magistrate or the District Magistrate or the section 30 Magistrate who actually tried the accused.
Further, the discretion of judicial officers is not arbitrary and the law provides for revision by (1) ; ; 1055 superior Courts of orders passed by the Subordinate Courts.
In such circumstances, there is hardly any ground for Apprehending any capricious discrimination by judicial tribunals.
On the facts and circumstances of this case we find ourselves in agreement with section K. Das, J., and Reuben, C. J., and hold that no case of infringement of fundamental right under Article 14 has been made out.
In the circumstances, we dismiss this appeal.
Appeal dismissed. | It is well settled that while Article 14 of the Constitution forbids class legislation, it does not forbid reasonable classification for the purposes of legislation.
In order, however, to pass the test of permissible classification two conditions must be fulfilled, namely, (i) the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group; and, (ii) that differentia must have a rational relation to the object sought to be achieved by the statute in question.
The classification may be founded on different bases; namely geographical, or according to objects or occupations or the like.
What is necessary is that there must be nexus between the basis of classification and the object of the Act under consideration.
Further Article 14 condemn,,; discrimination not only by a substantive law but also by a law of procedure.
The Constitution does not assure unanimity of decisions or immunity from merely erroneous action, whether by the courts or the executive agencies of a State.
Section 30 of the Code of Criminal Procedure does not infringe the fundamental right guaranteed by Article 14 of the Constitution.
Chiranjit Lal Chowdhuri vs The Union of India ( ; , The State of Bombay vs F.N. Balsara ([1951] S.C.R. 682), The State of West Bengal vs Anwar Ali Sarkar ([1952] S.C.R. 284), Kathi Raning Rawat vs The State of Saurashtra ([1952] S.C.R. 435), Lachmandas Kewalram Ahuja vs The State of Bombay ([1952] S.C.R. 710), Qasim Razvi vs The State of Hyderabad ([1953] S.C.R. 581), Habeeb Mohamad vs The State of Hyderabad ([1953] S.C.R. 661), The State of Punjab vs Ajaib Singh ([1953] S.C.R. 254), Yick Wo vs Peter Hopkins ([1886] ; 29 L. Ed. 220) and Snowden vs
Hughes ([1944] ; ; , referred to. |
minal Appeal No. 100 of 1969.
572 Appeal by special leave from the judgment and order dated January 8, 1969 of the Bombay High Court in Criminal Application No. 1341 of 1968.
C. L. Sareen and J. C. Talwar, for the appellant.
P. K. Chatterjee and section P. Nayar, for the respondent.
The Judgment of the Court was delivered by Shelat, J.
The appellant and one Bakshi Singh Sunder Singh were accused No. 2 and accused No. 1 respectively in the committal proceedings before the Presidency Magistrate, 28th Court, Greater Bombay.
This appeal, by special leave, is directed against the judgment of the High Court of Bombay refusing to quash the order of committal passed by the learned Magistrate.
The facts relevant to this appeal are few and may first be stated.
On October 31, 1963, one Jivansingh Uttam Singh obtained a British passport bearing No. 183459 at Nairobi.
On the strength of that passport he was returning to India with his family.
On his way he died on board the ship.
According to the prosecution that passport came into the hands of the appellant.
Bakshi Singh desired to go to the United Kingdom, but had no passport.
The appellant agreed to arrange his journey and also for that purpose to obtain a passport for him.
The allegation was that the appellant prepared an applica tion for a visa in the name of Bakshi Singh.
It was further alleged that with a view to procure the said visa the photograph of the said deceased Jivansingh was removed from the said passport and that of Bakshi Singh substituted.
The visa having in this fashion been obtained, Bakshi Singh journeyed to the United Kingdom having on his way made some intermediate halts.
The British authorities suspected that the, passport was a forged document and repatriated Bakshi Singh to India.
On his arrival he was handed over to the Special Police, Bombay.
The Special Police carried out investigation in the course of which they recorded statements of certain witnesses including that of Tanna Singh, the younger brother of Bakshi Singh.
On completion of the investigation, the police filed a charge sheet before the learned Magistrate.
That charge sheet is not before us.
But counsel for the appellant informed us that Bakshi Singh was therein charged under secs.
419 and 471 read with sec.
468, and the appellant was charged under secs.
419/109, 468 and 471 of the Penal Code.
Counsel also.
informed us that the Magistrate did not examine any witnesses, during the committal 573 proceedings but on a perusal of the charge sheet and the documents filed before him under sec.
173 of the Code of Criminal Procedure he framed the charges and committed, by his order dated September 13, 1968, Bakshi Singh and the appellant for trial before the Sessions Court.
By that order he directed the said Bakshi Singh to stand his trial under secs.
120B, 419, 467 and 471 read with sec.
467, and the appellant under secs.
120B and 467 of the Penal Code.
The offence of criminal conspiracy charged under sec.
120B was that the said Bakshi Singh and the appellant had conspired to forge the said passport for the use of the said Bakshi Singh.
In the High Court various contentions were raised on behalf of the appellant in support of his application under sec.
561A of the Code of Criminal Procedure including that under sec.
196A (2).
That contention was that no consent as required by sec.
196A(2) having been first obtained, the Magistrate had no jurisdiction to take cognizance of the offence of conspiracy, and therefore, the committal order was without jurisdiction and had to be quashed.
In this appeal we are concerned only with that contention as the special leave ranted to the appellant has been limited to that ground alone.
Sub sec.
2 of sec.
196A, which is relevant to the present case, provides that no court shall take cognizance of the offence of criminal conspiracy punishable under sec.
120B of the Penal Code in a case ' inter alia where the object of such conspiracy is to commit any non cognizable offence.
There is no doubt that the charge, as framed by the Magistrate and for which he committed the appellant and Bakshi Singh to stand their trial before the Sessions Court, was for criminal conspiracy, the object of which was to forge the said passport, a non cognizable offence.
In respect of that offence, sec.
196A(2) would undoubtedly apply.
What that section prohibits is taking cognizance of an offence of criminal conspiracy unless consent to the initiation of proceedings against the person charged with it has been first obtained.
As provided by sec.
190 of the Code of Criminal Procedure, a Magistrate may take cognizance of an offence either (a) upon receiving a complaint, or (b) upon a police report, or (c) upon information received from a person other than a police officer or even upon his own information or suspicion that such an offence has been committed.
As has often been held taking cognizance does not involve any formal action or indeed action of any kind but occurs as soon as a Magistrate applies his mind to the suspected commission of an offence.
Cognizance, therefore, takes place at a point when a magistrate first takes judicial notice of an offence.
This is the position whether the magistrate takes 574 cognizance of an offence on a complaint or on a police report, or upon information of a person other than a police officer.
Therefore, when a magistrate takes cognizance of an offence upon a police report, prima facie he does so of the offence or offences disclosed in such report.
It is not in dispute that the charge sheet submitted by the police officer for the purpose of initiation of proceedings by the magistrate was for offences under sees.
419 and 471 read with sec.
468 against Bakshi Singh and under sees.
419/109, 471 and 468 against the appellant.
The charge sheet admittedly did not refer to or charge either of them with criminal conspiracy under sec.
120B. Prima facie it is not possible to say that at the stage when the police filed the charge sheet the Magistrate took cognizance of the offence, under sec.
120B, for, that was not the offence alleg ed in the charge sheet to have been committed by either of the two accused persons.
True it is that the Magistrate ultimately drew up charges which included the offence under sec.
120B, the object of which was to forge the passport, an offence under sec.
The Magistrate also did not consider it necessary to examine any witnesses and frame the charges on a perusal of the charge sheet submitted to him by the police, the statement of witnesses recorded by the police during their investigation and such other documents as were filed under sec.
173 of the Code of Criminal Procedure &,fore him.
The materials before him, therefore, were the same as were before the police officer who had filed the charge sheet.
But while drawing up the charges and passing his order of committal, the Magistrate considered that though the charge sheet filed before him alleged the commission of offences under secs.
419/109, 471 and 468, the proper charge on the materials before him, although they were the same as before the police officer, warranted a charge of criminal conspiracy for forging a passport.
It is quite clear, however, that the cognizance which he took was of the offences alleged in the charge sheet because it was in respect of those offences that the police had applied to him to initiate proceedings against Bakshi Singh and the appellant and not for the offence under sec.
It was at a later stage, i.e., at the time of passing the committal order that he considered that a charge under sec.
120B was the more appropriate charge and not a charge under sec.
109 of the Penal Code.
That being so, it must be held that the Magistrate took cognizance of the offence of abetment of an offence of forgery and impersonation so far as the appellant was concerned and not of the offence of criminal conspiracy, and therefore, sec.
196A(2) did not apply.
Counsel in this connection relied on certain observations made in a minority judgment of section K. Das, J., in Pramatha Nath 575 Taluqdar vs Saroj Ranjan Sarkar.
(1) The question involved there was, whether a second complaint could be entertained by a magistrate who or whose predecessor had on the same or similar allegations dismissed a previous complaint, and if so, in what circumstances should such a complaint be entertained.
Arising .
out of this question a contention was raised whether on the complaint, as it was framed, the Magistrate had the jurisdiction to, take cognizance of the offences alleged in the complaint in the, absence of a sanction under sec.
The second complaint alleged offences under secs.
467 and 471 read with sec.
109 of the Penal Code.
But in para 5 thereof, there was an allegation as to criminal conspiracy and it was on the basis of that allegation that sec.
196A(2) was sought to be involved.
It was in this connection that the learned Judge at page 315 of the report, observed : "It would not be proper to decide the, question of sanction me rely by taking into consideration the offences mentioned in the heading or the use of the expression " criminal conspiracy" in para, 5.
The proper test should ' be whether the allegations made in the petition of complaint disclosed primarily and essentially an offence or offences for which a consent in writing would be necessary to the initiation of the proceedings within the meaning of section 196A(2) of the Code of Criminal Procedure.
It is from that point of view that the petition of 'complaint must be examined.
" The learned Judge ultimately held that though the offence of criminal conspiracy was alluded to in para 5 of thesaid complaint, the offence "primarily and essentially" chargedwas abetment by conspiracy under sec.
109 of the Penal Code, and therefore.
no consent under sec.
196A(2) was required.
In Biroo Sardar vs Ariff (2) the view also taken was that itis not the, sections referred to which matter but the offence prima facie disclosed.
Following that decision, the High Court of Bombay in Ramchandra vs Emperor(3) observed that the question whether sanction is necessary or not depends not on the sections referred to in a complaint but the offence prima facie disclosed '.
by the facts alleged in it.
It is clear from the charge sheet submitted to the magistratethat the offence of criminal conspiracy was not even referred to.
The offence "primarily and essentially" alleged therein was oneof abetment of forgery under secs.
468 and 471 and of false, (1) [1962] Supp. 2 S.C.R. 297.
(2) A.I.R. 1925 Cal.
(3) A.I.R. 1939 [Bom.] 129.
576 impersonation under sec.
419 read with sec.
Assuming that the Magistrate before taking cognizance had persued the statements of witnesses recorded by the police during investigation, it was conceded by counsel, after he himself had gone through them from the record, that none of the witnesses had alleged therein either directly or indirectly of the appellant having entered into a criminal conspiracy with Bakshi Singh for forging the passport.
It cannot be disputed that the charge sheet also prima facie disclosed the offence of abetment.
That being so, it is ,impossible to sustain the argument that the Magistrate took cognizance of the offence under sec.
120B, and therefore, consent under sec.
196A(2) was required as a condition precedent or that the committal order and the proceedings for committal which be took were vitiated for want of such consent.
The appeal, therefore, fails and is dismissed.
V.P.S. Appeal dismissed. | The police filed a charge sheet against the appellant and another for various offences in connection with the fabrication of a British passport.
The offences mentioned in the charge sheet against the appellant were sections 419/109, 468 and 471, I.P.C., and against the other accused sections 419 and 471 read with section 468.
The Magistrate did not examine any witnesses, but after perusing the charge sheet and other documents filed before him under section 173, Cr.P.C., framed charges against the two accused and committed them for trial before the Sessions Court.
The charges against the accused included the offence under section 120B, I.P.C., the object of the conspiracy being, to commit the non cognizable offence of forging the passport.
The appellant filed an application in the High Court for quashing the committal order on the ground that no consent, as required by section 196A(2), Cr.
P.C., having been obtained, the Magistrate had no jurisdiction to take cognizance of the offence of conspiracy.
The High Court dismissed the application.
Dismissing the appeal to this Court, HELD : (1) Cognizance takes place when the Magistrate takes judicial notice of an offence.
Therefore, when a Magistrate takes cognizance of an offence under section 190, Cr.
P.C. upon a police report, prima facie he does so of the offences alleged in the report.
[573 H; 574 A] In the present case the charge sheet did not refer to or charge either of the accused with criminal conspiracy.
The cognizance which the Magistrate took was therefore, only, of the offences alleged in the chargesheet, and it was only at the later stage of passing the committal order that he considered that a charge under section 120B was more appropriate than that of abetment.
[574 F H] (2) Even on the basis that it is not the sections referred to in the charge sheet that matter, but the offence prima facie disclosed by the allegations, in the present case the offence 'primarily and essentially disclosed in the charge sheet and other documents was one of abetment of forgery and of the false impersonation.
[575 F H] Therefore, the Magistrate did not take cognizance of the offence under section 120B, I.P.C., and hence, consent under section 196A(2) Cr.
P.C., was not a condition precedent.
[576 B C] |
Appeals Nos. 223 & 224 of 1961.
Appeals from the judgment and decree dated April 25, 1956.
of the Punjab High Court in Civil Regular Second Appeals Nos. 158 and 159 of 1949 respectively.
N. section Bindra and K. L. Mehta, for the appellants.
Gurbachan Singh, Harbans Singh and M. L. Kapur, for the respondents (in C. A. No. 224/61).
February 12.
The judgment of the court was delivered by SHAH J.
These appeal arise out of two suits relating to certian agricultural lands situate in village Umri Ana, tehsil Zira District Ferozepore in the Punjab.
The dispute relates to the right to inherit the estate of one Hamam Singh who was the last male holder.
The disputing parties are descended from Sahib Singh ' as disclosed by the following genealogy 21 Sahib Singh | | | | Hamir Singh Wazir Singh | Attar Singh | | | | Chuhar Singh Ghuda Singh Kahan Singh | | | | Mangal Singh | | | Daughter | | | | | Mst.
Bishno Ramji Singh Dasau | Tehl Singh Arjan Singh (married) | ndha | (Defdt.2) (Defdt.1) Singh | Singh | again) | | Narain Singh | | (Pltff.) | | | | | Bakhshish Ajaib Mukhtar | Singh Singh Singh | (Pltff.) (Pltff.) (Pltff.) | | | | | Roor Singh Bhola Singh | | Harman Singh | | | | | | Mst.
Tejo Mst.
Gejo (Died without issue) (died without issue) 22 Harnam Singh grandson of Kahan Singh died leaving him surviving two daughters Mst.
Tejo and Mst.
Gejo and no male lineal descendant.
The property of Harnam Singh devolved upon his two daughters in equal shares.
On the death of Mst.
Tejo without issue the entire estate was entered in the name of Mst.
Gejo by the revenue authorities.
Gejo also died in 1942 without leaving any issue surviving her.
By order dated September 6, 1945 the Assistant Collector directed that the entire estate be entered in the name of Narain Singh s/o Dasaundha Singh and Bakshish Singh, Ajaib Singh and Mukhtar Singh sons of Ramji Singh who will hereinafter be referred to collectively as 'the plaintiffs. ' In appeal to the Collector of Ferozepore the order of the Assistant Collector was set aside and the estate was directed to be entered in the names of Tehl Singh and Arjan Singh sons of Mangal Singh who will hereinafter be referred to collecti vely as 'the defendants. ' The Commissioner of the Division confirmed the order of the Collector.
The plaintiffs who are the descendants of Ghuda Singh then instituted suit No. 9/1947 in the Court of the Subordinate judge, Zira for a decree for possession of the estate of Harnam Singh, barring a small area of 8 Kanals and 11 MarlasKhasra No. 325 which was in their possession.
The defendants who are the descendants of Wazir Singh in their turn commenced an action (Suit No. 13/1947) for possession of Khasra No. 325 against the plaintiffs.
Each side claimed title to the estate of Harnam Singh according to the customary law applicable to the Jats residing in tehsil Zira, District Ferozepore.
It was the case of the plaintiffs that notwithstanding the adoption of Ghuda Singh by his maternal uncle Bhan Singh, Ghuda Singh 's descendants were not excluded from inheritance to the estate of a member in the natural family of Ghuda Singh It was submitted by the plaintiffs 23 that the family of the plaintiffs and Harnam Singh was governed by Zamindara Riwaj i am (general custom obtaining amongst the Zamindars) by virtue of which a son adopted in another family and his descendants do not lose their right to inherit in their natural family, because by the adoption according to the custom of the community the adopted son does not completely sever his connections with his natural family.
The defendants, on the other hand, claimed that in the District of Ferozepore every adoption in a Hindu family is 'formal ' and according to the Riwaj i am of the District an adopted son is excluded from the right to inherit in his natural family.
Consequently Ghuda Singh, who was adopted by Bhan Singh, could not inherit the estate of Hamir Singh, his adoption operating as a complete severance from the natural family.
The sole dispute between the parties was, therefore, as to the customary law applicable to the rights of a son adopted in a jat family residing in tehsil Zira, District Ferozepore.
The two suits were consolidated for trial.
The Subordinate judge held that all ceremonies relating to adoption were performed and Ghuda Singh ceased to be a member of the family of his natural father according to the custom prevailing in the District and the plaintiffs who were the descendants of Ghuda Singh could not inherit the estate of Hamir Singh.
In so holding he relied upon the manual of Riwaji i am of Ferozepore District prepared in 1914, which, in his view, recorded that when any adoption in the District takes effect the adopted on adoption son stand transplanted to the family of the adopter.
In appeal the District Court, Ferozepore held that in the case of Jats of Ferozepore District by special custom prevailing in the District, the adopted son bad the right to inherit collaterally in the family of his adoptive father only and could not inherit collaterally in his natural father 's family.
In second appeal the High Court of Punjab set aside the decree passed 24 by the District Court.
In the view of the High Court the record disclosed no evidence that the adoption of Ghuda Singh made by his maternal uncle Bhan Singh was formal and in the absence of any such evidence it must be presumed that the adoption was a customary appointment of an heir and not a formal adoption under the Hindu Law and that there was overwhelming authority in favour of the proposition that by reason of a customary adoption the adopted son and his descendants were not excluded from the right to inherit to collaterals in the natural family.
The High Court accordingly held that the plaintiffs, as grandsons in the male line of Ghuda Singh, were entitled to inherit the estate of Hamir Singh.
With certificate of fitness granted by the High Court, these two appeals are preferred by the defendants.
It is common ground that Ghuda Singh was adopted some time before 1856 by Bhan Singh, his maternal uncle.
The dispute between the parties has to be resolved by applying the customary law applicable to the parties, because section 5 of the which governs the parties provides that : "In questions regarding succession, special property of females, betrothal and marriage, divorce, dower, adoption, guardianship, minority, bastardy, family relations, wills, legacies, gifts, partition, or any religious usage or insti tution, the rule of decision shall be (a) any custom applicable to the parties concerned, which is not contrary to justice, equity or good conscience, and has not been by this or any other enactment altered or abolished, and has not been declared to be void by any competent authority 25 (b) The Muhammadan Law in cases where the parties are Muhammadans, and the Hindu Law, in cases where the parties are Hindus, except in so far as such "law has been altered or abolished by legislative enactment, or is opposed to the provisions of this Act, or has been modified by any such custom as is above referred to.
" In Daya Ram vs Sohel Singh (1), Rober son, J., (at P. 410) in dealing with the true effect of section 5 observed : "In all cases it appears to me under this Act, it lies upon the person asserting that he is ruled in regard to a particular matter by custom, to prove that he is so governed, and not by personal law, and further, to prove what the particular custom is.
There is no presumption created by the clause in favour of custom; on the contrary, it is only when the custom is established that it is to be the rule of decision.
The Legislature did not show itself enamoured of custom rather than law, nor does it show any tendency to extend the "Principles ' of custom to any matter to which a rule of custom is not clearly proved to apply.
It is not the spirit of customary law, nor any theory of custom or deductions from other customs which is to be a rule of decisions, but only 'any custom applicable to the parties concerned which is not. . and it "therefore ' appears to me clear that when either party to a suit sets up 'custom ' as a rule of decision, it lies upon him to prove the custom which he seeks to apply; if he fails to do so clause (b) of section 5 of the applies, and the rule of decision must be the personal law of the parties subject to the other provisions of the clause.
" This view was affirmed by the judicial Committee (1) (1906) P.R. No. 110 (F.B.).
26 of the Privy Council in Abdul Hussein Khan vs Bibi Sona Dero (1).
In Vaishno Ditti vs Rameshri (2), the ,Judicial Committee observed : "x x x x their Lordships are of opinion that in putting custom in the forefront, as the rule of succession, whilst leaving the particular custom to be established, as it nece ssarily must be, the Legislature intended to recognize the fact that in this part of India inheritance and the other matters mentioned in the section are largely regulated by a variety of customs which depart from the ordinary rules of Hindu and Mohamedan law." The pleadings also disclose an unanimity that the rights of the parties have to be adjudged in the light of the customary law applicable and not by the rules of Hindu Law.
The relevant general custom which is applicable in the matter of adoption is to be found in Rattigan 's Digest of Civil law for the Punjab, 13.
p. 572 Article 48 "An heir appointed in the manner above described ordinarily does not thereby lose his right to succeed to property in his natural family, as against collaterals, but does not succeed in the presence of his natural brothers.
" Article 49 : "Nor, on the other hand, does the heir acquire a right to succeed to the collateral relatives of the person who appoints him, where no formal adoption has taken place, inasmuch as the relationship established between him and the appointer is a purely personal one.
" This adoption, according to Rattigan is irrevocable and an adopted son cannot relinquish his status.
(1) (1917) L.R. 45.
I.A. 10. 2) (1928) LR, 55 I.A. 107, 421.
27 Article 52 sets out the rights of the adopted son.
It states : "The appointed heir succeeds to all the rights and interests held or enjoyed by the appointer and, semble, would succeed equally with a natural son subsequently born.
" There is a long course of decisions in the High Court of Lahore and the High Court of Punjab in which it has been held that the relationship between the appointed heir and the appointer which is called adoption is purely a personal one and resembles the Kritrima form of adoption of Hindu Law: Mela Singh vs Gurdas (1), Sir Shadi Lal, C.J. observed in dealing with the effect of a customary adoption in the Punjab : "The tie of kinship with the natural family is not dissolved and the fiction of blood relationship with the members of the new family has no application to the appointed heir.
The relationship established between the appointer and the appointee, is a purely personal one and does not extend beyond the contracting parties on either side." Similarly in Jagat Singh vs Ishar Singh (2), it was held that the reservation as to the adopted son not succeeding in the presence of his brothers refers only to his succession to his natural father but does not apply to cases of collateral succession in his natural family A similar view was expressed in Kanshi Ram V. Situ (3), and Rahmat vs Ziledar (4).
In the last mentioned case it was stated : "Under the general custom of the province a person who is appointed as an heir to a third person does not thereby lose his right to succeed to the property of his natural father.
But (1)(1922)I.L.R.3 Lah.362(F.B.) (2)(1930)1.L.R.II Lah.615.
(3) (4) Lab.
28 the appointed heir and his lineal descendants have no right to succeed to the property of the appointed heir 's natural father against the other sons of the natural father and their descendants.
The appointed heir can succeed to the property of his natural father when the only other claimant is the collateral heir of the latter.
" But it is urged on behalf of the defendants that the general custom applicable to the Punjab as recorded by Rattigan is shown to be superseded by proof of a special custom of the District recorded in the Riwaj i am of Ferozepore District prepared by Mr. Currie at the settlement of 1914, and reliance is placed upon answers to Questions 76 and 77 which deal with the effect of adoption.
The Questions and the Answers recorded are : "Question 76 Does an adopted son retain his right to inherit from his natural father ? Can he inherit from his natural father if the natural father dies without other sons ? Answer All agree that the adopted son cannot inherit from his natural father, except as for as regards such share of the property as would come to his adoptive father as a collateral.
Sodhis 'however ' say that he can inherit his natural father 's estate if the latter has no male descendants, while the Nipale say the adopted son inherits from both fathers.
Question 77 Describe the rights of an adopted son to inherit from his adoptive father.
What is the effect of the subsequent birth of legitimate sons to the adoptive father ? Will the adopted son take equal shares with them ? If natural legitimate sons be born subsequently to the adoption where the chundawand system 29 of inheritance prevails, how will the share of the adopted son, whose tribe differs from that of the adoptive father, ' inherit from him ? Does an adopted son retain his own got or take that of his adoptive father ? Answer An adopted son has exactly the same rights of inheritance from his adoptive father as a natural legitimate son.
The inheritance would only be by chundawand, if that was the prevalent rule of the family.
The Nipals, Rajputs, Arains, Moghals, Sayyads, Gujjars and Muhammadan Jats state that if the adopted son is of a different got he takes the got of his adoptive father ; while if he is of a different tribe, he cannot inherit.
As it is, as a rule aged men without hope of sons who adopt, cases of the birth of legitimate sons after adoption has taken place must be rare.
" When there is conflict between the general custom stated in Rattigan 's Digest of Customary Law and the Riwaj i am which applies to a particular area it has been held by this Court that the latter prevails.
In Jai Kapur vs Sher Singh (1), it was observed "There is, therefore, an initial presumption of correctness as regards the entries in the Riwaj i am and when the custom as recorded in the Riwaj i am is in conflict with the general custom as recorded in Rattigan 's Digest or ascertained otherwise, the entries in the Riwaj i am should ordinarily prevail except that as was pointed out by the Judicial Committee in Mt. Subhani vs Nawab [A.I.R. 1941 (1) 979. 30 (P. C.) 21], "that where, as in the present case, the Riwaj i am affects adversely the rights of females who had no opportunity whatever of appearing before the revenue authorities, the presumption would be weak, and only a few instances would suffice to rebut it.
" Therefore when there is a conflict between the record of custom made in Rattigan 's Digest of Customary Law and the local Riwaj i am, prima facie, the latter would prevail to the extent of the inconsistency, and it would be for the person pleading a 'custom or incident thereof different from the custom recorded in the Rewaj i am to prove such custom or incident.
Attention must, therefore, be directed to the question whether there is in fact Any inconsistency between ' the custom recorded in Rattigan 's Digest of Customary Law and the relevant entries in the Riwaj i am.
The general custom recorded in Rattigan 's Digest is apparently this : a person adopted according to the custom of the community i.e. who is appointed as an heir to ' inherit the property of a person outside the family does not, by virtue of such appointment, lose his right to inherit the property in his natural family except the right to inherit the property of his natural father when there are natural brothers.
The natural brothers would take the property to the exclusion of such an adopted son and his descendants.
Question 76 in the Riwaj i am primarily refers to the right of an adopted son to retain his right to inherit the property of his natural father and the answer recorded is that the adopted son cannot inherit the property of the natural father, except such property as would devolve upon his adoptive father as a collateral (of the adopted son 's natural father).
It is to be noticed that the question was directed to ascertain the right of the adopted son to inherit the estate of his natural father : it did not seek elucidation on the right of the adopted son to inherit the estate of any collaterals of the natural 31 father, and the fact that in the answer it was recorded that to the estate which would devolve upon his adoptive father as a collateral of his natural father he has a right of inheritance, strongly supports the view that the village elders in replying to the question were only concerned with the right of an adopted son to inherit the property of his natural father and were not concerned to dilate upon any right to collateral succession in the natural family.
The answer to question 77 also supports this view.
When asked to describe the rights of an adopted 'on to inherit the estate of his adoptive father, they replied that the adopted son had exactly the same rights of inheritance from his adoptive father as a natural legitimate son.
Mr. Bindra appearing on behalf of the defendants submitted that questions 76 and 77 were in tended to ascertain the custom of the District relating to the rights of the adopted son in his natural family and the family of his adoptive father and the answers must be read in that light.
We are unable to accept this suggested interpretation of Questions 76 and 77 and the information elicited thereby.
The Riwaj i am appears to have been carefully compiled by officers of standing and experience and it is clear that they made a limited enquiry about the rights of an adopted son to inherit the property of his natural father and of his adoptive father.
There is undoubtedly some conflict between the custom recorded in Rattigan 's Digest and the custom in the Riwaj i am.
Whereas in Rattigan 's Digest it is recorded that an heir appointed in another family does not succeed to his natural father in the presence of his natural brothers, in the Riwaj i am it is recorded that the adopted son does not directly inherit the estate of his natural father in any event, But we are not concerned with that ' inconsistency in this case.
It is sufficient to observe that in article 48 of Rattigan 's Digest, it is 32 recorded that an heir appointed in the manner described (an adopted son) does not thereby lose his right to succeed to property in his natural family : and nothing inconsistent therewith is shown to be recorded in the Riwaj i am of the District.
Mr. Bindra contended that in any event there is clear evidence of instances of devolution of property in the family of the parties indicating that a son adopted in another family was totally excluded from inheritance in the natural family.
Counsel relied upon Ext.
D 5 an extract from the register of mutations relating to certain agricultural lands in village Umri Ana.
It appears from that extract that on the death of Hamir Singh the estate was in the first instance entered in the names of his three sons.
But Salig Ram, Patwari of the village, made a report on May 28, 1884 that Kahan Singh and Chuhar Singh (two of the sons of Hamir Singh) claimed that Ghuda Singh had never been in possession of the 1/3rd share of the Khata entered in his name and that Ghuda Singh himself had admitted that he had no concern with the Khata in question and that his name should be removed.
On that report the Assistant Collector ordered that the lands be entered in the names of Kahan Singh and Chuhar Singh and that the name of Ghuda Singh be removed from the mutation entry and that the Jamabandi papers be altered accordingly.
But this instance of exclusion of Ghuda Singh from the right to participate in the estate of his father is consistent with the statement of custom recorded in Rattigan 's Digest.
It is expressly recorded in article 48 that an appointed heir does not thereby lose his right to succeed to property in his natural family, as against collaterals, but he does not succeed in the presence of his natural brothers.
Kahan Singh and Chuhar Singh were brothers of Ghuda Singh and Ghuda Singh having been adopted could not, according to the custom recorded in 33 Rattigan 's Digest, inherit his fathers estate in the "presence of his brothers.
" The other instance relied upon by counsel is about the devolution of the estate of Chuhar Singh on the remarriage of his daughter Bishno.
On the death of Chuhar Singh it appears that his property was entered in the name of his daughter Bishno, and when Bishno contracted a Karewa marriage according to the custom prevalent in the community, the estate held by her was entered in the name of Rura Singh and Bhola Singh sons of Kahan Singh.
In the register of mutations Ext.
R D 1 it is recorded that Ghuda Singh who was the Lambardar appeared before the Tehsildar and identified Mst.
Bishno and stated that she had contracted Karewa marriage with jawala Singh and further admitted that Rura Singh and Bhola Singh were entitled to take her property, and pursuant to this statement the Tehsildar directed that mutation regarding succession be sanctioned in favour of Rura Singh and Bhola Singh in equal shares.
This instance also, in our judgment, does not support any case of departure from the custom recorded in Rattigan 's Digest.
It is clear from the genealogy and the extract of the register of mutations Ext.
D 1 that the occasion for making an entry of mutation was the remarriage of Bishno.
Mr. Bindra submitted that according to the custom of the community a daughter inheriting property, from her father would on marriage be divested of the property, which would devolve upon the collaterals of her father, and according to that custom when on the remarriage of Bishno the succession opened, Ghuda Singh was on his own admission excluded.
This, counsel submitted, was a stronginstance supporting a departure from the custom recorded in Rattigan 's Digest.
But if by virtue of the custom prevalent in the community, as asserted by Mr. Bindra, on her marriage Bishno would lose her interest in the property of her father, it is 34 difficult to appreciate how she acquired title or continued contrary to that custom, to remain owner of the property of her father after her first marriage.
It is clear that it was not because of her marriage, but on re marriage, that the property was alleged to have devolved upon Rura Singh and Bhola Singh.
Why Bishno did not forfeit her right to the property on her marriage and forfeited her right thereto on remarriage has been left in obscurity.
The learned judges of the High Court held that the mere circumstance that Ghuda Singh permitted the estate to go to the descendants of Kahan Singh was not by itself sufficient to establish the custom set up by the defendants and uncontested instances were of little value in establishing a custom.
They observed that the instance might have received considerable reinforcement if it had been shown that Ghuda Singh or any of his descendants had inherited collaterally in the family of Bhan Singh but except succession of Ghuda Singh to the estate of Bhan Singh which is in accordance with the general custom no proof of collateral succession was established, and the single instance of Chuhar Singh 's estate devolving upon the descendants of Kahan Singh with the consent of Ghuda Singh does not establish any custom contrary to what is stated in Rattigan 's Digest.
We are unable to disagree with the view so expressed.
On that view of the case, these appeals fail and are dismissed with costs.
Appeal dismissed. | Harnam Singh died leaving behind two daughters.
They also died without leaving any issue surviving them.
The Revenue authorities ordered that the entire estate of Harnam Singh be entered in the revenue records in the names of the defendants.
The plaintiffs filed a suit for possession of the estate of Harnam Singh.
Their contention was that notwithstanding the adoption of Ghuda Singh, their predecessor, by his maternal uncle, they as descendants of Ghuda Singh were not excluded from inheritance to the estate of a member in the natural family of Ghuda Singh.
It was also contended that the family of the plaintiffs and Harnam Singh was governed by Zamindara Riwaj i am by virtue of which a son adopted in another family and his decendants did not lose their right to inherit in the natural family because by the adoption according to the custom of the community, the adopted son did not completely sever his connection with his natural family.
The contention of defendants appellants was that in the District of Ferozeporc, every adoption in a Hindu family was formal and according to the Riwaj i am of the District, an adopted son was excluded from the right to inherit in his natural family.
Consequently, Ghuda Singh, who was adopted by Bhan Singh, could not inherit the estate because his adoption operated as complete severance from the natural family.
The suit was dismissed by the Subordinate judge and his order was confirmed by the District judge.
However, the High Court set aside the order of the District judge and held that the record disclosed no evidence that the adoption of Ghuda Singh was formal and hence it must be presumed that the adoption was a customary appointment of an heir and not a formal adoption under the Hindu Law.
It was also held that there was overwhelming authority in favour of the proposition that by reason of a customary adoption, the adopted 20 son and his descendants were not excluded from the right to inherit to collaterals in the natural family.
The plaintiffs as grandsons in the male line of Ghuda Singh were entitled to inherit the estate.
The appellants came to this Court by a certificate of fitness granted by High Court.
Held, that the view of the High Court was correct.
A person adopted according to the customs of the community, i.e. who is appointed as a heir to inherit the property of a person outside the family, does not.
by virtue of such appointment, lose his right to inherit in his natural family except the right to inherit the property of his natural father when there are natural brothers.
The natural brothers would take the property to the exclusion of such an adopted son and his defendants.
Daya Ram vs Sohel Singh (1906) P. R. No. 110 (F.B.), Abdul Hussain Khan vs Bibi Sona Dero 1917) L.R. 45 I .A. 10, Vaishno Ditti vs Rameshri (1928) L. R. 55 I. A. 407, Mela Singh vs Gurdas, (1922) 1.
L. R. , Jagat Singh vs Ishar Singh Lah.
615, Kanshi Ram vs Situ (1934) I. L. R.16 Lah. 214, Rahmat vs Ziledar (1945) 1.
L. R.26 Lah.
504 and Jai Kapur vs Sher Singh, [1960] 3 section C. R.975, referred to. |
iminal Appeal No. 3 of 1971.
Appeal by special leave from the judgment and order dated October 30, 1970 of the Jammu and Kashmir High Court in Criminal Appeal No. 12 of .1969 and Criminal Reference No. 10 of 1969 628 Ram Asray Misra, Risi Ram, O. P. Rana and R. Bana, for the appellant.
D. Mukherjee and R. N. Sachthey, for the respondent.
The Judgment of the Court was delivered by Dua, J.
Only two points were argued at the bar in this appeal by special leave because if we agree with the appellant 's learned counsel on these points then the appeal must succeed ,and the appellant must be acquitted without going into the other points relating to the appellant 's guilt intended to be raised on his behalf by his counsel.
The relevant facts of the ease necessary for appreciating the two important points relating to the legality of the appellant 's conviction may briefly be stated On the morning of October 7, 1967 a football match was being played at the Srinagar Stadium between the Kashmir Uni versity and the Punjab University teams.
The Kashmir University team (hereafter called the home team) was the first to secure one goal against the Punjab University team (hereinafter called the visiting team).
The players of the home team were naturally ,cheered by the spectators, when they scored the first goal.
After ;a few minutes the visiting team equalised the score and a little later secured another goal against the home team.
This in turn brought cheers and applause for the visiting team from the spectators.
It appears that some of the more enthusiastic spectators rushed to the football ground and are said to have made some provocative gestures towards the players of the home team.
This apparently annoyed not only the players of the home team but also their sympathisers amongst the spectators and a clash between the rival sets of sympathisers of the two teams amongst the spectators followed.
As usually happens on such occasions stones were thrown at each other by the two rival groups.
These rival groups are stated to be those of Kashmir is on the one side and Punjab is on the other.
The headquarters of the P.A.C. (Police Armed Constabulary) are also stated to be located in the Stadium and some members of that force were present at the match.
The young men of the P.A.C. came to the spot and with their dandas put the people to flight.
Up to this stage there seems to be no controversy.
According to the prosecution case as stated by P. W. Abdul Gani Sheikh, on April 24, 1969 when the people bad left the Stadium the appellant, to use the words of the witness in his examination in chief. ". was seen descending the bund, in the direction of the stadium cycle shed.
The accused carried a gun in the hand.
He had a helmet on the bead.
629 Getting down the bund, the accused got near the cycle shed.
There he did something for a minute or a half.
Forthwith he opened the door of the cycle shed and came out.
The accused was facing the Militia wall.
As he turned his face that side, he fired a shot.
The shot hit the Militia wall.
I was at a distance of nearly 50 yards from the accused.
After firing the shot, the accused came on the main road which leads to the aerodrome.
A zamindar was going on it.
At the sight of the accused he stopped.
The accused fired a shot at him.
He fell along the drain adjoining the Militia wall.
Thereafter the accused turned to the right side.
There, on the other side of the road, in the direction of Hazuri Bagh Maidan, a young man in suit and boots was going there.
At the sight of the accused he too stopped.
There was exchange of some talk between him and the accused.
I did not hear what he spoke.
However, I saw that man facing the accused, with.
folded hands.
Then the accused fired a shot at him.
He fell down immediately on receiving the shot.
Then the accused again turned towards that Zamindar, at whom he had fired the first shot.
He fired another shot at him.
Thereafter, the accused turned towards a boy, aged 15 or 16 years, who was going towards Mira Kadal.
He fired a shot at him.
The boy did not fall down, may he took to his heels.
He ran in the direction of the tonga stand on the side of Mira Kadal.
Thereafter he fired again at the Young man in suit and boots, at whom he had already fired a shot.
Thereafter he fired another shot at the Zamindar.
The accused fired more shots as well after that.
In the meantime, three more men appeared there.
They were the accused 's men.
Besides.
a sardar of the K. A. P. also appeared at the spot.
They got hold of the accused and took him inside.
They were trying to snatch the rifle from the accused.
Another person held the rifle and the accused was taken inside the stadium.
I made a report of this occurrence at police station Sher Ghari, which may be at a distance of 150 yards from the place of occurrence.
I made an oral report.
I have heard the contents of the first information report.
The same are correct.
The police recorded what I stated.
I affixed my signatures to it.
It is correct.
(Note : It is marked Ext.
P/ I)" The learned Sessions Judge, Srinagar, Qazi Mirajudin, in whose court the appellant was tried for offences under sections 302 and 307, I.P.C. convicted him for both the offences imposing 630 the sentence of death under section 302 and rigorous imprisonment for five years under section 307, I.P.C. Charges under section 302 related to the death of Ghulam Mohd. Fuchey who died in the hospital on the day of the occurrence and also to the death of Aziz Teli who died two days later on October 9, 1967 at 5 50 p.m.
The charge under section 307, I.P.C; related to the injuries caused to P. W. Abdul Ghani Sheikh.
On appeal, the High Court which had before it also the sidered it necessary to examine the ballistic expert for elucidating certain points.
That Court permitted the appellant also to examine another ballistic expert Siyaram Gupta by name and also Shri Ratan Sahgal and C. L. Wasan, Commandant (U.P. P.A.C.).
,C. L. Wasan was allowed to be examined even though he had already been examined earlier as a prosecution witness.
It may also be stated here that the appellant wanted to produce some more witnesses in defence, but permission to do so was declined by the High Court and the appellant 's Counsel before us raised a grievance on this score as well.
The High Court, after considering the evidence, dismissed the appeal and confirmed the sentence of death.
An oral prayer for certificate to appeal to this Court was declined.
On behalf of the appellant it is not disputed before us that somebody did resort to firing during the disturbance in the course of the football match on October 7, 1967 and two persons were actually killed as a result thereof.
The first question raised before us in this connection is that there is no legal evidence that it was the appellant who fired the fatal and other shots in question on this occasion.
This indeed is the principal point urged.
And the second point which arises out of discussion on this point relates to the scope and effect of sections 161 and 162, Cr.
P.C. and the admissibility at the trial of the statements made by some of 'the witnesses to the police during investigation under section 161, Cr.
The High Court appears to have relied on such statements in their entirety for seeking corroboration of the statement made by the prosecution witnesses in court and ultimately for the purpose of sustaining the appellant 's conviction.
Incidentally, the manner in which the investigating agency conducted the investigation of this case also came up for serious criticism at the hands of the appellant 's counsel, it being urged that the investigation was not objective and impartial but smacked of prejudice against the appellant and was, therefore, unfair.
The investigation was however, sought to be justified by the counsel for the State.
The evidence of identification of the appellant on which the courts below placed reliance for convicting the appellant has to be with great care in order to see if such evidence is 631 legally admissible and on the facts and circumstances of this case this scrutiny must, in our opinion, include within its purview the manner in which the investigation of the alleged offences was conducted by the authorities concerned.
Before dealing with the evidence relating to identification of the appellant it may be remembered that the substantive evidence of a witness is his evidence in court but when the accused person is not previously known to the witness concerned then identification of the accused by the witness soon after the former 's arrest is of vital importance because it furnishes to the investigating agency an assurance that the investigation is proceeding on right lines in addition to furnishing corroboration of the evidence to be given by the witness later in court at the trial.
From this point of view it is a matter of great importance both for the investigating agency and for the accused and a fortiori for the proper administration of justice that such identification is held without avoidable and unreasonable delay after the arrest of the accused and that all the necessary precautions and safeguards are effectively taken so that the investigation proceeds on correct lines for punishing the real culprit.
It would, in addition, be fair to the witness concerned who was a stranger to the accused because in that event the chances of his memory fading are reduced and he is required to identify the alleged culprit at the earliest possible opportunity after the occurrence.
It is thus and thus alone that justice and fairplay can be assured both to the accused and to the prosecution.
The identification during police investigation, it may be recalled, is not substantive evidence in law and it can only be used for corroborating or contradicting evidence of the witness concerned as given in court.
The identification proceedings, therefore, must be so conducted that evidence with regard to them when given at the trial, enables the court safely to form appropriate judicial opinion about its evidentiary value for the purpose of corroborating or contradicting the statement in court of the identifying witnesess.
We may now turn to the evidence on the record.
Abdul Ghani Sheikh who claims to be the eye witness to the occurrence lodged the first information report (exhibit P 1) at 11 30 a.m. at the police station only about 200 feet away from the stadium.
In order to appreciate the value of this report and the value of the testimony of this witness in court in regard to the description of the alleged culprit we consider it proper to reproduce the whole of this report.
It says "At the Stadium a football match was being plaved.
From there the P.A.C. men chased and turned out the people.
All the people came out from the gates on 632 the East and North.
They were going back through the Hazuri Bagh Road.
I was standing near the cycleshop which is situated close to the Stadium chowk.
A P.A.C. jawan came out of the main gate.
He carried a rifle.
He fired a shot towards the road.
It went in the direction of the Militia wall.
Thereafter the P.A.C. Jawan came on the road and fired shots.
lie went towards the Militia gate and inflicted bullet injuries on three of the persons going on the Road.
Then a P.A.C. Sardar and a B.S.F. Jawan with three P.A.C. men who carried Dandas in the hands, got held of the said Jawan.
They took him inside the Stadium.
The said Jawan fired nine or ten shots recklessly, though the way farers were going on the road in a peaceful manner.
There was no crowd, nor was there any breach.
* * * In the trial court in his examination in chief he deposed that he had seen the accused coming down the bund with a gun in his hand and helmet on his head and that he fired the fatal and other shots.
The relevant portion has already been reproduced earlier in this judgment.
In cross examination he stated that apart from the first information report he did not make any statement to the police excepting that he signed the seizure memos.
He also could not remember if he had stated to the police that the accused was known to him.
He was further unable to remember if the police had asked him this question.
After the occurrence he saw the accused only in court and he was never required to identify putting on a helmetand had also grown a beard when seen in court though at thetime of the occurrence the accused had a helmet on his head.
At this stage we may appropriately point out that according to P. W. Chaudhuri Ghulam Nabi Mir, S.R.O., Maharajganj, who, on hearing reports of gun shots while he was in the police station, had come out on the road, the statement of Abdul Ghani Sheikh was actually recorded by him.
This, according to the S.H.O. was recorded near the Stadium gate at the chowk ' which means the police beat where three roads meet.
On this report witness endorsed a note to the thana for drawing up F.I.R. Chaudhri Ghulam Nabi Mir has also stated in cross examination that he recorded the statements of the pro secution witnesses during investigation under section 161, Cr.
Curiously all those statements were admitted in evidence and marked as exhibits by the trial court.
According to the concluding part of Ghulam Nabi Mir 's cross examination in court, Abdul Ghani Sheikh had at first met him near the verandah of the 633 police station and since he was leaving in the direction of the place of occurrence Abdul Ghani Sheikh followed him.
From the statements made to the police which were exhibited in evidence we find that Abdul Ghani Sheikh also made a statement on October 7, 1967 marked as exhibit D 2.
It is important to point out that, according to Abdul Ghani Sheikh, he had not made any statement to the police besides the report exhibit P 1.
From the testimony of P. W. Abdul Ghani Sheikh it is obvious that he did not give any description of the person alleged to have fired the shots in question in exhibit P 1 which was the first information given by him to the police and on which the investigation started; nor did he state in exhibit P 1 that he knew the appellant previously.
He was never made to identify the accused.
He has obviously told lies on a vital point when he says in the witness box that excepting exhibit P 1 he had made no other statement to the police.
Though the contents of those statements cannot be used for any purpose other than that laid down in section 162, Cr.
P.C. the fact of that statement having been made can certainly be relied upon for the purpose of showing how untruthful Abdul Ghani Sheikh is or at least, taking a charitable view of this contradiction on his part, how undependable his memory is.
No attempt was made on behalf of the State before us to show if this witness had identified the accused in the committing magistrates court.
We have referred to the statement of this witness under section 161, Cr. PC.
because the High Court seems to have taken into consideration not only the statement of this witness under section 161, Cr.
P.C. for seeking corroboration of his testimony in court but the statements of a large number of other witnesses during investigation have also been used for this purpose.
This is what the High Court has said in its judgment : "Lastly it was contended that although some of the eye witnesses have stated that the appellant Rameshvwar Singh was called by name at the spot by his fellow constables and saying that he would get involved, yet the name of the appellant was not mentioned in the FIR, nor was the fact that the appellant was called by name and warned by his fellow constables stated therein.
This circumstance in our opinion is not sufficient to demolish the prosecution case or cast any serious doubt thereon.
To begin with, the first informant, Abdul Ghani Sheikh, has not stated in his evidence about the fact of the accused being called by name by his fellow constables.
Furthermore, this was a matter of minute detail and since the FIR was lodged imme diately after the occurrence, it may be that this particular detail was not mentioned in the FIR by the informant.
What is more important is that all the eye 634 witnesses including the informant were examined by the police immediately after the occurrence was over and the defence has not cross examined the investigating officer on the question that the fact mentioned above was not stated by the eye witness before the Investigating Officer at that time.
Thus it should be taken for granted that this fact though not mentioned in the FIR was clearly stated by the eye witnesses in their state ments before the police soon after the FIR was lodged.
In fact the statements of the eye witnesses recorded by the police which have been marked by the court below as Exs.
D 1 to 6 clearly show that the above mentioned fact was stated before the police when they were examined soon after the FIR was lodged.
Thus the charge that said fact appears to be belated one appears to us to be groundless." The High Court was clearly in error in taking into consideration the contents of the statement recorded under section 161, Cr.
P.C. during the course of investigation for the purpose of finding corroboration of the statements made in court.
Section 162, Cr.
P.C. lays down the limited use of such statements.
It says "Statements to police not to be signed; use of statements in evidence.
in the course of an investigation under this Chapter shall, if reduced into writing, be signed by the person making it; nor shall any such statement or any record thereof, whether in a police diary or otherwise, or any part of such statement or record, be used for any purpose (save as hereinafter provided) at any inquiry or trial in respect of any offence under investigation at the time when such statement was made; Provided that when any witness is called for the prosecution in such inquiry or trial whose.
statement has been reduced into writing as aforesaid, any part of his statement, if duly proved, may be used by the accused, and with the permission of the Court, by the prosecution to contradict such witness in the manner provided by Section 145 of the and when any part of such statement is so used, any part thereof may also be used 635 in the re examination of such witness, but for the purpose only of explaining any matter referred to in his cross examination.
(2) Nothing in this section shall be deemed to apply to any statement falling within the provisions of Section 32, Clause (1) of the , or to affect the provisions of Section 27 of that Act.
" The language of this section is plain and explicit and it admits of no doubt as to its meaning.
We do not consider it necessary to refer to a large catena of decisions reported in law reports and cited in text books stating the legal position with regard to the restricted use of such statements as laid down in section 162, Cr.
P.C. prohibiting the court from using them as corroborative of the statements in court.
Once this part of the reasoning of the High Court is elimi nated all that is left is the statement of Abdul Ghani Sheikh in court and his report exhibit P 1 made to the police.
That report, it is not disputed, does not contain any description of the alleged culprit.
Had the witness known the culprit earlier, one would have reasonably expected him to so state in the report.
if, however, without knowing him earlier he had formed a distinct impression of the culprit 's looks and bearing so as to 'be able to identify him later, then also one would have expected this witness to give in the report the description of the culprit as seen by him so as to provide the investigating authorities with something tengible as guideline to start with the investigation.
His identification in court without any previous identification at a test parade and without any description in exhibit P 1 to corroborate it, is far too slender a piece of evidence to base the appellant 's conviction thereon.
So, Abdul Ghani Sheikh 's evidence seems to us to be of no value in bringing home the offence to the appellant.
In the opinion of the High Court the evidence of Abdul Ghani Sheikh and of Noor Hussain is corroborated by P.Ws.
Abdul Hamid and Noor Mohammed Sheikh.
This is what the High Court says "The evidence given by Abdul Ghani Sheikh the informant and also Noor Hussain, a resume of which has been given above is corroborated by Abdul Hamid and Noor Mad.
Sheikh PWs in all material particulars.
All these witnesses, Noor Hussain, Abdul Hamid and Noor Mohd. have stated that they know the accused before the occurrence and they had occasion to see him before.
They disclosed the name of the accused on the 636 very date of occurence when they said that they heard his three companions shouting at him "Ramesh what are you doing, don 't be mad, you will be involved." Ghulam Nabi Mir, S.I. P.W. has clearly stated that it was on the very day of occurrence that the name of Rameshwar Singh, accused, was disclosed by Abdul Hamid and by some other witnesses.
" Here again, the High Court has committed the same error in seeking corroboration from the statements said to have been made to the police by Abdul Hussain and others during investigation.
We have also to consider further the circumstance that the High Court has not adverted to the omission on the part of the investigating authorities to take steps to arrest the appellant soon after the alleged disclosure of his name to them by the said witnesses, According to Ch.
Ghulam Nabi Mr. S.H.O., the appellant 's name was disclosed on the very day of the occurrence.
There is no plausible reason discernible on the record as to why such steps were not taken if the appellant 's identity as a result of the disclosure of his name became known to the authorities the same day.
The High Court appears to us not only to have erroneously disregarded the forms of legal process but has also failed to advert to important and vital aspects, thereby causing serious prejudice to the appellant.
In view of what has just been stated prima facie grave and substantial injustice cannot but be considered to have resulted from the infirmities in the impugned judgment.
Let us now see if the evidence of Noor Hussain, Abdul Hamid and Noor Mohd. Sheikh in any way advances the case of the prosecution.
Abdul Hamid (P.W. 2) who has a cycle shop about 9 or 10 yards from the Stadium chowk claims to have gone to see the match in question.
When the P.A.C. young men are said to have turned the people out of the Stadium during the course of the trouble this witness also went out.
He claims to have watched the entire occurrence from the roof of his shop through the window panes because he was afraid of being seen in the open lest he may also, be fired at.
It is from there that he claims to have heard when the P.A.C. men addressed the appellant : "Have you turned mad ? Ramesh, have you turned mad This seems to us to be wholly unacceptable and it appears to us that these words have been introduced in the, evidence for the purpose of providing the missing link of identification of the appellant.
Noor Mohd. Sheikh is the brother of Abdul Ghani Sheikh.
He also did not know the appellant and he never saw him after the occurrence till he came to court, several months later.
Though he claims to have given the description of the culprit to the police and to have also expressed his ability to identify him, he was for reasons not disclosed on the record, never 637 made to identify the appellant at any test identification parade,, He also claims to have gone to the police station with Abdul Ghani Sheikh though the latter claims to have gone there all alone.
Now, if he had actually heard the name of the appellant being shouted by the P.A.C. men as claimed by him and had accompanied his brother to the police station then there is no reason why the name of the culprit was not disclosed to the police and not included in the report, exhibit P 1.
Noor Hussain has also stated that three young men of the appellant 's unit came to the place of occurrence after the appellant had fired 8 or 9 shots and they shouted addressing the appellant : "Ramesh what are you doing, you will 'be implicated" and according to him they continued shouting these words for some time, before they secured the appellant and took him inside.
In his cross examination he has admitted that on the day of the occurrence no police officer asked him whether he was an eye witness.
When he was approached by the police later he is stated to have told them : "The whole of the occurrence has taken place, outside the thana and you are not aware of it" Beyond this remark there was, according to him; no conversation between him and the police and indeed he asserts that no statement was taken from him on the day of the occurrence.
In fact his position is that the statement in court was the only statement he had ever made relating to the occurrence.
It is interesting to note that his statement before the police purporting to be under section 161, Cr.
P.C. is exhibited as D 6 and is dated October 7, 1967.
We are wholly unable to place any reliance on the testimony of anyone of these witnesses, who seem to us to be clearly untruthful.
Further, it appears from the evidence of C. L. Wasan (D.W. 2) who was again examined in the High Court that an informal identification parade of all the constables belonging to U.P. (P.A.C.) contingent had been held on October 7, 1967 in which the appellant was also present.
Some members of the public were also there who were asked to identify the culprit but none of them were able to do so.
, We need not dilate on this evidence as there was no formal record of any such test identification parade.
The significant fact, however, which casts serious doubt on the truth of the story of disclosure of the appellant 's name to the police on October 7, is the admitted omission by Ch.
Ghulam Nabi Mir, S.H.O. to summon the appellant for interrogation soon after the alleged discovery of his name.
No convincing or even intelligible explanation is forthcoming for interrogating the other P.A.C. men on the 8th and 9th October.
Such investigation can scarcely inspire confidence.
638 As a result of the foregoing discussion we do not consider it Possible to uphold the conclusion of the High Court on the legal evidence existing on this record.
In the absence of any, test 'identification parade and excluding from consideration the statements made under section 161, Cr.
P.C. we find no reliable material on which the appellant 's conviction can be sustained.
The High Court was in error in affirming the appellant 's conviction for the offence of murder and confirming the sentence of death.
It was equally in error in upholding his conviction and sentence under The appeal accordingly succeeds.
and allowing ,the same we acquit the appellant. | The appeallant was convicted of the offence of murder by shooting and the High Court confirmed the ' conviction and the sentence of death.
In appeal to this Court, HELD : The conviction and the sentence should be set aside.
(1)The substantive evidence of a witness is his evidence in the trial court.
But then the accused person is not previously known to a witness when the identification of the accused by the witness soon after the former 's arrest is of vital importance because it furnishes to the investigating agency an assurance that the investigation is proceeding on right lines, in addition to furnishing corroboration of his own evidence in court.
[631 A C] In the.
present case, the evidence of the witness who gave the F.I.Rshowed that he did not give any description of the person who was alleged :to have fired the shots.
Nor did he state in the F.I.R. that he knew the appellant previously.
There was no evidence to show that the witness had identified the accused in the Committing Magistrate 's Court.
Therefore, his identification in the Sessions Court of the accused without any previous identification at a test parade, and without any description in the F.L.R. to corroborate it, is far too slender a piece of evidence to support the ' appellant 's conviction.
B E; 635 D, F] (2)Some of.the witnesses had stated in their evidence that they had heard the name of the accused being called but neither this fact nor the name of the accused was mentioned in the F.I.R.
The High Court was in error in taking into consideration the contents of the statements recorded under section 161, Cr.
P '.C., of the various witnesses, during the course of .investigation, km the purpose of finding corroboration of their statements.
in court that the name of the accused was disclosed to the police.
the accused 's name was really disclosed soon after the occurrence steps would have been taken by the investigating authorities to arrest him immediately but no such action was in fact taken.
[634 D; 636 C D] |
Appeals Nos.
2441 and 2442 of 1968.
Appeals by special leave from the judgment and order dated October 17, 1968 of the Bombay High Court in Arbitration Petitions Nos. 49 and 50 of 1968.
I. N. Shroff, for the appellant (in C.A. No. 2441/1968).
V. M. Tarkunde and I. N. Shroff, for the appellant (in C.As.
2442 of 1968).
section V. Gupte, B. R. Agarwala for the respondent (in both the appeals).
The Judgment of the Court was delivered to Ray, J.
These two appeals are by special leave against I the judgment dated 17 October, 1968 of the High Court at Bombay determining under section 33 of the that the umpire rightly entered upon the reference and further extending the time till 31 December, 1968 for making an award thereof by the umpire.
Two questions arise for consideration in these appeals.
First, whether there can be any valid appointment of umpire by arbitrators without obtaining consent of the appointee to be an um 697 pire.
Second, on the construction of the arbitration agreement in the present case was the operation of paragraph 4 of Schedule: I of the excluded with the result that the umpire could enter upon the reference only in the event of a difference arising between the arbitrators.
On 26 April, 1967 there was an arbitration agreement between the partnership firm of Indian Engineering Company and Keshavsinh Dwarkadas Kapadia.
Kapadia had appointed M/s. Chetan Trading Company as the sole selling agent of Kapadia 's, several products including aluminium and copper wire by an agreement dated 16 September, 1965.
Chetan Trading Company in their turn appointed Indian Engineering Company as their sole selling agent in respect of aluminium and copper wires.
Chetan Trading Company terminated their agreement with Indian Engineering Company.
Kapadia also terminated the sole selling agency with Chetan Trading Company Indian Engineering Company contended that on the termination of the sole selling agency between themselves and Chetan Trading Company Indian Engineering Company became the sole selling agent of Kapadia in terms of the agreement ' dated 16 September, 1965.
Indian Engineering Company claimed damages against Kapadia for breach of the agreement.
Kapadia claimed damages and moneys from Indian Engineering Company. 'Disputes arose between the parties.
These disputes were referred to arbitration in accordance with the agreement dated 26 April, 1967.
There was a similar arbitration agreement between Chetan Trading Company and Indian Engineering Company on 5 June, 1967 in respect of their disputes and claims against each other.
The arbitration agreement and the arbitrators were identical in both the cases.
Clauses 1, 2, 5 and 6 of the arbitration agreement which are relevant for the purposes of the present appeals are as follows: Clause (1): All the disputes and differences arising out of or in relation to the said Sole Selling Agency Agreement be and they are hereby referred to the arbitration of the said Shri H. G. Advani and Shri J. N. Gandhi.
Clause (2) That the arbitration shall be governed by them provisions of the .
Clause (5): The arbitrators shall make and publish their award within four months from the date of their entering upon the reference and they are hereby authorised to extend the said time from time to time as may be required with the previous written consent of both the parties hereto.
698 Clause (6): The said arbitrators shall before proceeding with the arbitration appoint an umpire and in the event of any difference arising between them they shall refer the 'matter to the umpire for his decision and award.
The arbitrators Messrs. Advani and Gandhi held their first meeting on 12 September, 1967.
At the said meeting before entering upon the reference the arbitrators appointed an umpire in the following terms: "Mr. Porus Mehta failing him Mr. Murzban Mistry appointed umpire".
On 11 January, 1968 the time laid down by clause (5) of the agreement for making the award expired.
On 14 January, 1968 the respondents wrote to the appellants to obtain the neces sary extension of time for making the award.
The appellants did not comply with the request and on 6 March, 1968 wrote to the arbitrators that Mr. Advani one of the arbitrators would be biased in favour of the respondents.
Thereafter, the respondents through their solicitors called upon the arbitrators to refer the matter to the umpire and also by a separate letter called upon the umpire Mr. Porus A. Mehta to enter on the reference as umpire appointed by the arbitrators.
Mr. Mehta fixed a meeting on 27 May, 1968.
The appellants raised certain objections.
The meeting was adjourned.
Another meeting was fixed on 17 June, 1968.
At the meeting held on 17th June, 1968 Mr. Mehta gave certain directions in regard to the proceedings and instructions thereof and fixed 12 July, 1968 for hearing.
The appellants by letter dated 12 July, 1968 addressed to Mr. Mehta contended that the consent of the umpire was not obtained before his appointment and therefore there was no valid appointment of the umpire.
Mr. Mehta fixed the meeting on 13 July, 1968 and decided to proceed with the arbitration and adjourned the meeting to 20 July, 1968.
The appellants obtained an adjournment on the ground that the appellants wanted to file a petition challenging the appointment of Mr. Mehta as an umpire.
Mr. Mehta adjourned the matter till 30 July, 1968.
In this context of events the appellants filed applications under section 33 of the which resulted in the order appealed against.
Three contentions which had been advanced An the High Court were repeated here.
First, that the arbitrators before pro ceeding with the reference did not obtain consent of the umpire to his appointment as umpire, and, therefore, there was no appointment of umpire.
Secondly, under clause (6) of the arbitration agreement operation of paragraph 4 of Schedule I of the 699 was excluded and the umpire could enter upon the reference only in the event of a difference arising between the arbitrators on their disagreement.
No difference arose between the arbitrators in the present case but only time for making the award expired.
Therefore, the umpire had no right to enter upon the reference.
Thirty under clause (6) of the arbitration agreement, the umpire had no right to enter upon the reference unless the arbitrators referred the matter to the umpire.
The High Court relied on the decision of the Judicial Committee in Mirza Sadik Husain vs Mussanmat Kaniz Zohra Begam and Anr.(1) (38 I.A. 181) and held that the umpire signified the consent by taking up the office and the umpire rightly entered on the reference.
The High Court held that the contingency provided for in paragraph 4 of Schedule I to the was not excluded.
The High Court however said that if the High Court was wrong in the view that paragraph 4 of Schedule I to the was not excluded, expiry of time to make an award could not be regarded as a disagreement between the arbitrators.
The third contention of the appellants was also rejected by the High Court on the ground that clause (6) of the arbitration agreement in the present case did not apply when the arbitrators did not make an award within time.
Counsel for the appellants contended that the words 'if any appointed arbitrator or umpire I neglects or refuses to get ' occurring in section 8(1) of the mean that one can refuse to act only after one has accepted the appointment.
This contention was supported by relying on the following observation in Russell on Arbitration, 18th Edition, at page 212: "Acceptance of offices: Acceptance of the office by the arbitrator appears to be necessary to perfect his appointment.
It has been so decided in the case of an umpire, and it would seem to be only reasonable that an appointment should not be considered effective until the person appointed has agreed either expressly or tacitly to exercise the function of the office".
Two decisions are cited in Russell in support of the view expressed by the author.
These decisions are: Ringland vs Lowndes (7 ) ; E.R. 749 and Tradax Export section A. vs Volkawagenwerk 3 A.G. ', (1969) 2 O.B. 599.
The decision in Tradax Export case (supra) has been affirmed by the Court of Appeal as will appear in It is important to notice the distinction between appointment and acceptance of office.
The present appeals concern the appointment of an umpire.
The questions of effectiveness or per 700 fection of appointment are by the nature of things subsequent to appointment unless the agreement or the statute provides otherwise.
Arbitrators and umpire too are often appointed by the parties.
Sometimes an umpire is appointed by arbitrator.
The constitution of the arbitral body and the manner in which the appointments are made are primarily dealt with in the arbitration agreement or else the will apply.
In some cases, the appointment of arbitrator may require special consideration.
If, for instance, two arbitrators are required to be appointed one by each party an appointment of arbitrator by a party is not complete without communication thereof to the other party.
The reason in the words of Lord Denman is this : 'Neither party can be said to have chosen an arbitrator until he lots the other party know the object of his choice" (See Thomas vs Fredricks) ( 1 847) 10 Q.B. 775).
Where each party was to appoint a valuer by 31 May, 1847 and one of the parties nominated a referee late on 31 May and sent by that night 's post a notice thereof to the defendant who received it on 1 June, it was held that the plaintiff had not nominated a referee by 31 May. (See Tew vs Harris The necessity for communication of appointment of arbitrator to the parties as also to the appointee depends often on the languae of the arbitration clause.
In the Tradax Export case, (supra) the arbitration clause was as follows : ". .
Any claim must be made in writing and claimant 's arbitrator appointed within three months ' of final discharge and where this provision is not complied with the claim shall be deemed to be waived and absolutely barred".
This is described as the usual Centrocon arbitration clause in charterparty agreement.
It is noticeable that in the Centrocon arbitration clause the claimant is required to appoint an arbitrator within three months of final discharge of cargo or else the claim is barred.
An effective appointment of an arbitrator in such a clause is necessary to constitute arbitral authority within the stipulated time to prevent the claim from being barred.
Therefore, in such a clause not only communication to the appointee but also the acceptance of office by the appointee is essential for effective appointment of arbitrator within the meaning of the clause.
A mere nomination or appointment unknown to the appointee was held not to be an appointment far less an effective appointment of arbitrator within the meaning of that clause.
The appointment will be effective only when the appointed arbitrator accepts office and is armed with the duty and authority of an arbitrator.
Even in such a clause the stage of effective appointment will be when he has indicated his willingness to act in that matter.
701 In the Tradax Export case (supra) the charterers gave notice of appointment to the arbitrator.
Three months expired The other side contended that there was no appointment of arbit rator within the stipulated time.
The arbitrator was not set in motion.
Neither was the arbitrator clothed with the mandate of arbitration nor was the machinery of arbitration invoked by the charterers.
The appointment of an arbitrator there had to be perfected and implemented by calling upon the appointee to act.
In the Tradax Export case (supra) the Court of Appeal observed that if an application under section 27 of the English Arbitration Act, 1950 had been made, the court would have, granted relief as explained in Liberian Shipping Corporation 'Pegasus ' vs A. King & Sons Ltd. Section 27 of the English Arbit ration Act is a special provision conferring power upon the court to extend the time for commencement of arbitration proceedings where in the circumstances of the case undue hardship would otherwise be, caused.
This aspect indicates that in the Centrocon clause commencement of proceedings by effective appointment is vital and that is why relief against rigour of time clauses is granted under section 27 of the English Arbitration Act, 1950.
In the present appeals, the reference was to arbitrators and they were required to appoint an umpire.
The appointment of an umpire by two arbitrators means that the arbitrators are to coneur in appointing an umpire.
There is no particular method of appointment of an umpire prescribed by the Act.
The usual method of appointment of an umpire by the arbitrators is in writing.
Arbitrators who are required to appoint an umpire are under no obligation to obtain the approval of the choice of the personnel by the parties who appointed the arbitrators.
If any party is dissatisfied with the choice that will not affect the validity of the appointment (See Oliver vs Collings E.R. (1045).
The appointment by arbitrators of an umpire should be the act of the will and judgment the two.
Such an appointment is to be one of the choice and not of chance.
[See Re.
Cassell ; E.R. 232].
If an umpire declines the office the appointment is ineffectual.
Ile arbitrators in such a case can make another appointment of an umpire if the arbitration agreement empowers them to do SO Or the court can appoint an umpire in lieu of an appointed umpire who refuses to act.
Declining the office will be refusal to act.
It is, therefore, apparent that appointment of umpire is something different from the acceptance of office by the umpire.
The arbitrator Or umpire assumes his office when he accepts the appointment.
There is no NO authority for the proposition that consent of the appointee is required before an umpire is appointed by the arbitrators.
The observations in Russll on arbitration.
18 th Ed. 702 at page, 212 do not support that submission.
The decision in Ringland vs Lowndes supra) which is referred to in Russell had very special features.
Under the Public Health Act, 1848 a disputed claim to compensation was to be settled by arbitration.
Arbitrators were required to make an award within 21 days after the appointment or within extended time, if any.
If arbitrators neglected or refused to appoint an umpire for seven days after being requested so to do by any party the court of quarter sessions would on the application of such party appoint an umpire.
In that case arbitrators were appointed in January, 1861.
The arbitrators refused to appoint an umpire.
The plaintiff applied at the Easter sessions to appoint an umpire but failed in consequence of want of a notice of his intention to make such application.
The plaintiff thereafter gave the required notice and the second application was made at the Midsummer sessions.
One Johnson was named as umpire.
But as his consent had not been obtained no formal appointment was made.
A third application was made at the Michaelms sessions and Johnson was on 14 October appointed umpire and accepted the appointment.
The question for consideration was whether the appointment of the umpire was at the Midsummer sessions or at the Michaelmas sessions.
Under the statute the award was, to be made within three months from the umpire,s appointment.
The umpire made an award on 30 December, 1861.
If the appointment was in the Midsummer sessions the Award would be bad.
It will appear from the report (15 C.B ' (N.S.) 173 at pp.
178, 179 and 749 at pp.
752 and 759) that it was the duty.
and practice of the clerk of the peace to make an, entry of the acts and proceedings of the court from Which the orders of the court were subsequently formally drawn up and no order would in the course of practice be formally drawn up unless the assent of the umpire to act had been previously obtained.
Counsel for the board in Ringland 's case did not strongly press the objections that ' an order 'was made at the Midsummer sessions because there was no formal order of the Court in Midsummer 'sessions.
The decision in Ringland vs Lowndes (supra) went up on appeal as will, appear from; , , E.R. 207, The appeal, however was on actual decision in Tringland,s case (supra) ;is 'to whether a party who attended before, an, arbitrator under protest, cross examined adversary 's witnesses and called witnesses did not preclude himself from afterwards objecting that the arbitrator was proceeding without authority it will appear at conceded that the, appointment of Johnson as an umpire took Place the October sessions.
the special provisions of the statute, the mode.
of making an application to the court of quarter Sessions, me practice of the court in regard to drawing up of 703 orders for appointment of umpire and the specific requirement of consent of the appointee to an order for appointment of umpire are all special and peculiar features in Ringland vs Lowndes (supra) to support the view that acceptance of umpirage is necessary for the appointment of the umpire.
The decision of the Judicial Committee in Mirza Sadiq Husain vs Musammat Kaniz Zohra Begam (supra) was on the meaning of the words 'refuses to act ' occurring in section 510 of the Code of Civil Procedure, 1882.
That section conferred power on the court to appoint a new arbitrator or umpire "if the arbitrator or the umpire refuses to act".
The, Judicial Committee did not accept the construction put upon the words 'refuses to act ' by the High Courts in India that the power of the court under section 5 10 to appoint a new arbitrator in place of another arises only when that other had first consented to act and thereafter refused or became incapable.
The Judicial Committee said "it appears to their Lordships that when an.
arbitrator is nominated by parties, his refusal to act is signified as clearly by his refusal to accept nomination as by any other course he could pursue.
His refusal to act necessarily follows, for he has not performed the first action of all, namely, to take up the office by signifying his assent to his appointment Their Lordships do not enter at length,into the matter as it appears that any other construction would open the way to an easy defeat of the provisions of the statute".
Under section 8 of the Arbitration Act ,1940 if any umpire refuses to act and the arbitration agreement does not show that it was intended that the vacancy should not be supplied, and the parties or the arbitrators as the case may be, do not supply the vacancy any party may take recourse ' to the provisions of the statute for appointment of umpire.
The construction which the Judicial Committee put upon the words 'refuses to act ' in Mirza Sadik Husain 's case (supra) applies to the provisions contained in the .
Where the arbitrators appoint an umpire upon the condition of the umpire 's acceptance of office, the arbitrators wilt have power to reappoint an umpire if the post is refused. 'Where, again, the arbitrators appoint an umpire, without any such condition of acceptance of office, and the appointee declines the office, the, arbitrators in accordance with their powers under the arbitration agreement ea appoint an umpire again.
The court has also power to appoint in lieu of an appointed umpire who refuges to act, as stated in section 8 of the .
In all these cases the appointment of an.
umpire becomes effective by acceptance of the office.
Thereupon the power of appointment is exhausted.
If the appointed person 704 after acceptance of office refuses to act or will not act the parties have to take recourse to the court.
When the umpire assumes his office he accepts the appointment.
The acceptance may be express or implied.
Ile acceptance need not be in writing.
It may be evidenced by conduct.
It may be also by proceeding with the arbitration.
In Mirza Sadik Husain 's case (supra) both the parties by agreement appointed arbitrators to settle their respective rights.
One of the arbitrators refused to act.
The respondents in that case declined to nominate another arbitrator in their behalf .
The Judicial Committee said that this declinature was within their rights, the reason being that the arbitrator refused to accept office or to act after he had been appointed.
The arbitrators in the present case completed their appointment of umpire before entering on the reference.
Thereafter, it remained for the umpire to act or to refuse to act.
The question of acceptance of appointment of umpire arises with reference to the stage when he is called upon to act.
The does not say that appointment of umpire by arbitrators is to be made only after obtaining consent of the appointee.
The arbitrators here appointed an umpire before entering on the reference: The appointment was not conditional upon the acceptance of appointment by the umpire.
The scheme of arbitration proceedings indicates that the appointment of umpire and the acceptance of office are two separate matters arising at different stages in the proceedings.
When the umpire is called upon to proceed in terms of the, appointment he will either assent expressly or by conduct to act or he will decline to act.
The High Court was correct in holding that there was a valid appointment of the umpire and the umpire rightly entered upon the reference.
Ile umpire 's authority commenced when he entered upon the reference on being asked to proceed with the reference.
The other contention on behalf of the, appellants that para graph 4 of the First Schedule to the was excluded by clause (6) of the arbitration agreement in the: present case is unsound.
Section 3 of the provides that an arbitration agreement, unless a different intention is expressed therein, shall be deemed to include the provisions set out in the First Schedule in so far as they are applicable to the reference.
Paragraph 4 of the First Schedule provides that if the arbitrators have allowed their time to expire without making an award or have delivered to any party to the arbitration 705 agreement or to the umpire a notice in writing stating that they cannot agree, the umpire shall forthwith enter on the reference in lieu of the arbitrators.
Clause (6) of the arbitration agreement does not state that only in the event of a difference arising between the arbitrators there shall be a reference to the umpire.
There is no intention in the agreement to exclude the operation of paragraph 4 of the First Schedule to the .
In the present case the agreement provided for appointment of umpire.
The agreement also provided for making of the award by the arbitrators.
It is, therefore, apparent that the intention of the parties was that when arbitrators would allow their time to expire without making the award the umpire would enter on the reference in lieu of the arbitrators.
The High Court expressed the view that if the arbitrators allowed the time to expire that by itself would not amount to disagreement between the arbitrators.
As to what constitutes disagreement cannot be laid down in abstract or inflexible propositions.
It will depend upon the facts of the case as to whether there was a disagreement.
The High Court did not agree with the view expressed in Russel on Arbitration, 18th Ed.
at pages 205 and 208, that failure to make an award in time where the agreement prescribed time in which the arbitrators award is to be made would amount to disagreement.
In Lossifoglu vs Counmantaro [1941] 1 K.B. 396 the arbitration clause provided "in case the arbitrators so appointed disagree they shall appoints an umpire".
One of the arbitrators repeatedly endeavoured to arrange a meeting with the other, but failed to arrange such a meeting.
The arbitrator then unsuccessfully attempted to obtain consent of the latter to the appointment of umpire.
Thereafter, application was made to the court for the appointment of umpire.
Disagreement between the arbitrators may take various shapes and forms.
In the present case the arbitrators by reason of attitude of a party in correspondence addressed to the arbitrators could not agree to proceed with the matter.
Where one of the arbitrators decline to act and the other is left alone it will in a case of this type amount to disagreement between the two arbitrators.
In the Present case, there was disagreement between the arbitrators.
Time to make the award also expired.
Therefore, from both points of view the umpire had authority to inter upon the reference.
For these reasons, we are of opinion that the High Court was correct in making the order.
The appeals are dismissed.
The order of the, High Court is upheld, In view of the fact that the time granted by the High Court till 31 December, 1968 for making the award cannot apply, the umpire Porus A. Mehta is I L3Sup.
Cl/72 706 granted time for three months to make the award.
Three months will run from the date of service of this order by any party to these appeals.
The appellants will pay one set of hearing fee to the respondents.
V.P.S Appeals dismissed. | Disputes having arisen between the appellant and the respondent, they were referred to arbitration in accordance with an arbitration agreement.
The arbitrators entered upon the reference and also appointed an umpire.
After the time for making the award had expired the appellant took the stand that one of the arbitrators would be biased in favour of the respondents.
The respondents therefore called upon the arbitrators to refer the matter to the umpire and also wrote to the umpire and the umpire entered upon the reference.
Thereafter, the appellants filed applications under section 33 of the .
The High Court held that the umpire rightly entered upon the reference, and extended the time to enable the umpire to make an award.
In appeal to this Court it was contended that : (1) the appointment of the umpire was not valid because the consent of the appointee was not obtained,; and (2) under cl. 6 of the Arbitration agreement the operation of para 4 Sch.
I of the was excluded, and the umpire could enter upon the reference only in the event of a difference arising between the arbitrators and the arbitrators referred the matter to the umpire.
Dismissing the appeal, HELD : (1) There is a distinction between appointment and acceptance of an office.
The question of effectiveness or perfection is ordinarily subsequent to appointment.
The scheme of arbitration proceedings indicates that the appointment of an umpire and the acceptance of office are two separate matters arising at different stages in the proceedings.
[699 H; 700 A: 704 E] When the arbitrators are required to appoint an umpire it only means that the arbitrators are to concur in appointing the umpire.
There is no particular method of appointment of an umpire though the usual method is by writing.
Arbitrators who are required to appoint an umpire are under no obligation to obtain the approval of the choice of the person by the parties who appointed the arbitrators.
If any party is dissatisfied with the choice it will not affect the validity of the appointment; nor is the appointment conditional upon the acceptance of appointment by the umpire.
The necessity for communication of appointment to the parties as well as to the appointee depends on the language of the arbitration clause.
The does not say that the appointment of umpire by the arbitrators is to be made only after obtaining the consent of the appointee.
[700 D E; 701 D F; 704 D E] When the umpire assumes his office he accepts the appointment.
Acceptance may be express or implied.
It need not be in writing; it may be evidenced by conduct.
It may also be evidenced by proceeding with 696 the arbitration.
When the umpire is called upon to proceed in terms of the appointment he will either assent expressly or by conduct to act, or he will decline to act.
[704 A B, D, E F] Mirza Sadik Husain vs Mussamat Kaniz Zohra Begam, L.R. 38 I.A. 181, applied.
Ringland vs Lowndes, ; ; and Tradax Export S.A. vs Vokswagenwerk A.G. , explained and distinguished.
(2) (a) Paragraph 4 of the first schedule provides that if the arbitra delivered to any party to the arbitration agreement or to the umpire a notice in writing stating that they cannot agree, the umpire shall forthwith enter on the reference in lieu of the arbitrators. 'Mere is no intention in cl. 6 of the agreement to exclude the operation of this paragraph.
On the contrary the agreement shows that the intention of the parties was that when the arbitrators allowed time to expire without making the award the umpire should enter on the reference in lieu of the arbitrators.
[704 H; 705 A C] (b) In the present case, the arbitrators, by reason of the attitude of one of the parties could not agree to proceed with the matter.
Where one of the arbitrators declines to act and the other is left alone in a case of this type, it will amount to disagreement between the arbitrators.
[705 F G] (c) Failure to make an award in time where the agreement prescribed time does in.
certain circumstances, amount to disagreement.
[705 D E] Iossifoglu vs Counmantaros, and Russel on Arbitration, 18th Ed. pp. 205, 208, referred to. |
l Appeals Nos. 1970 to 1973 of 1968.
Appeals from the judgment and order dated September 20, 1967 of the Delhi High Court in Income tax Reference Nos. 2 :and 3 of 1967.
V.C. Mahajan and H. K. Puri, for the appellant (in all the appeals) V.S. Desai, R. N. Sachthey and B. D. Sharma, for the respondent (in all the appeals).
The Judgment of the Court was delivered by Hegde, J.
In these appeals by certificate, the only question arising for decision is : "whether on the facts and in the circumstances of the case, the assessee.
continued to be the owner of the property for the purposes of computation of income under section 9 of the Income tax Act, 1922" (to be hereinafter referred to as the Act).
A Full Bench of the Delhi High Court speaking through section K. Kapur, J. answered that question in the negative.
Being dissatisfied with that decision the assesses has brought these appeals.
Now turning to the facts of the case, the concerned assess ment years are 1952 53, 1955 56 and 1956 57, the relevant accounting periods being financial years ending March 31, 1952, March 31, 1955 and March 31, 1956.
The assesses is a registered 641 firm deriving income from interest on securities, property, business and other sources.
Sometime In the year 1946 it purchased the Nedous Hotel in Lahore for a sum of Rs ' 46 lakhs.
For that purpose it raised a loan of Rs. 30 lakhs from M/s. Bharat Bank Ltd., Lahore and a loan of Rs. 18 lakhs from the Raja of Jubbal.
The loan taken from the bank was partly repaid but as regards the loan taken from the Raja, the assessee came to an agreement with the Raja under which the Raja accepted a half share in the said property in lieu of the loan advanced and also 1/3rd of the outstanding liability of the bank.
This arrangement came into effect on November 1, 1951.
After the creation of Pakistan, declared an evacuee property and consequently vested in the Custodian in the Pakistan.
In its return for the relevant assessment years, the assessee claimed losses of Rs. 1,00,723.
Rs. 1,16,599/ and Rs. 1,16,599/ respectively but showed the gross annual letting.
value from the said property at Nil.
The loss claimed was stated to be on account of interest payable to the bank.
Since the property in question has vested in the Custodian of Evacuee Property, in Pakistan, the Income tax Officer held that no income or loss from that property can be considered in the assessee 's case.
He accordingly disallowed the assessees claim in respect of the interest paid to the bank.
The Appellate Assistant Commissioner confirmed the order of the Income tax Officer.
In second appeal the Tribunal came to the conclusion that the assessee still continued to be the owner ' of the property for the purpose of computation of loss.
The Tribunal held that the interest paid is a deductable allowance under section 9(1)(iv) of the Act.
In arriving it that conclusion, the Tribunal relied on its earlier decision in the case of the assessee in respect of the assessment year 1951 52.
thereafter at the instance of the assessee, the Tribunal submitted the question set out earlier.
Ile High Court on an analysis of the various provisions of the Pakistan (Administration of Evacuee property) Ordinance, 1949 (XV of 1049) (to be hereinafter erred to as the 'Ordinance) came to the conclusion that for the purpose of section 9 of the Act, the assasee cannot be considered as .he owner of that property.
It was urged by Mr. V. C. Mahajan, learned Counsel for the assessee that the High Court erred in opining that the assessee was not the owner of the property, for the purpose of section 9 of the Act.
According to him the property vested in the Custodian only for the purpose of administration and the assessee still continued to be its owner.
He contended that the expression "owner" means the person having the ultimate right to the property.
He further contended that the so long as the assessee had a right to that 7 L3Sup.
C.I./72 property in whatever manner that right might have been hedged in or restricted, he still continued to be the owner.
On the other hand, it was contended on behalf of the Revenue that the Incometax is concerned with income, gains and profits.
Therefore for the purpose of that Act, the owner is that person who is entitled to the income.
According to the Revenue the word "owner" in section 9 refers to the legal ownership and not to any beneficial interest in the property.
For deciding the question whether the assessee was the owner of the property for the purpose of section 9 of the Act during the relevant accounting years, we have to look to the provisions of the Ordinance.
Let us first take a survey of the relevant provisions of the Ordinance and thereafter analyse the effect of those provisions.
The long title of the Ordinance says that it is an Ordinance to provide for the administration of the evacuee property in Pakistan and for certain matters incidental thereto.
The preamble says that "whereas an emergency has arisen which renders it necessary to provide for the administration of evacuee property in Pakistan and for certain matters incidental thereto".
Section 6(1) provides that all evacuee property shall vest and shall be deemed always to have vested in the Custodian with effect from the 1st day of March 1947.
Section 9 gives Dower to the Custodian to take possession of the evacuee property.
Section 11 provides that any amount due to an evacuee or payable in respect of any evacuee property, shall be paid to the Custodian by the person liable to pay the same and the payment to the Custodian discharges the debtor 's liability to the extent of the payment made.
Section 12 prescribes that the property which hag vested in or of which possession has been taken by the Custodian shall be exempt from all legal process, including seizure, distress, ejectment or sale by any officer of a Court or any other authority a;; no injunction or other order of whatever kind in respect of such property shall be granted or made by any Court or any ot" authority.
Section 14(1) permits the Rehabilitation Authority, allot evacuee property to the refugees.
Section 16(1) says the no creation or transfer of any right or interest in or encumbrane, upon any property made in any manner whatsoever on or after the first day of March, 1947 by or on behalf of an evacuee or by or on behalf of a person who has or may become an evacuee after the date of such creation or transfer, shall be effective so as to confer any right or remedy on any party thereto or on any person claiming under any such party, unless it is confirmed by the Custodian.
Section 19 empowers the Custodian to restore the evacuee property to the lawful owner subject to such conditions as he may be pleased to impose.
Section 20(1) stipulates that the Custodian may take such measures as he considers 643 necessary or expedient for the purpose of administering, preserving and managing any evacuee property which has vested in him and may for any such purpose as aforesaid, do all acts and incur all expenses necessary or incidental thereto.
Sub section
(2) of that section provides that "without Prejudice to the generality of the provisions contained in sub section
(1), the Custodian may.
(m)sell any evacuee property, notwithstanding any this contained in any law or agreement to the contrary relating thereto, Provided that the Custodian shall not under this Clause or the next succeeding clause sell any immovable evacuee property or any business or undertaking which is evacuee property, except with the previous approval of the Central Government.
" Clause (i) of that sub section empowers the Custodian to demolish or dismantle any evacuee property which in his opinion cannot be repaired, or sell the site of such property and the materials thereof.
The Custodian can recoup all the expenses incurred by him in the administration of the evacuee property from out of the receipts in his hand in respect of that property, Section 22(1) requires the Custodian to maintain separate account of the property of each evacuee of which he has taken possession and shall cause to be made therein entries of all receipts and expenditure in respect therof.
The Ordinance starts by saying that it is an Ordinance to provide for the administration of evacuee property and not management of evacuee property.
The expression "administra tion" in relation to an estate, in law means managements and settling of that estate.
It is a power to deal with the estate.
The evacuee could not take possession of his property.
He could not lease that property.
He could not sell that property without the consent of the Custodian.
He could not mortgage that property.
He could not realise the lncome of the property.
On the other hand, the Custodian could take possession of that property.
He could realise its income.
He could alienate the property and he could under certain circumstances demolish the property.
All the rights that the evacuee had in the property he left in Pakistan were exercisable by the Custodian excepting that he could not appropriate the proceeds for his own use.
The evacuee could not exercise any rights in that property except with the consent of the Custodian.
He merely had some beneficial.
interest in that property.
No doubt that residual interest in a sense is ownership.
The property having vested in the Custodian, who bad 644 all the powers of the owner, he was the legal owner or the property.
In the eye of the law, the Custodian was the owner of that property.
The position, of the Custodian was no less than that of a Trustee.
Section 9(1) says : "The tax shall be payable by an assessee under the head "Income from Property" in respect of the bona fide annual value of property consisting of any buildings or lands appurtenant thereto of which he is the owner, other than such portions of such property as he may occupy for the purposes of any business, profession or vocation carried on by him the profits of which are assessable to tax subject to the following allowances namely : The question is who is the "owner" referred to in this section ? Is it the person in, whom the property vests or is it he who is entitled to some beneficial interest in the property It must be remembered that section 9 brings to tax the income from property and not the interest of a person in the property.
A property cannot be owned by two persons, each one having independent and exclusive right over it.
Hence for the purpose of section 9, the owner must be that person who can exercise the rights of the owner, not on behalf of the owner but in his own right.
For a minute, let us look at things from the practical point of view.
If the thousands of evacuees who left practically all their properties as well as business in Pakistan had been considered as the owners, of those properties and business as long as the 'Ordinance ' was in force then those unfortunate persons would have had to pay income tax on the basis of the annual letting value of their properties and on the income, gains and profits of the businesses left by them in Pakistan though they did not get a paisa out of those properties and businesses.
Fortunately no one in the past interpreted the law in the manner Mr. Mahajan wants us to interpret.
It is time that equitable considerations are irrelevant in interpreting tax laws.
But these laws, like all other laws have to be interpreted reasonably and in consonance with justice.
The question as to who is Vie owner of a house property under section 9 of the Act in circumstances similar to those before us came up for consideration before the Calcutta High Court in the matter of The Official Assignee for Bengal (Estate of Jnanendra Nath Pramanik) (1).
In that case on the adjudication of a person as insolvent under the Presidency Towns Insolvency Act, 1909, certain house property of the insolvent vested in the Official Assignee.
The question arose whether the Official Assignee (1)5.
I.T.R. 233.
645 could be taxed in respect of the income of the property under section 9.
The High Court held_ that the property did not by reason of the adjudication of the debtor cease to be a subject fit for taxation and in view of the provisions of section 17 of the Presidency Towns Insolvency Act, the Official Assignee was the, "owner" of the property and he could rightly be assessed in respect of the income from that property under section 9.
Section 17 of the, Presidency Towns Insolvency Act, reads: "On the making of an order of adjudication, the property of the insolvent wherever situate shall vest in the official assignee and shall became divisible among his creditors, and thereafter, except as directed by this Act, no creditor to whom the insolvent is indebted in respect of any debt provable in insolvency shall, during the pendency of the insolvency proceedings, have any remedy against the property of the insolvent in respect of the debt: or shall commence any suit or other legal proceedings except with the leave of the Court and on such terms as the Court may impose : Provided that this section shall not affect the power of any secured creditor to realize or otherwise deal with his security in the same manner, as he would have been entitled to realise or deal with it if this section had not been passed.
" We may note that the powers of the Custodian are no less than that of the Official Assignee under the Presidency Towns Insolvency Act, 1909.
Delivering the judgment of the Court in the Official Assignee 's case(1), Costello, J. observed : "With regard to the first point, Mr. Page argued that although by section 17 of the Presidency Towns Insolvency Act these properties vested in the Official Assignee he did not thereby or thereupon become the owner of those properties within the meaning properly ascribable to that word for the purposes of the applicability of Section 9.
What Mr. Page really invited us to do was to restrict the meaning of the word by putting before it the qualifying adjective "beneficial".
What was argued by Mr. Page was that the Official Assignee had no legal interest in the properties themselves, they were merely vested in him for the purposes of the administration of them in the interest of the creditors of the insolvent.
I am unable to accept Mr. Page 's contention.
In this country there is no difference between "legal estate" and "equitable estate".
In this connection the case of Sir Currimbhoy Ebrahim Baro (1) 646 netcy Trust vs Commissioner of Income tax, Bombay 612 I.A. 1209) is of assistance.
At page 217 Sir Sydney Rowlatt when giving the judgment of the Privy Council made this observation: "In their Lordships" opinion the effect of the Act creating these trusts is not to give the baronet for the time being any right to any part of the interest or property specifically or any right which, even granting that the legal title is not the only thing that can ever be looked at, would make it true to say that any proportion of the interest is not 'receivable ' or any proportion of the property is not 'owned ' by the incorporated trustees.
" The learned judges of the Calcutta High Court in reaching that conclusion relied on the decision in The Commissioner of Inland Revenue vs Fleming(1).
That appeal related to a claim for repayment of income tax to which the respondent claimed to be entitled in respect of "personal allowance" introduced into the Income tax system by section 18 of the Finance Act, 1920.
The claim arose in the following circumstances : The respondent was declared insolvent in 1921.
He was then the owner of heritable properties.
His insolvency lasted till May 10, 1926.
When he received his discharge on payment of composition and was reinvested in his estate.
At that time his estate consisted of (1) Two of the original heritable properties which had not been realised by the trustee in the insolvency and (2) a balance in cash of pound 53 odd.
During the insolvency, the trustee paid income tax on the full annual value of the two properties in question.
The contention of the respondent was that the radical right to these properties was in him all that time; and that; in paying the tax, the trustee was really paying it on his behalf that is, on his income and that consequently there arose in each of the years in which the payment was made a right to deduct his "personal allowance" from the annual value 'of the properties.
The right to this abatement is said to have passed to the Respondent himself in virtue of the reinvestment in his estate which occurred upon his discharge on composition.
Rejecting this contention Lord President observed : "It is obvious that, unless during the years in question the annual value of the properties was income of the Respondent, he cannot have any claim to abatement of it for income tax purposes; and accordingly everything depends upon the soundness of the proposition that the income consisting in the annual value of (1) 14, Tax Cases 78.
647 these properties was truly income of the Respondent.
I do not see how it can possibly be so described.
It was part of the income arising from the sequestrated estates vested in the trustee for the Respondent 's creditors.
Any income that did arise from those estates was income of the trustee as such, and he (and he alone) had the right to put it into his pocket as income.
It was not income that went or could go into the pocket of the Respondent as income in any of the years in question.
How then can it be said to have reached his pocket as income on his subsequent reinvestiture.
" For determining the person liable to pay tax, the test laid down by the court was to find out the person entitled to that income.
An attempt was made by Mr. Mahajan to distinguish this case on the ground that under the corresponding English statute the liability to tax in respect of income from property is not laid on the owner of the property.
It is true that section 82 of the English Income tax Act, 1952 is worded differently.
But the principles underlying the two statutes are identical.
This is clear from the various provisions in that Act.
The conclusion reached by Costello, J. in Official Assignee 's case(1) receives support from the decision of the Privy Council in Trustees of Sir Currimbhoy Ibrahim Baronetcy Trust vs Commissioner of Income tax, Bombay(2).
The Counsel for the appellant was unable to point out to us any decision which has taken a view contrary to that taken in Official Assignee 's case(3).
The learned judges of the High Court in reaching their con clusion that the assessee was not the owner of the property in the relevant assessment years, took assistance from the decisions of English courts dealing with the question of levy of income tax on the income from enemy properties taken possession of by the Custodian during war.
In those cases the English judges have enunciated the theory of suspended ownership.
We do not think that we need call assistance from those decisions.
Mr. Mahajan contended that despite the fact that evacuee property was taken over by the Custodian and that he had been conferred with large powers to deal with it, an evacuee from Pakistan who owned that property before he migrated to India still continued to be the owner of the property.
For this contention of his he placed reliance on some of the observations of this Court in Amar Singh vs Custodian, Evacuee Property, Punjab(1).
Therein delivering judgment of the Court Jagannadhadas, J. observed (at p. 815 of the report): (1)5 I.T.R. 233.
(2)2 I. T.R. 148.
(3) [1957] S.C.R. 648 "Stopping here it will be seen that the position, in its general aspect, is that all evacuee property is vested in the Custodian.
But the evacuee has not lost his ownership in it.
The law recognised his ultimate ownership subject to certain limitations.
The evacuee may come back and obtain return of his property, as also an account of the management thereof by the Custodian.
" Those observations have to be understood in the context in which they were made.
Therein, their Lordships were considering whether the right of an evacuee in respect of the property left by him in the country from which he migrated was property right for the purpose of article 19 (1 ) (1) (f ) of the Constitution.
No one denies that an evacuee from Pakistan has a residual right in the property that he left in Pakistan.
But the real question is, can that right be considered as ownership within the meaning of section 9 of the Act.
As mentioned earlier that section seeks to bring to tax income of the property in the hands of the owner.
Hence the focus of that section is on the receipt of the income.
The word "owner" has different meanings in different contexts.
Under certain circumstances a lessee may be considered as the owner of the property leased to him.
In Stroud 's Judicial Dictionary (3rd Edn.), various meanings of the word "owner" are given. ' It is not necessary for our present purpose to examine what the word "owner" means in different contexts.
The meaning that we give to the word " owner" in section 9 must not be such as to make that provision capable of being made an instrument of oppression.
It must be in consonance with the principles underlying the Act.
Mr. Mahajan next invited our attention to the observations in Pollock on Jurisprudence (6th Edn. 1929) 178 80: "Owner ship may be described as the entirety of the powers of use and disposal allowed by law.
The owner of a thing is not necessarily the person who at a given time has the whole power of use and disposal; very often there is no such person.
We must look for the person having the residue of all such power when we have accounted for every detached and limited portion of 'it; and he will be the owner even if the immediate power of control and use is elsewhere".
It is not necessary to consider whether those observations hold good even now because of the various legislative measures enacted during the last about forty years after those observations were made.
Suffice it to say that those observations are inapplicable to the case of the "owner" under section 9 of the Act.
649 Mr. Mahajan in support of his contention next placed reliance on the decision of the Patna High Court in Raja P. C. Lal Choudhary vs Commissioner of Income tax(1).
Therein the question was whether the receiver of a property appointed by court was the owner of the property for the purpose of section 9 of the Act.
The court came to the conclusion that he was not the owner as the property did not vest in him.
In fact in the course of the judgment, the court made a distinction between a receiver and a trustee and an official assignee.
In our opinion this decision instead of supporting the case of the appellant may lend some support to the contention of the Revenue.
Reliance was next placed on the decision of the Calcutta High Court in Nawah Bahadur of Murshidabad vs Commissioner of Income tax, West Bengal(2).
The facts of that case were : Properties which belonged to the ancestors of the Nawab of Murshidabad as Rulers, were, some time after the territories had been conquered by the British, settled by the Secretary of State for India in the year 1891 on the then Nawab of Murshidabad under a deed of settlement which provided that such properties " shall henceforth and for ever be held and enjoyed by the said Nawab Bahadur and such one among his lineal male heirs as may be successively entitled to hold the said title in perpetuity,.
with and subject to the incidents, power, limitations and conditions as to the inalienability and otherwise hereinafter contained".
One of the conditions was that he was not entitled to sell or alienate the properties except with the approval of the Governor of Bengal.
The Settlement deed was confirmed by Act XV of 1891.
The question arose whet her Nawab of Murshidabad was liable to pay tax in respect of the income of those properties under section 9 of the Act.
The Court held that whatever might have been the original nature of the "State properties, after the deed of settlement and the Act of 1891, as the dual status of the Nawab as the holder of the State and as an individual ceased, it could not be said that the Nawab for the time being was not the "owner" of such properties for the purposes of section 9 of the Act and the Nawab was therefore liable to be assessed to income tax on the income of such properties.
The Court further held that the word "owner" in section 9 of the Act applies to owners of the whole income, even though they are under certain restrictions with regard to the alienation of the properties.
We are unable to see how this decision gives any support to the contentions advanced on behalf of the assessee.
After giving our careful consideration to the question of law under consideration, we have come to the conclusion that the (1) (2) 650 assessee was not the owner of Neadous Hotel during the relevant assessment years for the purpose of section 9 of the Act.
Hence these appeals fail and they are dismissed.
In the circumstances of the case we make no order as to costs in these appeals.
G.C. Appeals dismissed. | The assessee was a .,registered firm deriving income from securities, property, business and other sources.
In 1946 it purchased a hotel in 'Lahore for a sum of Rs. 46 lacs.
For that purpose it raised a loan of Rs. 30 lacs from a bank and a loan of Rs. 18 lacs from one R. The 'loan taken from the, bank was largely repaid but with R the assessee came to an agreement whereby R accepted a half share in the said property in lieu of the loan advanced and .
also 1/3rd of the outstanding liability of the bank.
This arrangement came into effect on November 1, 1951.
After the creation of Pakistan, Lahore became a part of Pakistan and the hotel in question was declared evacuee property.
As such it came to vest in the Custodian in Pakistan.
In its returns for the assessment years 1952 53, 1955 56 and 1956 57 the assessee claimed certain amounts as losses on account of interest payable to the bank but showed the gross annual letting value from the said property at Nil.
The Income tax Officer held that since the property had vested in the Custodian no income or loss from that property could be considered in the assessee 's case.
The Appellate Assistant Commissioner confirmed the order of the Income tax Officer.
The Appellate Tribunal however came to the conclusion that the assessee still continued to be the owner of the property for the purpose of the computation of loss, and the interest paid was a deductible allowance under section 9(1) (iv) of the Income tax Act, 1922.
reference the High Court on an analysis of the various provisions of the Pakistan (Administration of Evacuee Property) Ordinance.15 of.
1949 came to the conclusion that for the purpose of section 9 of the Act the assessee could not be considered as the owner of that property: 'In the assesee 's appeal to this Court it was contended that the property vested in the Custodian only for.
the purpose of administration and the assessee still continued to be its owner.
HELD : Under the Pakistan (Administration of Evacuee Property) Ordinance 1949 the evacuee could not take possession of his property.
He could not lease that property.
He could not sell the property without the consent of the custodian.
He could not mortgage that property.
He could not realise the income of the property.
All the rights that the evacuee had in the property were exercisable by the Custodian excepting that he could not appropriate the proceeds to his own use.
The evacuee had only a beneficial interest in the property.
In the eye of the law the Custodian who had all the powers of the owner was the owner of the property.
His position_ was no less than that a Trustee.
[643 F 644 A] Section 9 of the Income tax Act, 1922, brings.to tax the income from property and.
not the interest of a. person in the property.
A property cannot be owned by two persons, each one having independent and exclusive right over it.
Hence for the purpose of section 9 the owner must be 640 that person who can exercise the rights of the owner, not on behalf of the owner but in his own right.
Accordingly the assessee was not the owner of the property in question during the relevant assessment years for the purpose of section 9 of the Act.
[644 D] It is true that equitable considerations are irrelevant in interpreting tax laws.
But those laws like all other laws have to be interpreted reasonably and in consonance with justice.
If the thousands of evacuee who left practically all their properties as well as businesses in Pakistan had been considered as the owners of those properties and businesses as long as the 'ordinance ' was in force then those unfortunate persons would have had to pay income tax on the basis of the annual letting value of their properties and on the income, gains and properties of the business left by them in Pakistan though they did not get a paisa out of those properties and business.
Fortunately no one in the past interpreted the law in the manner suggested by the assessee.
[644 E G] Official Assignee for Bengal (Estate of Jnanendra Nath Pramanik), , Commissioner of Inland Revenue vs Fleming, and .Sir
Currimbhoy Ibrahim Baronetcy Trust vs C.I.T., Bombay, , applied.
Amar Singh vs Custodian, Evacuee Property, Punjab, [1957] S.C.R. 801, distinguished.
P.C. Lai Choudhary vs C.I.T., and Nawab Bahadur of Murshidabad vs C.I.T., West Bengal, 28 I.T.R. 510, considered. |
Appeal No. 2421 of 1968.
Appeal from the judgment and order dated January 31, 1967 of the Madhya Pradesh High Court in Misc.
Civil Case No. 88 of 1966.
R. N. Sachthey and B. D. Sharma, for the appellant.
Rameshwar Nath and Swaranjit Sondhi, for the respondent.
The Judgment of the Court was delivered by Grover, J.
This is an appeal by certificate from a judgment of the Madhya Pradesh High Court in an Income tax Reference.
The Reference related to the assessment made on the assessee for the year 1962 63 for which the accounting period was the year ending March 31, 1962.
The assessee carried on business as sole, selling agent of M/s. Mohanlal Hargovindas, Jabalpur.
The assessee succeeded to this business on the death of her husband on or about February 17, 1960.
It would appear that M/s. Mohanlal Hargovindas had recovered a certain amount towards sales tax from the assessee 's husband relating to the period January 26, 787 1950 to March 31, 1951.
In an appeal filed by the said firm, however, the Assistant Commissioner of Sales Tax remitted the sum of Rs. 24,341/ so recovered by the firm by an order dated November 31, 1960.
Consequently M/s. Mohanlal Hargoving das refunded that amount to the assessee by means of a draft dated October 31, 1961.
This draft was received by the assessee on November 9, 1961 which fell in the accounting period.
The Income tax Officer sought to tax this amount under the provisions of section 41 (1) of the Income tax Act 1961, hereinafter called the 'Act '.
He did not accede to the contention of the assessee that the income, if at all, was the income of the assessee 's deceased husband and not her income.
The Appellate Assistant Commissioner dismissed the appeal filed by the assessee.
The Tribunal acceded to the contention of the assessee that since the allowance or deduction in question had been obtained by a different assessee, namely, her husband she was not liable to pay tax on that amount under section 41 (1) of the Act.
The Tribunal was moved by the Commissioner of Income tax for stating a case and referring the following question to the High Court : "Whether the sum of Rs. 24,341 was liable to tax under section 41 (1) of the Income tax Act, 1961 ?" The High Court answered the question in favour of the assessee.
Section 41(1) is in the following terms: "41 (1) Where an allowance or deduction, has been made in the assessment for an year in respect of loss, expenditure or trading liability incurred by the assessee, and subsequently during any previous year the assessee has obtained whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or the value of benefit accruing to him, shall be deemed to be profits and gains of business or profession and accordingly chargeable to income tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not".
As pointed one by the High Court under the general law if a trading liability has been allowed as a business expenditure and, if this liability is remitted in any subsequent year the amount remitted cannot be taxed as income of the year of the remission nor can the account for the year id which the liability was allowed be reopened or adjusted.
Section 41(1) was enacted to supersede this principle but this section can apply only to the a In 788 the present case if the husband of the assessee had been alive and had received the amount which had been remitted during his lifetime he would certainly have been liable to pay tax under the provisions of section 41(1).
But Kanhaiyalal having died and his widow being the assessee she cannot possibly be brought within the section.
Section 2(7) of the Act defines the word "assessee".
The definition is very general and assessee is stated to mean a person by whom income tax or super tax or any other sum of money is payable under the Act and includes every person as mentioned in clauses (a), (b) and (c).
The assessee, in the present case, does not fall within any of those clauses.
There is no specific provision in the Act under which it can be said that the assessee is a person by whom income tax is payable on the amount of Rs. 24,341/ which came to her by way of remission on account of what had transpired in the lifetime of her husband.
The Act does not contain any provision making a successor in business or the legal representative of an assessee to whom an allowance has already been granted liable to tax under section 41(1) in respect of the amount remitted and received by the successor or the legal representative.
The only provision which relates to the liability of the legal representative is section 159 of the Act.
Sub section (1) thereof provides that where a person dies his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died in the like manner and to the same extent as the deceased.
The corresponding provision in the Income tax Act 1922 was section 24B.
In Commissioner of Income tax Bombay vs Amarchand N., ' Shroff (1) it was laid down by this Court that section 24B did not authorise the levy of tax on receipts by the legal representative of a deceased person in the year of assessment succeeding the year of account being the previous year in which such person died.
The assessee had ordinarily to be a living person and could not be a dead person.
By section 24B the legal personality of the.
deceased assesses was extended for the duration of the entire previous year in the course of which he died.
The income received by him before his death and that received by his legal representative after his death but in that previous year became assessable to income tax in the relevant assessment year.
Any income received in the year subsequent to the previous year or the accounting year could not be called income received by the deceased person.
Thus the provisions of section 24B did not extend to tax liability of the estate of a deceased person beyond the previous or the accounting year in which that person Income tax, Bombay vs James Anderson(1).
Indeed the learned counselfor the Revenue did not and could not rely on the provisions of section 159 of the Act in the present case nor was any reliance (1)1.
T. R. 59.
(2) 51 789 placed on any other section in the Act apart from section 41 (1).
The, question referred is also based on that very section.
That section, in our opinion cannot possibly apply to the present case because the assessee who is now sought to be taxed is not the assessee contemplated by that section.
The assessee within section 41 (1), namely, Kanhaiyalal having died the Revenue could not take any advantage of its provisions.
The High Court rightly observed that the question whether the amount of Rs. 24,341/ was liable to tax as the personal income of the assessee did not arise in the present case in which the sole point to be decided was whether that amount was assessable in the assessee 's hands under section 41 ( 1 ) of the Act.
We, therefore, entirely concur in the view of the High Court and agree with the answer returned by it.
In the result the appeal fails and it is dismissed with costs.
K.B.N. Appeal dismissed. | The assessee who was successor in business to her deceased husband was sought to be taxed under section 41 (1) of the Income tax Act, 1961, in respect of certain amount received by her by way of remission from the sales tax recovered from her husband.
On the 'question whether the amount was assessable under section 41(1) of the Act.
HELD : Section 41(1) does not apply, because, the assessee who is sought to be taxed is not the assessee contemplated by the section.
If the husband of the assessee had been alive and had received the amount which had been remitted during his life time he would certainly have been liable to pay tax under the provisions of section 41(1).
But the husband having died the Revenue could not take any advantage of its provisions.
The Act does not contain any provision making a successor in business or the legal representative of an assessee to whom an allowance has already been granted liable to tax under section 41(1) in respect of the amount remitted and received by the successor or the legal representative.
[788 C D, 789 A B] C.I.T., Bombay City vs Amarchand N. Shroff and C.I.T Bombay vs James Anderson, , referred to. |
Appeal No. 563 of 1967.
Appeal from the judgment and order dated September 15, 16, 19, 1966 of the Bombay High Court in Civil Reference No. 8 of 1964.
G.B. Pai, Bhuvanesh Kumari and O. C. Mathur, for the appellants.
L. M. Singhvi, Ram Panjawani and section P. Nayar, for the respondent.
The Judgment of the Court was delivered by P.Jaganmohan Reddy, J.
In exercise of the powers under Sec.
96(1)(b)of the (hereinafter referred to as 'the Act ') relating to "the procedure to be followed in proceedings before such Courts and the execution of orders made by such Courts", the Government of Bombay made the following Rule; "17.
Limitation: (1) Every application to the Court shall be brought within twelve months from the date on which the cause of action arose or as the case may be the claim became due : Provided that the Court may entertain an application after the said period of twelve months if it is satisfied that the applicant had sufficient reasons for not making the application within the said period.
870 (2)Subject as aforesaid the provisions of and III of the Indian Limitation Act, 1908 (IX of (1908), shall so far as may be appli ed to very such application", The vires of this Rule was challenged by the Employees State Insurance Corporation (hereinafter referred to as 'the Corporation) when it filed an application on 7th October 1963 against the Appellant in the Employees Insurance Court (hereinafter referred to as the Insurance Court ') claiming payment of the contributions due from it for the period 1st September 1957 to 31st July 1963.
In those proceedings the Appellant had 'taken the plea that the application was barred under Rule 17 as it was not presented within twelve months from the date when the cause of action arose or as the case may be when the amount became due.
As the plea raised before ' it was important the Insurance Court made a reference under Section 81 of the Act on the following question for the decision of the High Court of Bombay : (1)Whether rule 17 of the Employees ' State Insurance Rule is ultra vires the rule making power of the State Government under Sec.
96(1) of the ? (2)If yes, what, if any, limitation applies to appli cationsfiled by the Corporation to the Employees ' In surance Court ? The High Court of Bombay having considered the several cases and the contentions and submissions mad .
before it held that the clear and unambiguous terms of section 96 (1) (b) exclude the grant of the power to any State Government to make a rule prescribing a period of limitation on claims ennumerated in Sec.75(2).
It was lb further of the view that where two interpretations of the terms of Sec.
96(1) (b) were possible that interpretation should be accepted which excludes the grant of such a power, because it appeared to it clear from the scheme of the Act and the provisos thereof that the legislature did not intend to confer such power on the State Governments.
It therefore answered the first question in affirmative namely that Rule 17 is ultra vires the rule making power of the State Government under See.
96(1) (b) of the Act.
On the second question it held that an application filed in a Court before 1 1 1964 for relief under Sec.
75 of the Act was not subject to any period of limitation, but an application filed on or after 1 1 64, would, however, be covered by article 137 of the Limitation Act of 1963 which provides a limitation of 3 years from the date when the right to apply accrues.
This appeal has been filed against that decision by certificate under article 1 3 3 (1) (c) of the Constitution.
871 This question has been the subject matter of the decisions in Employees State Insurance Corporation vs Madhya Pradesh Government & Ors.
(1) M/s Solar Works, Madras vs Employees State Insurance cc Corporation, Madras & Anr.(2) M/s. A. K. Brothers vs Employees ' State Insurance Corporation, ( 3 ) United India Timber Works, Yamunanagar & Anr.
vs Employees State Insurance Corporation, Amritsar, ( 4 ) Roshan Industries Pvt.
Ltd. Yamunagar vs Employees ' State Insurance Corporation(3), E.S.L.C. Hyderabad vs A. P. State Electricity Board, Hyderabad (6) .
All the High Courts in these cases except that of Allahabad held that the rule is ultra vires the powers conferred on the State Government under Sec.
9 6 ( 1 ) (b) inasmuch as it is not empowered to make rules prescribing periods of limitation for applications to be filed before the Court, though in Madhya Pradesh case it was also said that "Even if it be taken that clause (b) of Sec.
96(1), as it is worded, is wide enough to cover a rule of limitation, that cannot authorize the Government to frame a rule regulating limitation for the recovery of contributions. . . because according to it the validity of the rule does not necessarily depend on the ascertainment of "whether it confers rights or merely regulates procedure, but by determining whether it is in conformity with the powers conferred by the statute and whether it is consistent with the provisions of the statute".
These decisions also held that the scheme of the Act was such that the Legislature did not and could not have intended to confer any power upon the State Government to make rules prescribing a period of limitation for application under Sec.
75(2).
The question which directly confronts us is whether the power to prescribe periods of limitation for initiating proceedings before the Court is a part of, and is included, in the power to prescribe "the procedure to be followed in proceedings before such Courts".
The answer to this question would involve the determination of the further question whether the law relating to limitation is pro cedural or substantive or partly procedural and partly substantive.
If it is procedural law does it make any difference whether it relates to the time of filing application for initiation of proceedings before the Court or whether it relates to interlocutory applications or other statements filed before it after the initiation of such pro ceedings,.
The contention on behalf of the Appellant is that the law relating to limitation is merely procedural, as such it makes (1) AIR 1964 (Vol.
51) Madhya Pradesh 75.
(2) AIR 1964 (Vol.
51) Madras 376.
(3) AIR 1965 (Vol.
52) Allahabad 410.
(4) AIR 1967 (Vol. 54) Punjab 166 (FB).
(5) AIR 1968 (Vol.
55) Punjab 56 (SB).
(6) 1970 Labour & Industrial cases 921.
872 no difference whether it relates to the time of filing an application or it deals with the time for filing interlocutory applications or other statements.
There is also it is submitted no indication in the scheme of the Act that it is otherwise or that there is any impediment for the Government to prescribe under the rule making authority the period of limitation for applications under Sec.
75 (2).
Before we consider the scheme of the Act it may be necessary to examine the scope and ambit of the terms 'procedure ' as used in Sec. 96(1)(b).
The topic of procedure has been the subject of academic de bate and scrutiny as well as of judicial decisions over a long period but in spite of it, it has defied the formulation of a logical test or definition which enables us, to determine and demarcate the bounds where procedural law ends and substantive law begins, or in other words it hardly facilitates us in distinguishing in a given case whether the subject of controversy concerns procedural law or substantive law.
The reason for this appears to be obvious, because substantive law deals with right and is fundamental while procedure is concerned with legal process involving actions and remedies, which Salmond defines "as that branch of law which governs the process of litigation", or to put it in another way, substantive law is that which we enforce while procedure deals with rules by which we enforce it.
We are tempted in this regard to cite a picturesque aphorism of Therman Arnold when he says "Substantive law is canonised procedure.
Procedure is unfrocked substantive law(1)".
The manner of this approach may be open to the criticism of having over simplified the distinction, but nonetheless this will ,enable us to grasp the essential requisites of each of the concepts which at any rate "has been found to be a workable concept to point out the real and valid difference between the rules in which stability is of prime importance and those in which flexibility is a more important value (2 ) ".
Keeping these basic assumptions in view it will be appropriate to examine whether the topic of limitation belongs to the Branch of procedural law or is outside it.
if it is a part of the procedure whether the entire topic is covered by it or only a part of it and if so what part of it and the tests for ascertaining them.
The law of limitation appertains to remedies because the rule is that claims in respect of rights cannot be entertained if not commenced within the time prescribed by the statute in respect of that right.
Apart from Legislative action prescribing the time, there is no period of limitation recognised under the general law and therefore any time fixed by the statute is neces (1) XLV Harvard Law Journal 617 & 645.
(2) American Juris prudence Vol.
51 (Second Edn.) 605.
873 sarily to be arbitrary.
A, statute prescribing limitation however does not confer a right of action nor speaking generally does it confer on a person a right to relief which has been barred by eflux of time prescribed by the law.
The necessity for enacting periods of limitation is to ensure that actions are commenced within a particular period, firstly to assure the availability of evidence documentary as well as oral to enable the defendant to contest the claim against him; secondly to give effect to the principle that law does not assist a person who is inactive and sleeps over his lights by allowing them when challenged or disputed to remain dormant, without asserting them in a court of law.
The, principle which forms the basis of this rule is expressed in the maxim vigilantibus, non dormientibus, jura subveniunt (the laws give help to those who are watchful and not to those who sleep).
Therefore the, object of the statutes of limitations is to compel a person to exercise his right to action within a reasonable time as also to dis courage and suppress stale, fake or fraudulent claims.
While this is so there are two aspects of the statutes of limitation the one concerns the extinguishment of the right if a claim or action is not commenced with a particular time and the other merely bars the claim without affecting the right which either remains merely as a moral obligation or can be availed of to furnish the consideration for a fresh enforceable obligation.
Where a statute prescribing the limitation extinguishes the right, it affects substantive rights while that which purely pertains to the commencement of action without touching the right is said to be procedural.
According to Salmond the law of procedure is that branch of the law of actions which governs the process of litigation, both Civil and Criminal.
"All the residue" he says "is substantive law, and relates not to the process of litigation but to its purposes and sub , ject matter".
It may be stated that much water has flown under the bridges since the original English theory justifying a statute of limitation on the ground that a debt long overdue was pre sumed to have been paid and discharged or that such statutes are merely procedural.
Historically there was a period when substantive law was inextricably intermixed with procedure; at a later period procedural law seems to have reigned supreme when forms of action ruled.
In the words of Maine "So great is the ascendancy of the Law of Actions in the infancy of Courts of Justice, that substantive law has at first the look of being gradually secreted in the interstices of procedure()".
Even after the forms of action were abolished Maitland in his Equity was still able to say "The forms of action we have buried but they still rule us from their graves", to which Salmond added "In their life they were powers of evil and even in death they have not wholly ceased from troubling(2)".
Oliver Wendal Holmes had however observed in "The (1) Maine, Early Law and Custom 389.
(2) 874 Common Law", "wherever we trace a leading doctrine of sub stantive law far enough back, we are likely to find some forgotten circumstance of procedure at its source".
It does not therefore appear that the statement that substantive law determ.nes rights and procedural law deals with remedies is wholly valid, for neither the entire law of remedies belongs to procedure nor are rights merely confined to substantive law, because as already noticed rights are hidden even "in the interstices of procedure".
There is therefore no clear cut division between the two.
A large number of decisions have been referred before us both English and Indian some of antiquity in support of the proposition that the law prescribing the time within which an action can be commenced is purely procedural and therefore when a statute empowers the Govt.
to make rules in respect of procedure it confers upon it also the rights to prescribe limitation.
To this end have been cited the cases of Manoel Francisco Lopez & Ors.
vs Lieut.
Godolnhon James Burslem(l), and Ruckmaboye vs Lulloobhoy Mottichund(2).
An examination of these cases would.
show that what was being considered was whether the law of limitation was part of the lex fori which foreigners and persons not domiciled in the country have to follow if they have to have recourse to actions in that country.
In the latter case the Privy Council observed at page 265 "The arguments in support of the plea are founded upon the legal character of a law of limitation or prescription, and it is insisted, and the Committee are of opinion, correctly insisted, that such legal character of 'the law of prescription has been so much considered and di cussed among writers upon jurisprudence, and has been so often the subject of legal decision in the courts of law of this and other countries, that it is no longer subject to doubt and uncertainty.
In truth, it has become almost an axiom in jurisprudence, that is law of prescription, or law of limitation, which is meant by that denomination, is a law relating to procedure having reference only to the lex fori".
These observations as well as those in the earlier case must be understood in the light of the principles governing conflict of laws.
What was in fact being examined was whether they are part of the procedural law in the sense that the Municipal laws will be applicable on the question of limitation for the commencement of actions because if limitation was purely a question of substantive law that would be governed by the law of the country of the (2) (1849 54)_(V_Moore Indian Appeals 234).
875 domicile of the person who is having recourse to the Courts of the other country.
In other words the substantive rights of the parties to an action are governed by a foreign law while all matters pertaining to procedure are governed exclusively by the lex fori.
The cases cited at the Bar, of the various High Courts in this country show that they were construing the rules prescribing limitation in respect of proceedings in Court i.e. proceedings afterthe institution of the suit or filing of the Appeal.
In Sennimalai Goundan vs Palani Goundan & 4nr.(1), the question was.
whether &,,a High Court by framing a rule under Sec.
122 Civil Procedure Code could make Section 5 of the Limitation Act applicable to applications under sub rule (2) of Rule 13 of Order IX.
While holding that it could, Coutts Trotter, J as he then was made this pertinent observation : "Whatever may be the case of the statute prescribing say 3 years for an action to be brought I am quite clear that the Articles in the Act limiting applications of this nature which are almost entirely interlocutory deal clearly with matters of procedure. .
This was also the view of the Full Bench in Krishnamachariar vs Srirangammal & Ors.(2), which was followed by the Bombay High Court in Bandredas vs Thakurdev ( 3 ).
It was contended in Velu Pillai vs Sevuga Perumal Pillai(4), that rule 41 (A) (2) of the Appellate side Rules of the Madras High Court providing for the presentation of a petition to the High Court within 90 days from the date of the order passed in an execution proceedings was ultra vires, because the High Courts were not entitled by rules to regulate or enlarge the periods in the Limitation Act in respect of the proceedings to which the Limitation, Act apply 'This contention was negatived on the ground that such a powerwas inherent in Sec.
122 of the Civil Procedure Code.
The argument of the petitioner that he had a vested right to go up in revision at any time and that the decision of the Full Bench in Krishnamachariar vs Srirangammal & Ors.
(2 ) does not affect his right, was rejected on the ground that Sec.
122 Civil Procedure Code empowers the High Courts to make rules regu lating their own procedure and the procedure of the subordinate Courts subject to their superintendence.
There were earlier decisions of the Allahabad High Court and Lahore High Court as also a decision of the Bombay High Court rendered under Sec.
602 of the old Civil Procedure Code 1.
AIR 1917 Madras 957.
(2) ILR 47 Madras 824.
(3) ILR 53 Bombay 453.
(4) AIR 1958 Madras 392.
876 referred to by Krishnan, J., in his referring order in Krishnamachariar 's case which took the view that the High Court has riot the power by rule under Sec.
122 or the corresponding Sec.
602 of the old Civil Procedure Code to make rules for altering the period of limitation prescribed by the Indian Limitation Act see Narsingh Sahai vs Sheo Prasad(l), and Chunilal Jethabhai vs Dahvabhai Amulakh(2).
Again a similar question arose as to whether clause 27 of the Letters Patent of the Lahore High Court (there are similar clauses in the Letters Patent of the other High Courts) could validly empower the making of rule 4 prescribing a period for filing an appeal under Clause 10 of the Letters Patent.
Clause 27 of the Letters Patent empowered the High Court from time to time to make rules and orders for regulating the practice of the Court etc.
This Court in Union of India vs Ram Kanwar & Ors.
( 3 ) , approved the view of a Full Bench of the Punjab High Court in Punjab Cooperative Bank Ltd. vs Official Liquidators Punjab Cotton Press Company Ltd. (in liquidation) (4), where it was held that rule 4 is a special law within the meaning of Sec. 29 (2) of the Limitation Act.
Subba Rao, J., as he then was said at page 320 "Rule 4 is made by the High Court in exercise of the legislative power conferred upon the said High 'Court under cl. 27 of the Letters Patent.
As the said rule is a law made in respect of special cases covered by it, it would certainly be a special law within the meaning of section 29(2) of the Limitation Act".
In that case no question was raised as to whether rule 4 was dealing with a procedural matter or dealt with a substantive right.
These cases are of little assistance and if at all they lay down the principle that interlocutory proceedings before the Court do not deal with substantive rights and are concerned with mere procedure and can be dealt with by rules made under the powers conferred on the High Court to regulate the procedure.
It is therefore apparent that whether the fulfilment of a particular formality as a condition of enforceability of a particular right is procedural or substantive has not been, as we had already noticed free from difficulty.
What appears to be a self evident principle will not become so evident when we begin to devise tests for distinguishing procedural rule from substantive law.
It appears to us that there is a difference between the manner in which the jurisprudential lawyers consider the question and the %way in which the Judges view the matter.
The present tendency (1) All. 1 (FB).
(2) , Bom.
14 (FB).
877 is that where a question of limitation arises, the distinction between so called substantive and procedural statutes of limitation may not prove to be a determining factor but what has to be considered is whether the statute extinguishes merely the remedy or extinguishes the substantive right as well as the remedy.
Instead of generalising on a principal the safest course would IV to ' examine each case on its own facts and circumstances and determine for instance whether it affects substantive rights and extinguishes% them or whether it merely concerns a procedural rule only dealing with remedies or whether the intendment to prescribe limitation is discernible from the scheme of the Act or is inconsistent with the rule making power etc, Apart from the implications inherent in the term procedure appearing in Sec. 96(1)(b) the power to prescribe by rules any matter falling within the ambit of the term must be the "Procedure to be followed in proceedings be fore such Court".
The word 'in ', emphasised by us, furnishes a clue to the controversy that the procedure must be in relation to proceedings in Court after it has taken decision of the matter, which obviously it takes when moved by an application presented before it.
If such be the meaning the application by which the Court is asked to adjudicate on a matter covered by Sec.
75(2) is outside the scope of the rule making power conferred on the Government.
In the East & West Steamship Company, George Town, Madras vs section K. Ramalingam Chettiar(1), one of the questions that was considered by this Court was whether the clause that provides for a suit to be brought within one year after the delivery of the goods or the date when the goods should have been delivered, only prescribes a rule of limitation or does it also provide for the extinction of the right to compensation after certain period of time.
It was observed by Das Gupta, J, at page 836 : "The distinction between the extinction of a right and the extinction of a remedy for the enforcement of that right, though fine, is of great importance.
The legislature could not but have been conscious of this distinction when using the words "discharged from all liability" in an article purporting to prescribe rights and immunities of the shipowners.
The words are apt to express an intention of total extinction of the liability and should, specially in view of the international character of the legislation, be construed in that sense.
878 It is hardly necessary to add that once the liability is extinguished under this clause, there is no scope of any acknowledgement of liability thereafter".
What we have to consider is, apart from the question that the Government on the terms of Sec.
96(1) (b) is not em powered to fix periods of limitation for filing applications under Sec. 75 (2) to move the Court, whether on an examination of the Scheme of the Act, rule 17 affects substantive rights by extinguishing the claim of the Corporation to enforce the liability for contributions payable by the Appellant.
An examination of the purpose and intendment of the Act and the scheme which it effectuates, leaves no doubt that it was enacted for the benefit of the employees and their dependents, in case of sickness, maternity and 'employment injury ', as also to make provision for certain other matters.
40 makes the employer liable in the first instance to pay the contributions of the employer as well as the employee to the Corporation subject to the recovery from the employee of the.
amount he is liable to contribute.
This liability on the employer is categorial and mandatory.
He is further required under Sec. 44 to submit to the Corporation returns as specified therein.
Chapter V com prised of Sections 46 to 73, deals with the benefits which includes among others, sickness and disablement benefit of the employee, his eligibility for receiving payments and.
the compensation payable to his dependents.
If the employee fails or neglects to pay the contributions as required, the Corporation has the right to recover from him under Sec.
68, the amounts specified in that Section as an arrear of land revenue.
94 provides that the contributions due to a corporation are deemed to be included in the debts under the Insolvency Acts and the Company 's Act, and are given priority over other debts in the distribution of the pro perty of the insolvent or in the distribution of the assets of a Company in liquidation.
Chapter VI deals with adjudication of disputes and claims, of which Sec.
74 provi des for he Constitution of the Insurance Court; Sec.
74 specifies the matters to be decided by that Court; Sec. 76 and Sec.
77 deal with the institution and commencement of proceedings and Sec.
78 with the powers of the Insurance Court.
80 deals with the non admissibility of the claim, if not made within twelve months after the claim is due while Sec.
82(3) prescribes the period within which an appeal should be filed against the order of the Insurance Court.
These provisions in our view unmistakably indicate that the whole scheme is dependent upon the contributions made by the employer not only with respect to the amounts payable by him but also in respect of those payable by the employee.
No limitation has been fixed for the recovery of these amounts 879 by the Corporation from the employer; on the other hand Sec.
68 empowers the Corporation to resort to coercive process.
If any such steps are proposed to be taken by the Corporation and the employer is aggrieved he has a right to file and apply to the Insurance Court and have his claim adjudicated by it in the same way as the Corporation can prefer a claim in a case where the liability to pay is disputed.
75 (2) (d) clearly envisages this course when it provides that "the claim against a principal employer under Sec.
68" shall be decided by the Employees Insurance Court.
It may be useful to read Sec.
68 and 75 (2) (d) which are given below Sec.
68 (1)If any principal employer fails or neglects to pay any contribution which under this Act he is liable to pay in respect of any employee and by reason thereof such person becomes disentitled to any benefit or entitled to a benefit on a lower scale, the Corporation should have been paid by the principal employer, pay to the person the benefit at the rate to which he would have been paid by the principal employer, pay to the person the benefit at the rate to which he would have been entitled if the failure or neglect had not occurred and the Corporation shall be entitled to recover from the principal employer either (i) the difference between the amount of benefit which is paid by the Corporation to the said person and the amount of the benefit which would have been payable on the basis of the contributions which were in fact paid by the employer; or (ii) twice the amount of the contribution which the employer failed or neglected to pay; whichever is greater.
(2)The amount recoverable under this Section may be recovered as if it were on arrear of land revenue.
Sec.75 (2) The following claim shall be decided by the Employees ' Insurance Court, namely (d)Claim against a principal employer under Section 68; It is contended by the learned Advocates for the Appellant that Sec.
68 is a crucial provision as it indicates that the right of the Corporation to enforce its claim for payment has been preserved 880 subject to tile provision that the omission or neglect by the principal employer to make contribution deprives the employee of any benefit either totally or 'at a reduced scale.
It is only in these circumstances he submits that the Corporation can recover the amount by coercive process but in any other case the Corporation 's claim to recover by an application to the Insurance Court can be made subject to a period of limitation by a rule made under Sec. 96(1)(b).
We are unable to appreciate the logic of this submission because the benefit of an employee can be negatived or partially admitted for instance either by reason of the employer not showing him in the return as an employee of his or showing him as drawing a lesser wage than what he is entitled to or as it may happen mostly, when he fails to make the payments even according to the returns made by him.
In all these cases the employee 's benefits will be affected because the basis of the scheme of conferring benefit on the employee is the contribution of both the employer and the employee.
It is clear therefore that the right of the Corporation to recover these amounts by coercive process is not restricted by any limitation nor could the Government by recourse to the rule making power prescribe a period in the teeth of Sec.
What Sec.
75(2) is empowering is not necessarily the recovery of the amounts due to the Corporation from the employer by recourse to the Insurance Court but also the settlement of the dispute of a claim by the Corporation against the principal employer which implies that the principal employer also can, where he disputes the claim made and action is proposed to be taken against him by the Corporation under See.
68 to recover the amounts said to be due from him.
While this is so there is also no impediment for the Corporation itself to apply to the Insurance Court to determine a dispute against an employer where it is satisfied that such a dispute exists.
In either case neither Sec.
69 nor Sec. 75 (2) (d) prescribes a period of limitation.
It may also be mentioned that Sec. 77 which deals with the commencement of the proceedings, does not provide for any limitation for filing an application to the Insurance Court even though it provides under sub sec.
(2) of that Section that every such application shall be in such form and shall contain such particulars and shall be accompanied by.such fee, if any, that may be prescribed by rules made by the State Government in consultation with the Corporation.
This was probably an appropriate provision in which the legislature if it had intended to prescribe a time for such applications could have provided.
Be that as it may in our view the omission to provide a period of limitation in any of these provisions while providing for a limitation of a claim by an employee for the payment of any benefit under the regulations, shows clearly that the legis lature did not intend to fetter the claim under Sec.
75(2)(d).
It appears to us that where the legislature clearly intends to pro 881 vide specifically the period of limitation in respect of claims arising thereunder it cannot be considered to have left such matters in respect of claims under some similar provisions to be provided for by the rules to be made by the Government under its delegated powers to prescribe the procedure to be.
followed in proceedings before such Court.
What is sought to be conferred is the power to make rules for regulating the procedure before the Insurance Court after an application has been filed and when it is seized of the matter.
That apart the nature of the rule bars the claim itself and extinguishes the right which is not within the pale of procedure.
Rule 17 is of such a nature and is similar in terms to Sec. 80.
There is no gain saying the fact that if an employee does not file an application before the Insurance Court within 12 months after the claim has become due or he is unable to satisfy the Insurance Court that there was a reasonable excuse for him in not doing so, his right to receive payment of any benefit conferred by the Act is lost.
Such a provision affects substantive rights and must therefore be dealt with by the legislature itself and is not to be inferred from the rule making power conferred for regulating the procedure unless that is specifically provided for.
It was pointed out that in the Constitution also where the Supreme Court was authorised with the approval of the President to make rules for regulating generally the practice and procedure of the Court, a specific power was given to it by article 145 (1) (b) to prescribe limitation for entertaining appeals before it.
It is therefore apparent that the legislature does not part with the power to prescribe limitation which it jealously retains to itself unless it intends to do so in clear and unambiguous terms or by necessary intendment.
The view taken by the Madhya Pradesh, Madras, Punjab and Andhra Pradesh High Courts in the cases already referred to are in consonance with the view we have taken.
In the decision of the Punjab High Court, Dua, J, as he then was expressed the view of the Full Bench with which Palshaw C. J., and Mahajan J, agreed.
After examining the provisions of the Act he observed at page 170 171 "At this stage, I consider it appropriate to point out, what is fairly well recognised, that what is necessarily or clearly implied in a statute is an effectual as that, which is expressed because it often speaks as plainly by necessary inference as in any other manner.
The purposes and aims of an Act as discernible from its statutory scheme are accordingly important guideposts in discovering the true legislative intent.
One who considers only the letter, of an enactment, goes but, skin deep into its true meaning; to be able to fathom the real statutory intent it is always helpful to inquire into the object intended to be accomplished.
882 Considering the entire scheme of the Act before us, it is quite clear that fixation of any period of limitation for the Corporation to realise the contributions from the employer may tend seriously to obstruct the effective working and enforcement of the scheme of insurance".
It may be of interest to notice that Palshaw C. J. had earlier taken a different view in Chanan Singh vs Regional Director, Employees State Insurance Corporation(1), but said that he, had no hesitation in agreeing with Dua J 's view because he realised that his earlier view was based on an over simplification.
In the latest case the Andhra Pradesh High Court also following the earlier decision of Madhya Pradesh, Madras and Punjab held that the State Government had exceeded its powers to frame Rule 17 as no such power to prescribe limitation under the provisions ,of Sec. 96 (1 ) (b) or under Sec.
78 (2) can be said to have been delegated to the State Government.
We, however, find that Sec.
78(2) does not delegate any power to the Government to make rules but only requires the Insurance Court to follow "such pro cedure as may be prescribed by rules made by the State Government" which rules can only be made under Sec.
96 of the Act.
In the view we have taken it is unnecessary to examine the question whether legislative practice also leads to the same conclusion though in the Madras and the Punjab decisions that was also one of the grounds given in support of their respective conclusions.
The contrary view expressed by a Bench of the Allahabad High Court is in our opinion not good law.
We may before parting with this case point out that the legislature since chosen to specifically prescribe 3 years as limitation period by addition of sub sec.
(1A) to Sec. 77 while deleting Sec. 80.
See 77(1A) provides that "Every such application shall be made within a period of three years from the date on which the cause of action arose".
By this amendment the claim under clause (d), as well as, the one under clause (f) of sub section (2) of Section 75 which provides for the adjudication of a claim by the Insurance Court for the recovery of any benefit admissible under the Act for which a separate limitation was fixed under Sec. 80, is now to be made within 3 years from the date of the accrual of the cause of action.
amendment also confirms the view taken by this Court that the power under Section 96 (1) (b) does not empower the Government to prescribe by rules a period of limitation for claims under Sec. 75.
In the result this appeal is dismissed with costs.
K.B.N. Appeal dismissed. | In exercise of the power conferred by section 96(1)(b) of the , to "Prescribe by rule the procedure to be followed in proceedings" before the Insurance Court, the State Government made r. 17 prescribing a period of limitation of twelve months for every application to the Court.
The Employees ' State Insurance Corporation filed an application before the Court claiming payment of the contribution due from the appellant.
The appellant took the plea that the application was barred as it was not presented within the period prescribed.
The High Court, on a reference, held that section 96(1) (b) did not grant power to Government to make a rule prescribing a period of limitation on claims enumerated in section 75(2) and, therefore, r. 17 was ultra vires the rule making power under section 96(1).
On the question whether the power to prescribe a period of limitation 'for initiating proceedings before the court is a part of, and is included in, the power to prescribe "the procedure to be followed in proceedings" before such courts, HELD : The power under section 96(1) (b) does not empower the government to prescribe by rule a period of limitation for claims under section 75.
(i) The law of limitation to remedies because, the rule is that claims in respect of rights cannot be entertained if not commenced within the time prescribed by the statute in respect of that right.
The object of the statutes of limitation is to compel a person to exercise his right to take action within a reasonable time, as also, to discourage and suppress stale, fake and, fraudulent claims.
While this is so, there are two aspects of the statutes of limitation, the one concerns the extinguishment of the right if a claim or action is not commenced within a particular time; the other merely bars the claim without affecting the right which either remains merely a moral obligation or can be availed of to furnish the consideration for fresh enforceable obligation.
Where a statute prescribing limitation extinguishes the right it affects substantive rights, while, that which purely pertains to the commencement of action without touching the right is procedural.
The statement that substantive law determines rights and procedural law deals with remedies is not wholly valid, for, neither the entire law of remedies belongs to procedure, because, rights are hidden even in the "interstices of procedure".
There is, therefore, no clear cut division between the two.
[872 G, 873 C E, 874 B] (ii)There is difference between the manner in which jurisprudential lawyersconsider the question and the way in which judges view the matter.
Where a question of limitation arises, the present tendency is towards the view that statutes of limitation may not prove to be a deter mining factor.
But, what has to be considered is whether the statute 868 extinguishes merely the remedy, or extinguishes the substantive right as well as the remedy.
The safest course would be to examine each case on its own facts and circumstances and determine, for in stance, whether it affects substantive 'rights and extinguishes them, whether it merely concerns a procedural rule only dealing with remedies, whether the intendment to Prescribe limitation is discernible in the scheme of the Act, or whether it is inconsistent with the rule making power.
, [876 H] (iii) Apart from the implications inherent in the term "Procedure" appearing in section 96(1) the word in furnishes a clue, to the controversy, that the procedure must be in relation to the proceedings in court after it has taken seisin of the matter.
Therefore, the application by which the court is asked to adjudicate a matter covered by section 75(2) is outside the scope of the rule making power.
[877 D] (iv)The provisions of the Act clearly indicate that the whole scheme is dependent upon the contributions made by the employer not only in respect of the amounts payable by him but also in respect of those payable by the employee.
No limitation has been fixed for the recovery of these amounts by the Corporation from the employer; on the other hand section 68 empowers the Corporation to resort to coercive process.
If any such steps are proposed to be taken by the Corporation and the employee is aggrieved he has a right to file and apply to the Insurance Court and have his claim adjudicated by it in the same way as the Corporation can prefer a claim in a case where the liability to pay is disputed.
Section 75(2) (d) clearly envisages this course when it provides that the claim against a principal employer under section 68 shall be decided by the Insurance Court.
The fact that neither section 75(2) (d) nor section 68, nor section 77 which deals with the commencement of the proceedings, prescribe any period of limitation, while a period of limitation is provided in the case of a claim by an employee for the payment of any benefit under the regulations, clearly shows that the legislatures did not intend to fetter the claim under section 75 (2) (d).
Where the legislature clearly intends to provide specifically the period of limitation in 'respect of claims arising thereunder, it cannot be considered to have left such matters in respect of claim under some similar provisions to be provided for by the rules to be made by, government under its delegated powers to prescribe the procedure to be followed in proceedings before such court.
[878 H 879 C, 880 F] (v)Nor does section 78(2) delegate any power to the government to make rules.
The section only requires the Insurance Court to follow "such procedure as may be prescribed by rules made by the State Government".
And these rules can only be made under section 96 of the Act.
[882 D] (vi)Further, the nature of the rule bars the claim itself and extinguishes the right which is not in the pale of procedure.
A provision by which an employee loses his right to 'receive payment of any benefit conferred 'by the Act, if he does not file an application within 12 months after the claim has become due, affects substantive rights, and must, therefore.
be dealt with by the legislature itself and is not to be inferred from the rule making power conferred for regulating the procedure unless that is specifically provided for.
The legislature does not part with the power to prescribe limitation which it jealously retains to itself unless it intends to do so in clear and unambiguous terms or by necessary intendment.
[881 B F] Employees ' State insurance Corporation V. Madhya Pradesh Government & Ors., A.I.R. 1964 (51) M.P. 75, M/s. Solar Works, Madras vs Employees ' State Insurance Corporation, Madras A.I.R. 1964 (51) Mad.
869 376, United India Timber Works, Yamunagar & Anr.
vs Employees ' State Insurance Corporation, Amritsar A.I.R. 1967 (54) Punjab, 166 (FB) and E.S.L.C. Hyderabad vs A.P. State Electricity Board, Hyderabad, 1970 Labour & Industrial cases 921, approved.
View contra in M/s. A. K. Brothers vs Employees ' State Insurance Corporation, A.I.R. 1965 (52) All. 410, disapproved.
Roshan Industries Pvt. Ltd., Yamunagar vs Employees ' State Insurance Corporation, Manoel Francisco Lonez A Ors.
vs Lieut.
Godoluhin James Burslem, (1843) IV M.I.A. 300, Ruckmaboye vs Lulloobhoy Mottichund, (1849 54) V M.I.A. 234, Sennimalai Goundan vs Palani Gonndan & Anr.
A.I.R. 1917 Madras 957, Krishna mzchariar vs Srirangammal & Ors., I.L.R. 47 Madras 824, Bendredas vs Thakurdev, I.L.R. , Velu Pillai vs Sevuga Perumal Pillai, A.I.R. 1958 Madras 392, Narsingh Sahai vs Sheo Prasad, All 1(FB), Chunilal Jethabhai vs Dhyabhai Amulakh, Bom. 14(FB).
Union of India vs Ram Kanwar & Ors. ; , Punjab Cooperative Bank Ltd. vs Official Liquidators Punjab Cotton Press Company Ltd. (in Liquidation), A.I.R. 1941 Lah.
57 (FB), and East & West Steamship Company, George Town, Madras vs section K. Ramalingam Chettiar, , referred to. |
Appeal No. 266 of 1969.
Appeal by special leave from the judgment and order dated August 16, 1967 of the Kerala High Court in Income tax Referred Case No. 44 of 1966.
C. K. Viswanatha Iyer and K. Jayaram, for the appellant.
V. A. Seyid Muhammad and A. G. Pudissery, for the respon dent.
The Judgment of the Court was delivered by Hegde, J.
The appellant, Venugopala Varma Rajah is the present Rajah of the Vengunad Swaroopan in Palghat District, Kerala State.
He is the Karnavan of his Tarwad.
He will be hereinafter referred to as the assessee.
The predecessor of the appellant, as the then Kamavan of the family, submitted the return for the assessment year 1959 60 under the Kerala Agricultural Income tax Act (which will hereinafter be referred to as the Act) showing a gross income of Rs. 1,21,912/ and a net income of Rs. 84,065/60 P.
That 'represented the income from the properties held by him under the family Karar dated May 29, 1909.
Agricultural Income tax Officer overruling the objection of the assessee included in the income returned, the income of the properties which had been put in possession of the junior members of the family under the aforementioned Karar of 1909.
The net income so computed was Rs. 2,32,957/ and a tax of Rs. 1,30,672/35 P. was imposed.
In appeal the Appellate Authority excluded from the taxable income the income of the properties allotted to the "Rani Group" but sustained the addition of the income of the properties allotted for the enjoyment of the male members.
Aggrieved by the order of the Appellate Authority, the assessee took up the matter in second appeal to the Appellate Tribunal of the Agricultural Income tax.
The Tribunal rejected the contention of the assessee and dismissed the appeal.
Thereafter at the instance of the assessee, it stated a case under section 60(1) of the Act and submitted to the High Court for its opinion three questions of law namely L119SupCI/72 1002 "(1) Whether the findings of the Tribunal that the family karar of 1909 does not constitute a diversion of family income to the various allottees thereunder is correct ? (2) Whether the findings of the Tribunal that the provisions of sub section (1) of sec.
9 of the Act are applicable only to cases of diversion of income and not otherwise is correct ? (3) Whether the findings of the Tribunal that the provisions of sub sec.
(1) of sec.
9 of the Act are not applicable to the facts of this case are correct ? Questions Nos. 2 and 3, in our opinion, do not bring out the import of sec.
9 (1) correctly but it is not necessary to go into that aspect as our decision covers the real point in issue.
The Reference originally came up for hearing before a Division Bench but as the questions arising for decision were considered to be of importance, the same was referred to a Fun Bench of three judges.
The High Court by its judgment dated August 16, 1967 answered Question Nos. 1 and 2 against the assessee.
It did not answer the third question as it was of the view that answer to that question was unnecessary in view of its findings on Questions Nos. 1 and 2.
Thereafter this appeal was brought by certificate.
The assessee in this case is the H.U.F. of which the appellant was the Kamavan at the relevant time.
The question for decision is whether the income of the properties put in possession of the male members under the Karar of 1909 continues to be the, income of the family.
At present we are not concerned with the income of the properties put in possession of the "Rani Group" in view of the decision of the Appellate Authority which had not began appealed against.
If the income in dispute continues to be the income of the family then the revenue is justified in bringing the same to tax under the provisions of the Act.
On the other hand if that income has ceased to be the income of the family, then the same cannot be brought to tax in the hands of the assessee.
Therefore, the sole question is whether that income is the income of the family ? Section 9 of the Act provides "9(1) In computing the total agricultural income of an assessee all agricultural income arising to any person by virtue of a settlement or disposition, whether revocable or not, and whether effected before or after 1003 the commencement of this Act, from asset remaining the property of the settlor or disponer shall be deemed to be the agricultural income of the settlor or disponer and all agricultural income arising to any person by virtue of a revocable transfer of asset shall be deemed to be the agricultural income of the transferor Provided that for the purpose of this sub section a settlement, disposition or transfer shall be deemed to be revocable if it contains any provision for the transfer directly or indirectly of the agricultural income or asset to the settlor, disponer or transferor or in any way gives the settlor, disponer or transferor a right to reassume power directly or indirectly over the agricultural income or assets : Provided further that the expression settlement, disposition shall, for the purposes of the sub section include any disposition trust, covenant, agreement or.
arrangement and the expression "settlor or disponer" in relation to a settlement or disposition shall include any person by whom the settlement or disposition was made Provided also that this sub section shall not apply to any agricultural income arising to any person by virtue of a settlement or dispo sition which is not revocable for a period exceeding six years or during the life time of the person and from which agricultural income the settlor or disponer derives no direct or indirect benefit but that the settlor shall be liable to be, assessed on the said agricultural income as and when the power to revoke arises to him.
" A Hindu Undivided Family is a person within the, meaning of s.2(m) of the Act.
We shall now proceed to examine the nature of the Karar entered into in 1909.
The family of the assessee appears to have been one of the premier land holding families in Malabar.
It appears to have had agricultural properties in various places.
To the Karar in question all the then living members ( 12 in number) of the family were parties.
The properties mentioned in 'A ' Sch.
to the Karar were set apart for the maintenance, education and other expenses of the female and male members residing in Kalari Kovilagom which is otherwise known as "Rani Group".
Under the Karar, Karnavan of the Tarwad was to perform the marriage ceremonies of the female members of the Tarwad in accordance with the prevailing conditions and to meet 1004 the expenses thereof.
All other expenses of female, and male members residing in Kalari are to be met from the income of the 'A ' Sch. properties.
The members residing in the Kalari have no right to alienate or encumber the properties allotted to them and all government revenue due in respect of those properties should be paid by them.
Party No. 2, the second senior most member in the family was to be given 7,000 paras of paddy annually for his maintenance and for this purpose paddy lands yielding 3,500 paras of paddy shown in 'B ' Sch. were made over to his possession and Party No. 1, Karnavan of the Tarwad was directed to give to Party No. 2 from Malayalam era 1085 onwards 3,500 paras of paddy.
Further the Karnavan was directed that he should redeem "Karukakode Challa Nilam" and make over the same to Party No. 2, but after making over the same to Party No. 2, be was not to pay 3,500 paras of paddy referred to earlier.
" C" Sch. properties yielding an income of 4,750 paras of paddy were allotted for the enjoyment of Party No. 3.
He was required to maintain himself from out of their income.
Properties shown in 'D ' Sch. were set apart for the mainte nance of Party No. 4.
The land revenue of B, C and D Sch.
properties was required to be paid by the Karnavan of the tarwad.
On the death of Party No. 2 or on his becoming Karnavan of the family, Party No. 3 was to take over the properties allotted for the maintenance of Party No. 2 and Party No. 4 was to take over the properties for the maintenance of Party No. 3.
The Karar prohibited the persons who were in possession of the properties allotted for their enjoyment from alienating or encumbering those properties, and if in contravention of those terms, they alienated any of those properties, the Karnavan was entitled to resume the properties treating the alienation as void.
Clause 18 of the Karar prohibited the parties in possession of the properties from cutting and selling the kuzhikoors or dismantling the buildings in the properties in their possession.
Clause 19 of the Karar prohibited the parties from enhancing the munpattom amounts due to the tenant.
Clause 6 of the Karar provided that all the male members living in the Kalari, on completing the age of 21 should leave the Kalari and thereafter the Kamavan should make arrangements for their maintenance.
Karar does not stipulate what arrangement he should make for their maintenance.
Therefore it follows that he may maintain them either in the Tarwad house or give them maintenance allowance either in the shape of paddy or cash.
It may also be noted that the Karar does not provide as to what would happen if the number of members in the Tarwad substantially increases.
One other thing that has got to 1005 be noted is that the Karar is silent as to what would happen to the properties shown in Schs.
B, C and D after Parties Nos. 2, 3 and 4 die, all of whom, we were told have died.
Hence Kamavan can take possession of them on behalf of the family after their death.
On an examination of the various clauses in the Karar, it is obvious that the joint status of the parties was not disrupted.
The arrangement made in the Karar was only an arrangement for providing maintenance.
No party was given any absolute right in any portion of the family properties.
The properties mentioned in the Karar continued to be the properties of the family.
The arrangement made under the Karar cannot even be considered as a permanent arrangement.
The properties were not divided on the basis of Thavazies.
The liability to maintain the male members, aged more than 21 years excepting Parties Nos. 2, 3 and 4 continued to be that of the Karnavan.
The Karar also does not provide for devolution of the properties allotted to Parties 2 to 4.
Hence those properties must necessarily go back to the possession of the Karnavan after those Members die.
We have earlier seen that the responsibility of performing the marriage ceremonies of the female members continued to be that of the Karnavan.
He is also responsible for the payment of land revenue in respect of the family properties excepting properties included in Sch.
(A) to the Karar.
Under these circumstances, it is not possible to hold that Karar in question embodied an irrevocable settlement.
In the very nature of things, the arrangement made under that Karar must be held to be one which is revocable if there is any substantial change in the circumstances of the family.
For our present purpose it is sufficient if we hold that the properties allotted for the enjoyment of the various members of the family under the Karar continued to be the properties of the family.
In view of section 9(1) of the Act in computing the total agricultural income of the H.U.F., all agricultural income arising from the assets remaining the property of the family should be deemed to be the agricultural income of the family.
We have earlier come to the conclusion that the agrrangement made under the Karar is revocable if there is substantial change in the circumstances of the family.
That arrangement confers benefit on the family inasmuch as it is absolved of the responsibility to maintain its members which, otherwise is its responsibility.
Section 9 (1) of the Act is similar to section 16 (1) (c) of the Indian Income tax Act, 1922.
The latter section has come up for consideration by courts.
The courts have laid down the test that if 1006 the income in dispute is considered as having been applied to discharge an obligation of the assessee, the same is liable to be included in the assessable income of the assessee but if on the other hand the same had been diverted by an overriding charge, then it is not liable to be included in the assessable income of the assessee as it ceased to be his income.
If we apply this test to the facts of the present case, it is clear that the income in dispute continued to be the income of the family.
It was merely applied to discharge an obligation of the family namely the obligation to maintain the junior members of the family.
At first sight some of the decided cases on the subject appear to speak in conflicting voices.
But on a careful examination, it is possible to find out the dividing line.
The earliest decision on the subject is that of the Judicial Committee in Raja Bejoy Singh Dudhuria vs Commissioner of Income tax, Bengal(1).
The, assessee therein succeeded to the family ancestral estate on the death of his father.
Subsequently his step mother brought a suit for maintenance against him in which a consent decree was made directing the assessee to make a monthly payment of a fixed sum to his step mother and declaring that the maintenance was a charge on the ancestral estate in the hands of the assessee.
While computing his income, the assessee claimed that the amounts paid by him to the step mother under the decree should be excluded.
That contention was not accepted by the authorities under the Act as well as by the High Court but the Judicial Committee reversing their decision came to the conclusion that though assessee 's liability under the decree did not fall within any of the exemptions or allowances conceded in sections 7 to 12 of the Indian Income tax Act, yet the sums paid by the assessee to his stepmother were not "income" of the assessed at all; the decree of the court by charging the appellant 's whole resources with a specific payment to his step mother had to that extent diverted his income from him and had directed it to his step mother; to that extent what he received for her was not his income; it was not a case of the application by the appellant of part of his income in a particular way; it was rather the allocation of a sum out of his revenue before it became income in his hands.
This decision at the first sight appears to lend support to the assessee 's contention but in understanding the ratio of the decision, we must bear in mind the fact that in that case the Advocate General had abandoned before the High Court the contention that the assessee and his stepmother were members of undivided family and accepted the Position that the appellant was liable to be assessed as an individual and in no other manner.
In view of this concession, the payment that had to be made to the step mother of the assessee became a (1) 1007 charge on tile estate even before that estate devolved on him.
Therefore what the assessee got was the income of the property minus what he had to pay to his step mother.
The above conclusion of ours receives support from a later decision of the Judicial Committee in P. C. Mullick and anr.
(Executors) vs Commissioner of Income tax, Bengal(1).
Therein a testator had by his will appointed the appellants his executors and had directed them to pay Rs. 10,000/ out of the income of his property on the occasion of his addya sradh for expenses in connection therewith to the person who was entitled to perform the sradh.
He had also directed them to pay out of the income of his property the costs of taking out probate of his will.
During the year of account the executors had paid Rs. 5,537/ for expenses in connection with the addya sradh and a sum of Rs. 1,25,000/ for probate duty.
The question arose whether those payments were deductible in computing the chargeable income.
The Judicial Committee held affirming the judgment of the Calcutta High Court, that the payments made for the sradh expenses and the costs of probate could not be excluded in computing the chargeable income.
Those were payments made out of the income of the estate coming to the hands of the appellants as executors and in pursuance of obligation imposed by the testator.
Their Lordships were of opinion that it was not a case in which a portion of the income was by an overriding title diverted from the person who would otherwise have received it as in Bejoy Singh Dudhuria 's (2) case, but a case in which the executors having received the whole income apply a portion of it in a particular way.
From this judgment of the Judicial Committee, it is dear that the true test is that if the income in question is an income of the assessee, the application of the same being not relevant for determining its assessability, it is assessable in his hands but if it is not his income then it cannot form part of his assessable income.
The scope of section 16 (1) (c) of the Indian Income tax Act, 1922 came up for consideration by this Court in Commissioner of Income tax, Bombay City vs Sitaldas Tirathdas (3) .
Therein the assessee Sitaldas Tirathdas of Bombay had many sources of income, chief among them being property, stocks and shares, bank deposits and share in a firm known as M/s. Sitaldas Tirathdas.
He followed the financial year as his accounting year.
For the assessment years 1953 54 and 1954 55, his total income was respectively computed at Rs. 30,375/ and Rs. 55,160/ .
This computation was not disputed by him but he sought to deduct Rs. 1350/ in the first assessment year and a sum of Rs. 18,000/ (1) (3) (2) 1008 in the second assessment year on the ground that under a decree, he was required to pay these sums as maintenance to his wife and his children.
In support of his claim, he relied on the decision of the Judicial Committee in Bejoy Singh Dudhuria 's case (supra).
This Court rejected that contention observing (at pp.
374 and 375 of the Report) "In our opinion, the true test is whether the amount sought to be deducted, in truth, never reached the assessee as his income.
Obligations, no doubt, there are in every case, but it is the nature of the obligation which is the decisive fact.
There is a difference between an amount which a person is obliged to apply out of his income and amount which by the nature of the obligation cannot be said to be a part of the income of the assessee.
Where by the obligation income is diverted before it reaches the assessee, it is deductible, but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow.
It is the first kind of payment which can truly be excused and not the second.
The second payment is merely an obligation to pay another a portion of one 's own income, which has been received and is since applied.
The first is the case in which the income never reaches the assessee who even if he were to collect it, does so, not as part of his income, but for and on behalf of the person to whom it is payable.
" Counsel for the assessee tried to lay stress on the observation of this Court that the income should reach the hands of the assessee before it can be considered as his income.
According to him in the case before us, the income in dispute never reached the hands of the assessee.
We are unable to accept this contention as correct.
The income is the income of the family.
It reached the hands of the family as soon as it reached the hands of any of the members of the family who were entitled to receive it on behalf of the family.
The members of the family received that income on behalf of the family and applied the same in discharge of an obligation of the family.
When this Court spoke of the income reaching the hands of the assessee, it did not refer to any physical act.
It was dealing with a legal concept a receipt in law.
Viewed that way, it is quite clear that the income with which we are concerned in this case was received by the family.
One other decision on the point in issue which we would like to refer is the decision of the Bombay High Court in Commis (1) 1009 sioner of Income tax, Bombay vs Makanji Lalji(1), wherein Beaumont C.J., speaking for the court held that in computing the income of the H.U.F. for purposes of income tax, moneys paid to the widow of a deceased coparcener of the family as maintenance and residence allowance cannot be deducted, even though the amount of such allowance has been fixed by a decree of the Court and has be en made a charge on properties belonging to the family.
It is not necessary to refer to cases which deal with the diversion of the income of the assessee.
The test to be applied for finding out whether there is diversion of income or not is set, out by this Court in Commissioner of Income Tax, Bombay City, V. Ratilal Nathalal(1).
For the reasons mentioned above this appeal fails and the same is dismissed with costs.
V.P.S. Appeal dismissed. | The assessee was a Hindu undivided family of which the appellant was the Kamavan.
It possessed agricultural properties.
There was a family settlement among all the members of the family then living.
The settlement allotted some properties to some of the male members but did not provide for their devolution.
Also the joint status of the members was not disrupted and the properties allotted for the enjoyment of the various members of the family continued to be the properties of the family.
The liability to maintain the other male members and the responsibility of performing the marriages of the female members continued to be that of the Karnavan.
He was also responsible for the payment of land revenue in respect of the family properties excepting some items.
On the question whether the income of the properties put in possession of the male members under the settlement continued to be the income of the family and therefore liable to tax under the Kerala Agricultural Income tax Act, 1950, the department, Tribunal and the High Court on reference, held against the assessee.
Dismissing the appeal to this Court, HELD : Section 9(1) of the Act is similar to section 16(1) (c) of the Income tax Act, 1922.
Under the latter section the test is that if the income in dispute is considered as having been applied to discharge an obligation of the assessee, the same is liable to be included in the assessable income of the assessee, but if on the other hand the same bad been diverted by an overriding charge then it is not liable to be so included as it ceases to be the assessee 's income.
[1006 A B) In the present case, the arrangement only provided for maintenance and did not give any absolute right in any portion of the family properties to any one.
It thus conferred benefit on the family inasmuch as it was absolved of the responsibility of maintaining its members.
[106 5 G H] Further, it was not even a permanent arrangement and was revocable if there was any substantial change in the circumstances of the family.
The properties would 'go back to the possession of the Karnavan on the death of the member to whom the property was allotted.
[1005 C, D, E] The members of the family received the income of the various properties allotted to them on behalf of the family, and applied the same in discharge of an obligation of the family.
Therefore, the income reached the hands of the family as soon as it reached the hands of any of its members.
[1008 F H] 1001 Hence, under section 9(1) of the Act, the income should be deemed to be that of the assessee.
[1005 F G] Raja Bejoy Singh Dudhuria vs C.I.T., Bengal, and Mullick vs C.I.T. Bengal, , explained and applied.
C.I.T., Bombay City vs Sitaldas Tirathdas, , followed.
C.I.T., Bombay vs Makanji Lalji, and C.I.T., Bombay City vs Ratilal Nathalal, 25 l.
T.R. 426, referred to. |
Appeals Nos. 2459 and 2460 of 1968 and 1161 and 1162 of 1971.
Appeals by certificate/special leave from the judgment and order dated April 1, 1968 of the Calcutta High Court in Income tax Reference No. 163 of 1964.
N. A. Palkhivala, T. A. Ramachandran and D. N. Gupta, for the appellant (in all the appeals).
Jagadish Swarup, Solicitor General, B. B. Ahuja, R. N. Sach they and B. D. Sharma for the respondent (in all the appeals).
The Judgment of the Court was delivered by Hegde, J.
The first two appeals have been brought by certi ficate and the other two by special leave.
The later two appeals came to be filed because the certificates on the basis of which the earlier appeals were brought, were found to be defective inasmuch as the High Court had not given any reason in support of those certificates.
Hence it is sufficient, if we deal with the later two appeals.
The appellant is a non resident British Shipping Co. whose ships ply in waters all over the world including the Indian waters.
For the assessment years 1960 61, and 1961 62 (the relevant accounting years being calendar years 1959 and 1960), the Income tax Officer computed its total income taxable under the 12 L 256 Sup CI/72 170 Indian Income tax Act, 1922 (which will hereinafter be referred to as the, Act) by taking into account the ratio certificates issued by the Chief Inspector of Taxes, U.K. which were based on the assessments made on the appellant in U.K. During the relevant period, there was in U.K. "investment allowance" corresponding to "development rebate" under the Act.
The certificates issued by the Chief Inspector contained the percentage ratio of the total world profits of the appellant to its world earnings and similarly the percentage ratio of the wear and tear allowance and the investment allowance to its total world earnings.
In making the assessment the Income tax Officer purported to proceed on the basis of rule 33 of the Indian Income tax Rules 1922.
The said rule reads : "In any case in which the Income tax Officer is of opinion that the actual amount of the income, profits or gains accruing or arising to any person residing out of the taxable territories whether directly or indirectly through or from any business connection in the taxable territories, or through or from any property in the taxable territories or through or from any assets or source ,of income in the taxable territories, or through or from any money lent at interest and brought into the taxable territories in cash or in kind cannot be ascertained, the amount of such income, profits or gains for the purposes of assessment to income tax may be calculated on such percentage of the turnover so accruing or arising as the Income tax Officer may consider to be reasonable, or on an amount which bears the same proportion to the total profits of the business of such person (such profits being computed in accordance wi th the provisions of the Indian Income tax.
Act), as the receipts so accruing or arising bear to the total receipt of the business, or in such other manner as the Income tax Officer may deem suitable.
" The Income tax Officer proceeded to assess the appellant assessee on the second of the three bases mentioned in rule 33; but in computing Indian earnings, he did not include the destination earnings ' received in India ie.freight received in Indian ports in respect of cargo loaded at non Indian ports nor did he take into account the investment allowance granted to the appellant in its U.K. assessments.
Aggrieved by the order of the Income tax Officer, the assessee took up the matter in appeal to the Appellate Assistant Commissioner.
The Appellate Assistant Commissioner accepted the contention of the assessee as regards the inclusion of the desti 171 nation earnings in the computation of the *Indian earnings of the assessee but rejected its contention as regards the investment allowance.
Aggrieved by the order of the Appellate Assistant Commissioner both the assessee as well as the Revenue appealed to the income tax Appellate Tribunal.
The Tribunal allowed the appeal of the assessee and dismissed that of the Revenue.
Thereafter at the instance of the Revenue, the following two questions of law were referred to the High Court under section 66(1) of the Act.
Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the destination earnings collected in India should be considered as part of the Indian earnings in determining the assessee 's Indian income under Rule 33 of the Income tax Rules ? Whether, on the facts and in the circumstances of the case, the Tribunal was right in allowing the claim of the assessee for the investment allowance under the U.K. Act (corresponding to the development rebate under the Indian Income tax Act, 1922) in the compu tation of its total world income for the purpose of determining the assessee 's Indian income under rule 33 of the Income tax Rules, 1922 ?" The High Court answered the first question in favour of the, assessee and the second in favour of the Revenue.
Hence these appeals by the assessee.
The Revenue has not appealed against the decision of the High Court as regards Question No. 1.
Hence we have only to consider whether the decision of the High Court relating to Question No. 2 is in accordance with law.
At the commencement of his arguments Mr. Palkhivala, learned Counsel for the assessee indicated that rule 33 may not be applicable to the facts of the case; but he said that for the purpose of this case, he was prepared to proceed on the basis that the said rule is the governing provision.
The authorities under the Act as well as the High Court have examined the facts of this case on the basis of rule 33.
The second question referred to the High Court requires the High Court to express its opinion whether on the facts and in the circumstances of the case, the Tribunal was right in allowing the claim of the assessee for the investment allowance under the U.K. Act in the computation of the total world income for the purpose of determining the assessee 's Indian income under rule 33.
Under these circumstances, it would not be appropriate for, us at this stage to ignore the ,earlier proceedings and examine the case afresh on a wholly diffe 172 rent basis.
Hence we have not gone into the question whether rule 33 is applicable to the facts of the case.
We are proceeding on the assumption that it applies.
An mentioned earlier, the assessee is a non resident.
Its liability to pay tax arises under sections 3 and 4 of the Act.
The total income that arose or accrued or deemed to have arisen or accrued to it in this country in the relevant previous years is liable to be taxed in this country.
Section 10(2) provides for certain allowances to be deducted while computing the taxable income.
Section 10 (2) (vib) deals with the development rebate.
The material part of that section reads: "In respect of a new ship acquired or new machinery or plant installed after the 3 1st day of March, 1954 which is wholly used for the purposes of the business carried on by the assessee, a sum by way of development rebate in respect of the year of acquisition of the ship or of the installation of the machinery or plant, equivalent to, (i) in the case of a ship acquired after the 3 1st day of December, 1957, forty per cent of the actual cost of the ship to assessee, and (ii) in the case of a ship acquired before the 1st day of January, 1958 and in the case of any machinery or plant, twenty five per cent.
of the actual cost of the ship or machinery or plant ,to the assessee.
" The proviso to that clause says "Provided that no allowance under this clause shall be made unless (a) the particulars prescribed for the purpose of clause (vi) have been furnished by the assessee in respect of the ship or machinery or plant; and (b) except where the assessee is a company being a licensee within the meaning of the (54 of 1948), or where the ship has been acquired or the machinery or plant has been installed before the 1st day of January, 1948 an amount equal to seventy five per cent of the development rebate to be actually allowed is debited to the profit and loss account of the relevant previous year and credited to a reserve, account to be utilised by him 173 during a period of ten years next following : or the purposes of the business of the undertaking except (i) for distribution by way of dividends or profits, or (ii) for remittance outside India as profits or for the creation of any asset outside India, and if any such ship, machinery, or plant is sold or otherwise transferred by the assessee to any person other than the Government at any time before the expiry of ten years from the end of the year in which it was acquired or installed, any allowance made under this clause shall be deemed to have been wrongly allowed for the purposes of this Act.
" It may be noted that in the case.
of a shipping company like the appellant before us, whose ships ply all over the world, it may not be possible to strictly comply with the provisions contained in section 4 of section 10(2).
The provisions dealing with the levy of Income tax are not identical in all countries.
It may well nigh be impossible for a shipping company like the appellant to rigidly comply with the requirements of the laws in force in the numerous countries where it can be said to have earned income.
Possibly to get over such a difficulty rule 33 was enacted.
That is how the Revenue had proceeded in assessing the appellant.
Evidently in exercise of its power under section 5(8) of the Act, which says that "all officers and persons employed in the execution of this Act shall observe and follow the orders, instructions and directions of the Central Board of Revenue.
", the Central Board of Revenue had issued the notification dated February 10, 1942.
Under that notification instructions had been issued to the assessing authorities, laying down the principles to be applied in assessing the foreign shipping companies.
As regards the British Shipping Companies, they were directed to permit those companies "to elect to be assessed on the basis of a ratio certificate granted by the U. ' K. authorities regarding the income or loss and the wear and tear allowance".
At the time that notification was issued the Act did not provide for a development rebate.
Therefore that notification does not refer to any development rebate.
But it is made clear by that notification that a British Shipping Company can elect to be assessed on the basis of a ratio certificate granted by the U.K. authorities regarding the income or loss which means the net income or net loss.
During the relevant previous years, the Act 174 provided for deduction of the development rebate in the computation of the taxable income.
During those years the U.K. Income tax Act provided for a similar allowance; but that allowance was known as investment allowance.
We were informed at the bar that in those years, the percentage of devlopment rebate allowed under the Act was the same as that allowed under the U.K. law as investment allowance.
In about the beginning of 1964 M/s. Turner Morrison & Co.which was the a agent of several British Shipping Companies in India appears to have written to the Board of Revenue seeking its advice as to how the British Shipping Companies could claim development rebate.
In reply to that letter, the Board of Revenue wrote to them as follows "Sub: Assessment of British Shipping Companies on the basis of ratio certificates Treatment of investment allowance granted in the U.K.
I am directed to reply your letter dated 8th Feb. 1957 on the above subject and to state that as the development rebate which corresponds to the investment allowance granted in the U.K. is allowed under the In dian Income tax Act from the assessment year 1956 57, there is no objection to allow the investment allowances for the purpose of the computation of the Indian Income of British Shipping Companies.
This would, however be subject to the condition that the investment allowance would be permitted as a deduction only to the extent to which the rate of the allowance granted in the U.K. is not greater than the rate of development rebate allowed under the Indian Income tax Act.
" We were informed that the copies of that letter were sent to the Income tax Commissioners in the various States.
From this letter, it is clear that the Board of Revenue had instructed the taxing authorities to take into consideration the investment allowance granted by the U.K. authorities in computing the taxable income of the British Shipping Companies.
At this stage, it is necessary to mention that the proviso to cl.
(vib) of section 10(2) referred to earlier was incorporated into the Act sometime after the above instructions were issued by the Board of Revenue.
The authorities under the Act have proceeded on the basis that the computation of the income of the assessee has to be made on the second of the three bases mentioned in rule 33.
This assumption appears to be incorrect.
Admittedly the profits of the assessee company were not computed in accordance with the provisions of the Act.
That being so, the second basis mentioned 175 in rule 33 cannot be applied.
This aspect was brought to the notice of the High Court.
But the High Court refused to consider the same on the ground that both the Revenue as well as the assessee had proceeded before the authorities under the Act on the assumption that the second basis mentioned in rule 33 is the relevant basis.
In our opinion the High Court erred in adopting that approach.
The fact that the authorities under the Act as well as the parties were under a mistaken impression cannot alter the true position in law.
It is obvious that that basis could not have been applied.
That being so the computation of the appellant 's income had to be made either under the first basis viz. the calculation of the profits and gains on such percentage of the turnover accruing or arising as the Income tax Officer may consider to be reasonable or on the third basis i.e. 'in such other manner as the Income tax Officer may doom suitable '.
From the assessment orders made by the Income tax Officer, it does not appear that in computing the taxable income of the assessee, he adopted the first basis.
The most appropriate basis under which he could have computed the income was the last basis viz. "in such other manner as the Income tax Officer may deem suitable.
" While adopting that basis, the Income tax Officer is not required to rigidly apply the various conditions prescribed in the Act in the matter of granting one or the other of the permissible allowances.
He may adopt any equitable basis so long as that basis does not conflict either with rule ' 3 or with the instructions or directions given by the Board of Revenue.
The power given to the Income tax Officer under that basis is a very wide power.
That power is available not only to the Income tax Officer but also to the Appellate Assistant Commissioner and the Tribunal.
As the Tribunal had determined the tax due from the appellant on the basis of the ratio certificate given by the U.K. authorities, it cannot be said that the decision reached by the Tribunal was an unreasonable one.
The Tribunal 's decision accords with the instructions given by the Board of Revenue.
The fact that the Proviso to section 10 (2) (vib) was incorporated into the Act after the Board issued its instructions cannot affect either the validity of rule 33 or the force of the instructions issued by the Board of Revenue because neither rule 33 nor the instructions issued were strictly in accordance with section 10(2).
They merely lay down certain just and fair methods of approach to a difficult problem.
The learned Solicitor General appearing for the Revenue at one stage of his arguments contended that the instructions issued 176 by, the, Board of Revenue cannot have any binding effect and those instructions cannot abrogate or modify the provisions of the Act.
.But he did not contend that the Rule 33 is ultra vires the Act.
The instructions, in question merely lay down the manner of applying rule 33.
Now coming to the question as to the effect of instructions issued under section 5 (8) of the Act, this Court observed in Navnit Lal C. Javeri vs K. K. Sen Appellate Asstt.
Commissioner Bombay : (1) "It is clear that a circular of the kind which was issued by the Board would be binding on all officers and persons employed in the execution of the Act under section5(8) of the, Act.
This circular pointed, out to all the officers that it was likely that some of the companies might have advanced loans to their share holders as a result of genuine transactions of loans, and the idea was, not to affect such transactions and not to bring them within the mischief of the new provison." The directions given in that circular clearly deviated from the Provisions of the Act, yet this Court held that the circular was binding on the Income tax Officer.
For the reasons mentioned I above, Civil Appeals Nos. 1161 and 1162 of 1971 are allowed and in substitution of the answer given by the High Court to question No. 2, we answer that question in the affirmative and in favour of the assessee.
The assessee is entitled to its costs in those appeals both in this Court as well as in the High Court costs one set.
Civil Appeals Nos. 2459 and 2460 of 1968 are dismissed as being not maintainable.
In those appeals, there will be no order as to costs.
G.C. C.A.s Nos.
1161 and 1162/71 allowed.
C.A.s Nos.
2459 and 2460/68 dismissed. | Under a circular issued in 1962 by the Central Board of Revenue under section 5(8) of the Indian Income tax Act, 1922 the assessing authorities were directed to permit British Shipping Companies to elect to be assessed on the basis of a ratio certificate granted by the U.K. authorities regarding the income or loss and the wear and tear allowance.
In 1964 the Board instructed the taxing authorities to take into consideration the investment allowance granted by U.K. authorities in computing the taxable income of the British Shipping companies.
The appellant was a non resident British ' Shipping company whose ships plied all over the world including Indian waters.
For the years 1960 61 and 1961 62 the Income tax Officer computed it,, total income under the Indian Income tax Act, 1922 by taking into account the ratio certificates issued by the Chief Inspector of Taxes U.K. which were based on the assessments made on the appellant in U.K.
In making assessment the Income tax Officer purported to.proceed on the basis of r. 33 of the Indian Income tax Rules, 1922.
One of the points considered by the Income tax Officer and the Appellate Assistant Commissioner was whether the investment allowance was to be taken into account in assessing the Indian income.
Both of them rejected the contention of the appellant that it should be taken into account.
The tribunal decided in favour of the appellant but the High Court in reference took the oppo site view.
In appeal to this Court by special leave.
HELD : (i) The authorities under the Act proceeded on the basis that the computation of the income of the assessee had to be made on the second of the three bases mentioned in r. 33.
Admittedly the profits of the assessee were not computed in accordance with the provisions of the Act.
That being so, the second basis mentioned in r. 33 could not be applied.
This aspect was brought to the notice of the High Court.
But the High Court refused to consider the same on the ground that both the Revenue as well as the assessee had proceeded before the authorities under the Act on the assumption that the second basis mentioned r. 33 was the relevant basis.
The High Court erred in adopting this approach.
The fact that the authorities under the Act as well as the parties were under a mistaken impression could not alter the true position in law.
[174 H 175 B] (ii) The computation of appellant 's income had to be made either under the first basis viz. the calculation of the profits and gains on such percentage of the turnover accruing or arising as the income tax Officer may consider to, be reasonable, or on the third basis i.e. 'in such other manner as the Income tax Officer may deem suitable '.
[175 C] 169 From the assessment orders it did not appear that the first basis was adopted.
The most appropriate basis under which the income could have been computed was the last basis viz. "in such other manner as the Income tax Officer may deem suitable".
While adopting that basis the Income tax Officer is not required to rigidly apply the various conditions prescribed in the Act in the matter of granting one or the other of the permissible allowances.
He may adopt any equitable basis as long as the basis does not conflict either with r. 33 or with the instructions or directions given by the Board of Revenue.
The power given to the Income tax Officer on that basis is a very wide power.
That power is available not only to the Income tax Officer but also to the Appellate Assistant Commissioner and the Tribunal.
[175 D F] As the Tribunal had determined the tax due from the appellant on the basis of the ratio certificate given by the U.K. authorities, it could not be said that the decision reached by the Tribunal was an unreasonable one.
The Tribunal 's decision was in accord with the instructions of the Board of Revenue.
[175 F] The fact that the proviso to section 10(2) (vib) was incorporated into the Act after the Board issued its instructions could not affect either the validity of r. 33 or the force of the instructions issued by the Board of Revenue because neither r. 33 nor the instructions issued by the Board were strictly in accordance with section 10(2).
[175 G H] Navnit Lal C. Javeri V. K. K. Sen, Appellate Asstt.
Commissioner, Bombay, , applied. |
Appeal No. 457/58.
Appeal from the Judgment and order dated September 12, 1956, of the Punjab High Court in Letters Patent Appeal No. 38 of 1955.
N. C. Chatterjee and Naunit Lal, for the appellants.
Nanak Chand, for the respondents Nos. 4 to 9. 1961.
May 4.
The Judgment of the Court was delivered by MUDHOLKAR, J.
In this appeal under article 133 (1) (c) of the Constitution the question which arises for consideration is whether after July 22, 1952 the Custodian of ' Evacuee Property in the State of Punjab of the Custodian General hearing an appeal from an order made by the Custodian after July 22, 1952 has the power to cancel an allotment of rural evacuee property on a quasi permanent basis except upon the grounds set out in r. 14 (6) of the Administration of Evacuee Property Rules, 1950 as amended by notification No. section R. 0. 1290 dated July 22, 1952.
The circumstances under which this question arises may now be briefly stated.
The appellants and their father Nand Singh were displaced persons from West Pakistan and got allotment of some land in the village Raikot, District Ludhiana on a temporary basis.
Later, each of the appellants 1 to 3 was allotted 8 1/3 standard acres of land on a quasi permanent basis while Nail(] Singh, their father who was entitled to 41 standard acres and 7 units and to whom land to that extent had been temporarily allotted in the 740 village Raikot was allotted the same acreage of land in the village Hambran which is situate at a distance of 25 or 30 miles from Raikot.
Nand Singh made an application for revising the order under which this was done but he died in the year 1951, during the pendency of that application.
The appellants as his legal representatives continued the application.
That application was rejected and revision application made against the order passed thereunder was also rejected on the ground that after July 22, 1952 the Additional Custodian was not competent to cancel an allotment made in favour of any person except upon the grounds set out in r. 14 (6) of the Evacuee Property Rules.
Respondents 4 to 9 owned lands in Chak No. 127, G. B. Jaranwala, District Lyallpur and are also displaced persons.
They were, therefore, allotted certain lands in the village Karodian as quasi permanent allottees.
Subsequently some revenue papers were received from Pakistan from which it appeared that they were entitled to urban allotment.
They, therefore, brought this matter before the Deputy Commissioner exercising the powers of Deputy Custodian.
Thereupon he cancelled the allotment in their favour sometime in the year 1952 and proposed to the Additional Custodian, who was also acting as Director of Relief and Rehabilitation, for the allotment of the lands which were originally allotted to the respondents to others.
Appellant No. 2, Gopal Singh, on behalf of his father Nand Singh applied to the Director of Relief and Rehabilitation that the allotment in the name of his father Nand Singh might be shifted from the village Hambran ' to the village Karodian.
Additional Custodian not only allowed the Application of Gopal Singh and shifted the allotment of Nand Singh to the village Karodian but he also shifted the entire allotment of the appellants Nos. 1 to 3 from the village Raikot to the village Karodian with 741 the result that the lands allotted to the family were consolidated in the same village.
The appellants thereupon obtained possession of the Karodian lands.
Respondents 4 to 9 were allotted urban lands, which according to the appellants are more valuable and are of a superior quality.
They did not prefer an application for review of the order of cancellation of their earlier allotment or of the order passed by the Additional Custodian allotting their lands to the appellants.
Six months later, however, respondents 4 to 9 preferred an application before the Additional Custodian stating therein that the land abandoned by them in West Pakistan was rural and that their allotment should be shifted back to the village Karodian.
To this application they did not make the appellants parties.
The Additional Custodian held that he could not cancel the allotment in favour of the appellants in view of r. 14(6) of the Evacuee Property Rules already referred to.
He, however, recommended the case to the Custodian General of India by his memo, dated October 14, 1953, for taking appropriate action.
The Deputy Custodian General who heard the case sent it back to the Additional Custodian observing therein that if the respondents 4 to 9 are restored to their original lands the persons to whom those lands had been allotted will have to be shifted elsewhere and this process may involve "an interminable chain of cancellation of allotments.
" He also observed that if the Additional Custodian could not cancel the allotment because of the coming into force of the amended r. 14 (6), the Custodian General also would be incompetent to cancel it.
Thereafter the Additional Custodian heard the application of the respondents 4 to 9 on merits and dismissed it.
Against his order dismissing the application respondents 4 to 9 preferred a revision application before the Custodian General.
Curiously enough the Deputy Custodian General, 742 who heard it, this time granted the application and set aside the allotment in favour of the appellants.
The appellants thereafter moved the High Court of Punjab under article 226 of the Constitution.
The matter went up before a single Judge of the High Court who dismissed the petition observing as follows : "If the order of cancellation against the present opposite parties was made after the 22nd July, 1952, the order was inoperative in view of Rule 14 (6) and if it be said that the order of allotment was after the date then Rule 14 (6) is not bar to the cancellation of the order.
In either case I am of the opinion that there is no error in the order of the Custodian General sufficient for the purpose of quashing his order .
" The appellants thereupon preferred an appeal under the Letters Patent which was also dismissed by a Division Bench of the High Court.
The substance of the reasoning of the learned Judges is that the allotment in favour of respondents 4 to 9 was wrongly cancelled and it was the duty of the Custodian to restore to 'them the lands from which they were ousted.
They also said that the provisions of r. 14 (6) (lid not preclude the Deputy Custodian General from exercising the powers conferred upon him by section 27 of the or prevented him from cancelling the allotment made after July 22, 1952.
The view taken by the Division Bench to the effect that r. 14 (6) did not stand in the way of the Custodian General of the Custodian from restoring the lands to the respondents the allotment with respect to which was wrongly cancelled by the Custodian cannot be sustained.
No doubt it is one of the highest duties of all courts to take care that the act of the court does not do injury to suitors; but the court must have power to rectify the wrong.
743 Such power may either inhere in the Court or may be expressly conferred by statute.
The law does not confer any express power on the Custodian to make restitution.
But we will assume that be had inherent power to do so.
Just as power can be conferred expressly by statute it can also be taken away or restricted and where it is taken away or restricted then, whether the power was statutory in its origin or was inherent in the court, it will be either wholly unexercisable or exercisable only subject to the conditions laid down in the statute, as the case may be.
Here we have the notification dated July 22, 1952 which substituted the present sub r. 6 of r. 14 for the original sub r. 6.
The amended sub rule has placed a limitation on the powers of the Custodian to cancel allotment of rural evacuee property on a quasi permanent basis.
The result is that an allotment of such land can be cancelled only in the circumstances specified in that sub rule.
Therefore, subsequent to July 22, 1952 the Custodian of Evacuee Property would have the power to cancel an allotment only upon a ground which falls within the exceptions enumerated in sub r. 6.
Making of restitution is not within the exceptions and, therefore, it will have to, be said that the inherent power of the Custodian to cancel an allotment for making restitution has been abrogated by the amended sub rule.
The other argument of the Division Bench is to the effect that the powers of the Custodian General under section 27 are untouched by sub r. 6 of r. 14 and that despite the making of this rule the Custodian General was not prevented from cancelling an allotment made after July 22, 1952.
Now section 27 of the Act provides that the Custodian General may call for the record of any proceeding in which 4 District Judge or a Custodian has passed an order for the purpose of satisfying himself as to the legality or propriety of any such order and may pass such order in relation thereto as he thinks At.
The 744 District Judge or the Custodian can in any matter before him do only that which the act or the rules made thereunder permit or require him to do.
If he fails to do what he is required to do or if he does something which he is not permitted to do or if he commits an error in doing an act which he is permitted to do, the Custodian General has the power to order that to be done which the law requires the Custodian or the District Judge to do or to quash that which has illegally been done or to rectify the error which the Custodian or the District Judge has committed.
He has no power to do something which the Custodian or District Judge could not have done or was prohibited from doing.
Clearly, therefore, the High Court was in error in holding that the limitations placed by the present sub r. 6 of r. 14 did not affect the power of the Custodian General.
The learned single Judge as well as the Division Bench have taken the view that where an allotment is made in favour of a displaced person subsequent to July 22, 1952, the provisions of sub r.
6 of r. 14 did not preclude the Custodian from cancelling that allotment.
This view is sought to be supported by Mr. Nanak Chand on behalf of respondents 4 to 9 on, what he says, the language of sub r. 6 of r. 14.
He says that according to this sub rule what the Custodian is precluded from doing is to cancel an allotment which had already been made, that is, made before the coming into force of the sub rule except upon certain grounds and does not place any further restrictions.
We do not find any justification for placing such a restricted interpretation upon the plain language of the Sub rule.
Learned counsel then referred to the second proviso to the sub rule and contended that it supported the interpretation which he was placing.
The proviso reads thus : "Provided that where an allotment is cancelled or varied under clause (ii) the allottee 745 shall be entitled to retain such portion of the land to which he would have been entitled under the scheme of quasi permanent allotment of land: Provided further that nothing in this subrule shall apply to any application for revision, made under section 26 or section 27 of the Act, within the prescribed time, against an order passed by a lower authority on or before 22nd July, 1952.
" How this proviso supports the argument of the learned counsel is difficult to appreciate.
The proviso was not originally there when sub r. 6 was amended on July 22, 1952.
It is possible that a doubt was entertained after the making of this subrule on the question whether the Custodian General or the Custodian before whom a revision application had been made against an order passed before July 22, 1952, could make an order cancelling the allotment.
Apparently to remove the doubt such as may have existed this proviso had been added.
Then learned counsel contended that this subrule can not take away the wide powers conferred upon the Custodian by section 10 of the Act.
No doubt section 10 confers wide powers on the Custodian but the opening words of the section show that the powers conferred thereby are subject to the provisions of ruler, made under the Act and section 56 (2) (i) enables the Central Government to make rules to provide for "circumstances in which leases and allotments may be cancelled or terminated or the terms of any lease, or agreement varied.
" We, have, therefore, no doubt that the High Court was in error in holding that sub r. 6 of ' r. 14 was not a bar to the, exercise by the Custodian General of the power to cancel an allotment after July 22, 1952.
Having failed on the point which alone finds a place in the statement of the cases of both the 746 parties, Mr. Nanak Chand raised a contention that the allotment in favour of the appellants was itself bad because the cancellation of the allotment in favour of the respondents 4 to 9 was in contravention of r. 14 (6) and that, therefore, the appellants were not entitled to the relief from the High Court under article 226 of the Constitution and accordingly are not entitled to any relief in this Court.
Since the respondents have not relied upon this ground in the statement of their case we are not prepared to consider it.
There may be more than one answer to the point urged by the respondents and had they specifically raised it in their statement of case, the appellants would have been in a position to give an appropriate answer.
Accordingly we allow the appeal with costs and quash the orders of the High Court as well as of the Deputy Custodian General.
There is one more matter to which we must refer.
It is this.
During the hearing of the appeal learned counsel for the appellant brought to our notice the fact that on the records of the proceedings before the Deputy Custodian General there was a slip of paper from which it would appear that Deputy Custodian General had been approached by the then Speaker of the Punjab Assembly apparently on behalf of the respondents.
We, therefore, asked for a report from the High Court.
That report has come and it exonerates both the ex Deputy Custodian General as well as the ex Speaker.
We are not satisfied with the report.
However, considering the fact that the matter has become quite stale and we have allowed the appeal we do not propose to examine the matter further.
Appeal allowed. | Respondents Nos. 4 to 9 who were displaced persons from Pakistan, were allotted certain rural lands in village Karodian on a quasi permanent basis.
On information being received from Pakistan that they were entitled to urban allotment their allotment in village Karodian was cancelled and they were allotted urban land.
The land thus vacated in village Karodian was allotted to the appellants.
On July 22, 1952, r. 14(6) of the Administration of Evacuee Property Rules was amended and the power of the custodian to cancel quasi permanent allotments of rural evacuee property was taken away except in certain enumerated circumstances.
Thereafter respondents Nos. 4 to 9 applied to the Custodian for shifting back their allotment to village Karodian on the ground that they were really ' entitled to allotment of rural property.
The Custodian dismissed the application holding that r. 14(6) did not permit the cancellation of the allotment of the appellants.
Respondents Nos. 4 to 9 filed a revision application before the Custodian General who allowed the application and cancelled the allotment of the appellants.
The appellants contended that the Custodian General had no power to cancel their allotment.
The respondents replied that the wide powers of the Custodian General under s.27 of , were not affected by the restrictions imposed by the amended r. 14 (6) on the power of the Custodian to cancel allotments.
Held, that the Custodian General had no power to cancel an allotment of rural property made on a quasi permanent basis in a revision application against an order of the Custodian made after July 22, 1952.
The power of the Custodian under section 10 of the Act to cancel allotments was subject to the rules.
The amended r. 14(6) restricted the power of the Custodian to cancel such an allotment to the circumstances mentioned therein and the present case did not fall within any of those excep 739 tions.
Amended r. 14(6) could not be resorted to for cancellation of allotments made before July, 22, 1952.
The power of the Custodian General under section 27 of the Act was to see whether the order passed by the Custodian was legal and proper ; he had no power to do something which the Custodian could not have done or which he was prohibited from doing. |
Civil Appeal No. 1331 of 1966.
Appeal by special leave from the order dated January 20, 1966 of the Bombay High Court in Special Civil Application No. 54 of 1966.
D. V. Patel and L N. Shroff for the appellant.
G. P. Pai, Bhajan Ram Rakhiani and R. K. Khanna, for respondent No. 1.
The Judgment of the Court was delivered by Mitter, J.
The question involved in this appeal by special leave from an order of the Bombay High Court rejecting summarily a petition under Art.227 of the Constitution for the issue of a writ of certiorari or other appropriate writ for examining the legality of the award made by the Industrial Tribunal, Maharashtra on July 27, 1965 and published in the Maharashtra Gazette on August 19, 1905 and for quashing the same appears to be one of first impression so far as this Court is concerned.
The appellant before e this Court is an institution which came into existence as far back as 1834.
It originated in the desire of certain Hindu and Parsee gentlemen of the City of Bombay to put a stop to the practice of killing of stray dogs by the stray dogs by the sepoys of the East India Company.
the deed of October 18, 1834 shows that certain Hindus , Parsees and Mahajuns had resolved to start a Panjrapole with suitable.buildings by raising subscription and also by promising to pay certain fees on stated mercantile commodities to the Panjrapole to be established for the keeping of stray cattle and other animals and for protecting their lives.
This was followed by a deed of declaration of trust executed on 2nd November, 1850.
This shows that the institution mentioned in the earlier document had 204 been established and the management of its funds had been placed in the hands of certain Banians.
under the superintendence of Sir Jamshedjee Jeejeebhoy and that out of the surplus funds collected Rs. 75,057/ had been invested in the purchase of Government Promissory notes.
The trustees were to stand possessed of the said notes and interest and dividends thereof upon trust for the use and benefit of the said institution.
On 2nd November, 1850 a deed of assignment and declaration of trust in favour of panjrapole was executed by Sir Jamshedjee Jeejeebhoy to Khimchand Motichand.
This document shows that a part of the surplus funds had been invested in the purchase of several pieces or parce Is ,of lands, houses etc.
and the new trustees were to stand possessed of the same upon trust for the use and benefit ,of the said institution.
Another trust deed was executed ,on 5th September, 1851 by Khimchand Motichand, Sir Jamshedjee Jeejeebhoy and others.
This document shows that the institution was then possessed of considerable wealth comprising of Government promissory notes, houses, lands and other immovable estate in the Islands of Bombay, besides cash balances.
The funds of the institution appear to have been augmented further under a deed of 10th June, 1871.
According to this document certain charitably disposed persons, Hindus and Parsees, had raised a fund for releasing animals in Surat meant for slaughter on the occasion of Bakrild and Id E Kurbani.
The trustees of the said fund being desirous of transferring the sums in their hands with all accumulations of interest, income etc.
and also the trust thereof to the trustees of the Bombay Panjrapole had requested the trustees of the said Panjrapole to become the trustees of Surat Bakri Id fund to which the latter had a in Surat meant for slaughter on the occasion of Bakrild and Id E Kurbani.
The trustees of the said fund being desirous of transferring the sums in their hands with all accumulations of interest, income etc.
and also the trust thereof to the trustees of the Bombay Panjrapole had requested the trustees of the said Panjrapole to become the trustees of Surat Bakri Id fund to which the latter had agreed.
This document shows further that the trustees of the Bombay Panjrapole had agreed to use the said funds towards the purchasing, releasing and redeeming from slaughter some of the cows, sheep and other animals intended or likely to be sacrificed at Surat on the Bakrid or Id Kurbani occasions and for conveyance of the animals so purchased to be kept there according to the custom and rules of that institution.
In 1915 the Government 205 declared the institution as an infirmary under the Preven tion of Cruelty to Animals Act (IX of 1890).
it would appear that the Bombay Panjrapole expanded its activities considerably over the years and had besides its original seat at Bombay, branches at three other places viz., at Raita, Bhiwandi and Chembur Cattle, birds and other animals were kept and maintained at all these places.
A very large number of persons was pursuing manifold acti vities at the said places.
Latterly the workers of the institution were not satisfied with their wage scales and other service conditions.
On the basis of the report submitted by the Conciliation Officer under sub s.(4) of s.12 of the Industrial Disputes Act the Government of Maharashtra referred the dispute for adjudication to the Tribunal constituted under a Government notification.
An order of reference was made on 25th June, 1963 and the heads of disputes were, the wages, privilege, sick and casual leave, bonus, gratuity and reinstatement of certain workmen.
In the written statement filed by Panjrapole it was stated inter alia (a) The main aims and objects of the institution were purely charitable.
Whatever income the institution had was not all to be distributed either to the donors or the trustees.
It was wholly and solely for the maintenance and treatment of animals of the Bombay Panjrapole.
To aehieve the above objects the means to be adopted were (i) maintenance of a shelter house for aged and unserviceable animals; (ii) the feeding and treatment of all animals entrusted to the institution either by the owners anxious to pension their old animals or rescued by philanthropic persons from the hands of butchers and the protection of animals remanded by magistrates; (iii) the breeding of bulls under ideal and sanitary conditions; (iv) the maintenance of a dairy farm with special attention to proper feeding, accommodation and water supply, the proceeds to go to the benefit of other animals of the Panjrapole; and 20 6 (v) bringing up of calves of the young cows under healthy conditions.
(b) The Managing Committee of trustees of the institution was advised that in fulfilment of their primary and only object of maintaining sick and infirm cattle and dogs etc.
it was necessary that they should have healthy food and nutrition.
Since milk from outside would not fulfil that condition it was decided to upgrade the infirm cattle and rear them into good animals so as to get good and pure milk for the inmates of the Panjrapole.
Thus the milk that was produced and remained surplus after feeding the old cows, motherless calves and dogs and other such animals was sold to members of public instead of being thrown off.
The income derived therefrom was again utilised only after maintenance of the Panjrapole animals.
The sale proceeds of the milk was never utilised nor meant for the benefit or the profit of the donors of of trustees nor was it produced and sold for the purpose or satisfying human needs or desires or with any object of rendering material service to the community.
The cows which yielded milk were kept by the Panjrapole till the end of their lives.
The milk derived from them could only be considered as natural and incidental product in the maintenance of cows.
It was submitted on the basis of the above that essentially object with which the institution received animals was not for doing service to their owners or others but to the animals themselves.
The Tribunal examined meticulously the activities of the institution over a number of years.
The workers served various interrogatories on the trustees to elicit from the various facts relating to the income by way of rent from building etc.
the income from milk and milk products, the income from sale of other commodities, the number and categories of animals in the Panjrapole, the number of animals, if any, purchased, the number of dry and wet cows owned by the Panjrapole and the number of stud bulls either purchased by or bred at the Panjrapole for the last ten years.
The society answered all the particulars.
The chart below prepared by the respondent shows the total cattle strength of the Panjirapole in all its four branches comprising of productive animals (whether milch cows milch buffaloes, 207 stud bulls and working bullocks), the number of unpro ductive animals, including cows, buffaloes, buffalo calves, heifers and calves and bullocks.
The chart was compiled from the documents disclosed by the appellant and contains the figures for the years 1958 to 1962 Total strength in the following years.
1958 1959 1960 1961 1962 Total strength Bombay 149 117 150 201 214 Raita 833 595 508 604 538 Bhiwandi 501 653 503 408 426 Chambur 191 233 272 275 281 Total 1,674 1,598 1,533 1,4881,459 Sick, old and infirm Bombay.
Raita 32 19 10 16 31 Bhiwandi 424 364 132 150 171 Chambur.
Total 466 25 % 383 20% 142 10% 166 10% 202 15% Young animals Bombay Raita 181 44 120 50 36 Bhiwandi 6 47 5 99 59 Chambur 56 87 79 93 100 Total 243 178 204 242 185 Other cattle not sick Bombay 149 117 150 201 214 Raita 620 532 488 538 471 Bhiwandi 71 242 366 159 196 Chambur 135 146 193 182 181 Total.
975 1,037 1,197 1,080 1,602 The following chart was pared by the respondents showing the values of the milk supplied to the animals as 208 also the amounts fetched by sale of the surplus milk for the same years.
Chart.
Year Own consump Sale Total Percentage tion.
Rs. Rs. Rs. of sale approxima tely 1 2 3 4 5 1958 2,681 1,49,854 1,314 3,995 1,53,849 2.
6% 1959 5,256 6,716 5,475 17,447 1,69,465 1,86,912 9. 5% 1960 1,755 6,570 2,686 11,011 2,13,117 24,1185% 1961 2,046 3,286 3,504 8,836 2,23,095 2,31,9314 4% 1962 1,954 4,555 3,650 10,159 2,30,043 2,40,2024% The facts found by the Tribunal may be summarised as follows (1) At the end of the year 1962 there were altogether, 445 cows, 48 bulls, bullocks and oxen, other cattle (cows and bullocks) 508, calves 495, dogs 160, goats and sheep 32, horses 12, hares 18, cocks, hens and ducks ' 18 and parrots 8 : the total number was 1754.
(2) The total income for the year was Rs. 6,64,043 including the amount of Rs. 1,73,583 received by way of donation.
The income proper was thus Rs. 4,90,459.
, 20 9 (3) Some lands of the institution were under its personal cultivation.
The sale proceeds of the yield thereof was Rs. 6,492.
The rent fetched by the immovable property was Rs. 2,20.549.
The milk vielded by the cows was regularly collected and sold, the sale proceeds for the year being Rs. 4,30,034.
A large number of workmen was employed to attend to the cows and to feed them, to.
milk the cows and to carry and sell the milk to the public.
(4) The number of cows yielding milk at the end of the year was 242.
At that time there were 75 pregnant cows.
There were 57 other cows, 101 grown up calves (female) and 91 other small calves (female) all described as "reserved".
In the opinion of the Tribunal all these calves would in course of time grow into cows.
(5) The institution maintained some stud bulls.
Besides there were bullocks which were used for plying the carts or for cultivation of the lands of the institution.
(6) There were 36 heads of cattle described as arrivals from Bombay.
There were another 87 cows described as "danger"; the rest of the cattle (cows and bullocks) were 57 lame and blind, 177 weak, 51 infirm, quite infirm 80 and sick 108, the total of this category being 473; including the "danger" cows the total was 560.
These animals depended entirely on the charity of the institution.
The Tribunal found the activities of the institution in connection with its movable property and collection and sale of milk to be an industry while the maintenance of danger cows, blind, lame, infirm and sick, the dogs and other animals did not constitute an industry.
As already noted, the application under article 227 by the Panjrapole to the Bombay High Court was dismissed summarily and therefore we do not have the benefit of a judgment of the High Court.
As the records stand we must proceed one the facts found by the Tribunal and such light as is thrown thereon by arguments of counsel.
Before looking into the relevant authorities on the subject, we may note the points canvassed in support of or against the appeal by learned counsel on either side.
Referring to the trust deeds it was argued on behalf of the appellant that the essential purpose of the institution was 210 to keep and foster animals which were either rejected by their owners as old and infirm or of no use to them as suckling calves, dry cows etc.
It is not necessary to take into account the other animals which were maintained by the institution.
Leaving out of account the number of dogs kept, the number of other animals was insignificant.
It was argued that although the sale of milk produced a fair amount of income, certain portion of it was necessary for the maintenance of the sick and infirm animals and the sale of the balance of the milk ought to be regarded as incidental to the keeping of cows thrown on the hands of the institution and ought not to lead to an inference that the institution was pursuing an industry.
With regard to the immovable properties, it was said that they had been purchased out of surplus funds in the hands of the insti tution over 50 years back and on a conspirator of the acti vities of the institution it should be held that it was merely doing charity to animals and it was not producing food or giving service to humans to constitute its activity as an industry within the meaning of s.2(1) of the Industrial Disputes Act.
Learned counsel for the respondent drew our attention to certain facts which according to, him went to show that so far as the activity of keeping cattle, specially cows and she buffaloes was concerned, there could be little doubt that it was pursued as an industry.
He handed over two charts containing analysis of the cattle population as culled from the documents placed before the Tribunal by the institution itself.
The total strength of cattle in all the four branches of the institution in the year 1958 was 1674, 1598 in the year 1959, 1533 in the year 1960 and 1488 in 1961 and 1459 in 1962.
The sick, old and infirm cattle for the year 1958 was 456 or roughly 25 per cent of the total strength.
Young animals numbered 243 and other cattle which were not at all sick was 975 in number.
The percentage of sick, old and infirm cattle in the year 1959 was roughly 20 % in.
the year 1960 and 1961, 10 per cent and in the year 1962 15%.
The rest of the cattle according to counsel were neither old nor infirm but were either producing milk or being put to use immediately or capable of yielding milk or work in the future.
Another chart handed over by him went to show that the total value of milk produced in the year 1958 was Rs. 1,53,849 and 211 leaving out of account of Rs. 3,995 being the value of milk supplied to the sick cattle, the institution derived an in come of Rs. 1,49,854/ from the sale of milk.
The corres ponding figures for 1959 were total sales Rs. 1,86,912, value of milk consumed Rs. 17,447, income from milk, Rs. 1,69,465.
The figures for 1960 were Rs. 2,24, 118, Rs. 11,011 and Rs. 2,13,117/ ; those for 1961 were Rs. 2,31,931, Rs. 8,836 and Rs. 2,23,095/ .
The figures for the last year 1962 were Rs. 2,40,202, Rs. 10,159 and Rs. 2,30,043.
Thus according to the above figures, the percentage of milk given to the animals out of the total production was 2 6 in 1958, 9 5 in 1959, 5 in 1960 and 4 in the years 1961 and 1962.
Learned counsel drew our attention to the figures of expenses of tending the sick and infirm cattle either by employment of hospital workers or medical expenses and compared the same with the total expenses of the institution and the number of men employed.
The value of medical relief to animals either by way of salary to workers, dearness allowance paid to them, medical expenses and feeding of milk to the animals for the Bombay Panjrapole in the year 1961 was Rs. 11,762, 'for Raita Rs. 5,551, for Chembur Rs. 5,028 and for Bhiwandi Rs. 28,805.
The expenses of feeding and maintenance of sick animals for the said branches were Rs. 1,825, 13,596, 7,554 and 81,464.
But it is pertinent to note that medical expenses accounted for very small sums, namely, Rs. 1,267 for Bombay, Rs. 559 for Raita, Rs ' 1,696 for Chembur and Rs. 552 for Bhiwandi.
The figures of medical expenses for the year 1962 were equally negligible.
The number of people employed for giving medical relief at the Bombay Panjrapole in the year 1961 was only 7, namely, a doctor, a dresser, 4 coolies and other workers and a sundry worker.
Their total salary came to Rs. 6,000 besides dearness allowance of Rs. 2,448.
Similarly at Raita there were a doctor, two coolies, two dressers and sundry workers and expenditure was only Rs. 552 out of the total expenditure on all these items Rs. 4,992.
It was argued oil the basis of these figures that if the object of the Panjrapole was only to maintain and treat the old, diseased or infirm or rejected cattle on its hands acquired from different sources, the number of men employed would be very small and the milk required for the sick and infirm cattle could be had from only a few milch 212 cows and she buffaloes.
It was urged that the fact that a large number of milch cattle were to be found every year among the cattle population yielding milk regularly of the value of over Rs. 2,00,000 for the last 3 or 4 years went to show that the institution was pursuing an activity mole or less like that of, a dairy farm.
It was maintaining a number of stud bulls and had actually purchased one, the obvious object behind it being improving the cattle wealth of the institution by the production of good and healthy cattle, the females of which would come to yield milk in future.
It was said that the value of milk sold could not be as high as disclosed by the figures unless the institution was getting a number of milch cattle every year to replace those which were going dry for the time being.
This could only be possible if the institution was in a position to keep up its number of milch cattle from the young ones either given to the Panjrapole or those which were bred at the Panjrapole.
The only difference between the Panjrapole and a well organised dairy farm was that the Panjrapole was not buying milch cattle of good quality nor destroying or getting rid of any which were found to become useless.
As the objects of the institution did not permit it to get rid of any cattle it undoubtedly had to maintain whatever cattle came to it but nevertheless the activities displayed by the facts were enough to show that it was being run on the lines of a business or an undertaking, though not of the normal type of a well organised dairy business.
In our view the arguments of learned counsel for the respondent have considerable force.
The main heads of the income of the institution were income from immovable properties, donation from charitably disposed members of the public and the sale of milk.
No doubt the immovable property had been acquired many years back from the surplus funds in the hands of the trustees.
These were old houses and buildings but the Panjrapole was maintaining them in tenantable condition by incurring considerable expenses every year over the repairs.
The more significant factor was the steadily growing income from the sale of milk derived from milch cows and buffaloes, the number of which though not steady was always considerable.
Regard must also be had to the written statement of the institution itself before the Tribunal showing 213 that the Managing Committee of the trustees had decided some time back to upgrade the infirm cattle and rear them into good animals so as to get good and pure milk for the inmates of Panjrapole.
In fact however the upgrading was to such an extent that the milk yielded always was far in excess of the needs of the inmates of the Panjrapole.
Although the sale proceeds of the milk was never utilised nor was ever meant for the benefit or profits of the donors or trustees, the very production of it in such large bulk wholly unrelated to the needs of the sick cattle showed that the institution was pursuing an activity with the central idea of obtaining a steady income therefrom.
In our view, the facts justifiably lead to the conclusion that the institution deliberately diversified its objects from only tending to the sick, infirm or unwanted cattle by adopting the policy of keeping cattle not merely for their own sake but for the sake of improving the cattle population committed to its care with an eye to serve human beings by making large quantities of good milk available to them and thereby getting an income which would augment its resources.
It pursued its policy just as any dairy owner, would by having a few good quality bulls to impregnate the cows and thereby ensuring a steady production of milk and also improve the quality of the progeny.
We have then to consider whether on the above facts an inference ought properly to be drawn that the activities of the Panjrapole constituted an industry.
It is not necessary to go through the plethora of cases decided by this Court to find out whether the Tribunal had come to a proper conclusion.
Although there is no decision of this Court arising out of the affairs of a Panira Dole, there are several dealing with the question as to whether hospitals constituted industries.
The contention of learned counsel for the appellant W. as that the main and chief object of the appellant institution being the keeping and fostering of ' animals incidental activities ought to be disregarded and the institution ought to be considered as a hospital.
If the activities relating to the production of milk could be said to be incidental to the maintaining of sick, infirm and diseased or rejected cattle, the argument would, in our opinion, rest on solid foundation.
2 1 4 At the time when the application under article 227 of the Constantine was presented before the Bombay High Court, the decision of this Court in State of Bombay vs The Hospital Mazdoor Sabha (1) held the field and it can be assumed that it was on the strength of this decision that the Bombay High Court did not feel called upon to examine the merits of the case by issuing a rule.
In the 'Hospital Mazdoor Sabha 's case (supra) the dispute arose out of the retrenchment of respondents 2 and 3 before this Court who ' had been engaged as ward servants in the J.J. Group of Hospitals, Bombay under State control and management without payment of compensation as required by section 25 F(b) of the Industrial Disputes Act.
The decision of this Court shows that there was a group consisting of five hospitals under the administrative control of the Surgeon General of the appellant and its day to day affairs were conducted and controlled by a Superintendent who was a full time employee of the appellant.
The residential staff including the Resident Medical Officers, Horsemen, Nurses etc. were all full time employees of the appellant and their salaries were drawn on the establishment pay bills of the appellant and paid entirely by the appellant.
According to this Court : "This group serves as a clinical training ground for students of the Grant Medical College which is a Government Medical College run and managed by the appellant for imparting knowledge of medical, sciences leading to the Degrees of Bachelor of Medicine and Bachelor of Surgery of the Bombay University as well as various Post Graduate qualifications of the said University and the College of Physicians and Surgeons, Bombay; the group is thus run and.
managaed by the appellant to provide medical relief and to promote the health of the people of Bombay.
" On the question as to whether the activities of this group of hospitals would be covered by the definition of 'in dustry ' in s.2(j) of the Industrial Disputes Act, the Court ,observed (see at p. 878) "In considering the question as to whether the group of Hospitals run by the appellant undoubtedly (1) ; 21 5 for the purpose of giving medical relief to the citizens and for helping to impart medical education are an undertaking or not, it would be pertinent to enquire whether the activity of a like nature would be an undertaking if it is carried on by a private citizen or a group of private citizens.
There is no doubt that if a hospital is run by private citizens for profit it would be an undertaking very much like the trade or business in their conventional sense. .
Trust the character of the activity involved in running a hospital brings the institution of the hospital within s.2(j).
Does it make any difference that the hospital is run by the Government in the interpretation of the word "undertaking" in s.2(j)? In our opinion, the answer to this question must be in the negative.
It is the character of the activity which decides the, question as to whether the activity in question attracts the provision of s.2(j); who conducts the activity and whether it is conducted for profit or not do not make a material difference.
" As to the attributes which made the activity an under taking it was stated (see at p. 879) : "It is difficult to state these possible attributes denitely or exhaustively; as a working principle it may be stated that an activity systematically or habitually undertaken for the production or distribution of goods or for the rendering of material services to the community at large or a part of such community with the help of employees is an undertaking.
Such an activity generally involves the co operation of the employer and the employees; and its object is the satisfaction of material human needs.
It must be organised or arranged in a manner in which trade or business is generally organised or arranged.
It must not be casual or must it be for oneself nor for pleasure.
Thus the manner in which the activity in question is organised or arranged, the condition of the co operation between the employer and the employee necessary for its success and its object to render material service to the community can be regarded as some, of the features which are distinctive of activities,, 5 Ml 1245 Sup.
Cl/71 216 to which s.2(j) applies.
Judged by this test, there would be no difficulty in holding that the State is carrying on an undertaking when it runs the group of Hospitals in question.
" The recent decision of this Court in Safdar Jung Hospital, New Delhi vs K. section Sethi and Management of M/s T.B. Hospital, New Delhi vs The Workmen (1) is a pointer in the contrary direction.
There was also another appeal relating to the Kurji Holy Family Hospital.
The Court proceeded to consider the general proposition whether a hospital could be considered to fall within the concept of industry in the Industrial Disputes Act and whether all hospitals of whatever description could be covered by the concept or only some hospitals under special conditions.
According to this Court in Safdar Jung Hospital case , '(see p.1412 paragraph 1.3) "an industry is to be found when the employers are carrying on any business, trade , under taking, manufacture or calling of employers.
If they are not, there is no industry as such.
" The Court referred to the decision of this Court in Gymkhana Club Union vs Management (2) and the conclusion therein that : "Primarily, therefore, industrial disputes occur when the operation undertaken rests upon co,operation between employers and employees with a view to production and distribution of material goods, in other words, wealth, but they may arise also in cases where the co operation is to reduce material services.
The normal cases are those in which the production or distribution is of material goods or wealth and they will fall within the expressions, trade, business or manufacture.
" With regard to trade and business it was said : "Business too is a word of wide import.
In one sense it includes all occupations and professions.
But in the collocation of the terms and their defi (1) A. I.R. 1970 S.C. 1407.
(2) [1968] 1 S.C.R. 742.
217 nitions these terms have a definite economic content of a particular type and all the authorities of this Court have been uniformly accepted as excluding professions and are only concerned with the production, distribution and consumption of wealth and the production and availability of material services.
" With regard to the Hospital Mazdoor Sabha case (1) was remarked (see p. 1414) "The case proceeds on the assumption that there need not be an economic activity since employment of capital and profit motive were considered unessential.
It is an erroneous assumption that an economic activity must be related to capital and profit making alone.
An economic activity can exist Without the presence of both.
Having rejected the true test applied in other cases before, the test applied was 'can such activity be carried on private individuals or group of individuals? ' Holding that a hospital could be run as a business proposition and for profit, it was held that a hospital run by Government without profit must bear the same character.
With respect, we do not consider this to be the right test.
This test was employed to distinguish between the administrative functions of Government and local authorities and their functions analogous to business but it cannot be used in this context.
When it was emphasised in the same case that the activity must be analogous to business and trade and that it must be productive ,of goods or their distribution or for producing ,material services to the community at large or a part of it, there was no room for the other proposition that privately run hospitals may in certain circumstances be regarded as industries.
" This Court held that the Hospital Mazdoor Sabha case(1) "took an extreme view of the matter which was not justi fied".
With regard to the activities of the individual hospitals it was said the Safdar Jung hospital had not embarked on an economic activity which could be said to be analogous to trade or business.
There was no (1) [1960] 2 section C. R. 866, 218 evidence that it was more than a place where persons could get treated.
This was a part of the functions of Government and ,the hospital was run as a Department of Government and could not therefore be said to be an industry.
Again, with regard to Tuberculosis hospital it was found not to be an independent institution but a part of the Tuberculosis Association of India.
The hospital was wholly charitable and was a research institute.
The dominant purpose of the hospital was research and training, but as research and training could not be given without beds in a hospital, the hospital was run.
According to this Court, treatment is thus a part of research and training.
In these circumstances the Tuberculosis hospital could not be described as an industry.
With regard to the Kurji Holy Family Hospital again it was found to be entirely charitable.
It carried on the work of training, research and treatment; its income was mostly from donations and distribution of surplus as profit is prohibited.
It could not therefore be an industry as laid down in the Act.
Reference may also be made to the case of Lalit Hari Ayurvedic College Pharmacy vs Its Workers ' Union (1).
In this the appellate Tribunal found that the pharmacy run by the appellant sold medicines in the market and realised about Rs. one lakh per annum whereas in the hospital run by it about 30% of the medicines manufactured by it were consumed and about 70% were sold in the market.
This judgment was delivered on the same date by the same Bench which decided the Hospital Mazdoor Sabha case (supra).
On the facts found this Court held that there could be no doubt "that the activity of the appellant in running the pharmacy and the hospital was an undertaking under s.2(j) and was an industry".
The only case of Panjrapole which appears to have come before the High Courts was that of the Madras Panjrapole vs Labour Court(2)which was the subject matter of an industrial dispute referred to in the year 1958 by the State Government for adjudication by the Labour Court, Madras.
This was decided after the Hospital Mazdoor, Sabha case.
The facts referred to by the High Court were that the Madras Panjrapole was a charitable society (1) A.I.R. 1960] S.C. 1261.
(2) 219 registered under the Societies Registration Act occupying an area of about Ac.
12 00 of land within the city of Madras on which the munificence of several donors had enabled the construction of shelters for animals as well as sanctuary for birds.
The objects of the society, as stated in the memorandum of association, are protection, care and treatment of old, infirm and injured cows, calves, bullocks etc.
and affording freedom to such animals from being slaughtered unnecessarily and to guarantee old age relief to the old, infirm and unserviceable animals till they die of natural causes.
To achieve these objects, the means envisaged to be adopted were : (a) maintenance of shelter house for aged and unserviceable animals ' (b) the feeding and treatment of all animals entrusted to the care of the society either by the owners anxious to pension their old animals or rescued by philanthropic persons from the hands of butchers and the protection of animals remanded by magistrates; (c) the breeding of bulls under ideal and sanitary conditions (d) the maintenance of a dairy farm with special attention being paid to proper feeding, accommodation and water supply, the proceeds of which will go to the benefit of the other animals of the Panjrapole; and (e) the bringing up of the calves of the young cows under healthy conditions.
The Court observed (see p. 689): " It is a matter of common knowledge that a number of dry cows in the City of Madras are sold away to butchers by the poor milkmen who could not support them.
Butchers themselves offer tempting prices for such cows, a temptation which the poverty of the milkmen could not but lead him to succumb.
Dry cows were admitted into the Panjrapole to prevent them from going into the slaughter house.
Maintenance of the dry cows called for stud bulls Stud bulls were presented to the society by the Government.
In the course of time, the dry cows brought forth their progeny and began to yield milk.
220 The Panjrapole was, therefore, in a position to sell milk yielded by the cows which were received by it with a view to protect them from the slaughter house details of the sale amounts in respect of the milk produced shows that the institution had been receiving substantial sums every year by sale of milk." So for as the activities of the Madras Panjrapole and Bombay Panjrapole are concerned they are Practically identical except that in the present case the maintenance, of a dairy farm is not explicitly referred to anywhere but the facts as culled from the evidence makes the same only too obvious.
There was however a certain difference in the case of the Madras Panjra pole inasmuch as the Madras High Court found that (see p. 691) "During certain years, it even went a step further.
The Panjrapole purchased cows, maintained a dairy farm and supplemented their own production of milk with out side milk and sold them.
These activities would certainly partake the character of a business, though the profit of such business might have gone to the humanitarian activities undertaken by the society.
But the activities have long ago ceased.
What the society is now having is the milk yielded by its own cows.
Those cows are admittedly kept by the Panirapole till their lives.
They are not sold.
They are the property of the Panjrapole.
The milk yielded by those cows could only be considered as an incidental product in the maintenance of the cows.
The sale of cowdung cakes and menure and of the calves after the mother cows become dry are also incidental.
It cannot be held that a trade or business is conducted by the institution.
" According to the learned single Judige who heard the peti tion the activities of the Panjrapole had nothing to do with human needs.
They were solely devoted to the needs of helpless animals; though incidentally such activities have a business tinge about them it cannot be said to be for human need or material welfare.
The objects were mainly religious and humanitarian.
Following the test laid down in the Hospital Mazdoor Sabha case the learned Judge was of opinion that there was no industrial dispute which could be referred by the State Government to the 221 Labour court for adjudication.
The case went in appeal to a Letters Patent Bench : Workmen Employed in Madras Panjrapole vs Madras Panjrapole (1).
The Bench took a somewhat different view from that of the learned single Judge.
It demurred to the observations of the trial Judge that "there is no element of trade or business involved in the various activities of the society".
According to the Bench : "These observations, however, do not extend to subsequent developments, the result of the growth of the institution, and its attempt to achieve self sufficiency.
There were (1) purchase and sale of milk, a fairly wide upon scale, (2) the maintenance of a dairy farm during a period of the history of the institution, and (3) similarly, the maintenance of stud bulls, to enable dry cows to conceive and bear calves." The Bench felt compelled to allow the appeal to the extent of modifying the writ of certiorari and laying down that the actual decision would have to be arrived at after the record of adequate evidence by the Labour court in the light of the principles formulated, the available evidence being both inadequate and contradictory.
For the guidance of the Labour court the Bench observed Even if the institution at the inception, and as basically defined, be purely humanitarian,.
non industrial and not amenable to any of the tests.
upon which the definition has been applied,, it cannot be gainsaid that, if the.
institution had largely altered its complexion through the years, so as to have become a focus of economic production, the definition again night be applicable.
" The Bench also examined the question whether the activity of the Panjrapole was in essence religious, or spiritual, as according to it a temple or a church could not be considered to be an industry.
(1) [1962]2 L.L.J. 472.
222 The net result of the above seems to be that although the Bench was inclined to hold that the Madras Panjrapole at its inception was not an industry the complexion of its activities might have been altered by later developments so, as to render the institution as then organised an industry within the meaning of, the Act.
Further according to the Bench individual units of the Organization (like the dis trict dairy farm) might constitute an industry though the society itself may not be one.
The matter came up again before the Madras High Court (see , The Tribunal held in favour of the workmen and the learned Judge dismissed the application for the issue of a writ by the Panjrapole.
The learned Judge referred to the reports of the institution in several years past from 1937 to 1957.
He found that the object of the society had been amended in 1937 to enable it to receive young cows and charge fees from the owners.
The idea of starting a dairy farm was for supporting the infirm cows, bullocks and horses and in pursuance of that idea stud bulls were acquired for improving the cattle breeding.
, The income from the sale of milk rose phenomenally reaching the figure of Rs. 60,000 in the year 1957.
The learned Judge found himself unable to hold that maintaining cows and stud bulls and selling milk were only Subsidiary in nature to the humane the society, namely, to provide Shelter for the de CrePit and useless and infirm animals.
The learned Judge held that "if the Madras Panjrapole had confined itself to the objectives at its inception, namely, to give protection to the old, infirm and decrepit animals, it could well be con tended that it was only for the purpose of satisfying purely spiritual needs, as it is common knowledge that Hindus 'consider cow protection.
as one of their religious duties.
If the Madras Panjrapole had not extended its activities, following 'the, authorities cited above, would have had no hesitation in holding that it is not an industr) A reading of the annual reports show that a large number of high milk yielding cows and buffaloes were pur ,chased, by the society and due to the successful working of the dairy farm the Panjrapole was able to supply milk to various institutions .
The reports show that considerable profits were made by the Panjrapole, the sale of milk fetching a sum of Rs. 60,000 in the year 1957".
In the 223 result the petition was dismissed and the labour court was directed to determine the other issues.
We have referred at some length to the Madras Panjle case to show the analogy of the activities of the radoras Panjrapole to the.
Bombay Panjrapole.
Save for the fact that the Madras Panjrapole definitely and expressly changed its objective by starting a dairy farm and purchasing mulch cows and stud bulls there is very little difference between the facts of the case before us from those in the Madras Panjrapole case.
In the present case only one stud bull w s purchased but the activities pursued by the Bombay Panjrapole make it clear that they were pursuing the same kind of activity, namely, that of using ,stud bulls for the purpose of breeding healthy cattle including cows so as to be able to make a very sizable income from the sale of milk.
For the last few years, from 1958 to 1962 the number of milch cows was always Considerable which could only be accounted for by the fact that from time to time the place of cows which had become dry was being taken up by cows fecundate by the bulls maintained for the purpose of keeping up a steady supply of milk.
We have already referred to the fact that ' the value of milk supplied to the sick and infirm cattle was infinitesimal compared to that sold in the market.
The expenses incurred in connection with the treatment of sick and infirm animals was also negligible compared to the total expenses of the institution.
The number of men employed for such treatment was very small at all times.
The mere fact therefore that the Panjra pole never purchased milch cows and never purchased stud bulls except once makes no difference to the question as to whether their activity of maintaining cows and bulls could only be considered as an investment.
It was certainly carried on as a business although it was not pursued in the same way as astute businessmen only out to make profit would, namely, get rid of the animals which were no longer fit for any Use.
The value of the milk supplied for the last 3 or 4 years was well in excess of Rs. 2 lakhs per annum and this could only be possible if the cows and buffaloes had been kept and maintained not merely to keep them alive but with the idea of getting as much production out of them as possible.
224 In this view of the matter, it is hardly necessary to consider the other cases which were cited at the Bar, namely, Gymkhana Club Union case (1), Cricket Club vs Labour Union (2) and Harinagar Cane Farm vs State of Bihar (1).
It was remarked in the Gymkhana Club case that the activity of the club is conducted with the aid of employees, who follow callings or avocations and that the activities of the club was not a calling or business of its members, of Managing Committee and there was no undertaking analogous to trade or business.
In the Cricket Club 's case (2) the Court examined the different activities of the club and came to the conclusion that they did not lead to the inference that the club was carrying on an industry.
On the facts of this case we hold that the activities of the Panjrapole as disclosed in this case constituted an industry within the meaning of section 2(j) of the Industrial Disputes Act and the appeal must therefore be dismissed with costs.
S.C. Appeal dismissed. (1) [1968] 1 S.C.R. 742.
(2) ; (3) ; 225. | The appellant Panjrapole was started in 1834 as a charitable institution for the care and protection of animals.
it expanded its activities considerably over the years.
The institution gradually diversified its objects from only tending to the sick, infirm and unwanted cattle by adopting a policy of keeping cattle not merely for their own sake but for the sake of improving the cattle population in order to get large quantities of milk for sale and there by get an income which would augment its sources.
The institution was using stud bulls for the purpose of breeding healthy cattle including cows so as to be able to make a sizable income from the sale of milk.
The value of the milk sold was considerable compared to the value of milk supplied to the sick and infirm cattle of the institution.
The expenses for treating the sick animals was also very little compared to the total expenses of the Institution.
A large number of workers were employed at the institution.
They raised an industrial dispute in relation to their wages and other service benefits.
The dispute was referred for adjudication to the Industrial Tribunal.
It was contended by the Appellant that the Institution was a charitable institution and therefore was not an 'industry ' within the meaning of section 2(j) of the Industrial Disputes Act.
The Tribunal found that the activities of the institution in connection with its movable property and collection and sale of milk to be an "industry" while the maintenance of lame, infirm and sick cows, dogs and other animals was held not to constitute an "industry".
A petition under article 227 was moved in the High Court for quashing the award of the Industrial Tribunal but the same was summarily rejected.
Dismissing the appeal, HELD:On the facts and circumstances of the case, the Bombay Panjrapole is an "Industry" within the meaning of Sec.
2(j) of the Industrial Disputes Act.
The activities of the Panjrapole, though charitable at the.
beginning, was not exclusively so in later years, and the later activities show that it was carried on as a business concern.
Even the value of the milk supplied for the last 3 or 4 years itself was well in excess ,of Rs. 2 lakhs per annum and this could only be possible if the cows ,and buffaloes had been kept and maintained not merely to keep them ,alive but with the idea of getting as much production out of them as possible and the Panjrapole was run like a dairy firm.
[223H] State of Bombay vs The Hospital Mazdoor Sabha, ; , Safdar Jung Hospital, New Delhi vs K. section Sethi & Management of M/s T. B. Hospital, New Delhi vs The Workmen, A.I.R. 1970 'S.C. 1407.
Gynmkhana Club Union vs Management, [1968].
1 S.C.R. 742, Lalit Hari Ayurvedic College Pharmacy vs
Its Workers Union, A.I. R. , Madras Panjrapole vs Labour Court, , Worknien Employed in Madras Panjapole vs Madras Panjropole , Cricket Club vs Labour Union, ' [1969] 1 S.C.R. 60, Harinagar Cone Firma vs State of Bihar, [1964] 2 S.C.R. 458, referred to. |
Appeal No. 105 of 1953.
Appeal by Special Leave granted by this Court 's Order dated the 24th September, 1951 from the Judgment and Decree dated the 2nd day of September, 1949 of the High Court of Judicature at Bombay in Appeal No. 274 of 1948 from Original Decree arising out of the Decree dated the 30th day of July, 1946 of the Court of Civil Judge, Senior Division at Hubli in Special Suit No. 56 of 1944.
K. R. Bengeri and Sardar Bahadur for the appellant.
section B. Jathar and I. N. Shroff for respondents Nos. 3, 4 and 5.
December 10.
The Judgment of the Court was delivered by MEHR CHAND MAHAJAN C. J.
This appeal raises a question of importance "whether a widow can exercise a power of adoption conferred on her or possessed by her at any time during her life irrespective of any devolution of property or changes in the family or other circumstances and even after a grandson has come on the scene but has subsequently died without leaving a widow or a son".
The situation in which this question arises can properly be appreciated by reference to the following genealogy: 1137 Dyamappa I I I Kalasappa I I Krishtarao Radhabai=Gangabai (deft.2) (Deft.1) (Senior widow) (Junior window) | Gurunath | (Appellsnt adopted | by Gsngsbai on | | 18 11 53) | | | Dattatraya (son) (died 1913) | | =Sundarabai (died after | | her husband in 1913) Kamalabai Yamunabai (Resp.1) (Resp.2) | | | | | | | Kalasappa Jagannath (predeceased (died 1914) Dattatraya) Girimaji | Hanamanta | | | | | | Malhar Ganesh (Resp.3) (Resp.5) Venkatesh Hanamant (Resp.4) (Resp.6) 1138 Gurunath, the plaintiff, claims that he was adopted in 1943 by Gangabai, widow of Krishtarao.
Krishtarao died in 1890, leaving him surviving two widows Radhabai and Gangabai and a son Dattatraya.
Dattatraya died in 1913 leaving him surviving a widow Sundarabai and a son Jagannath.
Sundarabai died shortly after Dattatraya while Jagannath died in the year 1914.
After an interval of about 30 years since his death, it is alleged that Gangabai who survived both her son, and grandson adopted the plaintiff, and thus raised the problem which we are called upon to solve.
On the 15th of March, 1944 the appellant instituted the suit out of which this appeal arises in forma pauperis on the allegation that he was the adopted son of Krishtarao and adopted to him by Gangabai, his junior widow, and as such was entitled to the possession of his adoptive father 's properties comprised in the suit.
He also claimed a declaration regarding the amount of compensation money payable to the plaintiff 's family for the land acquired by Hubli Municipality.
The defendants who are the sons and grandsons of the first cousin of Krishtarao disputed the plaintiff 's adoption on the ground that Gangabai 's power to adopt was extinguished when Dattatraya died in 1913, leaving behind him a widow Sundarabai and a son Jagannath who could continue the family line.
Gangabai in her written statement supported the plaintiff 's claim and asserted that the senior widow Radhabai had given consent to her adopting the plain tiff.
The trial judge upheld the defendants ' contention and dismissed the plaintiff 's suit.
The factum of the plaintiff 's adoption was however upheld, and it was further held that Radhabai did not give her consent to the adoption.
On appeal this decision was affirmed by the High Court and it was held that Gangabai 's power to adopt came to an end at the time when her son died leaving a son and a widow to continue the family line.
No finding was given on the question whether Radhabai had given her consent to the adop tion.
That perhaps would have been the simplest way to end the dispute.
Against the decision of the High 1139 Court this appeal in forma pauperis is now before us by special leave.
The only question canvassed in the appeal is in respect to the validity of the plaintiff 's adoption.
It was contended that Hindu Shastric Law itself sets no limit to the exercise of the widow 's power of adoption once she has acquired that power or is possessed of it, and that being so, the power can be exercised by her during her life time when necessity arises for the exercise of it for the purpose of continuing the line of her husband.
On the other hand, it was argued that though Hindu Shastric Law itself sets no limit to the exercise of the power, yet it has long been judicially recognised that the power is not an unlimited and absolute one, and that it comes to an end when another heir has come on the scene and he has passed on to another the duty of continuing the line.
The question at what point of time the widow 's duty of continuing the line of the husband comes to an end has been the subject matter of a number of decisions of Indian High Courts and of the Privy Council and the point for our consideration is whether the limits laid down in these decisions have been arbitrarily fixed and are not based on sound principles and should be reviewed by us.
A brief reference to the different decisions of the Privy Council is necessary for a proper appreciation of the state of law on this subject at the present moment.
The two leading cases on this point are the decisions of the Privy Council arising out of the adoption made by Shrimati Chundrabullee and decided in 1876 and 1878.
The judgment in the first of these cases, i.e. in Bhoobun Moyee vs Ram Kishore(1) was delivered by Lord Kingsdown.
What happened there was that one Gour Kishore died leaving a son Bhowanee and a widow, Chundrabullee, to whom he gave authority to adopt in the event of his son 's death.
Bhowanee married and died at the age of 24 without issue, but leaving him surviving his widow Bhoobun (1) (1965] 10 M.I.A. 279. 146 1140 Moyee.
Chundrabullee then adopted Ram Kishore.
Ram Kishore brought a suit against Bhoobun Moyee for the recovery of the estate.
The Privy Council held that the claim of Ram Kishore failed on the ground that even if he had been in existence at the death of Bhowanee he could not displace the widow of the latter.
It was further held "that at the time when Chundrabullee professed to exercise her power of adoption, the power was incapable of execution on the ground that Bhowanee had married and left a widow as his heir".
The following quotation from the judgment of Lord Kingsdown may be cited as indicating the reasons for the decisions: "In this case, Bhowanee Kishore had lived to an age which enabled him to perform and it is to be presumed that he had performed all the religious services which a son could perform for a father.
He had succeeded to the ancestral property as heir; he bad full power of disposition over it; he might have alienated it; he might have adopted a son to succeed to it if he had no male issue of his body.
He could have defeated every intention which his father entertained with respect to the property.
On the death of Bhowanee Kishore, his wife succeeded as heir to him and would have equally succeeded in that character in exclusion of his brothers, if he had any.
She took a vested estate, as his widow, in the whole of his property.
It would be singular if a brother of Bhowanee Kishore, made such by adoption, could take from his widow the whole of his property, when a natural born brother could have taken no part.
If Ram Kishore is to take any of the ancestral property, he must take all he takes by substitution for the natural born son, and not jointly with him. .
The question is whether the estate of his son being unlimited, and that son having married and left a widow his heir, and that heir having acquired a vested estate in her husband 's property as widow, a new heir can be substituted by adoption who is to defeat that estate, and take as an adopted son what a legitimate son of Gour Kishore would not have taken.
1141 This seems contrary to all reason and to all the principles of Hindoo law, as far as we can collect them. .
If Bhowanee Kishore had died unmarried, his mother, Chundrabullee Debia, would have been his heir, and the question of adoption would have stood on quite different grounds.
By exercising the power of adoption, she would have divested no estate but her own, and this would have brought the case within the ordinary rule; but no case has been produced, no decision has been cited from the Text books, and no principle has been stated to show that by the mere gift of a power of adoption to a widow, the estate of the heir of a deceased son vested in possession, can be defeated,.
and divested".
In the result the suit of Ram Kishore was dismissed.
After the deaths of Bhoobun Moyee and Chundrabullee, Ram Kishore got possession of the property under a deed of relinquishment executed in 1869 in his favour by Chundrabullee, who herself had entered into possession of the property as mother and next heir of Bhowanee Kishore after the death of Bboobun Moyee in 1867.
If Ram Kishore 's adoption was good he was undoubtedly the next heir to the property.
A distant collateral however claimed the estate on the ground that his adoption was invalid.
The Privy Council then held that "upon the vesting of the estate in the widow of Bhowanee, the power of adoption of Chudrabullee was at an end and incapable of execution" and that Ram Kishore had therefore no title.
This was the decision in Padma Coomari vs Court of Wards(1) wherein a second effort to maintain the validity of his adoption by Chundrabullee was made but without success.
The High Court in its judgment in Padma Coomari 's case(1) remarked that the decision in Bhoobun Moyee vs Ram Kishore(2) did not decide that Chundrabullee could not adopt on the extinction of the issue either of natural born son or of the first to be adopted son, and that if Chundrabullee had on the death of Bhoobun Moyee made the adoption and so divested her own estate,, there would be (1) [1881] L.R. 8 I.A, 229.
(2) [1865] 10 M.I.A. 279, 1142 nothing in the judgment of the Privy Council and nothing in the law to prevent her doing that which her husband authorised her to do, and which would certainly be for his spiritual benefit, and for that of his ancestors and even of Bhowanee Kishore.
The learned Judges of the High Court proceeded then to observe as follows: "With all respect, therefore, we imagine that Lord Kingsdown must have said by inadvertence, in reference to the idea of adopting a son to the great grandfather of the last taker, that at that time 'all the spiritual purposes of a son, according to the largest construction of them, would have been satisfied '; and again, Bhowanee Kishore had lived to an age which enabled him to perform, and it is to be presumed that he had performed, all the religious services which a son could perform for a father.
There is really no time at which the performance of these services is finally completed, or at which the necessity for them comes to an end".
To this Sir Richard Couch, who delivered the judgment of the Privy Council, gave a very emphatic answer in these terms: "The substitution of a new heir for the widow was no doubt the question to be decided, and such.
substitution might have been disallowed, the adoption being held valid for all other purposes, which is the view that the lower Courts have taken of the judgment, but their Lordships do not think that this was intended.
They consider the decision to be that, upon the vesting of the estate in the widow of Bhowanee, the power of adoption was at an end, and incapable of execution.
And if the question had come before them without any previous decision upon it, they would have been of that opinion.
The adoption intended by the deed of permission was for the succession to the zemindary and other property, as well as the performance of religious services; and the vesting of the estate in the widow, if not in Bhowanee himself, as the son and heir of his father, was a proper limit to the exercise of the power".
The question of limitations upon the power of the 1143 widow to adopt thus stated in the Chundrabulle series of decisions was again affirmed by the Judicial Committee in Thayammal and Kuttiswami Aiyan vs Venkatarama Aiyan(1) decided in 1887 and in Tarachurn vs Suresh Chunder(2) decided in 1889.
In the year 1902 this question came up for consideration before the Full Bench of the Bombay High Court in Ramkrishna Ramchandra vs Shamrao(3).
There a grandmother succeeded to her grandson who died unmarried andit was held that her power to make an adoption hadcome to an end and that the adoption was invalid.
Chandavarkar, J., who delivered the judgment of the Full Bench, enunciated the principle in these words: "Where a Hindu dies leaving a widow and a son, and that son dies leaving a natural born or adopted son or leaving no son but his own widow to continue the line by means of adoption, the power of the former widow is extinguished and can never afterwards be revived".
This principle was approved and applied by the Judicial Committee in Madana Mohana vs Purushothama Deo(4) in these words: "Their Lordships are in agreement with the principle laid down in the judgment of the Full Court of Bombay as delivered by the learned judge, and they are of opinion that, on the facts of the present case, the principle must be taken as applying so as to have brought the authority to adopt conferred on Adikonda 's widow to an end when Brojo, the son she originally adopted, died after attaining full legal capacity to continue the line either by the birth of a natural born son or by the adoption to him of a son by his own widow".
The next and the most important decision of the Judicial Committee in regard to this matter was given in the year 1933 in Amarendra Mansingh vs Sanatan(5) where there was a departure from or at least a reorientation of the old doctrine, and stress was laid on the spiritual rather than on the temporal aspect (1) (1887] L.R. 14 I.A. 67.
(3) Bom.
(2) [1889] L.R. 16 I.A. 166.
(4) [1918] L.R. 45 I.A. 150.
(5) [1933] L R. 60 I.A. 242.
1144 of adoption, linking it up with the vesting and divesting of the estate.
There a Hindu governed by the Benaras school was survived by an infant son and a widow, to whom he had given authority to adopt in the event of the son dying.
The son succeeded to his father 's impartible zamindari but died unmarried at the age of 20 years and 6 months.
By a custom of the family which excluded females from inheritance the estate did not go to his mother but became vested in a distant collateral.
A week after the son 's death she made an adoption.
It was held that the adoption was valid and it divested the estate vested by inheritance in the collateral.
All the previous decisions were reviewed in this case by Sir George Lowndes who delivered the judgment of the Board.
At page 248 of the report it is said as follows: "In their Lordships ' opinion, it is clear that the foundation of the Brahminical doctrine of adoption is the duty which every Hindu owes to his ancestors to provide for the continuance of the line and the solemnization of the necessary rites.
And it may well be that if this duty has been passed on to a new generation, capable itself of the continuance, the father 's duty has been performed and the means provided by him for its fulfilment spent: the "debt" be owed is discharged, and it is upon the new generation that the duty is now cast and the burden of the "debt" is now laid.
It can, they think, hardly be doubted that in this doctrine the devolution of property, though recognised as the inherent right of the son, is altogether a secondary consideration. . that the validity of an adoption is to be determined by spiritual rather than temporal considerations; that the substitution of a son of the deceased for spiritual reasons is the essence of the thing, and the consequent devolution of property a mere accessory to it.
Having regard to this well established doctrine as to the religious efficacy of sonship, their Lordships feel that great caution should be observed in shutting the door upon any authorised adoption by the widow of a sonless man, The Hindu law itself sets no limit 1145 to the exercise of the power during the lifetime of the widow and the validity of successive adoptions in continuance of the line is now well recognised.
Nor do the authoritative texts appear to limit the exercise of the power by any considerations of property.
But that there must be some limit to its exercise, or at all events some conditions in which it would be either contrary to the spirit of the Hindu doctrine to admit its continuance, or inequitable in the face of other rights to allow it to take effect, has long been recognised both by the Courts in India and by this Board, and it is upon the difficult question of where the line should be drawn, and upon what principle, that the argument in the present case has mainly turned".
In another part of the judgment their Lordships observed as follows: "It being clear upon the decisions above referred to that the interposition of a grandson, or the son 's widow, brings the mother 's power of adoption to an end, but that the mere birth of a son does not do so, and that this is not based upon a question of vesting or divesting of property, their Lordships think that the true reason must be that where the duty of providing for the continuance of the line for spiritual purposes which was upon the father, and was laid by him conditionally upon the mother, has been assumed by the son and by him passed on to a grandson or to the son 's widow, the mother 's power is gone.
But if the son die himself sonless and unmarried, the duty will still be upon the mother, and the power in her which was necessarily suspended during the son 's lifetime will revive".
The learned counsel for the appellant placed reliance upon the last sentence in the passage in the Privy Council judgment quoted above and contended that if the power of the widow which remained suspended during the lifetime of the son could revive on the son dying sonless and unmarried, logically the power must also revive when the son and his widow and the grandson and his widow all died out.
Reliance was also placed on the passage already cited in which 1146 their Lordships laid emphasis on the proposition that the substitution of a son of the deceased for spiritual reasons is the essence of the thing, and the consequent devolution of property a mere accessory to it and it was contended that the grounds on which an outside limit was laid on the exercise of the widow 's power in the Chundrabullee series of decisions no longer survived, in view of the ratio in Amarendra 's decision and that it having been held that the power of adoption did not depend on and was not linked with the devolution of property or with the question of vesting or divesting of property and could be exercised whenever necessity for continuing the line arose, it should be held that when the son and his widow were dead and the grandson to whom he handed the torch for continuing the line also died, the power of Gangabai to make the adoption revived and thus the adoption was valid.
This argument, in our opinion, is not well founded as it is based on an incorrect apprehension of the true basis of the rule enunciated in this judgment, the rule being that "where the duty of providing for the continuance of the line for spiritual purposes which was upon the father and was laid by him conditionally upon the mother, has been assumed by the son and by him passed on to the grandson or to the son 's widow, the mother 's power is gone".
In the words of Chandavarkar, J. affirmed by the Judicial Committee in Madana Mohana vs Purushothama Deo(1) "the power having once been extinguished it cannot afterwards be revived".
In other words the true rule is this: "When a son dies before attaining full legal competence and does not leave either a widow or a son or an adopted son then the power of the mother which was in abeyance during his lifetime revives but the moment he hands over that torch to another, the mother can no longer take it".
The contention of the learned counsel therefore that even if the second generation dies without taking steps to continue the line the grandmother still (1) [1918] L R. 45 I.A. 156.
1147 retains her authority and is still under a duty to continue the line cannot be sustained.
The three propositions that the Privy Council laid down in Amarendra 's case therefore cannot now be questioned.
These propositions may be summed up in these terms: (1) That the interposition of a grandson, or the son 's widow, competent to continue the line by adoption brings the mother 's power of adoption to an end; (2) that the power to adopt does not depend upon any question of vesting or divesting of property; and (3) that a mother 's authority to adopt is not extinguished by the mere fact that her son had attained ceremonial competence.
The rule enunciated in Amarendra 's case was subsequently applied in Vijaysingji vs Shivsangji(1) and was again restated and reaffirmed as a sound rule enunciating the limitations on the widow 's power to adopt in Anant Bhikappa Patil vs Shankar Ramchandra Patil(2).
One of the propositions enunciated in this decision was not accepted by this court in Shrinivas Krishnarao Kango vs Narayan Devji Kango(3), but that apart no doubt was cast in this decision on the above rule.
The result of these series of decisions is, that now for about three quarters of a century the rule that "the power of a widow to adopt comes to an end by the interposition of a grandson or the son 's widow competent to adopt" has become a part of Hindu Law.
though the reasons for limiting the power may not be traceable to any Shastric text; and may have been differently stated in the several judgments.
It is well known that in the absence of any clear Shastric text the courts have authority to decide cases on principles of justice, equity and good conscience and it is not possible to bold that the reasons stated in support of the rule are not consistent with these principles.
During the arguments no substantial grounds have (1) [1935] L.R 62 I.A. 161.
(2) [1943] L.R. 70 I.A. 232.
(3) ; 147 1148 been suggested for holding that the rule is either in equitable or unjust or is repugnant to or inconsistent with any doctrine or theory of Hindu Law of adoption.
In this situation we are bound to hold that it is too late in the day to say that there are no limitations of any kind on the widow 's power to adopt excepting those that limit the power of her husband to adopt, i.e. that she cannot adopt in the presence of a son, grandson or great grandson.
Hindu Law generally and in particular in matters of inheritance, alienation and adoption gives to the widow powers of a limited character and there is nothing in the limitations laid down by the course of decisions above referred to repugnant to that law.
For the reasons given above, we are unable to depart from the rule that a widow 's power to make an adoption comes to an end by the interposition of a grandson or the son 's widow competent to continue the line by adoption.
The learned counsel for the appellant placed considerable reliance on two decisions of the Indian High Courts in support of his contention and suggested that the rule laid down in Amarendra 's case had no application to the situation that has arisen in the present case and that on the death of the grandson the widow 's power to adopt which was in abeyance during his life revived.
Reference in this connection was made to the decision of the Nagpur High Court in Bapuji vs Gangaram(1).
There a Hindu died leaving a widow and his son and the son died leaving a widow only who re married.
It was held that the power of the mother revived on the re marriage of the son 's widow.
Reliance for this proposition curiously enough was placed on the decision of the Judicial Committee in Amarendra 's case as appears from the following quotation from that judgment: "If the observation quoted from Amarendra Mansingh vs Sanatan Singh(2) be understood as limited to the case where the widow D or the grandson E stands between (is interposed) the grand widow C and her power, everything is clear except for the (1) (1941) I.L.R. Nagpur 178.
(2) Pat.
642, 658.
1149 words "and can never be revived" quoted from Ramkrishna vs Shamrao(1).
Strictly the above is the true meaning of their Lordships ' words.
That amounts to nothing more than this: that while D or E is alive and competent to adopt his or her existence prevents any adoption being made by C.
That leaves at large what happens when the "interposition" is ended.
Logic says that as the death of the son removes his "inter position" whereupon C 's power revives so the death of D removes her interposition and so C 's power revives".
In our judgment there is not only an obvious fallacy in this reasoning but it is based on a wrong apprehension of the true reasons stated for the rule in Amarendra 's case.
The reason for the rule in Amarendra 's case was "where the duty of providing for the continuance of the line for spiritual purposes which was upon the father, and was laid by him conditionally upon the mother, has been assumed by the son and by him passed on to a grandson or to the son 's widow, the mother 's power is gone".
If that is the true reason, obviously the duty having come to an end cannot be revived on logical grounds.
We are therefore clearly of opinion that the ratio of the decision in Bapuji vs Gangaram(2) was erroneous.
The second decision to which reference was made is a decision of the Lucknow Court reported in Prem Jagat Kuer vs Harihar Bakhsh Singh(3).
The learned Judges in that case followed the decision of the Nagpur High Court above quoted, and further added (though under some misapprehension) that this decision had been approved by their Lordships of the Privy Council.
As a matter of fact, there was another decision reported in the same report on a different question that had been upheld by the Privy Council and not the decision above referred to.
The authority of this later decision therefore is considerably shaken by this error and even otherwise the decision gives no independent reasons of its own apart from those contained in the Nagpur case.
(1) Bom.
(2) (3) Luck.
1. 1150 For the reasons given above, this appeal fails and is dismissed, but in the circumstances of the case we will make no order as to costs.
Appeal dismissed. | It is well settled according to Hindu Law that a widow 's power to adopt comes to an end by the interposition of a grandson or the son 's widow competent to continue the line by adoption.
The mother 's authority to adopt is not extinguished by the mere fact that her son had attained ceremonial competence.
The power to adopt does not depend upon any question of vesting or divesting of property.
The decision of the Judicial Committee of the Privy Council in Anant Bhikappa Patil vs Shankar Ramchandra Patil (L.R. 70 I.A. 232) is not sound in so far as it relates to the properties inherited from collaterals prior to adoption.
In respect of such properties the adopted son can lay no claim on the ground of relation back.
Shrinivas Krishnarao Kango vs Narayan Devji Kango ([1955] 1 S.C.R. 1), followed.
Amarendra Mansing vs Sanatan ([1933] L. R. 60 I. A. 242), explained.
Anant Bhikappa Patil vs Shankar Ramchandra `Patil ([1943] L.R. 70 I.A. 232), not relied on in part.
Bhoobun Moyee vs Ram Kishore ([1865] 10 M.I.A. 279); Pudma Coomari vs Court of Wards ([1881] L.R. 8 I.A. 229); Thayammal and Kuttisami Aiyan vs Venkatarama Aiyan ([1887] L.R. 14 I.A. 67); Tarachurn vs Suresh Chunder ([1889] L.R. 16 I.A. 166); Ramkrishna 1136 Ramchandra vs Shamrao ([1902] I.L.R. ; Madana Mohana vs Purushothama Deo ([1918] L.R. 45 I.A. 156); Vijaysingji vs Shivsangji ([1935] L.R. 62 I.A. 161); Bapuji v Gangaram ([1941] I.L.R. Nagpur 178); and Prem Jagat Kuer vs Harihar Bakhsh Singh ([1945] I.L.R. 21 Lucknow 1), referred to. |
ivil Appeal NO. 293 of 1988.
From the Judgment and Order dated 24.4.1987 of the Andhra Pradesh High Court in W.P.
NO.1645 Of 1987.
M.C. Bhandare, M. Qamaruddin and Mrs. M. Qamaruddin for the Appellant.
P.A. Choudhary, A.V. Rangam and T.V.S.N. Chari for the Respondents.
JAGANNATHA SHETTY, J.
This appeal by leave is directed against the judgment and order dated April 24, 1987 Of the Division Bench Of the High Court of Andhra Pradesh dismissing the writ petition NO.1645 Of 1987.
PG NO 896 Briefly stated, the facts are these: In the month of August 1984 a Ministry headed by Sri N. Bhaskara Rao suddenly came into power in A.P.
The said Ministry just lasted for about a month and had to go out of office for want of vote of confidence by the State Legislative Assembly.
During that short term, the Government granted a number of permissions to various private bodies and individuals for starting colleges of education (B.Ed.) courses.
The appellant was one among those beneficiaries.
The permission was granted with several conditions.
Those conditions were required to be complied with within a period of six months.
In the middle of September 1984 Bhaskara Rao 's Ministry went out of office and the Government headed by Sri N.T. Rama Rao came back to power.
Soon thereafter the permissions granted were suspended or cancelled.
The appellant and other institutions aggrieved by the cancellation moved the High Court of Andhra Pradesh for relief under Article 226.
~he appellant filed writ petition No. 812 of 1986.
The State contended that the parties did nOt comply with the conditions of the grant of permission.
All those writ petitions were disposed of by common order dated March 7, 1986.
The High Court was of opinion that the cancellation was as arbitrary as the grant of permission.
So a via media was taken since the parties have invested large sums of money for establishing the colleges.
The High Court laid down certain conditions and issued directions for compliance for granting permission and recognition to the colleges.
Some of those directions are as follows| "(1) The petitioners shall comply with the requirement of the deposit of Rs.4,50,000 within one month from this date.
If the Director of School Education does not cooperate with the petitioners in opening a joint account the deposit shall be made in a fixed deposit account in the name of the college in any nationalised or scheduled bank.
(It shall be open to the petitioner to pursue his application for exemption meanwhile but the time limit prescribed herein remains or applies to this petition as well).
(2) The petitioners shall comply with the requirements relating to the appointment of qualified staff and the laboratory, Library and audio visual equipment within three months from today.
For the purpose of recruitment of the teaching staff, the petitioners shall issue Notifications in two dailies with wide circulation in this State Calling PG NO 897 for applications from the qualified teachers on receipt of applications selections shall be made by the Selection Committee if one is already constituted by the Government or the University and if no Selection Committee is constituted, it shall be constituted consisting of a member of the Management, the Director of School Education or his nominee, not below the rank of a Joint Director and in his absence by D.E.O and an Expert to be nominated by the University.
The petitioners shall send communications to the Director of School Education and the University as soon as applications are received for the purpose of constituting the Selection Committee and the said officers shall take the necessary steps in this behalf.
(3) If the qualified staff do not respond to the Notification issued by the petitioners and consequently the petitioners find difficulty in appointing qualified staff the petitioners shall made a representation to the Director of School Education seeking his help in the recruitment and appointment of qualified teaching staff.
(4) All other requirements, including the Model School, subject to which permissions were initially granted to the petitioners shall be complied with by the petitioners not later than 3]st July, 1986.
(5) The petitioners shall send a compliance report to the Director of School Education as soon as the requirement regarding deposit of Rs.4,50,00() within the permitted time is complied with duly endorsing a copy of the compliance report to the Government.
Similarly, the petitioners shall send a compliance report to the Director of School Education regarding the appointment within the permitted time of the required qualified teaching staff and also the provision of library laboratory and audio visual equipment endorsing a copy of the compliance shall send a report to the Director of School Education endorsing a copy thereof to the Government regarding the compliance of all other requirements as directed above by 3 Ist July, 1986.
" The Director of School Education was asked to make such enquiry as he thinks fit to satisfy himself about compliance of the above requirements.
If there was no satisfactory compliance within the prescribed period, the High Court said PG NO 898 that the concerned institution shall cease to function at the end of the academic year 1985 86.
In accordance with directions issued by the High Court, the District Educational Officer inspected the appellant 's college.
He made a report dated June 25, 1986 stating that there was non compliance with the directions of the High Court.
Accepting that report, the Director made an order dated September 20, 1986 declaring that the college shall cease to exist with effect from the last working day of the academic year 1985 86.
Challenging the validity of that declaration, the appellant moved the High Court with writ petition No. 1645 of 1987.
The appellant also filed three more writ petitions.
Writ petition No. 11087 of 1985 was filed for a direction to the Nagarjuna University, Guntur to grant affiliation to the appellant 's college.
Writ petition No. 9417 of 1986 was filed for a declaration that the resolution of the Nagarjuna University refusing to grant affiliation to the college was arbitrary and illegal.
Writ petition No. 17725 of 1986 was filed by the students of the college for a direction to declare the results of their B.Ed.
examination held on October 7, 1985.
All the four writ petitions were disposed of by the High Court by a common order which is now under appeal before us.
The writ petition No. 1645 of 1987 was dismissed on the ground that the appellant has not complied with the conditions laid down by the High Court.
Consequently, Writ Petition Nos. 11087 of 1985 and 9417 of 1986 which were filed against the Nagarjuna University were also dismissed.
The High Court however, made some observations regarding the manner in which the syndicate of the University has to dispose of the application for affiliation.
The High Court observed that denial of affiliation affects the very life and existence of institution.
Therefore, it would be fair and proper that the syndicate or other competent authority of the University which deals with the question of affiliation, must give reasons for refusal to grant affiliation.
However, there are no appeals before this court against the dismissal of those two writ petitions.
The present appeal is only against the order of dismissing writ petition No. 1645 of 1987.
At the outset.
it may be stated that before the High Court the appellant did not contend that it had complied with all the conditions laid down for recognition.
The contention.
however, was that the college is a minority institution and therefore.
it need not comply with all those requirements.
The High Court did not accept that contentionand in our opinion very rightly.
It was observed that since the appellant has deliberately refused to comply PG NO 899 with the conditions by taking a new and untenable stand that it is a minority institution, it is not entitled to any relief.
The High Court also noted the inadequacy in the recruitment of lecturers.
As against seven lecturers, only five lecturers were appointed by the appellant.
The posts of lecturer in Mathematics and Physical Science were left unfilled.
The Principal was not qualified to hold the post.
The lecturer in social studies was also not qualified.
The High Court further referred to the deficiencies pointed out by the Inspection Commission of Nagarjuna University and finally said: "The court allowed the writ petition subject to directions (a) to (j) contained in paragraph 134 of its judgment.
Direction (b) clearly says that the selections shall be made by a selection committee comprising of one nominee of the Director of School Education and one nominee of the University.
This was so directed notwithstanding the contention urged by the petitioner that it is a minority institution.
Indeed, the Bench was of the opinion that the said aspect is totally irrelevant in the circumstances of the case.
The reason is evident.
The Division Bench merely directed the petitioner institution to comply with the conditions of grant within a certain extended period and no more.
The petitioner did not question the judgment of the Division Bench dated 7.3.1986, which means that he has accepted it.
The said judgment has become final so far as the petitioner is concerned.
Now when the question of compliance with and implementation of those direction arise, the petitioner cannot turn round and say that since the petitioner institution is a minority institution.
it need not comply with the said directions.
Such a contention cannot be countenanced, and cannot be taken note of in the circumstances of the case.
" Before us, the question as to the nature of the institution whether it is a minority institution or not, has not been canvassed.
Counsel for the appellant said that he will urge that contention in other appropriate case.
He rested this case on one ground that the conditions laid down by the High Court have been substantially complied with.
Reference was made to the earnest efforts made by the appellant to recruit the best qualified staff by inviting applications through successive advertisements in news papers.
When there was no response to the advertisements, the appellant, it is said, approached the department for recruitment of staff.
But the department did not cooperate.
PG NO 900 It was argued that the appellant in the circumstances could not be blamed and if at all it should be the department to be found fault with.
In the alternative it was contended that the appellant has since satisfied all the necessary requirements for grant of permission and affiliation of the college.
We do not want to examine the alternate contention urged by the appellant.
That is a matter for the statutory authorities like the District Educational Officer and the Nagarjuna University to satisfy them selves whether the institution should be permitted to carry on the course of study.
Whether it has satisfied the necessary conditions for grant of permission and affiliation.
We express no opinion on that aspect of the matter.
As to the first contention, very little remains in favour of the appellant.
While considering the validity of the earlier cancellation of the permission, the High Court had laid down certain guidelines and issued some directions for obedience.
The High Court made that order in the interest of the institution and the students, though strictly speaking it was beyond the power of the High Court.
The High Court did make it clear that if those conditions were not complied with within the prescribed period, the institution shall cease to function.
The record reveals that there were many deficiencies in the institution.
The reports of the District Educational Officer and the Inspection Commission of Nagarjuna University indicated that the appellant did not satisfy all the requirements for granting permission or affiliation.
We find no justification to consider the correctness of those reports.
Nor we could find fault with the order of the High Court.
Indeed we must accept it in the circumstances of the case.
We may however, state that if the appellant has since substantially complied with the necessary conditions after the disposal of the matter by the High Court, it will be open to it to approach the concerned authorities for permission to start the college again.
This however, is not the end of the matter.
There still remains another question.
That question arises out of the interim order made by this Court.
In this Court when the Advocates were on strike, the appellant appears to have personally moved CMP No. 5153 of i988 for permission to admit students for the term l987 88.
That petition came up before a Bench of this Court on February 23, 1988.
Mr. J. Prasad, petitioner in person was present in the Court and Mr. Balasubramaniam on behalf of the State Government was present.
No advocate was present.
Mr. Balasubramaniam, was PG NO 901 an officer of the establishment of the Andhra Pradesh Government Legal Cell at Delhi.
Obviously he was ignorant of, the facts of the case.
This Court after going into the relevant papers made an interim order as follows: "We have also read the report of 9th February, 1988 made by the District Educational Officer, Ongole.
We direct subject to compliance of the conditions, petitioners should be permitted to admit students for the term 1987 88.
The verification should be made within one week from today and if there have been any shortfall, petitioner has opportunity to comply the same within one week.
The time granted upto Ist of March, 1988 shall stand extended upto 15th March, 1988.
CMP is disposed of.
" As is obvious from the above interim order that the appellant was permitted to admit students for the academic year 1987 88 subject to compliance with the conditions.
This Court did not specify the number of students to be admitted.
On March 9, 1988, the Department sent a Committee of two persons for inspection and report about the facilities available in the college.
The Committee consisted of Shri R. Durga Prasad of G.G.C.E. Nellore and Shri B. Venkateswara.
District Educational Officer, Ongole.
They visited the college and submitted the report dated March 9, 1988.
Several irregularities were pointed out in that report particularly with regard to accommodation, furniture, library.
laboratory and games material.
With regard to staff it is stated that the staff appointed are qualified, but it does not state whether the required numbers in different disciplines have been recruited or not.
That report was forward to the Directorate of School Education.
On March 11, 1988, the Director wrote to the Secretary.
Government Education Department, A.P. to examine the case of the appellant in detail and accord permission to run the college till 1987 88 and also permit admissions of students in view of the interim order made by this Court.
The Director also pointed out in his letter that the appellant is claiming to be a minority institution and seeking admission of 160 students.
On April 4, 1988, the Government made an order according sanction to run the college till 1987 88 with an intake capacity of 100 students subject to fulfilment, among others, the following conditions: "(1) The college building should be constructed expeditiouly.
The management should procure equipment and material for the laboratories expending an amount of not PG NO 902 less than Rs.20,000 during 1987 88.
They should also procure audio visual equipment and material at a cost of not less than Rs.30,000.
The management should provide library facilities and expend a sum of Rs.5,000 towards purchase of books.
They should also provide adequate furniture.
(2) The management should appoint full contingent staff on prescribed scales of pay.
(3) They should appoint edequate teaching and non teaching staff on prescribed scales of pay.
(4) Admissions into the B.Ed.
Course in the College should be through the Common Entrance Examinations conducted by the University in view of the High Court judgment dated 8.10.1987 in W.P. No. 552 of 1986.
(6) The management should not collect any capitation fees.
(7) To establish a Model School The Director of School Education was requested to report the fulfilment of conditions by the management to the Government within six months from the date of issue of the order, failing which the permission accorded as liable to be cancelled without any notice.
This order was made subject to final judgment of the Supreme Court of India. ' ' It appears even before the aforesaid Government order, the appellant had admitted 160 students.
The students were not allotted by the Convenor, B.Ed., Common Entrance Test.
It is now said that these 160 students have undergone the required nine months training in the academic year 1987 88 and therefore, they should be permitted to appear for the examination.
Counsel for the State submitted that the appellant has been a law breaker from the very beginning and no concession should therefore be extended to perpetuate the illegality by permitting the students to appear in the examination.
In any event, he said that more than 100 students should not be permitted.
PG NO 903 The explanation of the appellant however, in this context is, that there is a general circular of the State Government permitting unaided schools/colleges to admit 160 students for B.Ed.
course as economic viability.
The appellant, therefore, had to admit the students before the due date extended by this Court and could not have waited for the belated Government order.
The explanation of the appellant appears to be far from satisfactory.
The permission to start the college by the appellant was cancelled twice by the authorities for want of requirements.
On the ground, the university also has refused to grant affiliation to the college.
The order of the High Court affirming the decision of the university is not under appeal before us.
In spite of it, the appellant s sought an interim order from this Court and admitted 160 students.
If the Government order had been delayed, the appellant ought to have asked the Convenor, B.Ed.
Common Entrance Test to allot the students for admission to the college.
That was one of the conditions laid down by the High Court also.
Even that was not complied with.
From the sequence of events which were earlier referred to, we cannot avoid the conclusion that the appellant was trying to overreach everybody body at every stage.
This is one side of the picture.
There is however, another side.
They are the students who were admitted on the strength of the interim order made by this Court.
The student were perhaps led to believe that this Court permitted the appellant to admit them.
We consider, therefore, that it may not be proper to drive them to street if they have undergone the prescribed course with the necessary syllabi and other matters relating thereto.
But it would be for the Director of School and the Registrar.
Nagarjuna University to consider and satisfy themselves and not for this Court at once to permit to them to appear in the examination.
In the result we dismiss the writ appeal.
but direct respondent 1 and 3 to consider forthwith whether the students in the appellant 's college have undergone the necessary B.Ed.
course and if so, permit them to appear for the ensuing examination and publish their result.
In the circumstances.
however, we make no order as to costs.
Before parting with the case, we should like to add a word more.
Though teaching is the last choice in the job market, the role of teachers is central to all processes of formal education.
The teacher alone could bring out the PG NO 904 skills and intellectual capabilities of students.
He is the 'engine ' of the educational system.
He is a principal instrument in awakening the child to cultural values.
He needs to be endowed and energised with needed potential to deliver enlightened service expected of him.
His quality should be such as would inspire and motivate into action the benefitter.
He must keep himself abreast of ever changing conditions.
He is not to perform in a wooden and unimaginative way.
He must eliminate fissiparous tendencies and attitudes and infuse nobler and national ideas in younger minds.
His involvement in national integration is more important, indeed indispensable.
It is, therefore, needless to state that teachers should be subjected to rigorous training with rigid scrutiny of efficiency.
It has greater relevance to the needs of the day.
The ill trained or substandard teachers would be detrimental to our educational system; if not a punishment on our children.
The Government and the University must, therefore, take care to see that inadequacy in the training of teachers is not compounded by any extraneous consideration.
A.P.J. Appeal dismissed. | In August, 1984 the State Government granted permission to various private bodies and individuals for starting colleges of education (B.Ed.) courses, with several conditions required to be complied with within a period of six months.
The appellant was one among these beneficiaries.
When a change of the Government ensued in September 1984, the permissions granted were suspended or cancelled.
The appellant and other institutions aggrieved by the cancellation moved the HighCourt for relief under Article 226.
The High Court while disposing of all the writ petitions by a common order was of the opinion that the cancellation was as arbitrary as the grant of permission.
Since the parties had invested large sums money for establishing the colleges a via media was taken.
The High Court laid down certain conditions and issued directions for compliance for granting permission and recognition to the colleges.
The District Educational Officer inspected the appellant 's college and made a report stating that there was non compliance with the directions of the High Court.
Accepting that report, Director of School Education made an order declaring that the College of the appellant shall cease to exist with effect from the last working day of the academic year 1985 86.
Challenging the validity of that declaration, the appellant again moved the High Court by filing a writ petition.
He filed two more writ petitions for a direction to the Nagarjuna University to grant affiliation to the appellant 's college and for a declaration that the resolution of the Nagarjuna University refusing to grant affiliation to the college of the appellant was arbitrary and illegal.
The students of the college also filed a writ petition for a direction to declare the results of their B.Ed.
examination held in 1985.
The High Court by a common order disposed of all the four writ petitions.
PG NO 893 PG NO 894 The appellant filed an appeal to this Court only against the order dismissing writ petition No. 1645 of 1987, on the ground that the appellant has not complied with the conditions laid down by the High Court.
Before the High Court the appellant did not contend that it had complied with all the conditions laid down for recognition.
However, it was contended that the college is a minority institution and, therefore, it need not comply with all those requirements.
The High Court did not accept this contention.
Before this Court he relied solely on the ground that the conditions laid down by the High Court have been substantially complied with.
On behalf of the respondent State it was contended that the appellant has been a law breaker from the very beginning and no concession should be extended to perpetuate the illegality by permitting the students to appear in the examination and in any event, more than 100 students should not be permitted.
Dismissing the appeal, this Court, HELD: 1.
While considering the validity of the earlier cancellation of the permission, the High Court had laid down certain guidelines and issued some directions for obedience.
The High Court made that order in the interest of the institution and the students, though strictly speaking it was beyond the power of the High Court.
The High Court did make it clear that if those conditions were not complied with within the prescribed period, the institution shall cease to function.
The record reveals that there were many deficiencies in the institution.
The reports of the District Educational Officer and Inspection Commission of Nagarjuna University indicated that the appellant did not satisfy all the requirements for granting permission or affiliation.
[900D E] 2.
The permission to start the college by the appellant was cancelled twice by the authorities for want of requirements.
On that ground,the University also has refused to grant affiliation to the college.
The order of the High Court affirming the decision of the University is not under appeal before this Court.
In spite of it, the appellant 's sought an interim order from this Court and admitted 160 students.
If the Government order had been delayed, the appellant ought to have asked the Convenor, B.Ed.
Common Entrance test to allot the students for admission to the college.
That was one of the conditions laid down by the High Court also.
Even that was not complied with.
[903B D] 3.
They are the students who were admitted on the strength of the interim order made by this Court.
It may not be proper to drive them to street if they have under gone the prescribed course with the necessary syllabi and other PG NO 895 matters relating thereto.
But it would be for the Director of School Education and the Registrar, Nagarjuna University to consider and satisfy themselves and not for this Court at once to permit them to appear in the examination.
[903E F] 4.
Though teaching is the last choice in the job market, the role of teachers is central to all processes of formal education.
The teacher alone could bring out the skills and intellectual capabilities of students.
He is 'engine ' of the educational system.
He is a principal instrument in awakening the child to cultural values.
He needs to be endowed and energised with needed potential to deliver enlightened service expected of him.
His quality should be such as would inspire and motivate into action the benefitter.
He must keep himself abreast of ever changing conditions.
He is not to perform in a wooden and unimaginative way.
He must eliminate fissiparous tendencies and attitudes and infusenobler and national ideas in younger minds.
His involvement in national integration is more important, indeed Indispensible.
It is, therefore, needless to state that teachers should be subjected to rigorous training with scrutiny for efficiency.
It has greater relevance to the needs of the day.
The ill trained or sub standard teachers would be detrimental to our educational system; if not a punishment on our children.
The Government and the University must, therefore, take care to see that inadequacy in the training of teachers is not compounded by any extraneous consideration.
[903H; 904A D] |
peal No. 291 of 1968.
Appeal by special leave from the judgment and order dated March 28, 1968 of the Calcutta High Court in Criminal Revision No. 159 of 1968.
P. K. Chatterjee, for the appellant.
P. K. Chakravarty, for respondent No. 1.
The Judgment of the Court was delivered by Ray, J.
This is an appeal by special leave from the judgment dated 28 March, 1968 of the High Court at Calcutta quashing the processes issued against the three accused persons.
The appellant on 8 March, 1966 filed a petition of complaint against the Block Development Officer Purulia, the Officer in Charge of the local Police Station and T. Ganguly, the Deputy Superintendent of Police, Purulia under section 395 of the Indian Penal Code on the allegation that during search of the appellant 's house they committed dacoity in the house.
The Magistrate dismissed the complaint under section 203 of the Code of Criminal 672 Procedure on the ground that the complaint was incompetent without sanction as the accused were Government servants.
The complainant thereafter moved the Sessions Judge, Purulia against the order of dismissal.
A reference was made to the Calcutta High Court.
The learned Single Judge of the Calcutta High Court accepted the reference, set aside the order of the Magistrate and sent the case back for proceeding in accordance with law.
On 27 March, 1967 the Magistrate Shri section K. Ganguly took cognizance of the case and fixed a date for holding judicial enquiry.
The Magistrate on 22 November, 1967 came to the conclusion that a prima facie case under section 395 of the Indian Penal Code had been made out against the three accused and submitted a report to the Sub Divisional Magistrate, Purulia.
The Sub Divisional Magistrate, Purulia on receipt of the report of the judicial enquiry passed an order on 6 December, 1.967 directing the issue of process against all the three accused.
This order forms the subject matter of the appeal.
One of the accused thereafter moved the High Court at Calcutta for quashing the process.
The High Court at Calcutta said that cognizance of the offence was taken by the Magistrate Shri section K. Ganguly but process was issued by the Magistrate Shri section Sarkar and held that Shri Sarkar not having taken cognizance of the offence had no right to issue process under section 204 of the Code of Criminal Procedure.
The High Court, therefore, quashed the process and observed that the learned Magistrate who had taken cognizance of the offence if he was so advised would be at liberty to issue processes against the other two accused persons.
The question for consideration is whether Shri Sarkar could have issued process in the present case.
Shri Ganguly was the Magistrate who took cognizance.
Shri Sarkar was not the Magistrate who took cognizance.
Therefore, under section 204 of the Code of Criminal Procedure the Magistrate who took cognizance of the case could issue process.
Sections 191 and 192 of the Code of Criminal Procedure con template transfer of cases by a Magistrate, who has taken cognizance, of an offence.
Section 191 of the Code of Criminal procedure of transfer of a case or commitment to the Court of sessions on the application of the accused.
Section 192 of the Code of Criminal Procedure speaks of transfer of a case by a Magistrate who has taken cognizance to any Magistrate subordinate to him for enquiry or trial.
673 In these cases where either the Magistrate has taken cogni zance and is in session of the case or where a case is transferred by a Magistrate who has taken Cognizance to another Magistrate subordinate to him the complainant is required to be examined under section 200 of the Code of Criminal Procedure.
There are certain exceptions with which we are not concerned in the the present appeal.
The relevant section which confers power on the Magistrate to whom the case has been transferred to issue process is section 202 of the Code of Criminal Procedure.
The language of section 202 of the Code of Criminal Procedure is that the Magistrate may, for reasons to be recorded in writing, postpone the issue of process for compelling the attendances of the person complained against.
Therefore the power of the Magistrate to issue process under section 202 of the Code, of Criminal Procedure is not limited by the terms of section,204 of.
the Code of Criminal Procedure to issue process.
Therefore, the two courses are : first, under section 204 of.
the Code of Criminal Procedure for the Magistrate taking cognizance to issue process Or secondly under section 202 of the Code of Criminal Procedure for a Magistrate to whom a case has, been transferred to issue process.
In the present case there was no order of transfer of the case, by Shri Ganguly to Shri Sarkar.
The issue of process is a matter for judicial determination.
Before issuing a process ' the Magistrate has to examine the complainant.
That is why the issue of process is by the Magistrate who has taken cognizance or the Magistrate to whom the case has been transferred.
The High Court therefore correctly quashed the issue of process.
It was contended on behalf of the appellant that the High Court should not have gone to the question as to whether a prima facie case was established or not.
The High Court under section 561 A of the Code of Criminal Procedure can go into the question as to whether there is any legal evidence.
When the High Court said that the evidence in the present case came from tainted sources and was not reliable the High Court meant what can be described as 'no case to go to the jury '.
The High Court correctly quashed the process against T. Ganguly.
The appeal therefore fails and is dismissed.
V.P.S. Appeal dismissed. | After taking cognizance of an offence against the respondent the Magistrate enquired into it and submitted a report to the Sub Divisional Magistrate that a prima facie case was made out against the respondents.
The Sub Divisional Magistrate directed the issue of process.
The High Court in a petition to quash the issue of process hold that under section 204, the Sub Divisional Magistrate had no right to issue process since he was not the Magistrate who had taken cognizance of the offence, and also observed that the evidence in the case came from tainted sources.
Dismissing the appeal to this Court, HELD: (1) Under section 204, Cr.
P.C. the Magistrate who takes cognizance could issue process and under section 202, Cr. P.C., a Magistrate to whom a case had been transferred could issue process.
Since, in the present case, the magistrate who issued process had not taken cognizance of the offence and there was no order transferring the case to him, the High Court was right in quashing the issue of process.
[673 C F] (2) Under section 561A, Cr.
P.C., the High Court could go into the question as to whether there was any legal evidence.
[673 F G] |
o. 1239 of 1970.
Appeal under Section 116 A of the Representation of the People Act, 1951 from the judgment and order dated February 13, 1970 of the Madras High Court in Election Petition No. 1 of 1969.
K. K. Venugopal, R. Gopalakrishnan and T. L. Garg, for the Appellant.
M. K. Ramamurthi, Vineet Kumar, section section Khanduja and N. Natrajan, for the Respondent.
The Judgment of the Court was delivered by Hegde, J.
This is an election appeal arising from a judgment of the Madras High Court.
It relates to the Election to the Ariyankuppam Assembly constituency of the Pondicherry Legis lative Assembly.
The said election was held on March 9, 1969.
In that election, the appellant as well as the respondent contested.
The appellant was the Congress nominee and the respondent was.
the nominee of the D.M.K. After the counting of votes, the res 648 pondent was declared elected as having obtained 3774 votes as against 3758 obtained by the appellant.
The appellant challenged the validity of the election of the respondent on various grounds.
In his election petition he alleged that the respondent war, guilty of canvassing votes on the basis of his caste, that he had, bribed the voters, that the election was not conducted property, that there was improper reception of void votes and lastly that he had incurred expenditure more than the prescribed limit.
The charge of bribery was not pressed at the time of the trial.
The other grounds pleaded on behalf of the appellant were rejected by the High Court and the election petition was dismissed.
After hearing the Counsel for the parties regarding the allegation relating to the contravention of section 123(6) of the Representation of the People Act, 1951 (,to be hereinafter referred to as the Act), we have come to the conclusion that the respondent was guilty of an offence falling within that section as he is proved to have incurred expenditure more than the prescribed limit.
We therefore thought that it was not necessary to go into the other charges levelled against the respondent.
The limit of expenditure prescribed for the constituency was Rs. 2,000/ .
In his election return, the respondent had stated that he had incurred an expenditure of Rs. 1865/59 P.
The trial court came to the conclusion, which conclusion was not challenged before us, that he had incurred a further expenditure of Rs. 20/50 P. Hence if the appellant is able to establish that the respondent had incurred at least a further expenditure of Rs. 113/92 P., then the election of the respondent will have to be set aside under section 100 ( 1 ) (b) of the Act on the ground that the respondent was guilty of the corrupt practice falling under section 123(6).
The appellant had alleged in his election petition that the respondent had suppressed in the return submitted by him expenditure incurred under various heads such as, expenditures incurred in connection with, the holding of election meetings, hire paid for the cars used in connection with the elections as well as the price of petrol used for the cars used in that connection.
We shall first take up the question of expenditure said to have been incurred in connection with the holding of meetings.
The allegation as regards the same is found in paragraph 8(v) of the ,election petition.
The material portion of that allegation reads "The total expenditure incurred or authorised by the respondent herein in connection with the election exceeded the limit prescribed under the Act and the Rules made thereunder.
The accounts submitted by the respondent to the Special Officer (Election), Pondicherry showing a sum of Rs. 1,865/59 are false 649 and unrelated to the actual expenditure incurred or authorised by the respondent for his purposes.
In his election account the respondent has failed to show the following items of expenditure (v) The respondent held a large number of election meetings and all these election meetings were conducted in a pandal where a dias was constructed for the speakers.
All these meetings were installed with loud speakers, tube lights and other electrical fittings were also provided.
The construction of the pandal and dais and the installation of loudspeakers and other electrical equipment such as lights etc.
would have at least cost Rs. 100/ for each meeting except for the meeting at Ariyankuppam on 5 3 69 at 7.30 p.m. when Shri V. R. Nedunchezian presided in which meeting several loudspeakers and extra light fittings were provided costing over Rs. 200.
The dates, the time and the place of the meetings are as follows : (i) On 5 3 1969 at about 8.30 p.m. at Poornamukuppam.
(ii) On 6 3 1969 at about 10.00 p.m. at Nonamkuppam.
(iii) On 28 2 69 at about 8.00 p.m. at Manaveli.
(iv) On 5 3 69 at about 9.00 p.m. at Manaveli.
(v) On 27 2 1969 at about 7.30 p.m. at Ariyankuppam.
Three other election meetings at Ariyankuppam and one meeting at Periaveerampatinam were also held at the instance of the respondent.
(vi) On 23 2 1969 at about 8.00 p.m. at Ariyankuppam.
(vii) On 24 2 1969 at about 8.00 p.m. it Ariyankuppam. (viii) On 26 2 1969 at about 8.00 p.m. at Veerampattinam.
" The respondent 's plea relating to those allegations are found paragraph 17 of his written statement.
Therein he averred "The allegations made in paragraph 8 of the petition are totally false and they are hereby denied.
Every one of the allegations made therein are factually incorrect and false.
None of the expenditure alleged therein was incurred, by the Respondent or under his authority.
" 650 This is a general denial.
The respondent did not deal with .the various facts stated in the election petition.
From those averments, it is clear that the respondent denied having arranged .any of the meeting mentioned in the election petition.
After the respondent filed his written statement, the appellant applied for and obtained permission of the court to amend certain clerical mistakes that had crept into the election petition.
After those amendments were carried out, the respondent filed an additional written statement.
In paragraph 3 of that statement the .averred thus : "I state that no public meeting took place either on 27 2 1969 or on 28 2 1969 in the manner as alleged by the petitioner in paragraph 4(iii) and 4(iv) of the Election Petition.
Consequently, the allegations as amended in paragraph 8 (v) (iii) and 8 (v) (v) are also ,not correct.
I further state that no meeting took place on 5 3 69 at Ariyankuppam in the manner as alleged by the petitioner in the amendment application No. 2204 of 1969".
On October 13, 1969, the appellant applied for amendment of the election petition by giving some more particulars of the meetings held by the respondent.
By that application he sough, to give particulars of about six other meeting; in addition to what he had already stated in his election petition, said to have beer arranged by the respondent.
The court rejected that application on the ground that by that application, additional grounds on, corrupt practice were sought to be included in the election petition and the same cannot be permitted to be done after the period, prescribed for filing the election petition was over.
It may be noted that the trial of the case started on January 9, 1970.
In the order rejecting the amendment application though the court, referred to the delay in filing the application, it did not reject is on the ground of laches, nor did it reject the application on the ground that it was not a bona fide one.
The sole ground or which it was rejected was that it was not 'maintainable as is sought to include additional grounds of corrupt practice.
In our opinion, the High Court was wholly wrong in coming to the conclusion that the amendment application moved on behalf of the appellant sought to add any new corrupt practice The incurring or authorising of an expenditure in contravention of section 77 of the Act is one single corrupt practice.
The incurring or authorising of an expenditure in connection with the election is not by itself a corrupt practice.
The corrupt practice is the incurring or authorising the expenditure of more than the prescribed limit.
Hence the trial court erred in thinking that each 651 item of expenditure is a corrupt practice by itself.
This position is obvious from the language of the section itself.
This Court had occasion to go into that question in D. P. Mishra and anr.
v Kamal Narayan Sharma and anr.(1).
In that case this Court came to the conclusion that the particulars of a corrupt practice falling under section 123 (6) may in an appropriate case be introduced by amendment.
By doing so, no additional ground of corrupt practice can be said to have been introduced.
If it had been necessary for the case, we would have allowed that amendment application and sent back the case for further trial.
But for the reasons to be presently stated, we have thought it unnecessary to do so.
In dealing with the expenditure incurred in connection with the election meetings, the first and the important question that has to be decided is as to when the election campaign of the respondent commenced.
According to the appellant, it commenced on February 23, 1969.
But according to the respondent it commenced on February 27, 1969.
Decision on this question has great bearing on the other points arising for decision.
Hence we shall first address ourselves to that question.
The learned trial judge did not give any positive finding on this question.
In the course of his judgment he doubted the evidence of the respondent on this point but by taking a facile view of the evidence on record, he just rejected the evidence of the appellant as un acceptable and wholly accepted the evidence of the respondent as regards the number of meetings held though he felt that the respondent has not come forward with a truthful version.
It is true that in election cases oral evidence has to be examined with great deal of care because, of the partisan atmosphere continuing even after the election.
But it will be wrong on the part of courts to just brush aside the oral evidence even when the evidence is highly probable and the same is corroborated by unimpeachable documentary evidence.
As mentioned earlier, according to the appellant, the respondent started his election campaign with a well attended meeting on February 23, 1969 at Ariyankuppam.
In support of that version he examined P.Ws. 3, 4, 7, 13, 16 and 19.
Their evidence was corroborated by Exhts.
P. 15 and P. 3.
But the learned trial judge rejected this evidence without examining them.
He came to the conclusion that the witnesses examined are partisan witnesses.
Therefore much reliance cannot be placed on their testimony.
But he failed to attach sufficient importance to the tell tale evidence (1) [1971] I S.C.R. 8. 652 afforded by Exhts.
P. 17 and P. is an application made by the respondent to the Inspector of Police, 'C ' Circle, Pondicherry.
Therein the respondent stated : "Please grant me permission to hold a public meeting at Ariyankuppam Cuddalore Road in front of market, on the occasion of inauguration of my electoral office on 23 2 1969 from 9 to 12 a.m. and to make use of loud speakers.
" The permission sought for was granted by the Inspector.
The Inspector, P.W. 24 deposed that he deputed a Head constable to cover that meeting and report about the same.
It is gathered from the evidence of P.W. 24, that in Pondicherry, before holding a meeting, permission of the police will have to be obtained and it is the usual practice there to depute a police officer to cover the meetings and report about the speeches made by the speakers, P.W. 24, further says that he deputed a Head constable to cover the meeting to be held in connection with the inauguration of the election campaign of the respondent and in that connection the Head constable in question submitted to him the report Exh.
The report in question was proved through the Inspector without any objection.
The report says that the election campaign of the respondent was inaugurated by holdings a public meeting on February 23, 1969 and that meeting was addressed by as many as eight persons in addition to the respondent.
This report was received by the Inspector on the 25th of February.
Despite this clinching evidence afforded by Exhts.
P. 15 and P. 35, the respondent made bold to deny the factum of having held a meeting on the 23rd.
In view of this documentary evidence, the learned trial judge was unable accept the evidence of the respondent.
All the same he opined that it was immaterial whether the election campaign was inaugurated on the 23rd or on the 27th, since he was inclined to accept the evidence of the respondent that he had held only seven meetings and not more.
This in our opinion, is an erroneous approach.
As seen earlier, the respondent has denied having held any meeting on February 23.
But this denial cannot be accepted as true.
For the reasons already mentioned we feel satisfied that the respondent 's election campaign commenced on the 23rd February 1969 and in that connection a meeting was held in Ariyankuppam on that date.
Before proceeding further, we may at this stage mention that though in his written statement, respondent denied having held any meeting at all a statement which on the face of it cannot be true in his evidence he admitted having arranged seven meetings.
This he had to admit in view of the receipts that be had produced along with his return.
In his evidence he admitted 653 that he held meetings on February 27, 1969, March 5, 1969 and March 6, 1969 at Ariyankuppam.
He also admitted that he held a meeting on March 5, 1969 at Poornamukuppam and on March 6. 1969 at Manaveli and again on the same day at Veerampatnam.
Hence admittedly he held seven meetings.
Let us now proceed to see whether the appellant has satisfactorily proved that the respondent had held any more meetings.
We have earlier come to the conclusion that he had held a meeting at Ariyankuppam on February 23, 1969.
The appellant alleged that the respondent had held one more meeting at Ariyankuppam on February 24, 1969.
To prove this fact he had examined P.Ws. 3 and 4.
Their evidence is corro borated by Exh.
P 16,an application admittedly given by the respondent to the police for permission for holding a meeting on that day and exhibit P.36, the police report sent in that connection, The learned trial judge did not accept the contention of the respondent that he had not hold a meeting on Ariyankuppam on February 24, 1969.
Then we come to the meeting alleged to have been held on February 26, 1969 at Veerampatinam.
On this question the trial court has come to the conclusion that the respondent bad held a meeting at Veerampattinam on February 26, 1969.
On this point the oral evidence adduced by the appellant is corroborated by exhibit P. 17, the application made by the respondent to the police for permission to hold that meeting and P. 38, the report made by the police.
Then we come to the meeting said to have been held at Manaveli on February 28, 1969.
The respondent himself admitted in his evidence that he did arrange a meeting at Manaveli on that date.
In his evidence the respondent admitted as having arranged a meeting at Ariyankuppam on March 6, 1969.
According to him he arranged that meeting but curiously the learned trial judge came to the conclusion, despite that admission of the respondent that P.W. 6 arranged that meeting as that witness in his evidence claimed that he arranged that meeting and spent for the same.
The learned trial judge over looked the fact that no such plea was taken by the respondent in his written statement nor was it his case in his evidence that meeting was arranged for P.W. 6.
For the reasons mentioned above,we are satisfied that in addition to the seven election meetings which the respondent admitted having arranged, the appellant has been able to satisfactorily prove that the respondent had arranged at least four more meetings.
Now coming to the question as to the expenditure incurred in collection with those meetings, it is no doubt for the appellant L643SupCI/72 654 to prove the same.
According to the respondent he had not maintained any accounts in connection with his election.
The expenditure incurred for his election is specially within the knowledge of the respondent.
He has not adduced any evidence in that connection.
He has totally denied having held those meetings.
That denial for the reasons already mentioned cannot be accepted.
Therefore we have now to find out what would have been the reasonable expenditure incurred in connection with those meetings.
Even according to the respondent for the seven meetings held by him, he incurred an expenditure of more than Rs. 225/ .
That means on an average he had incurred an expense of about Rs. 32/ per meeting.
This is clearly an underestimate.
But even if we accept that to be correct, for the four meetings referred to earlier, he would have incurred an expenditure of Rs. 128/ .
If this expense is added to the sum of Rs. 1886/9 p., referred to.
earlier, the total expenditure incurred exceeds the prescribed limit of Rs. 2,000/, ' .
Hence the respondent is clearly guilty of the corrupt practice mentioned in section 123(6).
Before leaving this case it is necessary to refer to one of the contentions taken by Mr. Ramamurthi, learned Counsel for the respondent.
He contended that the police reports referred to earlier are inadmissible in evidence as the Head constables who covered those meetings have not been examined in the case.
Those reports were marked without any objection.
Hence it is not open to the respondent now to object to their admissibility see Bhagat Ram vs Khetu Ram and anr.
It was next urged that even if the reports in question are admissible, we cannot look into the contents of those documents.
This contention is again unacceptable.
Once a document is properly admitted, the contents of that document are also admitted in evidence though those contents may not be conclusive evidence.
It was lastly contended that the, evidence afforded by the police reports is not relevant.
This again is untenable contention.
Reports in question were made by government officials in the discharge of their official duties.
Those officers had been deputed by their superiors to cover the meetings in question.
Obviously they were deputed in connection with the maintenance of law and order which is the special responsibility of the police.
Hence, the question whether those reports were made in compliance with any particular provision of law is irrelevant.
The first part of section 35 of the Evidence Act says that an entry in any public record stating a fact in issue or relevant fact and (1) A.I.R.1929P.C.110.
655 made by a public servant in the discharge of his official duty is relevant evidence.
Quite clearly the reports in question were made by public servants in discharge of their official duty.
The issue before the court is whether the respondent had arranged certain election meetings on certain dates.
The police reports in question are extremely relevant to establish that fact.
Hence they come within the ambit of the 1st part of section 35, of the Evidence Act.
In this connection we would like to refer to the decision of the Madras High Court in Navaneetha Krishna Thevar vs Ramaswami Pandia Thalavar(1).
Therein the learned judges observed thus: "As however the case may not stop here, we think it right to allow the petitioners in Civil Miscellaneous Petitions Nos. 845 and 1655 of 1915 for the admission of certain documents rejected by the Subordinate Judge, namely (1) the decree of the Zilah Court of Tinnevelly, dated 31st May 1859 in Original Suit No. 4 of 1859, (2) the Takid of the Collector to the Muzumdar on the death of the raja in 1850, (3) the reply of the Muzumdar and (4) the Collector 's Takid in 1853 on the complaint of the zamindar 's widow as to the conduct of Maruthappa Thevar who according to the plaintiff 's case was the father of Gnanapurani 's mother.
They will accordingly be marked as Exhibits XXXIV, XXXV, XXXVI and XXXVII respectively and incorporated in the record.
The learned Advocate General did not support the exclusion of the last three on the ground that the copies of correspondence kept in the Collector 's and taluk offices were not signed but contended that they were not admissible under section 35 of the Indian Evidence Act.
We think however that copies of actual letters I made, in registers of official correspondence kept for reference and record are admissible under section 35 as reports and records of acts done by public officers in the course of their official duty and of statements made to them, and that in the words of their Lordships in Rajah Muttu Ramalinga Setupati vs Periyanayagam Pillai (2 ) they are entitled to great consideration in so far as they supply information of material facts and also in so far as they are relevant to the conduct and acts of the parties in relation to the proceedings of Government founded upon them.
" We are in agreement with the view taken by the Madras High Court in that case.
(1) I.L. R. at 678 & 870.
(2) [1974] L. R. I.A. 209.p.
656 Now coming to the value to be attached to the evidence afforded by those reports, we may usefully refer to the decision of the Judicial Committee in Arjuno Naiko and ors.
vs Modonomohano Naiko and ors.(1) In fact case a person brought a suit for establishing that lie was the adopted son of a dismissed Sirdar and as such entitled to succeed to the Sirdarship.
In evidence documents coming from official sources recording statements as to adoption made to the officials in the locality not merely by the plaintiff himself in the presence of others but also by other member and by the dismissed Sirdar himself were produced.
These statements were made at a time when no disputes had arisen and were made in connexion with a matter of local interest viz. the appointment of a new Sirdar.
The Judicial Committee held that the documents carried greatest possible weight and could not be dismissed as mere self assertions.
Similarly in this case, the police reports in question were made by the government officials who are not shown to be inimically disposed towards the respondent or his party.
They were made when there was no dispute and the dispute in question could not have been anticipated.
In view of the above conclusion, it is not necessary to go to the other contentions advanced on behalf of the appellant.
In the result we allow this appeal, set aside the order of the High Court, accept the election petition of the appellant and set aside the election of the respondent.
The respondent shall pay the costs of the appellant both in this Court as well as in the High Court.
S.C. Appeal allowed. | The appellant challenged the validity of the election of the respondent to the Pondicherry Legislature Assembly on various grounds including corrupt practices.
The High Court dismissed the election petition.
In the appeal to this Court, the appellant contended (i) that the appellant 's amendment application of the election petition giving more particulars of meetings held by the respondent was wrongfully rejected by the Trial Court on the sole ground that it sought to include additional grounds of corrupt practice and (ii) that the respondent had actually incurred expenses in connection with 4 more meetings thereby exceeding the prescribed limit.
The respondent, on the other band, contended that the various police reports about the meetings relied on by the appellant were not admissible in evidence as the head constable who covered the meetings had not been examined in the case that even if the reports were admissible, the Court could not look into the contents of those documents and that the evidence afforded by the Police reports was not relevant.
Allowing the appeal, HELD : (i) The incurring or authorising of an expenditure in contravention of section, 77 of the Act is one single corrupt practice.
The incurring or authorising of an expenditure in connection with the election is Dot by itself a corrupt practice.
The corrupt practice is the incurring or authorising the expenditure of more than the prescribed limit.
Hence, the Trial Court erred in thinking that each item of expenditure is a corrupt practice by itself.
The particulars of corrupt practice failing under sections 123(6) of the Act may, in an appropriate case, be introduced by amendment.
By doing so, no additional ground of corrupt practice can he said to have been introduced.
[650 H] D. P. Misra and Anr .
vs Kamal Narain Sharma and Anr.
[1971] I .S.C.R. 8, referred to.
(ii) As regards the number of meetings held by the respondent, although he denied having held any meeting at all however admitted in his evidence that he bad arranged seven meetings between, February 27, 1969 to March 6, 1969.
The appellant, however, had been able to prove that the respondent had held four more meetings between February 23, 1968 to March 6, 1969.
In support of his claim, the appellant examined a number of witnesses and their evidence was corroborated by a number of applications (which the respondent made to the Inspector of Police asking permission to hold the meetings) and by the police reports (which the Head constables made to their superior after attending the meetings).
Therefore, on an average, if the respondent spent Rs. 32/ per meeting (which he admitted), the total for the 4 extra meetings must have cost the Respondent Rs. 128/ .
If this expense was added to the sum of Rs. 18,86.09 which the respondent had spent for his entire election, the 647 total expenditure, would exceed the prescribed limit of Rs. 2,000/ .
Hence, the respondent was clearly guilty of corrupt practices mentioned in 123(6).
[652 H] (iii) The police reports were marked without any objection.
Hence, it was not open to the respondent to object to their admissibility at a later stage.
Bhagat Ram vs Kheta Ram and Anr., A.I.R. 1929 P.C. 110, referred (iv) Further as regards the contents of the document, once a document is properly admitted the contents of that document are also admitted in evidence although the contents may not be conclusive evidence.
[654 F] (v) The first part of section 35 of the Evidence Act says that an entry in any public record stating a fact in issue or relevant fact made by a public servant in discharge of his official duties is relevant evidence.
Quite clearly the reports in question were made by public servants in discharge of their official duty.
The issue before the Court was whether the respondent had arranged certain election meetings on certain dates.
The police reports in question were extremely relevant to establish that fact.
Hence, it came within the ambit of the first part of section 35 of the Evidence Act.
[655 B] Naveneetha Krishna Thelavar vs Ramesway Pandia Thelavar, I.L.R. 40, Madras 871, approved.
In the present case, the police reports in question were by government officials who were not shown to be inimically disposed towards the respondent or his party.
They were made when there was no dispute and the dispute in question would not have been anticipated.
Therefore, such reports carry greatest possible weight and could not be dismissed lightly.
[656 D] Arjuno Naiko and Ors.
vs Madonomohano Naiko & Ors., A. I. R. , referred to. |
Appeals Nos. 901 to 903 of 1971.
Appeals by special leave from the judgment and order dated May 13, 1971 of the Andhra Pradesh High Court in Writ Petitions Nos.
6090 of 1970, 221 of 1971 and 543 of 1971 respectively.
section V. Gupte, P. section Shankar and P. P. Rao, for the appellants (in C.A. No. 901 of 1971).
P. section Shankar and P. P. Rao, for the appellants (in C.A. Nos.
902 and 903 of 1971).
V. M. Tarkunde and K. Rajendra Chowdhary, for the respon dents (in C.A. No. 901 of 1971).
G. Narasimhulu and P. A. Chowdhry, for the respondent (in C.A. No. 902 of 1971).
A. Subba Rao, for the respondent (in C.A. No. 903 of 1971).
The Judgment of the Court was delivered by Vaidialingam, J.
These three appeals, in which the State of Andhra Pradesh is the first appellant, by special leave, are directed against the judgment and order dated May 13, 1971 of the Andhra Pradesh High Court in a batch of writ petitions, striking down Rule 9, in the Rules relating to the selection of candidates for admission to the Integrated M.B.B.S. Course in the Government Medical College in the Andhra Pradesh area, issued G.O. No. 1.648/Health dated July 23, 1970 as also under G.O. No. 1793,/Education dated September 23, 1970, regarding reservation of seats, in professional colleges for Backward Classes together with the annexure to the said notification containing the 250 list of Socially and Educationally Backward Classes.
The Addl.
Director of Medical and Health Services, Hyderabad and Principal, Government Medical College, Guntur, are also appellants Nos. 2 and 3 respectively in the appeals.
The Government of Andhra Pradesh by G.O. No. 1648/ Health dated July 23, 1970 announced Rules for the selection and admission of students to the Integrated M.B.B.S. Course in the Government Medical Colleges, in the Andhra area.
The rules provided a pattern of allotment of seats by reference to certain.
qualifying examinations.
The candidates eligible for admission to the Integrated M.B.B.S. Course, being largely taken from the students who had passed the qualifying examination for the Pre University Course and those who had passed the Higher Secondary Course (Multipurpose), the rules provided for a pattern of earmarking seats for the students according to the qualifying examinations taken by them.
It may be mentioned at this stage that the H.S.C. Course (Multipurpose) students are called Multipurpose candidates since they pass their examinations from Multipurpose Schools.
Rule 8 dealt with the pattern of allotment of seats in respect of qualifying examination.
Rule 9 outlined the procedure for selection.
Rule 10 provided that all the reservations would be subject to the order of merit of marks obtained in the entrance test by the students in the relevant category of reservations, namely, P.U.C. and H.S.C. Rule 24 provided that the selections made under the Rules will be subject to any rules or orders that may be made in regard to the reservation of seats for Socially and Educationally Backward Classes of students, having regard to the recommendations made by the Andhra Pradesh Backward Classes Commission.
But there was a condition that such Rules or Orders should have been made by the Government before the finalisation and communication of the selection of candidates.
On June 20, 1970, the Backward Classes Commission appointed by the State, 'a couple of years back, made its report re garding the various categories of persons who are to be treated as belonging to Backward Classes and recommended reservation of 30% of seats to persons belonging to the Backward Classes.
The State by G.O. No. 1793/Education, dated September 23, 1970 announced reservation of 25% of the seats in the M.B.B.S. Course for candidates belonging to the various Backward Classes enumerated therein on the basis of the report of the Backward Classes Commission.
In or about August, 1970, the validity of the entrance test provided under the Rules issued by the G.O. ' No.
1648 of 1970 was challenged before the High Court of Andhra Pradesh in a batch of writ petitions Nos. 3859, 3881, 3955 and 4052 of 1970.
The challenge was on the ground that 251 the State had no power or authority to determine admission by reference only to the result of the entrance test there by ignoring the results of the qualifying examinations taken by a candidates These writ petitions were dismissed by a learned Single Judge of the High Court on September 5, 1970.
But on Letters Patent Appeals by the candidates, a Division Bench of the High Court on September 18, 1970 reversed the order of the Single Judge and struck down the provisions regarding holding of entrance test for admission to Government Colleges as illegal.
The State came to this Court in Civil Appeal Nos.
2161A and 2162B of 1970.
This Court by its judgment dated February 11, 1971 allowed the appeals holding that the Government could hold an entrance test for selection eligible candidates for admission to the medical course in the colleges run by the Government.
The said decision is State of Andhra Pradesh and another vs Narendranath and others (1).
On the basis of the decision of this Court in the above appeals the Government on February 12, 1971, published an additional list of candidates selected on the basis of the entrance test for admission to the Integrated M.B.B.S. Course.
On December 27, 1970, the respondent in Civil Appeal No. 901 of 1971, who was a P.U.C. candidate filed in the High Court Writ Petition No. 6090 of 1970 challenging the validity of the classification of candidates into two categories as P.U.C. and H.S.C. (M.P.) and reserving 40% of seats to the latter as also the G.O. No. 1793/Education dated September 23, 1970 specifying certain classes as being Socially and Educationally backward and providing for them a reservation of 25% of seats in the colleges.
Certain other candidates belonging to the H.S.C. (M.P.) category had filed writ petitions challenging G.O. No. 1793 of 1970 regarding the reservation made for the Backward Classes.
The P.U.C. candidate contended that the classification and reservation of 40% of seats for the H.S.C. (M.P.) candidates was vio lative of article 14 of the Constitution and that it was arbitrary and illegal.
In particular he contended that he has obtained more marks than some of the H.S.C(M.P.) candidates at the entrance test and that he was entitled to admission in preference to such candidates.
Both the P.U.C. as well as the H.S.C.(M.P.) writ petitioners attacked G.O. No. 1793 of 1970 regarding reservation of 25% of seats for the Socially and Educationally Backward Classes as violative of article 15(1) read with article 29 and that it has not been saved by article 15 (4).
According to them the classification of Backward Classes was not made on any reliable material and in the enumeration of such classes, the, various principles laid down by this Court have not been given due regard.
(1) 252 The State contested the writ petitions on various grounds.
Regarding rule 9 of G.O. No. 1648 of 1970, the stand taken by the State was that the P.U.C. and H.S.C. (M.P.) candidates formed two distinct categories and they did not form part of the same class.
It was further contended that the State was entitled to lay down the principles regarding the source from which the candidates are to be selected to the medical colleges which are run by the Government and that in providing for equal distribution of seats to the P.U.C. and H.S.C. (M.P.) candidates, no discrimination has been made and there has been no violation of article 14.
Regarding G.O. No. 1793 of 1970, the State referred to the appointment of a high powered commission to exhaustively in vestigate and report as to the persons who are to be considered as Backward Classes for the purpose of reservation being made in their favour.
The Commission had gone into the matter and after considering the educational and social backwardness of the various classes of citizens in the State in the light of the various principles and tests laid down by this Court, had submitted its report on June 26, 1970 enumerating the various classes of persons who are to be treated as Backward Classes.
The report accepted by the Government had also given the reasons for such classes being treated as backward.
The High Court by its judgment, under attack, allowed the writ petitions and also directed the State to give admissions to the writ petitioners to the 1st Year Integrated M.B.B.S, Course.
The High Court has held that the only basis for selection for the 1st Year Integrated M.B.B.S. Course in relation to the H.S.C. and P.U.C. candidates is the marks obtained by them at the entrance test provided by the, rules framed under G.O. No. 1648 of 1970.
According to the High Court when once rules have been framed in that manner, the selection of candidates from these categories must only be of those who have obtained the highest number of marks in the said test irrespective of the fact as to which category they belonged.
In view of the fact that the selection is sought to be made by earmarking 40% of seats to the H.S.C. (M.P.), the latter are having an unfair advantage over the P.U.C. candidates, who will be denied admission, though they have obtained higher number of marks.
In this view the High Court held that rule 9 providing for reservation of 40% to the H.S.C. (M.P.) framed under G.O. No. 1648 of 1970 was illegal as being discriminatory and as such offends article 14 of the Constitution.
The said rule was struck down in consequence.
Regarding the enumeration of Backward Classes by the Backward Class Commission, and the order of the Government, G.O. No. 1795 of 1970, reserving 25% of seats in the Colleges, 253 the High Court held that the Government order violate& article 15 (1) read with article 29 and that the reservation was not saved by article 15 (4).
It is the view of the High Court that, proper investigation and collection of data have not been done by the Commission in accordance with the principles laid down by this Court in its various decisions.
On the other hand, the High Court has held that the Commission has merely enumerated the various persons belonging to a particular caste as Backward Classes, which is contrary to the decisions of this Court.
We will deal further with this aspect when we advert to the validity of G.O. No. 1739 of 1970.
Suffice it to say that the High Court struck down the said Government Order as violative of article 15(1) and that it was not saved by article of the Constitution.
The High Court declared that the writ petitioners were entitled to be admitted to the Integrated M.B.B.S. Course in the Medical Colleges in the Andhra area.
Before us, on behalf of the appellants Mr. S.V. Gupte, learned counsel has attacked the findings of the High Court striking down Rule 9, issued under G.O. No. 1648 of 1970, as well as the reservation of seats made in the Professional Colleges for the Backward Classes by G.O. No. 1793 of 1970.
We will first deal with the validity of Rule 9 issued under G.O. No. 1648 of 1970 reserving 40% of seats for the H.S.C. (M.P.) candidates.
Before we consider the contentions urged in that regard by Mr. Gupte, on behalf of the State and Mr. Tarkunde, on behalf of the respondents, it is necessary to broadly refer to some of the material rules issued under G.O. No. 1648 of 1970.
The rules were issued as annexure to this Government Order.
It was specifically stated in the said Government Order that the rules specified in the annexure have to be followed in respect of admissions of students to the Integrated M.B.B.S. Course in the Government Medical Colleges in the Andhra area including Bhadrachalam Division of Khammam District and Mungala Division of Nalgonda District from the academic year 1970 71.
Rule I referred to the availability of 550 seats in the 1st Year Integrated M.B.B.S. Course in the four Government Medical Colleges, referred to therein the Andhra area.
Rule 2 dealt with reservation of seats (viz.) for candidates outside the State, candidates distinguished in N.C.C., Presidents ' Scouts and Guides and children of exhibit Servicemen and Armed personnel; and candidates belonging to Scheduled Caste and Scheduled Tribes, women candidates etc.
Rule 3 deals with the age and educational qualifications.
Regarding educational qualifications it is provided that candidates possessing the minimum qualifications of H.S.C. 254 (M.P.), I.S.C., P.U.C. and A.I.H.S.C. or equivalent qualifications are eligible to appear in the Entrance Test.
But there was a .proviso to the effect that in the qualifying examination the candidates should have taken up physical sciences and biological sciences and must have obtained not less than 50% of marks in ,.those subjects put together.
But in respect of candidates belonging to Scheduled Castes and Scheduled Tribes, the provision is that they should obtain not, less than 40% of marks in those Subjects put together in their qualifying examination.
Rule 4 dealt with basis and method of admission.
Clause (i) of this rule provides that all candidates who, have applied for admission and are found eligible will be required to take Entrance Test to be conducted by the Director of Medical and Health Services.
The said rule also dealt with the holding of the Entrance Test at the centres specified therein.
Clause (v) specifically provided that the Entrance Test will consist of four papers of 50 marks each in (a) subject of Physical Science (Chemistry and Physics), (b) subject of Biological Science, (Zoology and Botany).
,Clause (vi) provided for the examinations in Chemistry and Physics being held in 'the morning and the remaining two i.e. Zoology and Botany, in the evening session and that answers will be written in separate answer books and that the Entrance Test will be conducted in a single day.
The said rule also provided for the standard of test, type of the test and the medium of the test.
Rule 6 deals with the method of admission.
It provides that based on the result of the Entrance Test, a separate Master List of eligible candidates will be prepared in order of merit and that the selection will be made keeping in view the various reservations mentioned therein.
It may be mentioned at this stage that the reservations refered to therein are for Scheduled Castes and Schedule Tribes, Women candidates, children of exhibit Servicemen etc.
There is no reservation referred to therein either of H.S.C. or P.U.C. candidates.
Rule 7 deals with the distribution of seats.
The total number of seats available is stated to be 550.
But the actual number of seats available to be filled up on the basis of merit at the Entrance Test is given as 532.
The said rule also provides for the distribution of seats to certain reserved groups such as Scheduled Castes and Scheduled Tribes, women candidates etc.
Here again there is no reservation for H.S.C. or P.U.C. candidates.
Rule 8 deals with the pattern of allotment of seats in respect of qualifying examination.
The seats are distributed as follows : 40% each to Multipurpose and P.U.C. candidates; 5% to M.Sc.
255 and B.Sc.
candidates; 4% for N.C.C., President 's Scouts and Guides and exhibit Servicemen and 11% strictly in the order of merit in the Entrance Test from the general pool.
Rule 9 deals with the procedure for selection.
Clause (D) dealing with the Multipurpose and P.U.C. candidates, refers to the fact that the total seats available are 545 and that according to the pattern of distribution, 40% of the seats are reserved for Multipurpose and 40% for P.U.C. (including I.S.C.)".
The said clause further provides that the rate of seats to be filled up by the candidates from the P.U.C./Multipurpose and allied qualification holders should be done so as to keep the number of seats according to the ceiling, i.e., 40% as per the pattern of allotment for each group.
It is this provision that was really struck down by the High Court.
Rule 10 specifies that all reservations would be subject to the order of merit of marks obtained in the Entrance List.
The other rules are not material.
From a perusal of the rules, referred to above, two aspects underlying the scheme of selection broadly emerge : (1) that there is to be an Entrance Test for all the applicants for the admission to the 1st Year Integrated M.B., B.S. Course; and (2) that the result of the Entrance Test is to form the basis for admission to the medical course.
Under rule 3 (2) candidates possessing the minimum qualification of H.S.C. (M.P.), I.S.C., P.U.C. ,and A.I.H.S.C. or equivalent qualification are eligible to appear in the Entrance Test.
Therefore, it is clear that all the candidates possessing these qualifications are to be put on a par and are qualified to take the Entrance Test.
We have already referred to the fact that there is a proviso that the candidates excepting those belonging to the Scheduled Castes and Scheduled Tribes should have obtained in their qualifying examination not less than 50% of marks in Physical and Biological Sciences put together in their qualifying examination.
There is no distinction made between a P.U.C. or Multipurpose candidate.
Both of them, in order to become eligible to appear in the Entrance Test, must have secured not less than 50% marks in their qualifying examinations in the two Physical and Biological Sciences put together.
The only relaxation, or exception, if it may be so called, is regarding the candidates, belonging to the Scheduled Castes and Scheduled Tribes.
These candidates should have secured not less than 40% of the marks in those subjects in their qualifying examination.
Rule 4 emphasises that all eligible candidates who have applied for admission are bound to take the Entrance Test conducted by 87 Sup.
Cl/72 256 the Director of Medical and Health Services.
All the candidates, who take the Entrance Test, must take all the, four papers, referred to therein.
Here again, it will be seen that there is no distinction made between a P.U.C. and a Multipurpose candidate.
Both of them must have obtained not less than 50% marks under rule 3 in Physical and Biological Sciences in their qualifying examinations, and both of them will have to appear for those subjects in the Entrance Test, which is common to all the candidates.
Rule 6 specifically provides for the admission being made on the bases of the results of the Entrance Test.
Rule 7 regarding distribution of seats specifically refers to 532 seats being available to be filled up on the basis of merit in the Entrance Test.
But when we come to rules 8 and 9, it is stated in the former that 40% each is to be allotted on the basis of qualifying examination to Multipurpose and P.U.C. students and the latter refers to distribution in the same proportion to the two sets of candidates on the basis of the result of the Entrance Test.
This is so, notwithstanding the fact that rule 10 provides even in respect of candidates for whom reservations have been made, their selection will be in the order of merit of marks obtained in the Entrance Test.
When the scheme of the rules clearly shows that the basis of selection for the 1st Year Integrated M.B., B.S. Course is according to the result of the Entrance Test, the question is whether the reservation of 40% of seats for the H.S.C. candidates under rule 9 is valid ? Under this rule though a P.U.C. candidate may have got higher marks than a H.S.C. candidate, he may not be able to get admission because 40% of the seats allotted to the P.U.C. candidates would have been filled up; whereas a H.S.C. candidate who may have got lesser number of marks than a P.U.C. candidate may be eligible to got a seat because of 40% quota allotted to the H.S.C. candidates has not yet been completed.
Does this amount to an arbitrary discrimination violative of article 14 ? Prima facie having due regard to the scheme of the rules and the object sought to be achieved, namely, of getting the best students for the Medical Colleges, the provision is discriminatory and it has no reasonable relation to the object, sought to be achieved.
Mr. Gupte, learned counsel for the State urged that the P.U.C. and H.S.C. candidates form two separate categories and that unless such reservation of seats is made, the H.S.C. candidates may not be able to get adequate number of seats in the Medical Colleges.
He further contended that the Medical Colleges being run by the Government, it is open to the State to specify the sources from which the candidates will have to be selected for admission to those Colleges.
He also pointed out that such a categorisation of students into two separate groups as P.U.C. and H.S.C. has been held to be valid by the High Court.
257 Mr. Tarkunde, learned counsel for the respondents, on the other hand, urged that whatever may have been the circumstances that originally existed when the High Court then upheld the division into separate groups of P.U.C. and H.S.C. students, when once the rules clearly specify that there is to be a common Entrance Test and that selections are to be made only on the basis of the results of such a test, the reservation of 40% in favour of the H.S.C. candidates is arbitrary, unjust and discriminatory and as such it violates article 14 of the Constitution.
We are in agreement with the contention of Mr. Tarkunde regarding this aspect and, in our opinion, the High Court was justified in striking down the provision regarding reservation of 40% of seats to the H.S.C. candidates under rule 9.
We have already indicated the scheme of the Rules as well as the basis for selection, as could be gathered fro in these rules.
We will now briefly advert to the decisions referred to by the learned counsel on both sides.
Mr. Gupte drew our attention to the following decisions, In Gullapalli Nageswara Rao and others vs Principal Medical College, Guntur and others,(1) the High Court had considered the provision made in a rule by the Government regarding reservation of 1/3rd of total number of seats in favour of Multipurpose candidates in the Pre Professional Course in medicine.
The rule, no doubt, provided that admission for the said course should be both from the category of Multipurpose and P.U.C. students on the basis of merit.
Nevertheless a reservation of 1/3rd of the total number to be admitted was made in favour of H.S.C.
This reservation was attacked as being arbitrary and unjust.
On behalf of the State it was urged that the said reservation is not hit by article 14 as it was necessary to afford equal opportunities to Multipurpose candidates.
The High Court considered in this connection the syllabus for study prescribed for the P.U.C. and H.S.C. candidates in their respective courses.
The High Court held that the Multipurpose candidates have to study more subjects than the P.U.C. candidates and that their examinations also covers a course extending over a period of four years.
In this view the High Court held that, the H.S.C. candidates are at a disadvantage in the matter of securing higher percentage of marks in their optional subjects, whereas a P.U.C. candidate had a distinct advantage over them.
It was further held that in such a situation there are possibilities of P.U.C. candidates securing higher percentage of marks in their optional subjects than the Multipurpose candidates and securing on the basis of the result of their qualifying examination a larger number of seats in the Pre Professional Course in medicine.
Ultimately, the reservation of 1/3rd number (1) A.I.R. 1962 A.P. 212.
258 of seats in favour of the H.S.C. candidates was held by the High Court.
It must be noted that at the time when the High Court deal(.
with the matter, there was no uniform Entrance Test to be taken, by both the P.U.C. and the H.S.C. candidates as is the position at present.
On the other hand, the selection to the Pre Professional Course in medicine was then made on the basis of the marks obtained in the optional subjects by the respective students in their previous course of study.
The above decision, in our opinion, has no application to the facts of the present case.
The fact that the High Court approved of reservation in the circumstances then existing will not help the State in the case before us.
The next decision to which our attention was drawn by Mr. Gupte is P. Sagar and others vs State of Andhra Pradesh, represented by Health Department, Hyderabad and others(1).
To this decision we will have to revert when we deal with the validity of reservation made for the Backward Classes under G.O. No. 1793 of 1970.
But so far as the question of reservation for the P.U.C. and H.S.C. students is concerned, it is seen that certain rules provided for reservation of percentage of seats for the candidates belonging to the H.S.C. and P.U.C.
Here again the rule was that 1/3rd of the total number of seats in all categories put together should be given to the H.S.C., Multipurpose and I.S.C. candidates and that at least 50% of the seats should be given to the P.U.C. candidates.
It appears that the reservation of 50% of seats for P.U.C. candidates was challenged as being unjust.
It was urged before the High Court that the H.S.C. (Multipurpose) Examination is very difficult and as such those candidates will not be able to secure higher marks as compared to the P.U.C. candidates and in support of this contention the earlier decision in Gullapalli Nageswara Rao and others vs Principal Medical College, Guntur and others(, ') was relied on.
But we find that during the course of the hearing the Advocate General intimated the High Court that the Government was aware that the reservation of 50% seats to the P.U.C. candidates was working a hardship on the Multipurpose candidates and that the rules were being amended.
It was later on represented that rules had also been amended.
Therefore, the High Court ultimately held that in view of the amendment to the rules, it was not necessary to consider the challenge with respect to the reservations made for the Multipurpose and the P.U.C. candidates.
Here again, it is to be stated that there was common Entrance test for all the candidates belonging to the P.U.C. and H.S.C. categories.
On the other hand, the selections were made on the basis of the marks obtained by them in their qualifying examinations.
It was further held in the said decision that even (1) A.I.R. 1968 A.P. 165.
(2) A.I.R. 1962 A.P. 212.
259 in the basis that the qualifying examinations taken by the P.U.C. and H.S.C. candidates were equal, still the reservation is not invalid as discreminatory under article 14 of the Constitution.
But hereagain it is to be noted that selection were made on the basis of the marks obtained in the qualifying examinations and not on the basis of marks obtained in a common Entrance Test held for all the candidates uniformly.
This decision is also, more or less similar to the one in Gullapalli Nageswara Rao and others vs Principal Medical College, Guntur and others.(1) The decision in Sagar and others vs State of Andhra Pradesh (2 ) had also to deal with the reservation of seat in the Professional Colleges for the Backward Classes on the basis of the G.O. which was then in force.
It was held that the said reservation was not saved by article 15 (4).
The decision of the High Court striking down the reservation for the Backward Classes alone was challenged by the State in this Court in State of Andhra Pradesh and another vs P. Sagar.
(3) This Court upheld the decision of the High Court.
We will have to refer to the above sections of the High Court Rs well as of this Court when we deal with the second aspect which arises for consideration before us regarding the reservation made for the Backward Classes under G.O. No. 1793 of 1970.
Mr. Gupte then referred us to the decision in Chitra Ghosh and another vs Union of India and others.
(4) That decision related to a challenge made by certain students who were denied admission to the Maulana Azad Medical College, New Delhi.
The said college was established by the Government of India.
Of the 125 students, who are to be admitted annually, 15% of the seats are reserved for Scheduled Caste candidates and 5% for candidates belonging to the Scheduled Tribes, 25 % of the seats (excluding the seats reserved for Government of India nominees) were reserved for girl students.
In particular 23 seats were reserved to certain categories and they were to be filled up by the candidates who were nominated by the Central Government.
The categories to which the said nomination had to be so made were as follows (1) Sons/daughters of residents of Union Territories specified below including displaced persons registered therein and sponsored by their respective Administration of Territory : (a) Himachal Pradesh, (b) Tripura, (c) Mani pur, (d) Naga Hills, (e) N.E.F.A. and (f) Andaman.
(1) A.I.R. 1962 A.P. 212.
(2) A.I.R. 1968 A.P. 165.
(3) (4) ; 260 (2) Sons/daughters of Central Government servants posted in Indian Missions abroad.
(3) Cultural Scholars.
(4) Colombo Plan Scholars.
(5) Thailand Scholars.
(6) Jammu & Kashmir State Scholars.
The appellants therein had obtained about 62.5% marks and were domiciled in Delhi.
According to them, they were entitled to admission on the basis of merit and would have been so admitted but for the reservations, which were filled by the nominations made by the Central Government.
It was their further contention that the students who had been so nominated by the Central Government and got admission had obtained less percentage of marks than the appellants.
Mainly the power of the Central Government to make the nominations was challenged on the ground that the provision for reservation in favour of such nominees of Central Government was not based on any reasonable classification and suffered from the vice of discrimination and hence the reservation was hit by article 14 read with cls.
(A) and f (iv) of article 15 and Cl.
(ii) of article 29.
This Court rejected the contention and held that neither cls.
(i) and (iv) of article 15 nor cl.
(ii) of article 29 violated.
In support of the challenge of discrimination under article 14, it was claimed by the appellants that merit being the sole criteria for admission, the provisions made for reservation for candi dates to be nominated by the Central Government, introduced discrimination, or it had no reasonable nexus to the object sought to be achieved.
After a reference to the provisions made in respect of each of the categories to be nominated by the Central Government on merits, it was held that the classification in all those cases was based on intelligible differentia, which distinguished them from the group to which the appellants belonged.
In particular, Mr. Gupte relied on the following observations in the said decision "It is the Central Government which bears the financial burden of running the medical college.
It is for it to lay down the criteria for eligibility.
From the very nature of things it is not possible to throw the admission open to students from all over the country.
The Government cannot be denied the right to decide from what courses the admission will be made.
That essentially is a question of policy and depends inter alia on all overall assessment and survey of the requirements of residents of particular territories and other categories of persons for whom it is essential to provide facilities for medical 261 education.
If the sources are properly classified whether on territorial, geographical or other reasonable basis, it is not for the courts to interfere with the manner and method of making the classification.
The next question that has to be determined is whether the differentia on which classification has been made has rational relation with the object to be achieved.
The main purpose of admission to a medical college is to impart education in the theory and practice of medicine.
As noticed before the sources from which students have to be drawn are primarily determined by the authorities who maintain and run the institution e.g., the Central Government in the present case.
In Minor P. Rajendran vs State of Madras(1) it has been stated that the object of selection for admission is to secure the best possible material.
This can surely be achieved by making proper rules in the matter of selection but there can be no doubt that such selection has to be confined to the sources that are intended to supply the material.
If the sources have been classified in the manner done in the present case it is difficult to see how that classification has no rational nexus with the object of imparting medical education and also of selection for the purpose.
" Based upon these observations, Mr. Gupte, contended that the sources for selecting candidates as well as the reservation made in respect of admission to the Maulana Azad Medical College have both been approved by this Court as valid and not violative of Art, 14.
On this analogy, the counsel urged, the present classification of P.U.C. and H.S.C. into two categories and the reservation of 40% for H.S.C. candidates are valid.
In our opinion, the above decision does not lead to the result contended on behalf of the State.
The special circumstances and the reasons for making the reservation to enable the Central Government to make nominations so that candidates belonging to those categories can get adequate representation by way of admission in the Medical Colleges have been elaborately adverted to by this Court and it is on that basis that this Court accepted the classification as valid.
It was further held that the said classification has got a rational relation to the object sought to be achieved.
The object was stated to he to impart medical education to the candidates belonging to those groups or area where adequate facilities for imparting such education were not available.
But the point to be noted in the said decision is that in respect of other candidates, who are not governed by any reservation, the selection on the basis of merit, namely, the marks obtained by them.
On the other hand, in the (1) ; 262 case before us, though a uniform Entrance Test has been prescribed for both the P.U.C. and H.S.C. candidates, still the selection is not made on the basis of the marks obtained in the Entrance Test.
On the other hand, the selections are made after disregarding those marks.
At any rate, so far as some P.U.C. candidates are concerned it shows a preference to the H.S.C. candidates, who may have got lesser number of marks and would not have got admission, but for the reservation of 40% made for the group to which they belonged.
It is no doubt true that it is open to the State to prescribe the sources from which candidates will be selected and also prescribe the criteria for eligibility.
In fact, in the case before us, as we have already pointed out, the rules provide for the qualifications which have to be satisfied to enable a candidate to apply and the sources from which selections will have to be made, have also been prescribed.
We have also pointed out that in respect of eligibility for applying for admission to the 1st Year Integrated M.B.B.S. Course, no distinction has been drawn between P.U.C. and H.S.C. candidates, both of whom have to get at least 50% marks in Physical and Biological Sciences.
So that clearly shows that they have been put on a par so far as eligibility is concerned.
But the discrimination is made only after the Entrance Test is over by denying admission to the P.U.C. candidates who may have got higher marks than some of the H.S.C. candidates who get admission because of the 40% reservation.
Mr. Gupte then referred us to the decision in Ganga Ram and Others V. The Union of India and others(1), wherein the classification of direct recruits and promotees into two different categories in the Accounts Department of the Railway Establishment was hold to be a reasonable classification not attracting the vice of article 14 or 16.
In that case this Court was considering a claim for promotion based upon the test of Seniority cum suitability.
After considering the background of the service concerned, it was held that the State which encounters diverse problems arising from a variety of circumstances is entitled to Jay down the conditions of efficiency and other qualifications for securing best service for being eligible for promotion in its different departments.
It was emphasised that the object sought to be achieved by the relevant provisions which were under attack was the requisite efficiency in the Accounts Department of the Railway Establishment.
It was in that connection held that the direct recruits and promotees constitute different classes or categories and such a classification is sustainable on intelligible differentia, which has a reasonable connection with the object of efficiency in the Department.
This decision also does not help the appellants as there was no distinction made inter se between the promotees and the direct (1) ; 263 recruits.
On the other hand, the same criteria was adopted for purposes of promotion to the persons forming the class of direct recruits.
Similarly, the same test was applied to the persons coming under the group of promotees.
It was under such circumstances that this Court held the classification to be valid, and the situation which this Court had to consider in that connection was entirely different, from the one before us where all the candidates belonging to both the P.U.C. and H.S.C. merge under the Rules when they take the Entrance Test.
In D. N. Chanchala etc.
vs The State of Mysore and others(1), one of the questions this Court had to consider was the validity of the university distribution of seats in the medical colleges run by the State of Mysore.
There were three Universities in Mysore State, namely, Karnatak, Mysore and Bangalore Universities.
The challenge to such distribution of seats was that candidates having lesser marks might obtain admission at the cost of another having higher marks from another university.
This Court after a reference to the different standards of examinations held in the three universities, rejected the challenge of discrimination as follows "Further, the Government which bears the financial burden of running the Government colleges is entitled to lay down criteria for admission in its own colleges and to decide the sources from which admission would be made, provided of course, such classification is not arbitrary and has a rational basis and a reasonable connection with the object of the rules.
So long as there is no discrimination within each of such sources, the validity of the rules laying down such sources cannot be successfully challenged. .
In our view the rules lay down a valid classification.
Candidates passing through the qualifying examination held by a university form a class by themselves as distinguished from those passing through such examination from the other two universities.
Such a classification has a reasonable nexus with the object of the rules, namely, to cater to the needs of candidates who would naturally look to their own university to advance their training in technical studies, such as medical studies.
In our opinion, the rules can.
not j ustly be attacked on the ground of hostile discrimi nation or as being otherwise in breach of Article 14.
" It will be seen that the above decision has empbasised that the selection which was made on the basis of the marks obtained in the qualifying examination held by each of the universities was valid and the distribution of seats in the medical colleges universitywise was also valid in view of the different standards adopted by each (1) ; 264 university.
Again it is to be noted in the said decision, there was no question of all the students of the three universities taking a common Entrance Test on the basis of which a selection was made.
This decision also does not help the appellants.
The decision in The State of Maharashtra and another vs Lok Shikshan Sansatha and others(1) which has laid down that in the matter of permitting colleges to be started in particular areas having due regard to the need of the area concerned, is essentially a matter of policy for the State which has to take a decision on overall assessment and summary of the requirements of a particular area, so long as the decision is not arbitrary or mala fide, it was further held that the courts will not interfere with the assessment made by the State in pursuance of its policy.
This decision is also of no avail to the appellants.
Mr. Tarkunde, apart from distinguishing the above decisions, for the reasons mentioned by us earlier pointed, out that in Gullapalli Nageswara Rao and others vs Principal Medical College, Guntur and others (2), the basis of classification of P.U.C. and H.S.C. was not challenged as there was no necessity for those students to take a common test as in the case before us.
He referred us to the averments in the counter affidavit filed by the Assistant Secretary to the Government in Writ Petition No. 3859 of 1970 in which conducting of Entrance Test was then challenged.
The Assistant Secretary in paragraph 9 of the said counter affidavit in respect of holding of the Entrance Test has stated that the selection of candidates for the 1st Year Integrated M.B.B.S. Course is made on the basis of marks obtained at the Entrance Examination, as such a method of selection ensures fair play and affords equal opportunity to all candidates.
He has again referred us to the fact that by introducing the method of selection by the Entrance Test the Government had done away with the reservations originally made for the P.U.C. and H.S.C. candidates and thus has offered equal opportunity to all candidates.
He has further stated that both the P.U.C. and the H.S.C. students apart from having obtained not less than 50% of marks in Physical and Biological Sciences to be eligible to apply for admission to the medical colleges, have also take the Entrance Test in the subjects mentioned in the rules.
According to the State, the result of the Entrance Test is a method of making selection to the medical colleges, thus ensuring fair play and justice.
In the same Writ Petition the Add].
Director of Medical and Health Services, (Professional Education) has referred to the necessity of holding an Entrance Test.
In this connection he refers (1) ; (2) A.I.R. 1962 A.P. 212.
265 to the marks obtained by certain P.U.C. and H.S.C. students in their qualifying examinations and also to their marks in the Entrance Test.
The Officer has stated that the marks obtained by the candidates in their qualifying examinations are not a reliable guide to assess their merits as the marks obtained by those candidates in the Entrance Test were very poor.
Therefore, it has been emphasised that the marks obtained in the Entrance Test is the guiding factor to assess the merits of both the sets of candidates for admission to the Medical College.
We have referred to the avernments contained in the counter affidavit of the two officers above as they form part of the present record and they have also been relied on for one purpose or other by both the State and the respondents.
The above averments clearly establish that even according to the State the marks obtained in the Entrance Test according to the rules is the decisive test for the purpose of considering the merits of the candidates, who seek admission to the Medical College.
These averments clearly show that there is absolutely no jurisdiction for making of special reservation of 40% in favour of H.S.C. candidates, when once a common Entrance Test is held for all the candidates and selection is made on an assessment of merit of marks obtained at the said examination.
Mr. Tarkunde referred us to Minor P. Rajendran vs State of Madras and others(1) where the validity of the scheme of districtwise distribution of seats as per the rules framed by the State of Madras, to the Medical Colleges, was challenged as violative of article 14.
The State attempted to justify the said method of districtwise distribution on the ground that if districtwise distribution is not made, the candidates from Madras City would have an advantage and would secure the largest number of seats in the Medical Colleges, which will not be justified on the basis of the proportion of population of the Madras City.
The challenge based on discrimination under article 14 was accepted by this Court and it was held that the allocation of seats districtwise results in discrimination and there is no nexus between the districtwise distribution and the object to be achieved, namely, admission of the best talent from the sources indicated in the rules.
On this ground, the allo cation of seats on districtwise basis was struck down as violative of article 14.
Similarly unitwise distribution of seats in the Medical Colleges in Tamil, Nadu was declared by this Court in Minor A. Periakeruppan and another vs State of Tamil Nadu and others(2) as violative of articles 14 and 15.
(1) ; (2) ; 266 These two decisions clearly establish that a classification which has no rational basis and has no relation to the object sought to be achieved is violative of article 14.
It is not necessary for us to refer to the various decisions laying down the contents of article 14.
Suffice it to say that it does not forbid reasonable classification.
In order to pass the test of permissible classification, two conditions must be fulfilled : (1) The classification is founded on an intelligible differentia which distinguishes persons or things that are grouped together from those left out of the group, and (2) the differentia must have a rational relation to the object sought to be achieved.
It is no doubt open to the State to prescribe the sources from which the candidates are declared eligible for applying for admission to the Medical College; but when once a common Entrance Test has been prescribed for all the candidates on the basis of which selection is to be made, the rule providing further that 40% of the seats will have to be reserved for the H.S.C. candidates is arbitrary.
In the first place, after a common test has been prescribed there cannot be a valid classification of the P.U.C. and H.S.C. candidates.
Even assuming that such a classification is valid, the said classification has no reasonable relation to the object sought to be achieved.
namely, selecting the best candidates for admission to the Medical Colleges.
The reservation of 40% to the H.S.C. candidates has .no reasonable relation or nexus to the said object.1.
Hence we agree with the High Court, when it struck down this reservation under rule 9 contained in G. No. 1648 of 1970 as violative of article 14.
The next question that arises for consideration is the correctness ,of the order of the High Court striking down the reservation of seats made for Backward Classes in the Professional Colleges under G.O. No. 1793 of 1970.
The said reservation has been struck down on the ground that it violates article 15(1) and falls outside article 15(4) of the Constitution.
The view of the High Court is very strenuously challenged by 'Mr. section V. Gupte, learned counsel for the appellants.
Mr. V. M. Tarkunde, learned counsel for the respondents, supported the various, reasons given by the High Court for striking down the said reservation.
Before we deal with the reasons given by the High Court for striking down the reservation made for the Backward Classes under the said G.O., we will refer to the circumstances under which the Backward Classes Commission was appointed and whose report has formed the basis for providing the reservation for the various ,persons mentioned therein.
267 The State of Andhra was formed on October 1, 1953 and the Andhra Pradesh State came into existence with effect from November 1, 1956.
The State of Andhra originally formed part of the Composite Madras State.
The Composite Madras State had maintained a list of Backward Classes (other than the Scheduled Castes Tribes), in that State and had made special provisions with regard to admission to educational institutions, reservation of posts in Government Service, grant of scholarships and other concessions to assist those Backward Classes.
After the formation of the Andhra State on October 1, 1953, the list maintained by the Composite Madras State was continued in the Andhra area with some modifications.
The former Princely State of Hyderabad was also maintaining a list of Backward Classes in that State, and this was also continued after the formation of Andhra Pradesh, which included Telangana area.
Thus with effect from November 1, 1956, there were two lists of Backward Classes in the State of Andhra Pradesh one for Andhra area and the other for Telangana area.
Both the lists together comprised about 146 communities 86 and 60 in the Andhra and Telangana areas respectively.
The President of India appointed in January, 1953, a Backward Classes Commission under article 341 nf the Constitution headed by Sri Kaka Kalelkar, to determine the criteria to be adopted for treating any section of the people, other than Scheduled Castes and Scheduled Tribes, as socially and educationally Backward Classes.
The said commission was also to draw up a list of such Classes on.
the basis of the criteria laid down by it.
The report of this Commission was considered by the Central Government, which issued a memorandum pointing out that some of the tests applied by the Commission were very vague.
It was further pointed out that if those tests were applied, a large majority of the Country 's population will have to be considered backward.
The Central Government decided to undertake further investigation to draw some positive and workable criteria for this purpose.
The State Governments were desired in the meanwhile to render every assistance possible to those persons who, in the opinion of the State Governments were backward.
Further attempts by the Central Government to draw up a list of Backward Classes on an All India basis did not meet with much of a success.
Even here some State Governments were in favour of adopting economic backwardness as a criteria while others were inclined to stick on to the list prepared by them on the basis of caste.
The Central Government conveyed to the State Governments on August 14, 1961 expressing its view that while the State Governments have the discretion to choose their own criteria for defining backwardness it would be better to apply economic tests rather than classifying people by their castes.
268 The State of Andhra Pradesh issued G.O. No. 1886 dated June 21, 1963 specifying a list of certain persons as belonging to Backward Classes.
The list was prepared for the purpose of selecting candidates to the seats reserved for backward communities in the Medical Colleges in Andhra Pradesh.
Under the said G.O., 25% of the seats were reserved for Backward Classes in accordance with the list contained therein.
The reservation for the Backward Classes was challenged before the Andhra Pradesh High Court by ,certain applicants on the ground that the Government order offends articles 15 and 29(2) of the Constitution.
It was alleged that the State Government acting in fraud of its powers listed more than 139 castes as socially and educationally backward.
It was the further allegation that the list had been prepared exclusively on the basis of caste.
The State Government contested the writ petitions on the ground that the Government was maintaining a list of Backward Classes based on socially and educationally backwardness of the caste and to such people 25 % of the seats had been reserved.
It was further averred that such reservation had 'been going on for a long time and the list was also being suitably revised by making additions or deletions whenever found necessary.
A learned Single Judge of the High Court in P. Sukhadev The Government of Andhra Pradesh(1) considered the validity of the impugned G.O. No. 1886 of 1.963 from two points of view: (1) whether the list of backward classes was based solely on consideration of caste; and (2) whether the Government had adopted any standard or method of determining the social and educational backwardness of the classes specified and, if so, the material upon which the Government has so acted.
The High Court held that the State on which lay the onus of supporting the classification as valid had placed no materials before the Court as to the economic condition of the various classes, their occupation and habitation and social status and their educational backwardness.
The High Court is also of the view that the enumeration of persons as B ackward Classes in the Government Order has been made almost exclusively on the basis of caste.
On these grounds the Government Order was struck down as violative of article 15 (1) and 29(2.) as being in fraud of powers conferred on the State.
After the G.O. No. 1886 of 1963 was struck down by the High Court, the State Government decided that the criteria for determining backwardness should be only economic factors and should be applied to individual family rather than to a whole caste.
The Government issued a G.O. No. 301/Education dated February 3.
1964 scrapping the then existing list of Backward Classes with (1) 269 effect from April 1, 1964 and directed that financial assistance be given to the economically poorer sections of the population, whose family income was below Rs. 1,500 / per annum.
The State Government again took up the question of drawing up a list of Backward Classes in consonance with the provisions of the Constitution.
For this purpose a Cabinet Sub Committee was constituted to draw up a list of persons who could be considered backward.
The Cabinet Sub Committee obtained information from other States and as per the advice of its Law Secretary, it was decided that certain criteria is to be adopted for determining the backwardness of the people.
The criteria included Poverty Low standard of education, Low standing of living, Place of habitation; Inferiority of occupation and caste.
The Cabinet Sub Committee having taken a decision regarding the criteria to be applied, directed the State Director of Social Welfare to check up the lists of Backward Classes which had been scrapped on February 3, 1964 and to select from those lists the castes or communities which could be considered backward on the basis of the above criteria.
The Director of Social Welfare, in consultation with the Law Secretary drew up a list of persons who could be included in the list of Backward Classes.
The said Cabinet Sub Committee considered the recommendations made by the Director of Social Welfare and accordingly drew up a Est of 112 communities which were considered as backward.
Accordingly, G.O. No. 1880/Education dated July 29, 1966 was issued with a list showing 112 communities as backward as being eligible for scholarships and reservation of seats to Professional Colleges and Government Services.
The validity of the above Government Order was again chal lenged before the High Court of Andhra Pradesh on the ground that the list was prepared solely on the basis of caste and violated the provisions of the Constitution.
Here again the students who filed the writ petitions in the High Court urged that there was no material difference between the list drawn up under this G.O. and the list which was struck down by the High Court as per G.O. No. 1886 of 1963.
The attack was that the list of 1966 was also prepared exclusively on the basis of caste.
The State attempted to justify the preparation of the list of Backward Classes as having been properly done after investigation by the Director of Social Welfare in consultation with the Law Secretary.
The State further urged that all relevant factors had been taken into account by the Director of Social Welfare before preparing the list.
The Division Bench of the Andhra Pradesh High Court in its decision in P. Sagar and others vs State of Andhra Pradesh(1) upheld the challenge leveled against the reservation made in the G.O. for Backward Classes on the ground that the State has not (1) A.I.R. 1968 A P. 165. 270 placed materials which were available before the Cabinet SubCommittee or the Council of Ministers.
The High Court is of the view that the list has been drawn up by the Director of Social Welfare and the Law Secretary, who cannot be considered in any sense to be experts and that they had made no investigation; nor collected material data for classifying the persons mentioned in the G.O. as backward.
It was further emphasised that neither the Director of Social Welfare nor the Cabinet Sub Committee had before them the population of the various classes, their economic conditions, percentage of literacy or their social and economic status.
It is the view of the High Court that no substantial change had been made from the list prepared under G.O. No. 1886 of 1963 And which had already been struck down by the High Court.
Ultimately, the High Court held that the preparation of the list of Backward Classes under G.O. No. 1880 of 1966 had been made without any material and as such the list was struck down as not being saved by article 15 (4).
We have referred rather elaborately to the list prepared by the State Government under Government Orders Nos 1986 of 1963 and 1880 of 1966 as well as the decisions of the High Court striking down those lists.
Even at the time when the earlier decision was given by the Andhra Pradesh High Court in P. Sukhadev vs The Government of Andhra Pradesh(1), the decision of this Court in M. R. Balaji and others vs State of Mysore(2) had been pronounced.
It is really on the basis of the said decision, that the High Court, on the former two occasions struck.down the reservations made under the two Government Orders on the ground that the preparation of the two lists of Backward Classes had not been made in accordance with the principles laid down by this Court.
In fact, in both the decisions the High Court has emphasised that there has been no investigation whatsoever regarding the various factors that are necessary to he obtained as laid down by this Court for the Purpose of making special provisions for the advancement of any socially and educationally Backward Classes of citizens as envisaged in article 15(4).
The sole reason given in the two decisions by the High Court for striking down the reservation is the fact that the necessary data or material, as laid down by this Court, had not been collected by the State Government.
We are again emphasising this aspect because the High Court in the decision, which is under attack before us, has relied on the above two earlier decisions, to a large extent for coming to the Conclusion that the present list of Backward Classes suffers from the same infirmity, as pointed out on the former occasion.
The High Court has further held that the same persons who had been included in the original list, as belonging to Backward Classes and which list was struck down twice, have again been included in the present G.O. No. 1793 (1) (2) [1963] Supp. 1 S.C.R. 439 271 of 1970.
In the course of the judgment, we will be pointing out that the High Court has committed a basic error in proceeding on the basis that the present lists suffers from the same vice, pointed out in he earlier decisions by the High Court.
The State of Andhra Pradesh challenged before this Court the decision of the High Court striking down the reservations made for Backward Classes as well as the preparation of list under G.O. No. 1880 of1966.
This Court in State of Andhra Pradesh and another vs P. Sagar(1) upheld the decision of the High Court striking down 'the reservation.
This Court agreed with the view of the High Court that no enquiry or investigation had been made by the State Government before preparing the list of Backward Classes enumerated in the said Government Order.
It was further held that the State had placed no materials before the Court, on the basis of which the list of Backward Classes was prepared, excepting relying on the fact that it was prepared by the Director of Social Welfare with the assistance of the Law Secretary.
It is to be noted that this Court upheld the decision of the Andhra Pradesh High Court in view of the fact that the State had made no investigation of enquiry, nor had it collected the necessary materials to ascertain the socially and educationally backwardness of the persons mentioned in the list.
The decision of this Court was rendered on March 27, 1968.
On April 12, 1968, the State Government by G.O. No. 870, appointed a Commission to determine the criteria to be adopted in considering whether any sections of the citizens of India in the State of Andhra Pradesh are to be treated as socially and educationally Backward Classes.
The Commission was also desired to prepare a list of such Backward Classes in accordance with the criteria to be adopted.
The Commission consisted of nine members, presided over by the retired Chief Justice of the Andhra Pradesh High Court.
The other members of the Commission included the members of the State legislature.
The terms of Reference have been printed as Appendix 1 in the report Submitted by the Backward Classes Commission.
A perusal of the terms of Reference shows that the Commission was desired to investigate and determine the various matters regarding the preparation of list of Backward Classes for providing a reservation in educational Institutions and also for appointments for posts in Government service.
The Commission was authorised to obtain any information that it considered necessary from the Government Departments, Collectors, Organisations, Individuals and from such other persons as it considered necessary.
It was also authorised to visit any part of the State for the purpose of investigation and enquiry.
Later on, it is seen that the retired Chief Justice of the High Court, Who was originally the Chairman of the 'Commission, resigned and (1) 87Sup Cl/72 272 the Commission was headed by a retired I.C.S. Officer.
The terms of Reference were as follows "The Commission shall (i) determine the criteria to be adopted in considering whether any sections of citizens of India in the State of Andhra Pradesh (other than the Scheduled Castes and Scheduled Tribes specified by notifications issued by the President of India under article 341 & 342 of the Constitution of India) may be treated as socially and educationally Backward Classes and in accordance with such criteria prepare a list of such backward classes setting out also their approximate numbers and their territorial distribution; (ii) investigate the conditions of all such socially and educationally backward classes and the difficulties under which they labour; and make recommendations as to the special provisions which may be made by the Government for their advancement and for prom otion of their educational and economic interests, generally and with particular reference to (1) th e reservation in educational institutions maintained by the State or receiving aid out of State funds; (2) the concessions, such as scholarships, which may be given by way of assistance; (3) the percentage or proportion of such reservation the quantum of such assistance and the period during which such reservation or assistance may be made or given; and (iii) advise the Government as to the backward classes of citizens (other than the Scheduled Castes and the Scheduled Tribes) which are not ,adequately represented in the services under the State and prepare a list of all such backward classes and make recommendation as to: (1) the reservation of appointments or posts in favour of such backward Classes, and (2) the percentage or proportion of such reservation and the period during which such reservation may be made.
273 The Commission submitted its report to the Government on June 20, 1970.
The report was placed before the State legislature as also the Andhra Pradesh Regional Committee.
The Commission in its report had drawn up a list of 92 classes, which according to it, are socially and educationally backward and have to be classified as Backward Classes and for whom reservations have to be made.
After having regard to the views expressed by the Legislature as well as the Regional Committee and after an examination of the Report, the Government issued G.O. No. 1793 of 1970.
The Government accepted the criteria adopted by the Commission for determining the social and educational backwardness of the citizens, namely, (i) the general poverty of the class or community as a whole; (ii) Occupations pursued by the classes of citizens, the nature of which must be inferior or unclean or undignified and unremunerative or one which does not carry influence or power; (iii) Caste in relation to Hindus; and (iv) Educational backwardness.
The Government also accepted the list drawn up by the Com mission in toto and declared that the castes and communities specified in the annexure to the G.O. are socially and educationally, Backward Classes for the purpose of article 15(4) of the Constitution.
Though the Commission had recommended reservation of 30% of seats for the Backward Classes in the Professional College, ,, the Government in the Order decided that only 25% of seats in the Professional Colleges should be reserved for Backward Classes, The Government also agreed to the recommendations of the Commission to the classification of the Backward classes into four groups, and directed that on the basis of the population of those four groups, the 25% reservation of seats in the Professional Colleges was to be apportioned amongst the said four groups in the proportion mentioned in the Government Order.
The Government made it clear that the acceptance of the recommendations of the Commission regarding reservations shall be in force for a period of 10 years in the first instance and the positions will be reviewed thereafter.
We have referred to the circumstances leading up to the passing of the impugned G.O. No. 1793 of 1970.
In order to appreciate the criticism made by the High Court regarding the approach made by the Commission, it is necessary to refer to the salient feature.
, , of the report of the Backward Classes Commission.
The report of the Backward Classes Commission is Annexure B before us.
As soon as the Commission was appointed, the Commission issued a questionnaire and circulated it very widely to the various authorities and organisations mentioned in its report.
The questionnaire refers to various matters regarding the criteria to be adopted for 274 ascertaining the backwardness of persons as well as the information on matters relating to the social and educational backwardness of the persons.
Apart from the distribution of the questionnaire, the Commission called for information from the Heads of all Government Departments regarding the number of persons belonging to each class or community employed in their Departments.
Information was, also asked from the Principals of Colleges, including the Professional and_Technical Colleges regarding the number of students belonging to each class or community in the, academic year 1967 68.
Similarly, the Head Masters of all the High Schools and Multipurpose High Schools in the State were also requested to furnish information regarding the total number of students belonging to each community who studied in those schools during the last 10 years as well as the number of students classwise and community wise who studied in classes VI to XI in 1968 69.
The Commission toured all the districts in the State and recorded oral evidence on oath from the representatives of a number of communities.
During the tour of the districts, the Commission visited the houses and huts belonging to different communities of the people and also made oral enquiries from the inmates about their conditions of living, their customs, relations _with other communities and their problems.
The names of places visited by the Commission together with the dates of such visits are given in Appendix IV of its Report.
The Commission also visited the neighboring States of Madras, Mysore and Kerala with a view to have discussion with the officers of those Governments, which were connected with the welfare of Backward Classes.
The report says that about 820 persons were examined at various places and that about 480 persons submitted written memoranda.
A large number of replies were received from the public to the questionnaire issued by the Commission.
The Commission has stated that it had an opportunity, during its tour and visit of the villages, of studying the living conditions and standard of life of the various communities.
The Commission has, no doubt, referred to the fact that upto date statistical information with regard to population of the several communities as well as the percentage of literacy was not available.
The difficulty was enhanced by the fact that no caste wise statistic had been collected after 1931 census.
So far as Andhra area is concerned, the figures of 1921 census were available, a$ it had been prepared on caste wise basis.
Regarding Telangana area, the 1931 census of caste wise statistic was available.
It had to estimate the 1968 population in the two areas on the basis of the respective census datas available.
The population figures for 1968 for each caste was fixed by the Commission by the percentage of the increase of the total population.
The estimate so made by the Commission is given in Appendix V of the Report.
275 Regarding literacy, the Commission adopted the percentage of student population per thousand of particular class or community in standards X and XI with reference to the average student population in the whole State.
The reasons for adopting this, procedure have been given in Chapter VI.
Though information was called for regarding the student population community wise in standards X and XI from about 2224 High Schools and Higher Secondary Schools in the State, only about 50% of the institutions sent the information regarding the student population community wise, in those two classes.
The Commission worked out an average on the basis of the replies received from the 50% of the institutions which itself comes to nearly more than 100 schools.
It is not necessary to refer to the employment statistics collected by the Commission.
The Commission itself has indicated the difficult problems it had to tackle.
Chapters IV and V deal with the constitutional provisions regarding the Backward Class as well as the general principles laid down by the High Court and this Court for ascertainment of their social and educational backwardness.
Chapter VI deals with the tests of criteria adopted by the Commission for ascertaining the social and educational backwardness of versions.
Regarding social backwardness, after a very exhaustive survey of the trade or occupations carried on by the persons concerned and other allied matters, the Commission has indicated that only such persons belonging to a caste or community who have traditionally followed unclean and undignified occupation, can be grouped under the classification of Backward Classes.
In this connection the Commission has adverted to the general poverty of the class or community as a whole, the occupation pursued by the class of citizens, the nature of which is considered inferior and unclean, undignified or unremunerative or one which does not carry influence or power, and caste in relation to Hindus.
Regarding educational backwardness, the Commission has adverted to the fact that during the past 10 years, the State has introduced many measures for the general educational advancement of its people by introducing com pulsory primary education for children and free education for boys upto Vlllth class and for (,Iris upto Xllth class. 'It has taken note of the fact that in 1968 69, free education for boys was also extended upto High School stage.
Having regard to the fact that because of literacy and educational advancement, passing in the School Final Class (XI Class) is taken as the minimum qualification for appointment in Public Service as also for admission to University and Technical Education, the Commission is of the view that it is proper to take the last two classes, 276 namely, Classes X and XI as standard for ascertaining the educational backwardness.
In this connection it has referred to the Report of the Backward Classes Committee, appointed by the Jammu and Kashmir Government, presided over by Dr. P. B. Gajendragadkar, former Chief Justice of India.
This Committee has expressed the view that the number of students on the rolls of IX and X classes should be ascertained for determining educational backwardness.
The reasons given by the said Committee for this view are quoted by the Commission in its report.
The Commission then has adverted to the fact that the average student population in classes X and XI in the State works out to about 4.55 per thousand.
On this basis, it has proceeded to apply the principle that communities whose student population in these standards is well below the State average, have to be considered as educationally backward.
Here again the Commission has referred to the fact that as only 50% of the schools had furnished figure$ with reference to the student population, it had to work out an average based on those figures applicable to the entire State.
Though the figures received from the schools show that certain groups showed a slightly higher level of education, the Commission felt in the light of their having personally seen their living conditions, the percentage supplied by the schools may not be accurate.
In view of this, the Commission has held even those persons as really backward from the educational point of view.
Chapter VII gives the list of socially and educationally Backward Classes and there is a very exhaustive note attached to each of these groups as to why the Commission regards them as socially and educationally backward.
In that Chapter the Commission has also exhaustively dealt with the names of the groups, the subdivisions in those groups, their traditional occupation and various other matters having a bearing on their social, economic and educational set up.
Appendix VI which enumerates the list of socially and educationally Backward Classes item by item gives a tabular statement containing information about the name of the community, its traditional occupation as well as its population in 1968.
Appendix VII contains a note about each of the classes enumerated by the Commission as Backwardness Classes.
Appendix VII contains information regarding the principal occupation, approximate family income, percentage of school going students in the particular groups and various other information regarding the persons mentioned in the list.
A perusal of the Appendix VII and VII shows that the traditional occupations of he persons enumerated as backward were of a very low order such as beggars, washermen, fishermen, watchmen at burial grounds etc.
The Commission had made certain recommendations regarding reservation in the Government Service and it had also made recommendations regarding other 277 assistance to be given to the Backward Classes.
In these appeals it is not necessary to refer to those recommendations.
For the purposes of these appeals it is only necessary to state that the observations made by this Court in Triloki Nath Tiku and another vs State of Jammu & Kashmir and others(1) that the principles laid down in M. R. Balaji and others vs State of Mysore (2) will equally apply for consideration on a question arising under article 16(4).
We have fairly elaborately dealt with the manner in which the Backward Classes Commission conducted its enquiries and investigation before submitting the report because that gives an idea of the complexity of the problem that it had to face as well as the volume of materials collected by it.
The main grounds on which the High Court has held invalid the enumeration of the Backward Classes as well as the reservation made for them are as follows : The Commission has classified the groups as Backward Classes mainly on the basis of caste, which is contrary to the principles laid down by this Court beginning from M. R. Balaji and others vs State of Mysore(2).
The Commission has not collected the necessary data and particulars for the purpose of ascertaining the social and educational backwardness of the groups.
The Commission has committed a very serious error in taking census figures of 1921 and 1931 for the Telangana and Andhra areas respectively and projecting those figures and arriving at a conclusion for enumeration of Backward Classes in 1968.
Certain communities whose inclusion in the list of.
Backward Classes by Government Orders Nos.
1886 and 1880 of 1963 and 1966 respectively and which had been struck down as invalid by the High Court have again been included in the list of Backward Classes.
This, according to the High Court, shows that no proper investigation has been made by the Commission, The Commission committed a mistake in adopting the average of student population per thousand of a particular class or community in the X and XI Classes with reference to the State average for the purpose of deter mining educational backwardness.
The Commission, and the Government through the vast machinery at their command should have collected more particulars on the various criteria which have been laid down by this Court for ascertaining the backwardness of a particular group or class.
The Commission has ignored the principle laid down by this Court that the social and educational backwardness of persons classified in the list should be comparable or similar to the Schedule Castes and Scheduled Tribes.
The groups in which the percentage of literacy is well above the State average have been included in the list of Backward Classes.
The Commission has further sub divided the groups into more backward and less backward classes.
(1) ; (2) [1963] SLIPP.
I S.C.R. 439.
278 We have thus indicating broadly the reasons given by the High Court for striking down the reservation made for the Backward Classes.
Mr. Gupte, learned counsel for the appellants, urged that the High Court has grossly erred in striking down the list of Backward Classes prepared by the Commission as well as the reservation made by the State.
Mr. Gupte, at one stage even urged that the view of the High Court that before a group can be included in the list of Backward Class, its social and educational backwardness must be similar or comparable to that of Scheduled Castes and Scheduled Tribes, is erroneous.
According to the learned counsel, there is no warrant for any such assumption on a clear reading of article 15 (4).
Counsel further urged that to treat article 15(4) as an "exception is also equally erroneous.
We are not inclined to accept these two contentions of Mr. Gupte because the said two principles have been laid down by this Court in M. R. Balaji and others vs State of Mysore(1), R. Chitralekha and another vs State of Mysore and others(2) and in Stale of Andhra Pradesh and another vs P. Sagar(3).
In all these decisions it has been held that article 15 (4) has to be read as a proviso or exception to articles 15(1) and 29(2).
The said decisions have also laid down that the Backward Classes for whose improvement special provision is contemplated by article 15 (4) must in the matter of their backwardness be comparable to Scheduled Castes and Scheduled Tribes.
In fact the attempt of Mr. Gupte was that the principles laid down in the above decisions require reconsideration.
It is not necessary for us to consider that aspect in this particular case because as we will be indicating later, factually the classes enumerated as Backward Classes are really socially and educationally backward, on the application of the principles laid down by this Court.
It must be pointed out that none of the above decisions lay down that social and educational backwardness must be exactly similar in all respects to that of the Scheduled Castes and Scheduled Tribes.
Those decisions also lay down that article 15(4) being in the nature of an exception, the conditions which justify the departure from article 15 (1) must be strictly shown to exist.
Therefore, we have to consider the correctness of the decision of the High Court taking into consideration also the above principles laid down by this Court.
By article 15 of the Constitution, as originally enacted, it was provided that : "(1) The State shall not discriminate, against any citizen on grounds only of religion, race, caste, sex, place of birth or any of them.
(2) . . . . . . (1) [1963] Supp.
I.S.C.R. 439.
(2) ; (3) 279 (3) Nothing in this article shall prevent the State from making any special provisions for women and children.
" Article 29(2) provided that " No citizen shall be denied admission into any educational institution maintained by the State or receiving out of State funds on grounds only of religion, race, caste, language or any of them." In Article 46, which occurs in Part IV of the Constitution relating to the Directive Principles of State Policy, the State has been enjoined to promote with special care the educational and economic interest of the weaker sections of the people and in particular of the Scheduled Castes and Scheduled Tribes and to protect them from social injustice and all forms of exploitation.
Articles 15 and 29, as originally framed, prohibited the making of any discrimination against any citizen on the ground only of religion.
race, caste, sex, place of birth or any of them.
In State of Madras vs Shrimati Champakam Dorajrajan(1), this Court had to consider the validity of an order issued by the Government of Madras fixing the number of students for particular communities for selection of candidates for admis sion to the Engineering and Medical Colleges in the State.
The challenge was on the ground that it violated the guarantee against discrimination under article 29(2).
This Court held that the Government Order constitutes a violation of the fundamental right guaranteed to the citizens of all by article 29(2) of the Constitution, notwithstanding the Directive Principles laid down in part IV of the Constitution.
This led to Parliament addin Cl.
(iv) in article 15 by the Constitution (First Amendment) Act, 1951.
Article 15(4) is as follows : "15(4) Nothing in this article, or in clause (2) of article 29 shall prevent the State from making any special provision for the advancement of any socially and educationally backward classes of citizens or for the Sche duled Castes and the Scheduled Tribes.
" This clause contained a special provision for the advancement of any socially and educationally backward classes of citizens or for the Scheduled Castes or Scheduled Tribes.
The reservation has to be adopted to advance the interest of weaker sections of Society, but in doing so it is necessary also to see that deserving and qualified candidates are not excluded from admission to higher educational institutions.
In the determination of a class to be grouped as backward, a test solely based upon caste or community cannot be accepted as valid.
But, in our opinion, though Directive Principles contained in article 46 cannot be enforced by courts, (1) ; 280 Art, 15(4) will have to be given effect to in order to assist the weaker sections of the citizens, as the State has been charged with such a duty.
No doubt, we are aware that any provision made under this clause must be within the well defined limits and should not be on the basis of caste alone.
But it should not also be missed that a caste is also a class of citizens and that a caste as such may be socially and educationally backward.
If after collecting the necessary data, it is found that the caste as a whole is socially and educationally backward, in our opinion, the reservation made of such persons will have to be upheld notwithstanding the fact that a few individuals in that group may be both socially and educationally above the general average.
There is no gainsaying the fact that there are numerous castes in 'the country, which are socially and educationally backward and therefore a suitable provision will have to be made by the State as charged in article 15 (4) to safeguard their interest.
The question before us is whether the Backward Classes Com mission had before it the relevant data and materials for enumerating the persons included in the list as Backward Classes.
Various factors or criteria to be adopted for such enumeration have been laid down in several decisions by this Court.
In particular there is a very exhaustive discussion on all aspects bearing on this matter in M. R. Balaji, and others vs State of Mysore(1) regarding the factors to be taken into account.
for the purpose of ascertaining whether a particular class of persons are socially and educationally backward.
Though Mr. Tarkunde, learned counsel for the respondents, supported the various reasons given by the High Court for striking down the reservations made for the Backward Classes, we are of the opinion that the criticisms leveled against the report of the Backward Classes Commission by the High Court are not justified.
It may 'be that something more could have been done and some further investigation could have been carried out.
But, in our opinion, the question is whether on the materials collected by the Commission and referred to in its report, can it be stated that those materials are not adequate or sufficient to support its conclusion that the persons mentioned in the list as Backward Classes are socially and educationally backward.
We may mention in passing that we have not been able to find any definite averment in the affidavits filed by the writ petitioners that any particular group or class included in the list by the Commission is not really socially and educationally backward.
In our opinion, the Commission has taken considerable pains to collect as much relevant material as possible to judge the social and educational backwardness of the persons concerned.
When, for instance, it had called for information regarding the student population in classes X and XI from (1) [1963] Supp.
I. section C. R. 439.
281 nearly 2224 institutions, if only 50% of the institutions sent replies, it is not the fault of the Commission for they could not get more particulars.
If the Commission has only to go on doing the work of collecting particulars and materials, it will be a never ending matter.
In spite of best efforts that any commission may make in collecting materials and datas, its conclusions cannot be always scientifically accurate in such matters.
Therefore, the proper approach, in our opinion, should be to see whether the relevant data and materials referred to in the report of the Commission justify its conclusions.
In our opinion, there was sufficient material to enable the Commission to be satisfied that the persons included in the list are really socially and educationally backward.
No doubt there are few instances where the educational average is slightly above the State average, but that circumstances by itself is not enough to strike down the entire list.
In fact, even there, it is seen that when the whole class in which that particular group is included, is considered the average works out to be less than the State average.
Even assuming there are few categories which are little above the State average, in literacy, that is a matter for the State to take note of and review the position of such categories of persons and take a suitable decision.
We have been referred to various decisions particularly of this Court where reservations for Backward Classes made by the concerned State have been either accepted as valid or struck down.
But it is not necessary for us to refer to those decisions because each case will have to be considered on its own merits, after finding out the nature of the materials collected by a commission or by the State when it enumerated certain persons as forming the Backward Classes.
But one thing is clear that if an entire caste, is as a fact.found to be socially and educationally backward, their inclusion in the list of Backward Classes by their caste name is not violative of article 15 (4).
In M. R. Balaji and others vs State Of Mysore(1) it was held that caste in relation to Hindus may be a relevant factor to consider in determining social backwardness of a group or class of citizens: but it cannot be made the sole or dominant basis in that behalf.
In the said decision enumeration of persons as Backward Classes on the basis solely of caste was struck down.
In State of Andhra Pradesh and another vs P. Sagar(2) a similar list prepared by the State of Andhra Pradesh solely on the basis of caste was struck down.
In Triloki Nath and another vs State of Jammu & Kashmir and others(3), the Constitution Bench of this Court held that the members of an entire caste or community may in the social, economic and educational scale of values, at a given time be backward and may on that account be (1) [1963] Supp.
I.S.C.R. 419.
(2) (3) 282 treated as backward classes, but that is not because they are members of a caste or community but because they form a class.
Therefore, it is clear that there may be instances of an entire cast, or a community being socially and educationally backward for being considered to be given protection under article 15(4).
In M. R. Balaji and others vs State of Mysore(1), it was ob served that it is doubtful if the test of average student population in the last, three High School Classes as appropriate in determining the educational backwardness and that it may not be necessary or proper to put the test as high.
Even in respect of educational State average it was observed in the said decision that the legitimate view to take would be that classes of citizens whose average is well below the State average can be treated as educationally backward.
But here again it was emphasised that the court does not propose to lay down any hard and fast rule as it is for the State to consider the matter and decide it in a manner which is consistent with the requirements of article _ 15 (4).
These observations made by this ,Court in the above decisions have, in our opinion, been misapplied by the High Court to the case on hand.
It has proceeded on the basis that it is axiomatic that the educational average of the class should not be calculated on the basis of the student population in the last three high school classes and that only those classes whose average is below the State average, that can be treated as educationally backward.
This Court has only indicated the broad principles to be kept in view when making the provision under article 15(4).
The High Court has committed another error in that it has proceeded on the basis that the groups whose inclusion as backward classes in the 1963 and 1966 lists, prepared by the State, which were struck down by the High Court, have again been included in the present list by the Commission.
The High Court has missed the fundamental fact that those two lists were struck down by the High Court on the ground that the State had made no investigation whatsoever, nor had the State collected the relevant materials before classifying the groups as Back ward Classes.
It was on that ground that those lists were struck down by the High Court.
In fact this Court also affirmed the latter decision of the Andhra Pradesh High Court striking down the 1966 list in its decision in State of Andhra Pradesh and another vs P. Sagar(2).
Though we are not inclined to agree with the decision of the High Court that the enumeration of groups as Backward Classes by the Commission is solely on the basis of caste, we will assume that the High Court is right in that view.
There are two decisions of this Court where the list prepared of Back ward Classes, on the basis of caste had been accepted as valid.
No doubt, this Court was satisfied on (1) [1963] Supp.
I S.C.R. 439.
(2) 283 the materials that the classification of caste as Backward Classes was justified.
The first decision is Minor P. Rajendran vs State of Madras.
(1) A Constitution Bench of this Court had to consider certain rules framed by the State of Madras for selection of candidates for admission to the last Year Integrated M.B.B.S. Course.
One of the rules, the validity of which had to be considered, was rule 5 providing for reservation for socially and educationally Backward Classes, referred to in the Government Order No. 839/Education, dated April 6, 195 1, as subsequently amended.
The challenge was that the said rule violated Article 15 of the Constitution as the list prepared by the State was exclusively on the basis of caste.
The State of Madras, after giving the history as to how the list of Backward Classes was made starting from the year 1906, had referred to the fact that the list was made upto date by making necessary amendments thereto.
It was further pointed out on behalf of the State that the main criteria for inclusion in the list was the social and educational backwardness of the caste based on occupations pursued by those castes.
It was further pleaded that as the members of the caste as a whole were found to be socially and educationally back ward, they were put in the list.
The, State further pointed out that after the Constitution came into force, the list was examined in the light of article 15 (4) and the same list which continued from 1906 was adopted for purposes of article 15 (4) as the entire caste was socially and educationally backward.
This Court accepted the explanation given by the State of Madras and held that though the list shows certain castes, members of those castes were really a class of socially and educationally backward citizens.
This Court held as a fact that the list prepared by the State was caste wise, nevertheless, as the castes included in the list were as a whole socially and educationally backward, the list was not violative of article 15.
In this view rule 5 was well as the lists of Backward Classes were held to be valid.
The following observations of this Court are apposite "The contention is that the list of socially and educationally backward classes for whom rese rvation is made r. 5 nothing but a list of certain castes.
Therefore, reservation in favour of certain castes, based only on caste considerations violates article 15(1), which prohibits discrimination on the ground of caste only.
Now if the reservation in question had been based only on caste and had not taken into account the social and educational backwardness of the caste in question, it would be violative of article 15(1).
But it must not be (1) ; 284 forgotten that a caste is also a class of citizens and if the caste as a whole is socially and educationally backward reservation can be made in favour of such a caste on the ground that it is socially and educationally backward class of citizens within the meaning of article 15 (4). . .
It is true that in the present cases the list of socially and educationally backward classes has been specified by caste.
But that does not necessarily mean that caste was the sole consideration and that persons belonging to these castes are also not a class of socially and educationally backward citizens. . " The above decision has been quoted with approval in State of Andhra Pradesh and another vs P. Sagar,(1) and it was empha sised that the principles laid down therein do not make any departure from those laid down in the previous decision The next decision of this Court where a list prepared on the basis of caste, on the ground that the entire caste was socially and educationally backward was approved as valid under article 15(4) is Minor A. Pertakaruppan vs State of Tamil Nadu and others.
(2) In this decision unit wise distribution of seats for the Medical Colleges was struck down by this Court as violative of articles 14 and 15, nevertheless the list of Backward Classes, which was challenged, as having been framed on the basis exclusively of caste, was held to be valid.
This Court after referring to the decisions in M. R. Balaji and others vs State of Mysore(1) and R. Chitralekha and others vs State of Mysore(1) held ' that caste is a relevant factor in ascertaining a class for the purpose of article 15(4).
The decision in Minor P. Rajendran vs State of Madras and others(5) was also quoted with approval and the said decision was relied on as an authority for the proposition that the classification of Backward Classes on the basis of caste is within the purview of article 15 (4), if those castes are shown to be socially and educationally backward.
After a perusal of the list of Backward Classes, which was under challenge, this Court held that though the list has been framed on the basis of caste, it does not suffer from any infirmity because the entire caste was substantially socially and educationally backward.
On this basis the list of Backward Classes was held on to be valid.
It may be mentioned that the list which was under challenge was more or less substantially the same as this Court held to be valid in Minor P. Rajendran vs State of Madras and others(5).
At this stage it may be recalled that the State of Andhra Pradesh originally formed part of the composite State of Madras.
We (1) [1968] 39.C.R. 595.
(2) ; (3) [1963] Supp.
I.S.C.R. 439.
(4) ; (5) ; 285 sent for the paper book in Writ Petition No. 285 of 1970, the decision of which is reported in Minor P. Rajendran vs State of Madras and others.(1) On a comparison of the list, which was under challenge in the said decision, but accepted as correct by this Court, with the list which is under attack before us, we find that most of the groups whose inclusion in the list by the State of Madras was held to be valid are also found in the list prepare by the Backward Classes Commission appointed by the Andhra Pradesh State.
To conclude, though prima facie the list of Backward Classes which is under attack before us may be considered to be on the basis of caste, a closer examination will clearly show that it is only a description of the group following the particular occupations or professions, exhaustively referred to by the Commission.
Even on the assumption that the list is based exclusively on caste, it is clear from the materials before the Commission and the reasons given by it in its report that the entire caste is socially and educa tionally backward and therefore their inclusion in the list of Backward Classes is warranted by article 15(4).
The groups mentioned therein have been included in the list of Backward Classes as they satisfy the various tests, which have been laid down by this Court for ascertaining the social and educational backwardness of a class.
The Commission has given very good reasons as to why it had to take into account the population figures based upon the 1921 and 1931 censuses.
It was also justified in taking the average student population of Classes X and XI, especially as the said procedure has been accepted by the Committee appointed by the Jammu and Kashmir Governments, presided by Dr. P. B. Gajendragadkar, former Chief Justice of India.
That Committee took into account IX and X standards average.
The decided cases have laid down the principles for ascertaining the social and educational backwardness of a class.
The Backward Classes Commission in this case has taken considerable pains in collecting data regarding the various aspects before including a particular group as Backward Class in the list.
There is a criticism levelled that the Commission has used its personal knowledge for the purpose of characterising a particular group as backward.
That, in the circumstances of the case, is inevitable and there is nothing improper or illegal.
The very object of the Commission in touring the various areas and visiting the huts and habitations of people is to find out their actual living conditions.
After all that information has been gathered by the Commission not secretly but openly.
In fact the actual living conditions of habitation can be very satisfactorily judged (1) ; 286 and found out only on a personal visit to the areas, which will give a more accurate picture of their living conditions and their surroundings.
If the personal impressions gathered by the members of the Commission have also been utilised to augment the various other materials gathered as a result of detailed investigation, it cannot be said that the report of the Commission suffers from any vice merely on the ground that they imported personal knowledge.
In our opinion, the High Court has not been fair to the Commission when it says that whenever the Commission found the figures obtained in respect of certain groups as relating to their educational standard being higher than the State average, it adopted an ingenious method of getting over that obstacle by importing personal knowledge.
In fact the Commission has categorically stated that the information received from the various schools showed that the percentage of education was slightly higher than the State average in respect of certain small groups; but in view of the fact that their living conditions were deplorably poor, the slight higher percentage of literacy should not operate to their disadvantage.
Regarding the criticism that the Commission has divided classes into more backward and less backward, in our opinion, this is not also well founded.
On the other hand, what the Commission has recommended was the distribution of seats amongst the reserved classes in proportion to their population.
This is not a division of the Backward Classes as more backward and less backward as was the case which was dealt with by this Court in M. R. Balaji and others vs State of Mysore.(1) There was a contention raised by Mr. Tarkunde, learned coun sel for the respondents, that the total number of seats that could be given to the candidates belonging to the Backward Classes cannot exceed the percentage of reservation made in their favour.
That is, according to the learned counsel, if more than the reserved quota amongst the Backward Classes candidates, have secured seats on merit, there can be no further selection of candidates from the reserved group.
No doubt our attention was drawn to a decision of the Kerala High Court, which has held that the reservation is irrespective of some of the candidates belongings to the Backward Classes, getting admission on their own merit.
The Andhra Pradesh High Court has taken a slightly different view.
If a situation arises wherein the candidates belonging to the groups included in the list of Backward Classes, are able to obtain more seats on the basis of their own merits, we can only state that it is the duty of the Government to review the question of further reservation of seats for such groups.
This has to be emphasised because the (1) [1963] Supp.
I S.C.R. 439.
287 Government should not act on the basis that once a class is considered as a backward class, it should continue to be backward for all time.
If once a class appears to have reached a stage of progress, from which it could be safely inferred that no further protection is necessary, the State will do well to review such instances and suitably revise the list of Backward Classes.
In fact it was noticed by this Court in Minor A. Periakarauppan vs State of Tamil Nadu and others(1) that candidates of Backward Classes had secured nearly 50% of seats in the general pool.
On that ground this Court did not hold that the further reservation made for the Backward Classes is invalid.
On the other hand it was held The fact that candidates of backward classes have secured about 50% of the seats.
in the general pool does show that the time has come for a de novo comprehensive examination of the question.
It must be remembered that the Government 's decision in this regard is open to judicial review.
" The only other aspect that has to be dealt with is the quantum of reservation made for the Backward Classes.
It was held in M. R. Balaji and others vs State of Mysore(2) that the total of reservation for Backward Classes, Scheduled Castes and Scheduled Tribes should not ordinarily exceed 50% of the available seats.
In the case before us, under G.O. No. 1793 of 1970, the total reservation is only 43%.
The break up of that percentage is 25%, 4% and 14%, for the Backward Classes, Scheduled Tribes and Scheduled Castes respectively.
The quantum of reservation is thus well within the limits mentioned in the decision, referred to above.
For the reasons given above, we are of the opinion that the list of Backward Classes, as well as the reservation of 25% of seats in Professional Colleges for the persons mentioned in the said list is valid and is saved by article 15(4) of the Constitution.
We are not inclined to agree with the reasons given by the High Court that the said G.O. offends article 15 (4) of the Constitution.
To conclude, we agree with the Wings of the High Court that reservation of 40% of seats to the H.S.C. candidates to the 1st Year Integrated M.B.B.S. Course under rule 9 of G.O. No. 1648 of 1970 is invalid.
That provision has been rightly struck down by the High Court.
To that extent the judgment and orders of the High Court are confirmed.
We, however, differ from the decision of the High Court regarding the invalidity of G.O. No. 1793 of 1970.
On the (1) ; 6 L8879upCI/72 (2) [1963] Supp.
I section C.R. 439.
288 other hand we hold that the said G.O. is valid and is saved by article 15(4) of the Constitution.
The judgment and orders of the High Court to the extent of striking down the said G.O., in consequence set aside.
In the result, the judgment and orders of the High Court striking down G.O. No. 1793 of 1970 are set aside and the appeals allowed in part to that txtent.
In other respects the appeals will stand dismissed.
There will be no order as to costs in the appeals.
It has been represented on behalf of the State that the admissions already given to the writ petitioners will not be disturbed.
G.C. Appeals allowed in part. | Admission to the integrated M.B.B.S. Course in the government medical colleges in Andhra Pradesh was from two sources, namely, those who had passed the pre University Course and those who had passed the Higher Secondary Course (Multi purpose) and a student from either course had to appear at a competitive test.
By G.O. No. 1648/Health dated July 23, 1970 40% of the seats were reserved for those candidates who had passed the Higher Secondary Course (Multi purpose).
Seats.
were also reserved for Scheduled Tribes and Scheduled Caste candidates.
Apart from these there was a reservation of 25% in favour of Backward Classes as enumerated by the Andhra Pradesh Backward Classes Com mission.
This reservation was provided by G.O. No. 1793/Education.
dated September 23, 1970.
The respondents who were candidates at the entrance examination for admission to these colleges were not selected on account of these reservations.
They filed writ petitions in the High Court challenging rule 9 under which 40% reservation had been made in favour of those passing Higher Secondary Course (Multi purpose) and the aforesaid G.O. making 25% reservation in favour of the Backward Classes.
The High Court by its judgment allowed the writ petitions and directed the State to give admission to the writ petitioners in the lst year, Integrated M.B.B.S. Course.
The High Court held that the only basis for selection for the first year course is the marks obtained by a candidate ,at the entrance test.
The selection thereafter should only be on the basis of highest number of marks irrespective of the fact as to whether the candidate was from the pore university course or the higher secondary course.
Rule 9 providing for the reservation of the 40%, in favour of ' HSC (M.P.) candidates was, therefore, struck down as offending Article, 14 of the Constitution.
Regarding the 25% seats in the colleges reserved for the Backward Classes the High Court held that the government order concerned was violative of Article 15(1) of the Constitution read with Article 29 and that it was not saved by Article 15(4) of the Constitution.
In appeal by the State of Andhra Pradesh, HELD : (1) It is no doubt open to the State to prescribe the source from which the candidates are declared eligible for applying for admission to the medical colleges; but when once a common entrance test has been prescribed for all the candidates on the basis of which the selection has to be made the rule providing further that 40% of the, seats will have to be reserved for H.S.C. candidates is arbitrary.
In the first place after 248 common test has been Prescribed there cannot be a valid classification ,,of PUC and Hsc candidates.
Even assuming that such classification is valid, the said classification has no reasonable relation to the object sought to be achieved, namely, selecting best candidate for the admission to the Medical Colleges.
The reservation of 40% to the H.S.C. candidates has no reasonable relation to the said object.
Hence the High Court was right when it struck down this reservation under rule 9 contained in G.O. No. 1648 of 1970 as violative of Article 14.
[266 C E] (ii) (a) Though prima facie the list of Backward Classes which was under attack may be considered to be on the basis of caste, a closer examination would clearly show that it is only a description of the group following the particular occupations or professions, exhaustively referred to by the Commission.
Even on the assumption that the list is based exclusively on caste, it was clear from the materials before the Commission and the reasons given by it in its report that the entire caste is socially and educationally backward and therefore the inclusion of subcaste in the list of Backward Classes is warranted by article 15(4).
The groups mentioned therein have been included in the list of Backward Classes as they satisfy the various tests which have been laid down by this Court for ascertaining social and educationally backward classes.
The list of Backward Classes as well as reservation of 25% of seats in Pro fessional Colleges for the persons mentioned in the said list was valid and was saved by article 15(4) of the Constitution and the High Court was wrong balding to the contrary.
[285 C D; 287 F G] (b) The actual living conditions of habitation of the classes under investigation can be satisfactorily judged and found out only on a personal visit to the areas which will give a more accurate Picture of their living conditions and their surroundings.
If the personal impression gathered 'by the members of the commission had also been utilised to augment the various other materials gathered as a result of detailed investigation it could not be said that the report of the Commission suffered from any vice merely on the ground that they imported personal knowledge.
[285 H286 A] (c) The criticism that the Commission had divided classes into more 'backward and less backward was not well founded.
on the other hand what the Commission had recommended was the distribution of seats amongst the reserved classes in proportion to their population.
This was not a division of the Backward Classes as more backward and less backward.
[286 D] (d) If a situation arises wherein the candidates belonging to the group included in the list of backward classes are able to obtain more seats on the basis of their own, merit it is the duty of the government to review the question of further reservation of seats for such groups If once a class appears to have reached a stage of progress from which it could be safely inferred that no further protection is necessary the State will do well to review such instances and suitably revise the list of Backward Classes.
[286 H] (e) In the present case under G.O. No. 1793 of 1970 the total reservation was only 43%.
The break up of that percentage is 25%, 4% and 14% for the Backward Classes, Scheduled Tribes and Scheduled Castes respectively.
The quantum of reservation was thus well within limit mentioned in Balaji 's case.
[287 E] State of Andhra Pradesh and another vs Lavu Narendra Nath and ,Others, , Gullapalli Nageswara Rao and Others vs 249 Principal Medical College, Guntur and Others, A.I.R. 1962 A.P. 212.
P. Sagar and Others vs State of Andhra Pradesh, represented by Health Department, Hyderabad and ' Others, A.I.R. 1968 A.P. 165, State Of Andhra Pradesh and Another vs P. Sagar, , Chitra Ghosh and Another vs Union of India and Others, ; , Minor P. Rajendra vs State of Madras, ; , Ganga Ram and Others vs Union of India and Others, A.I.R. 1970 S.C. 2178, D. N. Chanchala etc.
vs State of Mysore and Others ; , State of Maharashtra and Another vs Lok Shikshan Sanasatha and Ors., ; , Minor A. Periakaruppan and Anr.
vs State of Tamil Nadu and Ors.
; , P. Sukhadev vs The Government of Andhra Pradesh, , Triloki Nath Tiku and Anr.
vs State of Jammu & Kashmir and Ors.
[1967] 2 S.C.R. 265, M. R. Balaji and Ors.
vs State of Mysore, [1963] Supp.
I S.C.R. 438, R. Chitralekha and Anr.
vs State of Mysore and Ors.
, ; , State of Madras vs Shrimati Champakam Dorairajan, ; and Triloki Nath and Anr.
vs State of Jammu & Kashmir and Ors., [1969] I S.C.R.103, referred to. |
Appeal No. 527 of 1967.
Appeal from the judgment and decree dated August 2nd/3rd, 1965 of the Mysore High Court in Regular First Appeal No. 147 of 1958.
M. Natesan and K. Jayaram, for the appellant.
section section Shukla, for respondents Nos. 1 to 4.
The Judgment of the Court was delivered by Hedge, J.
This appeal by certificate arises from the deci sion of the Mysore High Court in R.A. No. 147 of 1958 on its file.
The plaintiff is the appellant.
The main question that arises for decision in this appeal is as to the share to which the plaintiff is entitled in the properties held to be partible by the High Court.
One other minor contention had also been urged which will be referred to and dealt With at the appropriate stage.
The facts as found by the High Court and which are no more in dispute may now be stated.
The appellant is the adopted son of one Ranga Rao alias Ramachandra Rao who died in 1912.
He was adopted by the 202 said Ranga Rao 's widow Seethabai on September 18, 1955.
The geneology of the family of Ranga Rao is as follows KRISHNA RAO DESHPANDE (Died 1934) MARRIED RADHABAI (Died 1935) Ranga Rao alias Hanumantha Rao Ramchandra Rao (went out of the (died 1912) family by adoption).
Married Seethabai (Defendant No. 1) Govinda (Adopted on 18 9 1955) Plaintiff Lakshmana Rao (died 6 9 1952) Married Venkubai Ambabai lst wife 2nd wife (died 1904) Napppa Nagamma Ansuyabai (Nagesh) Deft.
7 Deft.
2 Krishnaji Lakshamana Gundappa Deft.3 (Deft. 4) Deft. 5.
Hanumantha Rao went out of the family having been adopted into some other family.
There was a partition between Krishna ' Rao and Lakshmana Rao, the only two existing coparceners at that time, in 1933.
After partition Krishna Rao is said to have bequeathed his properties to some of his relations as per his will dated November 8, 1934.
Subsequently there was a further partition between Lakshmana Rao and defendant No. 2 Nagappa on 203 February 14, 1946.
Lakshmana Rao died in 1952.
Asmentioned earlier, the plaintiff was adopted on September 18, 1955 and the suit from which this appeal arises was instituted in1956 by the plaintiff appellant represented by his natural father ashis ' next friend as he was a minor on the date of the suit.
The trial court granted the plaintiff half share in the properties that were held to be that of the family.
The High Court modified the decree of the trial court in certain respects.
It is not necessary to refer to all the modifications made by the High Court.
We shall refer only to those modifications which are challenged in this appeal.
The High Court reduced the share awarded to the plaintiff from half to 1/3rd of the properties held by it to be partible.
The correctness of this decision is questioned.
The only other question is whether the High Court was justified in setting aside the trial court 's decree awarding a sum of Rs. 15001 to the plaintiff.
Before proceeding to examine the appellant 's contention that he is entitled to a half share in properties held to be partible, it would be convenient to dispose of his contention relating to the money decree.
The trial court came to the conclusion that out of the consideration of Rs. 6500/ received under the sale deed Exh. 177, the second defendant had not accounted for Rs. 3000/ .
Hence the plaintiff is entitled to a half share therein.
The trial court as well as the High Court have found that the sale in question is valid as the same was effected to meet family necessities.
The appellant did not seek an accounting from the 2nd defendant.
No case was made out for requiring the 2nd defendant to account in respect of the amounts received by him as the karta of the family, nor did the plaintiff aver in his plaint that there was any cash in the hands of the 2nd defendant.
Hence the High Court was justified in reversing the decree of the trial court directing the defendant to pay to the plaintiff a sum of Rs. 1500/ .
This leaves us with the question as to the share to which the plaintiff is entitled in the partible properties.
Even before the plaintiff was adopted into the family, there was a partition between Krishna Rao and Lakshmana Rao.
The genuineness of that partition is no more in dispute.
After the partition Krishna Rao became absolutely entitled to his share of the properties and hence he was entitled to deal with that property in the manner he thought best.
As mentioned earlier he had bequeathed his properties to others.
But it was urged on behalf of the appellant that his adoption dates back to the date of the death of his adoptive father, Ranga Rao.
By a fiction of law, he must be deemed to have been in existence, when Krishna Rao and Lakshmana Rao divided the properties amongst themselves.
The said partition having been effected without his joinder, the same has to be 204 ignored.
Hence he is entitled to a half share in the properties.
Alternatively, it was contended that the plaintiff is entitled to get by succession half share in the properties that fell to the share of Krishna Rao.
Before proceeding to examine the decided cases referred to at the time of the arguments, let us proceed to examine the question on first principles.
It is true that by a fiction of law well settled by decided cases that an adopted son is deemed to have been adopted on the date of the death of his adoptive father.
He is the continuator of his adoptive father 's line exactly as an aurasa son and an adoption, so far as the continuity of the line is concerned, has a retrospective effect.
Whenever the adoption may be made there is no hiatus in the continuity of the line.
From that it follows that the appellant must be deemed to have been adopted in 1912.
Consequently he is deemed to have been a coparcener in his adoptive father 's family when Krishna Rao and Lakshmana Rao partitioned the properties.
The partition having been effected without his consent, it is not binding on him.
But from this it does not follow that Krishna Rao and Lakshmana Rao did not separate from the family at the time of the partition.
It was open to Krishna Rao and Lakshmana Rao to separate themselves from the family.
Once they did separate, the appellant and his adoptive mother alone must be deemed to have continued as the members of the family.
It is true that because the plaintiff 's adoptive mother was alive, the family cannot be said to have come to an end on the date of partition.
But that does not mean that Krishna Rao and Lakshmana Rao did not separate from the family.
the partition took place in 1933, the appellant even if he was a coparcener on that day could have only got 1/3rd share.
We, fail to see how.
his position can be said to have improved merely because he was adopted subsequent to the date of partition.
It is true that because he was not a party to the partition, he is entitled to ask for reopening of the partition and have his share worked out without reference to that partition.
But so far as the quantum of his share is concerned, it must be determined after taking into consideration the fact that Krishna Rao and Lakshmana Rao separated from the family in 1933.
The alternative contention of the appellant referred to earlier is also untenable firstly because Krishna Rao disposed of his share of the properties by means of a will and secondly even if he had not disposed of his: share of the property, the same would have devolved on Lakshmana Rao by succession and the property that had once vested by succession cannot be divested as in that property the plaintiffs adoptive father had no right of his own.
The doctrine of relation back is only a legal fiction.
There is no justification to logically extend that fiction .
In fact the plaintiff had nothing to do with his adoptive father 's family when Krishna Rao died.
On that day 205 his adoptive father was not alive.
The devolution of Krishna Rao 's property must be held to have taken place at the very moment Krishna Rao died.
We know of no legal fiction under which it can be said to have been in a suspended animation till the plaintiff was adopted.
This takes us to the decided cases.
A long line of decisions has firmly laid down that an adoption dates back to the date of the death of the adoptive father.
It is not necessary to refer to the catena of decisions on this point.
Suffice it to refer to the decision of this Court in Shrinivas Krishnarao Kango vs Narayan Devji Kango and Ors.(1).
But that fiction by itself does not help the plaintiff.
That fiction merely enables him to establish that he must be deemed to have been in existence on the date of the death of his adoptive father.
Division of status need not be effected by bilateral agreement.
It can be effected by an unilateral declaration by a coparcener if the same is properly communicated.
Therefore it was within the power of Krishna Rao and Lakshmana Rao to separate themselves from the family and in fact they did so in 1933.
We see no basis for the contention of the appellant that he can ignore the events that took place in 1933.
He can no doubt ignore the actual partition by metes and bounds effected by Krishna Rao and Lakshmana Rao and ask for a repartition of the properties but his adoption by itself does not and cannot re unite the divided family.
It is one thing to say that an adopted son can ignore a partition effected prior to his adoption, which affects his rights and it is a different thing to say that his adoption wipes out the division of status that had taken place in his family.
Reliance was placed on the decision of the Bombay High Court in Ramchandra Shrinivas and Ors.
vs Ramkrishna Krishnarao (2 ) in support of the proposition that the plaintiff can enter into the adoptive family on the basis that the family is a joint and undivided Hindu family and his rights in the property of the family must be decided on that basis.
It is true that this decision lends some support to the argument that despite the partition effected in 1933, the plaintiff can work out his rights on the basis that the family remains joint.
The conclusion of the High Court that the adopted son is entitled to enter his adoptive family on the basis that the family continues as a joint and undivided Hindu family and that his rights in the family property must be decided on that basis does not appear to be supported by any Hindu law text or by any decision of this Court or the Judicial Committee.
The decision of the Judicial Committee in Anant Bhikappa Patil, Minor vs Shankar Ramchandra Patil(3), relied on by the High Court did not consider that question.
It is true that some of the observations of Chief Justice Stone in Bajirao and Ors.
vs Rant (1) ; (2) A.I.R. 1952 Bam.463 (3) 70 I.A. 232.
206 krishna(1), does support the view taken by the Bombay High Court.
But the question that arose for decision in that case was whether a person adopted, after a partition in his adoptive father 's family cannot divest the properties that had vested in the other coparceners.
It may be noted that in the course of his judgment, the learned Chief Justice observed : "There can, in our opinion, be no question of a partition whereby the partitioning male members take away all the family property from a joint Hindu family unless the family can be wholly disrupted and finally brought to an end.
We regard it as clear that a Hindu family cannot be finally brought to an end while it is possible in nature or law to add a male member to it.
The family cannot be at an end while there is still a potential, mother if that mother in the way of nature or in the way of law brings in a new male member.
The existing male members can separate off; they can take away their share.
They cannot prejudice by partitioning the rights of the after bom male member whether the birth is natural or legal.
If in point of fact, before his arrival, the existing coparceners have partitioned the new arrival can obtain a re opening of the partition and thereby get his share.
How that share is to be calculated in various circumstances need not be decided here.
" These observations in our opinion lay down the ratio of the decision and that ratio does not support the conclusion reached by the Bombay High Court.
The decision of the Full Bench of the Madras High Court, in K. R. Sankaralingam Pillai and anr.
vs Veluchami Pillai, Minor (2) , relied on by Bombay High Court merely laid down that an adopted son is entitled to reopen partition entered into in the family of his adoptive father, before his adoption.
That position is no more open to question and was not questioned in this appeal.
We are only concerned with the quantum of share to which the plaintiff is entitled.
Our attention has not been invited to any decision which supports the view taken by the Bombay High Court.
We see no justification to accept that view.
Further the interest of the society is not advanced by engrafting one more fiction to the already existing fiction that an adopted son is deemed to have been born on the date of death of his adoptive father.
Acceptance of the new fiction canvassed on behalf of the plaintiff is bound to create various complications.
Hindu widows in the past were proverbially long lived because of 'the child marriage system.
Adoptions might take place and have taken place more than half a century after the death of the adoptive (1) I.L.R. (2) I.L.R. 207 father.
Meanwhile the other coparceners might have dealt with the family property on the basis of the then existing rights.
They might have alienated the property.
We see no justification to create chaos by inventing a new fiction unknown to Hindu law texts nor authorised by stare decisis.
This Court in Shrinivas Krishnarao Kango 's case(1) has laid down that the fiction that an adoption relates back to the date of the death of the adoptive father applies only when the claim of the adoptive son relates to the estate of the adoptive father.
But where the succession to the property of a person other than the adoptive father is involved, the principle applicable is not the rule of relation back but the rule, that inheritance once vested cannot be divested.
It is true that the question that arose for decision in that case was whether an adoptive son can claim to succeed to a collateral 's estate, divesting the property that had already vested in someone else.
But the rule laid down by this Court in that case is much wider than the limited question that arose for decision and the reasons given in support of that rule support our conclusion.
The rights of an adopted son cannot be more than that of his adoptive father.
If the plaintiff 's adoptive father was alive in 1933 when the partition took place, he could not have obtained anything more than 1/3rd share in the family properties.
It passes our comprehension how the plaintiff could acquire a greater right than his adoptive father could have had if he had been alive on the date of partition and that he could have got if he had been adopted prior to that date.
In our judgment the plaintiff 's claim for a half share in the family properties is unsustainable.
In the result ibis appeal fails and the same, is dismissed with costs.
S.C. Appeal dismissed.
(1) [1955] 1.S.C.R. 1. | The appellant was adopted in 1955 by R 's widow after R 's death in 1912.
In 1933, there was a partition between K (R 's father) and his third son L, the only two coparceners existing at that time.
Thereafter, K. bequeathed his properties by will to some of his relations.
Later, there was a further partition between L and his son.
L died in 1952.
A suit was filed in 1956 by the appellant, claiming half of the family properties.
The trial court granted the appellant half share in the family properties.
The High Court reduced the share awarded to the appellant from 1/2 to 1/3 of the properties held by it to be partible.
The High Court also set aside the trial court 's decree awarding a sum of Rs. 1500 to the appellant as his share of the consideration received under a sale deed; In appeal to this Court the appellant contended that his adoption related back to the date of death of his adoptive father; by a fiction of law, he must be deemed to have been in existence when K and L divided the properties between them; the partition, having been effected without his joinder, the same had to be ignored; and, therefore, he was entitled to a half share in the properties.
Alternatively, it was urged that the appellant was entitled to get by succession, half share of the properties that fell to the share of K. Dismissing the appeal, HELD.
(i) The appellant must be deemed to have been adopted in 1912 when R died.
Therefore, he must be deemed to have been a coparcener in his adoptive father 's family when K and L partitioned the properties in 1933.
The partition having been effected without his consent, it is not binding on him; but from this it cannot be said that K and L did not separate from the family.
So far as the quantum of his share is concerned it must be determined after taking into consideration the fact that K & L separated from the family in 1933.
The appellant can ignore the actual partition,by meters and bounds effected by K and L and ask for a repartition of the properties but his adoption by itself cannot reunite the divided family.
The rights of an adopted son cannot be more than that of his adoptive father.
The fiction that an adoption relates back to the date of the death of the adoptive father applies only when the claim of the adopted son relates to the estate of the adoptive father.
If the appellant 's adoptive father was alive in 1933, when the partition took place, he could not have obtained anything more than 1/3rd share in the family properties.
Therefore, the appellant 's claim for a half share in the family properties is unsustainable.
T204 G; 207 B] 201 The alternative claim of the appellant is also not tenable because K disposed his share by a will and secondly, even if he had not disposed of his share, the same would have developed on L by succession and the property once vested cannot be divested as in that property the plaintiffs adoptive father had no right of his own.
The doctrine of relation back is only a legal fiction.
When K. died, plaintiff 's adoption father was not alive.
The revolution of K 's property must be held to have taken place as soon as K died.
The property could not have remained in a suspended animation till the appellant was adopted.
[2O4G] Shrinivas Krishnarao Kango vs Narayan Devji Kango and ors.
; , ; Anant Bhikappa Patil, Minor vs Shankar Ramchandra Patil, 70 I.A. 232; Bajirao and Ors.
vs Ramkrishna, I.L.R. and K. R. Sankaralingam Pillai and Anr.
vs Veluchami Pillai, Minor, I.L.R. , referred to.
Ramachandra Srinivas vs Ramakrishna Krishna Rao, A.I.R. 1952 Bom.
453, disapproved.
(ii) Both the courts below found the sale in question valid as the same was effected to meet family necessities.
As the appellant did not seek an accounting from the 2nd defendant, and as no case was made out for requiring the second defendant to account in respect of moneys received by him as Karta and as the plaint did not state that there was any cash in the hands of the 2nd defendant, the High Court was justified in reversing the decree of the trial court directing the payment of Rs. 1500 to the appellant.
[203 E] |
Appeals Nos.
347 to 350 of 1960.
Appeals by special leave from the judgment and order dated January 18, 1953, of the Incometax Appellate Tribunal, Calcutta Bench, in Incometax , Appeals Nos. 7062 7064 and C.P.T.A. No. 548 of 1951 52.
N.C. Chatterjee, A. V. Viswanatha Sastri and D.N. Mukherjee, for the appellants.
K.N. Rajagopal Sastri, and D. Gupta, for respondent.
July 17.
The Judgment of the Court.
was delivered by HIDAYATULLAH, J. These appeals with special leave, were filed by one Kanhaiyalal Lohia, who died during the pendency of the appeals, and who 841 is now represented by the executors appointed under his will.
By these appeals, which are consolidated, the appellants question an order dated January 8, 1953, of the Income tax Appellate Tribunal (Calcutta Bench) in appeals filed by the Department against the order of the Appellate Assistant Commissioner.
The Tribunal reversed the order of the Appellate Assistant Commissioner and restored that of the Income tax Officer.
Kanbaiyalal Lohia made petitions under section 66 (1) to the Tribunal, setting out a number of questions of which the following was I referred to the High Court : "Whether in the cirumstances of this case where the Income tax Officer, District III (2), separately assessed the business run in the name of Brijlal Nandkishore as belonging to a partnership firm consisting of Brijlal and Nandkishore, the Income tax Officer, Non Companies E. P. T., District can assess the income from the same business in the hands of the assessee ?" This question was answered against him.
Kanhaiyalal Lohia also applied under section 66 (2) to the High Court of Calcutta for reference of the other questions, but failed.
No appeal has been filed by him against the order of the High Court refusing to direct the tribunal to state a case or against the decision on the question referred, and the present appeals have been filed against the decision of the Tribunal.
At the hearing of these appeals, we asked counsel for the appellants how, in view of the recent decisions of this Court in Chandi Prasad Chokhani vs State of Bihar (1) and Indian Aluminium Co. Ltd. vs Commissioner of Income tax (2), these appeals were maintainable, if the two decisions of the High Court had become final.
Mr. A. V. Viswanatha Sastri relied upon the decisions in (1) ; (2) Civil Appeal No. 176 of 1959 decided on April 24, 1961.
842 Dhakeswari Cotton Mills Ltd. vs Commissioner of Income tax West Bengal (1) and Sardar Baldev Singh vs Commissioner of Income tax Delhi and Ajmer (2), and pointed out that in those cases, appeals were entertained from the Tribunal 's order, though he conceded with his usual frankness that special circumstances must exist.
He contended that this was a case in which such circumstances existed.
We shall deal with the appeals from that point of view, because unless special circumstances exist, the appeals must be regarded as not competent, in view of our recent rulings above mentioned.
Kanhaiyalal Lohia, who was a prosperous dealer in jute, had his head office in Calcutta.
He had no issue, and his family consisted of his wife,, his brother, Brijlal Lohia and Brijlal 's son, Nandkishore Lohia.
The properties of Kanhaiyalal Lohia were self acquired, and he was always assessed as an individual.
He maintained accounts according to the Ramaswami year.
In his return for the account year, April 14, 1943 to April 1, 1944 corresponding to the assessment year, 1944 45), he indicated that he had closed down in the middle of 1943 his purchasing centres in East Bengal, which stood in the name of Nandkishore, and that, he had gifted to his brother Rs. 5,1 1, 1. 01 on July.
12, 1943, and to his nephew, Rs. 2,50,000 on September 30, 1943.
He showed income of his East Bengal business only up to the closure of that business.
Brijlal and Nandkishore entered into partnership between themselves, and started a business under the name and style of "Brijlal Nandkishore.
" They took over the purchasing centres in East Bengal.
They opened accounts in banks in the name of "Brijlal Nandkishore", and became members of the Baled Jute Association, and the Jute ,Baler,sAssociation, and traded in their own names.
A deed of partnership between them was also executed on August 5, 1953.
The business of Kanhaiyalal Lohia and of "Brijlal Nandkishore (1) ; (2) ; 843 was within the jurisdiction of the same Incometax Officer.
In the assessment of the partnership firm, notices were issued to the partnership both under section 22(2) and section 34, and the partner ship also applied for registration under section 26A of the Income tax Act,which was granted.
The partnership was also assessed for the years, 1945 46 and 1946 47.
The assessment of Kanhaiyalal Lohia was completed by the Income tax Officer, Non Companies Income Tax cum Excess Profits Tax District, and during the assessment for the year, 1945 46 a notice was issued under section 22(4) of the Income Tax Act on August 24, 1949, calling for accounts of the head office at Calcutta and also the branches including the business being carried on as "Brijlal Nandkishore", Kanhaiylal Lohia proved, the above facts, producing the books of account, bank statements, registration certificate of "Brijlal Nandkhore" and evidence showing the membership of "Brijlal Nandkishore" of the two Associations.
He also produced letters from four persons including one Sri A.L. Mazumdar who was questioned by the Income tax Officer without notice to ' Kanhaiyalal Lohia and whose statement was also recorded.
Kanhaiyalal Lohia objected to this procedure, but the Income tax Officer, it is alleged, paid no heed to his protests, and on.
March 31, 1950 the assessment was completed, and the income of the branches under the direct control of "Brijlal Nandkishore" was pooled with the income of Kanhaiyalal Lohia.
The Income tax Officer held that the gifts were not bonafide, and were colourable transactions.
He relied upon the statement of Sri A. L. Mazumdar, which was recorded when Kanhaiyalal Lohia was not present.
Against the assessment, Kanhaiyalal Lohia, appealed to the Appellate Assistant Commissioner before whom two more letters from leading businessmen were filed.
The Appellate Assistant Commissioner accepted the letters which were filed, and held that the gifts were proved and were bona fide and directed the exclusion 844 of the income of "Brijlal Nand kishore" from the assessment of Kanhaiyalal Lohia.
The order of the Appellate Assistant Commissioner was pronounced on December 27, 1951.
The Department appealed to the Appellate Income tax Tribunal, Calcutta Bench.
The Tribunal disagreed with the Appellate Assistant Commissioner, all held on January 8, 1953, that the gifts were not proved by the assessee by unimpeachable evidence, and that the income of "Brijilal Nandkishore" was rightly included in the assessment.
As stated already,.
applications under section 66 (1) and section 66 (2) were made to the Tribunal and the High Court respectively.
The Tribunal referred one question, but declinedto refer the.
other quest ions.
The High Court then moved under section 66 (2) but without success.
The High Court agreed with the Tribunal and answered the question which was referred, against Kanhaiyalal Lohia.
Before the High Court, Kanhaiyalal 's counsel, Dr. Pal, admitted that he.
could not persuade the Court to answer the referred question against the, Department, and it appears that it was conceded by the Department before the High Court that the assessment of "Brijlal Nandkishore" would be cancelled.
Kanhaiyalal Lohia then filed the present appeals against the order of the Tribunal dated January 8, 1953.
This Court has pointed out in Chandi Prasad, Chokhani vs State of Bihar(1) and Indian Aluminium Co., Ltd. vs Commissioner of Income tax (2) that the two cases in which this Court interfered with appellate orders of a Tribunal and relied upon before us, were of a special kind.
In Dhakheshwari Cotton Mills case(3) there was a breach of the principle, of natural justice, and that was held sufficient to entitle an aggrieved party to come to this Court against the appellate order of the Tribunal under article 136.
In (1) ; (2)Civil Appeal No. 176 of 1959 decided on April 24, 1961.
(3) ; 845 Baldev Singh 's case (1) this Court entertained an appeal against the appellate order of the Tribunal, because limitation to take other remedies was IS barred without an fault of the assessee concerned.
The ratio in each of these cases is that a circumstance which cannot be corrected by the procedure of a stated question of law on a statement of the case may afford a ground for invoking the jurisdiction of Court under article 136.
That ratio does not apply, where a question of law can be raised, and is capable of being answered by the High Court or on appeal by this Court.
An appeal against an order of the High Court deciding a question referred or against a refusal to call for a statement can be brought before this Court under section 66A, if the High Court decides the question referred and under article 136, if the High Court refuses to call for a statement.
In the present case, the order of the High Court on the question referred was not brought before this Court by the ordinary, mode indicated in the Indian Income tax Act, presumably because of the concession of counsel that he could not claim that the question be answered in favour of the assessee and the attitude of the Department that the assessment of "Brijlal Nandkishore" would be cancelled.
The order refusing to call for a statement on questions other than the one referred is also not questioned before us.
The attempt is to bring this case within the ratio of Dhakeshwari Cotton Mills ' case(2),and in support, it has been pointed out mainly that the examination of Sri A. L. Mazumdar in the absence of Kanhaiyalal Lohia was against the principles of natural justice.
The statement of Sri A. L. Mazumdar was taken on March 28, 1950, and it is recorded as follows : "Mr. Mazumdar is questioned by me as to what be knows regarding the alleged gift as recorded in the books of Kanhaiyalal Lohia in favour of Brijlal and Nand Kishore.
He says (1) ; (2) ; 846 that I don 't remember things very distinctly but 1 can say that the gifts to Brij Lal or Nand.
Kishore were not made in my presence as alleged.
Mr. Kanhaiyalal Lohia used to tell me that his brother and nephew are idling away their time hence I shall give them a. gift and make them work by that money.
The partnership deed was most probably drawn up by me.
The gift, was reported to have been made to Brij Lal and Nand Kishore before I should have taken up the drafting of the deed.
Kanhaiyalal told me several times that he wanted to separate his brother and nephew.
When the firm was started then Brijlal came to me and asked me if father and son 's partnership deed could be drawn up.
I don 't know anything else than this in the matter.
" The lie given by Sri Mazumdar to the statement of Kanhaiyalal Lohia has affect his credibility.
The order sheet shows that Mr. B. Sen Gupta took a copy of Sri Mazumdar 's statement and expressed a desire to cross examine him; but when the opportunity was given, he failed to appear.
It is impossible to think in these circumstances that there has been any breach of the principles of natural justice.
The order sheets of March 29 and 30, 1950 clearly record the absence of Mr. B. Sen Gupta.
In our opinion, there is no breach of the principles of natural justice in this case to entitle the appellants to invoke the ruling in Dhakeshwari Cotton Mills case It was contended before us that the finding of the Tribunal was perverse, and that on an examination of the total circumstances, it is quite clear that the gifts were not only real, but were acted upon.
This was a matter within the jurisdiction of (1) ; 847 the Appellate Tribunal as the final fact finding authority.
The Tribunal acted within its powers in refusing to accept the evidence tendered, and looking at the circumstances of the. case, we cannot say that the finding has been perversely reached.
For a number of years, the brother and the nephew were supported by Kanhaiyalal Lohia, and it does not appear that a gift of even a small sum was made to them to put them on their legs.
Suddenly in the year 1943, 'Kanhaiyalal Lohia made up ' his mind to put them in business with a gift of the order of Rs. 7,60,000 odd.
For this purpose, he had to overdraw his accounts with the Bank and to pay interest to the Bank.
It does not appear why he felt that the establishment of his brother and nephew in business should be made on such a grand scale, which involved him in debt.
This circumstance, taken with the fact that Mr. Mazumdar stated that he had always complained that they were good for nothing and were idlers, makes the transactions auspicious.
It was presumably done with a view to reduce the assessable profits in the hands of Kanhaiyalal Lohia, and on the evidence, the Tribunal was entitled to hold, as it did, that this was a sham transaction.
In our opinion, no special circumstances exist, on which the appellants can claim to come to this Court against the decision of the Tribunal, by passing the decision of the of High Court on the question referred and there fusal 'the High Court to call for a statement of the case from the Tribunal on questions which the Tribunal refused to refer to the High Court.
The appeals are, therefore, within the rulings of this Court in Chandi Prasad Chokhani vs State of Bihar (1) and Indian Aluminium Co., Ltd. vs Commissioner of Income tax(2), and must be regarded as incompetent.
The appeals are dismissed with costs, one set.
Appeal dismissed. | The appellant supported his brother and his nephew for a number of years as they were doing no work.
In the year 1943 he made a gift of Rs. 7,60,000 odd to them though he had to overdraw his account with the Bank and to pay interest or the amount borrowed to raise the money.
He also made a transfer of some of his businesses to them.
His explanation was that these gifts were made to set these two persons up in business.
The Income tax Officer held that the gifts were riot bonafide and he assessed, the income of all the businesses in the hands of the appellant.
The appellant had produced letters from some businessmen in support of his case.
One such person was one M. who was examined by the Income tax Officer without notice to the appellant.
Later, however, a copy of the statement of M. was taken by the appellant 's counsel and at his request M. was summoned for cross examination but on the date fixed none appeared for the appellant who was also absent.
The appellant made a petition under section 66(1) of the Income tax Act to the Tribunal asking that a number of questions of law be referred to the High Court.
Only one question was referred by the Tribunal which declined to refer the other questions.
In the High Court the question referred by the Tribunal was answered against the appellant on the admission of his counsel.
The High Court was moved also under section 66(2) to order a reference of the remaining questions but the High Court rejected the application.
The appellant did not appeal against these two orders of the High Court and instead filed appeals against the orders of the Tribunal.
The appellant relied upon two cases of this Court viz. Dhakeshwari Colton Hills ' Case and Baldev Singh 's case and contended that tile appeal to this court was competent.
Held, that the appeals were incompetent in view of the decisions of this Court in Chandi Prasad Chokhani vs State of Bihar and The Indian Aluminium Co., Ltd. 840 Held.
further, that an appeal against an order of the High Court deciding a question referred or against a refusal to call for a statement can only be brought before the Supreme Court under section 66(A) of the Income tax Act, if the High Court decides the question referred, and under article 136 of the Constitution if the High Court refuses to call for a statement.
There can be no direct appeal to the Supreme Court by passing the decisions of the High Court.
Held,.
also, that there was neither any breach of the principles of natural justice in this case nor the existence of circumstances as existed in Baldev Singh 's case to justify the appeal.
Held, that where a witness has been examined by the Income tax Officer behind the back of the assessee but a copy of the statement of the witness is made available, to the assessee and an opportunity is given to him to cross examine the witness, thereis no breach of the principle of natural justice.
ChandiPrasad Chokhani vs State of Bihar.
(1962) 2 S.C.R. 276and Indian Aluminium Co., Ltd., vs Commissioner of Income tax.
(Civil Appeal No. 176 of 1959, decided on April 24, 1961) followed.
Dhakeshwari Cotton Mills Ltd. vs Commissioner of Income.
tax ; and Sardar Baldev Singh vs Commissioner of Income tax, Delhi and Ajmer.
; , explained. , |
iminal Appeals Nos. 89 and 90 of.
Appeals by Special Leave from the Judgment and Order dated the 23rd November 1953 of the High Court of Judicature 'at Bombay in Criminal Appeal No. 1213 of 1953, and from the Judgment and Order dated the 25th August 1953 of the High Court of Judicature at Bombay in Criminal Appeal No. 1121 of 1953 arising out of the judgment and decree dated the 6th August 1953 of the Court of Sessions Case No. 36 of 1952.
section Narayanaiah and Dr. C. V.L. Narayan, for the appellant in Criminal Appeal No. 89 of 1954.
C. Sanjeevarow Nayadu and R. Ganapathy Ayyar, for the appellant in Criminal Appeal No. 90 of 1954.
M.C. Setalvad, Attorney General of India (G. N. Joshi and Porus A. Mehta, with him) for the respondent.
151 1180 1954.
December 22.
The Judgment of the Court was delivered by BOSE, J.
These two appeals arise out of the same trial.
The two appellants, Shreekantiah (the first accused in the trial Court and the appellant in Appeal No. 89 of 1954) and Parasuram (the second accused and the appellant in Appeal No. 90 of 1954) were tried with a third accused Dawson on a number of different charges centering round section 409 of the Indian Penal Code: criminal breach of trust by a public servant.
The trial was by jury and all three were found guilty of an offence under section 409 read with section 34.
They were convicted and sentenced as under: Accused No. 1.
Shreekantiah to one year and a fine of Rs. 500 with four months in default; Accused No. 2.
Parasuram to two years and a fine of Rs. 500 with six months in default; and Accused No. 3.
Dawson to six months and a fine of Rs. 200 with two months in default.
The appeal of the second accused to the High Court was dismissed summarily on 25 8 1953 with the one word "dismissed".
The first and third accused appealed separately.
Their appeal was heard by another Bench and was admitted, and a reasoned judgment followed on 23 11 1953.
This, to.
say the least, was, in the circumstances of this case, anomalous.
The ap.peals arise out of the same trial and are from one judgment and relate to the same charge to the jury, and what is more they raise substantially the same points.
This Court was constrained to express its disapproval of the summary rejections of appeals which raise issues of substance and importance.
We draw attention to the remarks in Mushtak Hussein vs The State of Bombay(1).
Those observations apply with even greater force in the present case.
The three accused are Government servants.
At all material times, the first was the Officer Commanding, the Military Engineering Stores Depot at Dehu Road near Poona.
He was in over all charge.
The (1) ; , 820. 1181 second was under him as the officer in charge of the Receipts and Issue control section.
The third worked directly under the second as the Assistant Stores Officer.
The depot is maintained by the Central Government and covers an area of some 150 acres.
Government stores worth several lacs of rupees are kept there.
On 11 9 1948 iron stores worth about Rs. 4,000 were illegally passed out of the depot and were handed over to one Ibrahim Fida Hussain, an agent of the approver Mohsinbhai (P.W. 1).
The case for the prosecution is that the three accused, who were in charge of these stores and to whom they had been entrusted in various capacities, entered into a conspiracy to defraud Government of these properties and that in pursuance of this conspiracy they arranged to sell them to the approver (P.W. 1) for a sum of Rs. 4,000.
The money is said to have been paid and then the stores were passed out of the depot.
The money is said to have been pocketed by the three accused and not credited to Government.
On these facts a number of charges were framed.
The first set was drawn up on 9 7 1953.
All three accused were jointly charged with an offence punishable under section 5(2) of the Prevention of Corruption Act, 1947 and all three were further jointly charged with having committed criminal breach of trust in furtherance of the common intention of all under section 409 of the Indian Penal Code read with section 34.
Then followed a number of alternative charges in which each was separately charged with having committed criminal breach of trust personally under section 409.
As a further alternative.
, all three were jointly charged under section 409, Indian Penal Code read with section 109 for having abetted each other in the commission of a criminal breach of trust under section 409.
Objection was at once taken to these charges and the one which concerns us now was couched in the following terms; 1182 "It is further submitted that the trial under section 5(2), Corruption Act, 1947 with Indian Penal Code section 409 is likely to embarrass the accused in their defence as it would be difficult to efface the evidence (if any) of the accused persons given on oath from the minds of the Jurors when considering the charge under section 409, Indian Penal Code.
It is therefore prayed that the charges under sec409, Indian Penal Code and section 5(2) of the Corruption Act may not be tried together in one trial".
The Assistant Public Prosecutor said he had no objection to separating the charges and leaving the one under section 5(2) for another trial.
The Court then made the following order on 10 7 1953: "Thus, though a joint trial for offence under section 5(2) of the Prevention of Corruption Act and the offences under the Indian Penal Code is legal and valid,, I think, in view of the circumstances mentioned above, it would be in the interest of justice and also in the interests of the accused themselves if the trial for the offence under section 5(2) of the Prevention of Corruption Act is separated.
I therefore grant the application to this extent and order that the charge should be amended accordingly".
In view of this the charges were re framed on 11 7 1953.
The only difference of substance is that the charge under section 5(2) was dropped.
The others remained.
Now it will be observed that the accused are all public servants and they contend that as, according to the prosecution, they purported to act in the discharge of their official duties, sanction was necessary under section 197 of the Criminal Procedure Code.
There is sanction so far as the first accused is concerned but the second accused contends that there is none in his case to justify the present trial, so his trial,, conviction and sentence are bad.
The position about this is as follows: On 27 10 1949 the Governor General, acting under section 197 of the Code of Criminal Procedure, sanctioned the prosecution of the first accused for offences tinder sections 1183 120 B, 409, 109 and so forth, for having conspired with the other two to commit criminal breach of trust in respect of the properties with which this case is concerned and thus for having abetted the commission of that offence, and also for having committed it.
Similar sanction could easily have been given against the other two accused but it was not.
The sanction for these offences was limited to the first accused.
On the same date sanction was also given for the prosecution of the first accused under section 5(2) of the Prevention of Corruption Act and a similar sanction was given against the second accused.
The question is whether this sanction against the second accused can be extended to cover his prosecution under section 409 of the Indian Penal Code.
In our opinion, it cannot.
At the date of the sanction the unamended Prevention of Corruption Act (II of 1947) was in force.
Criminal breach of trust under section 409 of the Indian Penal Code was included in the definition of "criminal misconduct" under section 5(1)(c) of the Act of 1947.
Therefore, an offence under section 409 could be tried under the Act of 1947 and the question arose whether it would have to be tried under that Act, or whether it could also be tried in the ordinary way by the ordinary Courts.
The Punjab High Court held in The State vs Gurucharan Sinah(1) that it could not.
Because of this the Act of 1947 was amended in 1952 by Act LIX of 1952 and section 4 of the amending Act makes it clear that the trial can be under either law.
But in the same year the Criminal Law Amendment Act, 1952 (Act XLVI of 1952) was passed and because of this Act trials under section 5(2) of the Prevention of Corruption Act must be before a Special Court and a special procedure must be followed.
Therefore, the position which these various Acts created was this.
First, a choice was conferred on some authority to choose whether any given accused should be tried in a special Court with a special procedure and be subject to a lesser punishment under section 5(2) or whether he should be tried in the ordi (1) A.I.R. 1952 Punjab 89, 1184 nary way under section 409 of the Indian Penal Code with the risk of a higher punishment.
The question then is who is to do the choosing.
Under section 197 of the Code of Criminal Procedure the Governor General was at that date the sanctioning authority though the words "exercising his individual judgment" had by that time been deleted.
Under the Prevention of Corruption Act the sanctioning authority was the "Central Government".
Now it may well be that the two mean the same thing because of section 8(a) of the General Clauses Act but that makes no difference at the moment.
The fact remains that either one, or two, Government authorities were given the right, and invested with the duty, of making an election.
They had the right to say whether a certain class of public servant who had committed criminal breach of trust should be tried for that offence under section 409 of the Indian Penal Code in the ordinary courts of the land according to the normal procedure obtaining there and be subject to a maximum penalty of ten years plus an unlimited fine or be tried for the same offence under another name in a special court by a special procedure and be subject to no more than seven years plus a fine which is also unlimited.
At this stage of the arguments we asked the learned counsel for the appellants whether they intended to challenge the vires of this law under article 14 of the Constitution because, if they did, the matter would have to go to a Constitution Bench as we, being only three Judges, would have no power to decide it.
The learned Attorney General at once objected because the point had not been raised at any stage and was not to be found even in the grounds of appeal to this Court.
The learned counsel for the appellants replied that they did not wish to take the point.
Accordingly, we have to proceed in this case on the assumption that the amending Act of 1952 (Act LIX of 1952) is valid.
That results in the position we have outlined above.
There is a choice, not only of forum, but also of procedure and the extent of the maximum penalty.
If two separate authorities are given the right to 1185 choose and neither can encroach upon the preserve of the other, then the Governor General has not sanctioned the present prosecution against the second accused and no other authority has the power to do so.
Therefore, in that event, the sanction given to prosecute under section 5(2) cannot be used to cover the present trial because it is given by another authority not competent to give it.
On the other hand , if the two authorities are really one, then the election has been made clearly and unequivocally.
The sanction is to proceed in the special courts with the special procedure and the second accused is not to be exposed to the risk of the higher penalty.
In that event, the present trial against the second accused is incompetent.
That a defect of this kind is fatal and cannot be cured is well settled.
See the Privy Council in Gokulchand Dwarkadas vs The King(1), the observations of Varadachariar, J. in Hori Ram Singh vs The Crown(1) and the decision of this Court in Madan Mohan vs The State of Uttar Pradesh(1).
But the learned Attorney General argued that no sanction was necessary because, according to him, despite what the second accused says, by no stretch of imagination can he be said to have been acting, or even purporting to act, in the discharge of his official duty.
The argument ran as follows: The act complained of here is the breach of trust and the prior abetment of it: the breach occurred as soon as the goods were loaded on Mohsinbhai 's lorries: it was no part of this accused 's official duties to permit an unauthorised removal of the goods: therefore.
, when he allowed that he neither acted.
nor purported to act, in the discharge of his official duties.
Reference was made to the decision of the Federal Court in Lieutenant Hector Thomas Huntley vs The King Emperor(1) where Zafrullah Khan, J. held that "it must be established that the act complained of was an official act", and to the observations of Varadachariar, J. in Hori Ram Singh vs The Crown(1) (1) A.I.R. 1948 P.C. 82.
(3) A.I.R. 1954 S.C. 637, 641.
(2) , 184.
(4) , 269.
(5) , 186.
1186 where, dealing with section 409 of the Indian Penal Code, he says "Though a reference to the capacity of the accused as a public servant is involved both in the charge under section 409 and in the charge under section 477 A, there is an important difference between the two cases, when one comes to deal with the act complained of.
In the first, the official capacity is material only in connection with the 'entrustment ' and does not necessarily enter into the later act of misappropriation or conversion, which is the act com plained of".
What this argument overlooks is that the stress in the passage quoted is on the word "necessarily" which we have underlined.
A later passage at page 187 explains this: "I would observe at the outset that the question is substantially one of fact, to be determined with reference to the act complained of and the attendant circumstances; it seems neither useful nor desirable to paraphrase the language of the section in attempting to lay down hard and fast tests".
With that we respectfully agree.
There are cases and cases and each must be decided on its own facts.
Now it is obvious that if section 197 of the Code of Criminal Procedure is construed too narrowly it can never be applied, for of course it is no part of an official 's duty to commit an offence and never can be.
But it is not the duty we have to examine so much as the act, because an official act can be performed in the discharge of official duty as well as in dereliction of it.
The section has content and its language must be given meaning.
What it says is " when any public servant. . is accused of any offence alleged to have been committed by him while acting or purporting to act in the discharge of his official duty.
We have therefore first to concentrate on the word "offence".
Now an offence seldom consists of a single act.
It is usually composed of several elements and, as a rule, a whole series of acts must be proved before it can be 1187 established.
In the present case, the elements alleged against the second accused are, first, that there was an "entrustment" and/or "dominion"; second, that the entrustment and/or dominion was "in his capacity as a public servant"; third, that there was a "disposal"; and fourth, that the disposal was "dishonest".
Now it is evident that the entrustment and/ or dominion here were in an official capacity, and it is equally evident that there could in this case be no disposal, lawful or otherwise, save by an act done or purporting to be done in an official capacity.
Therefore, the act complained of, namely the disposal, could not have been done in any other way.
If it was innocent, it was an official act; if dishonest, it was the dishonest doing of an official act, but in either event the act was official because the second accused could not dispose of the goods save by the doing of an official act, namely officially permitting their disposal; and that he did.
He actually permitted their release and purported to do it in an official capacity, and apart from the fact that he did not pretend to act privately, there was no other way in which he could have done it.
Therefore, whatever the intention or motive behind the act may have been, the physical part of it remained unaltered, so if it was official in the one case it was equally official in the other, and the only difference would lie in the intention with which it was done: in the one event, it would be done in the discharge of an official duty and in the other, in the purported discharge of it.
The act of abetment alleged against him stands on the same footing, for his part in the abetment was to permit the disposal of the goods by the doing of an official act and thus "wilfully suffer" another person to use them dishonestly: section 405 of the Indian Penal Code.
In both cases, the 'offence" in his case would be incomplete without proving the official act.
We therefore hold that section 197 of the Code of Criminal Procedure applies and that sanction was necessary, and as there was none the trial is vitiated from the start.
We therefore quash the proceedings 152 1188 against the second accused as also his conviction and sentence.
We now turn to the appeal of the first accused.
He has been convicted under section 409 of the Indian Penal Code read with section 34.
The main point here concerns a vital misdirection in the charge to the jury about section 34.
The learned Additional Sessions Judge misunderstood the scope and content of this section and so misdirected the jury about the law.
The section was expounded at length in paragraphs 15 and 16 of the charge and though some of the illustrations given are on the right lines, there is much there that is wrong and which, if acted on, would cause a miscarriage of justice.
The essence of the misdirection consists in his direction to the jury that even though a person "may not be present when the offence is actually committed" and even if he remains "behind the screen" he can be convicted under section 34 provided it is proved that the offence was committed in furtherance of the common intention.
This is wrong, for it is the essence of the section that the person must be physically present at the actual commission of the crime.
He need not be present in the actual room; he can, for instance, stand guard by a gate outside ready to warn his companions about any approach of danger or wait in a car on a nearby road ready to facilitate their escape, but he must be physically present at the scene of the occurrence and must actually participate in the commission of the offence in some way or other at the time the crime is actually being committed.
The antithesis is between the preliminary stages, the agreement, the preparation, the planning, which is covered by section 109, and the stage of commission when the plans are put into effect and carried out.
Section 34 is concerned with the latter.
It is true there must be some sort of preliminary planning which may or may not be at the scene of the crime and which may have taken place long beforehand, but there must be added to it the element of physical presence at the scene of occurrence coupled with actual participation which, of 1189 course, can be of a passive character such as standing by a door, provided that is done with the intention of assisting in furtherance of the common intention of them all and there is a readiness to play his part in the pre arranged plan when the time comes for him to act.
The emphasis in section 34 is on the word "done": "When a criminal act is done by several persons. .
It is essential that they join in the actual doing of the act and not merely in planning its perpetration.
The section has been elaborately explained by Lord Sumner in Barendra Kumar Ghosh vs The King Emperor(1).
At page 52, he explains that "participation in action" is the leading feature of section 34.
And at page 53 in explaining section 114 of the Indian Penal Code, he says "Because participation de facto (as this case shows) may sometimes be obscure in detail, it is established by the presumption juris et de jure that actual presence plus prior abetment can mean nothing else, but participation.
The presumption raised by section 114 brings the case within the ambit of section 34".
At page 55 he says about section 34 that "participation and joint action in the actual commission of crime are, in substance, matters which stand in antithesis to abetments or attempts".
The misdirection is plain and it goes to the root of the matter because the jury returned a verdict of guilty under section 409 of the Indian Penal Code read with section 34 alone and not under section 409 read with section 109.
It is part of the defence of the first accused that he was not present when the goods were loaded nor was be present when they were allowed to pass out of the gates, that is to say, that he was not present when the offence was committed.
It is true there is evidence to show that he was there when the lorries left but apart from the fact that there is a small discrepancy on the point, there is nothing to indicate that this evidence was believed.
If he was not present he (1) [1924) L.R. 52 I.A. 40.
1190 cannot be convicted with the aid of section 34.
He could have been convicted of the abetment had the jury returned a verdict to that effect because there is evidence of abetment and the charge about abetment is right in law.
But the jury ignored the abetment part of the charge and we have no means of knowing whether they believed this part of the evidence or not.
There is also non direction on an important point which may have caused a miscarriage of justice.
The case for the prosecution is that the accused disposed of the goods to Mohsinbhai for a sum of Rs. 4,000 which was duly paid to the second accused on the 10th.
The learned trial Judge told the jury that "the evidence led by the prosecution about the payment of the Rs. 4,000 is proved to be utterly useless", and in telling them why he gave them a number of reasons.
But he omitted to follow this up by telling them that if they rejected this part of the prosecution case, as he invited them to do, then the strongest part of the case against the accused collapsed because officers.
in the position of the accused do not commit illegal acts like this and expose themselves to a prosecution and possible disgrace unless they are prompted by some strong motive, usually self interest; and though a conviction can be based on evidence which does not disclose a motive if the facts proved justify such a course, yet it would ordinarily be unsafe to convict in a case like the present in the absence of proof indicating an adequate reason for criminal behavior on the part of the accused.
Had the jury been told this, as they should have been, it is possible they would not have returned a verdict of guilty.
In the circumstances, we have no alternative but to quash this conviction also.
We have now to consider whether there should be a retrial.
As the present trial cannot proceed against the second accused, and as all the accused are said to have acted in concert each playing an appointed part in a common plan, we do not think it would be right 1191 to direct a retrial though this is the normal course when a jury trial is set aside on the grounds of misdirection and non direction.
We therefore discharge (not acquit) both the appellants leaving it to Government either to drop the entire matter or to proceed in such manner as it may be advised.
We do this because the accused expressly asked that the charge under the Prevention of Corruption Act should be left over for a separate trial.
The two convictions are therefore quashed and also the sentences.
We are told that the first accused has already served out his sentence.
The fine if paid, will be refunded.
The bail bond of the second accused will be cancelled. | The three accused Government servants were jointly charged with an offence punishable under section 5(2) of the Prevention of Corruption Act, 1947 and all three were further jointly charged with having committed breach of trust in furtherance of the common intention of all under section 409 of the Indian Penal Code read with section 34.
Then followed a number of alternative charges in which each was separately charged with having committed criminal breach of trust personally under section 409.
As a further alternative, all three were 1178 jointly charged under section 409 read with section 109 for having abetted each other in the commission of a criminal breach of trust under section 409.
On objection taken to these charges, the trial for the offence under section 5(2) of the Prevention of Corruption Act was separated from the trial under section 409 of the Indian Penal Code.
The charges were reframed.
One under section 5(2) was dropped while others remained.
On 27 10 1949 the Governor General acting under section 197 of the Code of Criminal Procedure sanctioned the prosecution of the first accused (appellant No. 1) for offences under sections 120 B, 409, 109 for having conspired with the other two to commit criminal breach of trust in respect of properties belonging to Government and for having thus abetted the commission of that offence and also for having committed it.
Similar sanction was not given against the other two accused and was limited only to the first accused.
On the same date sanction was given for the prosecution of the first accused under section 5(2) of the Prevention of Corruption Act, 1947 and a similar sanction was given against the second accused.
The question was whether this sanction against the second accused could be extended to cover his prosecution under section 409 and whether his trial was valid.
Held, (answering the question in the negative) that under section 197 of the Code of Criminal Procedure the sanctioning authority was the Governor General.
Under the Prevention of Corruption Act, 1947 the sanctioning authority was the Central Government.
Either one, or two, Government authorities were given the right and invested with the duty of making an election.
If two Government authorities are given the right to choose and neither can encroach upon the preserve of the other, then the Governor General has not sanctioned the present prosecution against the second accused (appellant No. 2) and no other authority has the power to do so.
Therefore the sanction given to prosecute under section 5(2) of Act II of 1947, could not be used to cover the present trial, because it was given by an authority not competent to give it.
If, on the other hand, the two authorities are really one, then the election has been made clearly.
The sanction under section 5(2) of the Prevention of Corruption Act, 1947 as amended by Act LIX of 1952 and Act XLVI of 1952 is to proceed in special courts with a special procedure so the present trial against the second accused was incompetent.
It is well settled that a defect of this nature is fatal and cannot be cured when section 197 applies and, as it did, sanction was necessary so the trial was vitiated from the start.
The proceeding,,; were accordingly quashed.
If section 197 of the Code of Criminal Procedure is construed too narrowly it can never be applied for it is no part of an official 's duty to commit an offence and never can be.
But it is not the duty of an official which has to be examined so much as his act, because an official act can be performed in the discharge of official duty as well as in dereliction of it.
The section has content and its language must be given meaning.
1179 In the case of the first accused there was misdirection in the charge to the Jury under section 34.
The essence of the misdirection consisted in the Sessions Judge 's direction to the jury that even though a person may not be present when the offence is actually committed and even if he remains "behind the screen" he can be convicted under section 34 provided it is proved that the offence was committed in furtherance of the common intention.
This is wrong because the essence of the section is that the person must be physically present at the actual commission of the crime.
The misdirection is plain and goes to the root of the case because the jury returned a verdict of guilty under section 409 read with section 34 alone and not under section 409 read with section 109, I.P.C. Held, that in cases which raise questions of substance and importance the High Courts should not pass summary orders of rejection without giving some indication of their views on the points raised before them.
Mushtak Hussein vs The State of Bombay ([1953] S.C.R. 809), The State vs Gurucharan Singh (A.I.R. [1952] Punjab 89), Gokulchand Dwarkadas vs The King (A.I.R. , Hori Ram Singh vs The Crown ([1939] F.C.R. 159), Madan Mohan vs The State of Uttar Pradesh (A.I.R. , Lieutenant Hector Thomas Huntley vs The King Emperor ([1944] F.C.R. 262), and Barendra Kumar Ghosh vs The King Emperor ([1924] L.R. 52 I A. 40), referred to. |
l Appeals Nos.
1091 to 1093 of 1971.
Appeals by special leave from the award dated April 15, 1971 of the Industrial Tribunal, Maharashtra, Bombay in References (IT) Nos. 20 of 1969, 70 of 1970 and 105 of 1969.
V.M. Tarkunde, R. A. Jahagirdar and I.N. Shroff, for the appellant (in all the appeals).
K.T. Sule.
Janardan Sharma and Indira Jaisingh, for respondent No. 1 (in all the appeals).
Urmila Kapoor and Kamlesh Bansal, for respondent No. 2 (in all the appeals).
The Judgment of the Court was delivered by Vaidialingam, J.
These three appeals, by special leave, arise out of the Award, dated April 15, 1971 of the Industrial Tribunal, Maharashtra, Bombay in Reference (I.T. Nos. 20 and 105 of 1969 and 70 of 1970).
The main questions that arise for consideration in these appeals relate to the award of Dearness Allowance, Classification of Grades and Fixation of Wages and a direction given by the Industrial Tribunal regarding the Incentive Bonus Scheme, as modified by the Company.
There is also a minor point regarding a particular clause in the Gratuity Scheme as framed by the Tribunal in Reference (I.T. No. 20 of 1969).
Though there are certain other matters dealt with in the Award in Reference (I.T. No. 20 of 1969) they are not the subject of controversy in these appeals.
We will now state the circumstances under Which the Refer ences came to be made to the Tribunal.
570 The appellant was started as a proprietary concern in the year 1944 and was later transformed to a public limited Company and registered as such under the Indian Companies Act, 1962.
From its inception, the Company has been dealing in the business of manufacturing and selling pharmaceutical products.
It had its factory in Jogeshwari in Greater Bombay.
At the time of the Reference, the Company was employing about 714 workmen of whom 558 were operatives and 156 were members of the clerical and subordinate staff.
All these employees were covered by the demands comprised in all the References.
The wage scales of the workmen had been determined originally in Reference (I.T.No. 23 of 1959).
The wage scales of the operatives were as follows "Unskilled A Rs. 1 .52 0 .09.2 .23 0 .12 2 .93
Unskilled B 1.25 0.96 1.85 0.09. 2.30 Semi skilled A 2 .00 0 .12 2 .72 0 .18 3 .80
Semi skilled B 1 .76 0 .11 2 .64 0 .15 3 .39
Skilled 2 59 0 .13 2 .85 0 22 3 .95 0 .30 4 .25".
The wage scales of the clerical and subordinate staff were as follows .200 260 "Junior Chemist Rs. 120 10 12 Manufacturing Assistant140 10 220 15 310 Store keepers Store Assistants 180 10 260 15 350 Stenographers Junior Clerk 60 8 90 10 146 E.B. 15 215.
Intermediate Clerks75 8 115 12 175 E.B. 15 250.
Senior Clerks 115 10 255 15 315 E.B. 20 395.
" In addition to the basic wages, referred to above, the employees were getting dearness allowance, which in the case of operatives was equal to 80% of the revised textile scale of dearness allowance and in the case of clerical and subordinate staff 100% of the revised textile scale of dearness allowance.
The nomenclature of the grades of the operatives was changed by a consent award in Reference (I.T. No. 170 of 1961).
The grades and wages as per this award were as follows "Unskilled Rs. 1 25 0 06 1 85 0 09 2 30 Semi skilled A, 1 52 0 02 2 33 0 12 2 93 Semi skilled B ' 1 76 0 11 2 64 0 15 3 39 Skilled 2 00 0 12 2 72 0 18 3 39 Highly Skilled 2 59 0 13 2 85 .O 22 . 3 95. .
O 30 4 25.
" The dearness allowance of the operatives and clerical and subordinate staff underwent a change by the award in Reference (I.T. No. 402.
of 1963).
Under that award the dearness allowance 571 of the operatives was increased to 90% of the revised textile scale of dearness allowance from January 1, 1964 and to 95% of the revised textile scale of dearness allowance from July 1, 1964.
The dearness allowance of the clerical and subordinate staff was supplemented at different slabs with effect from January 1, 1964 as follows : "Basic salary upto Rs. 100 Basic salary of Rs. 101 to 200 Basic salary of Rs. 201 to 300 Basic salary of over Rs. 300 .
Operatives ' dearness allowance plus Rs. 7 .50 Operative , ' dearness allowanceplus Rs. 15.
Operatives dearness allowance plus Rs. 22 50.
Operatives ' dearness allowance plus Rs. 25.
" Though the award prescribed to the clerical and subordinate staff the same rate of dearness allowance of the operatives plus a fixed amount, as referred to above, the Company continued to give them dearness allowance equal to 100% of the revised textile scale of dearness allowance.
This was also supplemented with the fixed amount depending upon the slab of the salary.
There was a settlement on June 24, 1966 between the Company and its employees, in and by which the wages of the opera tives and the clerical and subordinate staff underwent a final revision.
The wages of the operatives were fixed as follows "Unskilled Rs. 1 .25 0 .10 2 .75
Semi skilled B 1 60 0 .12 2 32 0 .15 3 .67
Semiskilled A 1 .80 0 .15 2 85 0 .20 4 . 45 Skilled 2 .,10 0 20.3 .10 0 .25 5 .10
Highly skilled 2 .75 0 20 3 75 0 .25 5 00 0 .30 6 .50.
" Similarly, the wages of the clerical and subordinate staff were as follows : "Junior Clerk Rs. 75 6 105 10 155 15 260 E. B. 17 311.
Intermediate Clerk 90 8 130 12 190 15 295 E. B. 18 349.
Senior Clerk 125 10 195. 15 270 20 390 E. B 25 440.
Steno and Storekeeper180 10 260 15 380 E. B. 20 4 460.
" The above basic scales in respect of all the categories were again supplemented by dearness allowance as provided for in the award passed in Reference (I.T. No. 402 of 1963).
The Company had also an Incentive Bonus Scheme, by virtue of which a large number of operatives were getting, on an average an additional sum of Rs. 28/ per month.
The Company further revised 572 from about November 1, 1969 the wage scales of Drivers and Watchmen as follows : "Drivers Rs. 70 6 100 9 145 12 205 E. B. 15 250.
Watchmen 45 4 65 6 95 E. B. 8. 135".
The above was the pattern of the wage structure and dearness allowance for the operatives and the clerical and subordinate staff.
The Unions concerned made a demand for introducing the following scheme of dearness allowance in respect of all the workmen with immediate effect : Wage slab .
When the working classVariation in the cost of living in dearness allow dex figure is inance for every 10 the group of 401 points rise or 410.
upto 100 100 per cent 5 per cent From Rs. 101 to 200 50 per cent2 1/2 per cent From Rs. 201 and above 25 per centII percent Minimum dearness allowance Rs. 100.
Minimum variation Rs. 5.
" They also demanded that the above scheme of dearness allow ance was to have retrospective effect from August 1, 1967.
In the same demand the Unions required that the workmen should be granted one month 's wages for every year of service as gratuity in case of resignation, dismissal, discharge, death or termination of service for any reason.
By this demand the Unions required modification of the then existing pattern of payment of dearness allowance at 95% of revised textile scale of dearness allowance to operatives and 100% of revised textile scale of dearness allowance plus Rs. 7.50 to Rs. 25/ paid to the clerical and other staff.
The Company did not agree to the demand and in consequence by order dated January 14, 1969 the Government of Maharashtra referred for adjudication to the Industrial Tribunal the demands.
This Reference was registered as Reference (I.T. No. 20 of 1969).
The Unions again made a demand for revision of scales of pay as well as the classification of employees, their grades and their fitment in the revised scales of pay.
As against the then existing six categories of workmen and their wage scales of the operatives the Unions demanded new classification and gradation into eight grades with new wage scales.
Similarly, as against the then existing five grades of the clerical and subordinate staff, the Unions demanded the creation of six categories with enhanced wage scales.
These demands again were not accepted by the Company which led to the State Government making a reference Oil January 9, 1970, which reference was registered as Reference (I.T. No. 70 of 1970).
573 The Company some time in the year 1959 had introduced an Incentive Bonus Scheme.
This was introduced, according to the appellant, because of the fact that the workmen were not giving a substantial production.
The basis of the scheme, introduced by the appellant, was that if the workmen gave only 30% of the 100% production expected of them, their performance would be considered zero.
On the other hand, if they gave production above 30% and upto 100%, they would be eligible for payment of Incentive Bonus which would be from 31 to 100 points.
In other words, for the 70 points above the first 30 points, the workmen would get Rs. 501 as Incentive Bonus which would work out approximately to about Rs. 71.43 per point.
The appellant desired that the then existing floor limit of 30% ought to be raised to 75% without varying the quantum of Rs. 501 that was originally payable on achievement of 100% production.
What was intended was that the 25 points between 75 and 100 points Were to be made eligible for payment of Incentive Bonus of Rs. 2/ for each point.
The 'Company served a notice of change on the workmen under section 9A of the .
As the workmen protested against this change, this led the Government to make a Reference to the Industrial Tribnual for adjudication.
This was numbered as Reference, (I.T. No. 105 of 1969).
The appellant resisted the claims made for revision of dearness allowance and wage scales as well as the modification sought for in the gratuity scheme.
The appellant also wanted the Tribunal to uphold the notice of change given by it under section 9A of the in respect of the Incentive Bonus Scheme.
In particular the appellant contended that it was not a comparable concern with the units referred to by the Unions and that any modification in the scale of dearness allowance and wages would be beyond its financial capacity.
The appellant also relied oil the coming into force of the Drugs (Price Control) Order, 1970 with effect from May 16, 1970.
According to the appellant the wages and dearness allowance paid by it to the workmen were far higher than what were paid by other units in the region.
The Company also referred to the various awards wherein it had been held that it could not be compared with an International Company having branches in Bombay or with foreign concern though incorporated in India.
The wage scales had been fixed by Settlement dated June, 24, 1966 and that nothing has happened since the date of Settlement to justify a revision of wage scales 'and dearness allowance.
The appellant further urged before the Tribunal that the double linking of dearness allowance, as required by the Unions had never been adopted for the Pharmaceutical units in the Bombay region.
According to the appellant, the revision 574 effected regarding the Incentive Bonus Scheme was justified and the amount of 2/ offered per point was much more than the prevailing rate of Rs. 71.43p.
per point.
It also opposed the revision of the then existing gratuity scheme as demanded by the Unions.
According to the appellant the gratuity scheme which was in force had been introduced by a consent award in 1963.
The appellant filed copies of balance sheets and profit and loss accounts from 1962 63 to 1969 70 and various other charts in support of its plea that it will not be able to bear the additional financial burden that would result if the wage scales and dearness allowance are revised as per the demands made by the Unions.
It will be seen from the facts mentioned above that thr main controversy between the parties related to the revision of wage structure and dearness allowance.
As the demands of the workmen related to regrouping, in different grades, the operatives and the clerical and subordinate staff and as this involved a very radical change in the existing pattern of grades, the Tribunal felt that the opinion of an expert should be obtained on the advisibility of the reclassification.
In this regard both the Unions and the against filed a joint application on December 22, 1970 requesting the Tribunal to appoint Sri N. L. Gadkari, retired Chief Inspector of Factories, Maharashtra State as an assessor.
They also prayed that the points mentioned in the application be referred for the opinion of the assessor.
The Assessor submitted his report on February 22, 1971, in which he recommended the continuance of the then existing grades.
The Unions, while demurring to the report of the Assessor, requested the Tribunal, by their application dated March 25, 1971 to fix for the then existing five grades the following wage scales "Unskilled. .
Rs. 85 8 125 10 225 Semi skilled B. 100 10 150 12 210 15 285.
Semi skilled A 120 12 180 15 255 18 345.
Skilled 140 15 215 18 305 20 405.
Highly skilled 225 25 350 30 500 35 675.
" The appellant, when the Reference came up for hearing, raised an objection to the selection of wage scale by the Unions for the existing grades of the operatives on the ground that such a selection was not permissible, being contrary to the provisions of s.10(4) of the .
The Unions, ultimately, made it clear to the Tribunal that their demand for revision of wage scales of the existing five grades of operatives is to be as follows : "Unskilled Rs. 60 5 85 7 155.
Semi skilled B 70 6 100 8 180.
Semi skilled A 85 8 125 10 225.
Skilled 100 10 150 12 210 15 285.
Highly skilled 120 12 180 15 255 18 345.
" 575 It is on the basis of this claim that the question of revision has been dealt with by the Tribunal.
Regarding the financial incapacity pleaded by the appellant, the Tribunal after an analysis of the balance sheets and profit and loss accounts, held that the average net profit of the Company during the years 1965 66 to 1969 70 works out to about Rs. 1384691/ .
It is also of the, view that the apprehensions of the appellant/regarding the possible impact of the Drugs (Price Control) Order, 1970 are not justified.
It is the view of the Tribunal that in spite of the price freeze effected in 1963, the appellant has been doing very good business from 1962 63 to 1969 70.
Ultimately, the Tribunal found that the financial condition of the appellant is quite sound.
Regarding the comparable concerns in the region, the Unions referred to as many as twenty units.
One of the units relied on as comparable with the appellant was M/s. Burroughs Wellcome & Co. (India) Private Ltd., Bombay.
The appellant opposed its being compared with the concerns relied on by the Unions on the ground that those units were either foreign concerns doing business in India or Indian units working, in collaboration with foreign concerns.
The appellant in turn relied on several other concerns as being comparable with it.
The appellant very strongly relied on certain previous awards in support of its contention that it has been held in those awards that the appellant cannot be compared with foreign concerns or with the concerns working in collaboration with foreign concerns.
The Tribunal, after a consideration of the materials placed ' before it, in this regard, ultimately, held that M/s. Burroughs Wellcome & Co. (India) Private Ltd., was a unit which could be considered as a comparable concern with the appellant.
The Tribunal having regard to the grades and scales of pay obtaining in M/s. Burroughs Welcome & Co. (India) Private Ltd., held that the wage scales for the five grades for the operatives of the appellant should be as follows : "Unskilled .
Rs. 42 3 71 4 112 Semi skilled B 47 3 50 82 4 122 Semi skilled A 50 4 90 5 50 134 Skilled 55 5 50 110 6 50 155 50 High skilled 72 7 142 8 182 9 5C 220.
" The Tribunal fixed the following grades and scales of pay for the clerical and subordinate staff "Junior Clerks and Laboratory Assistants Rs. 85 7 50 145 10 195 12 259 17 323 Intermediate Cierks 120 10 200 12 260 15 335 18 353 Senior Clerks 185 15 305 20 365 25 465" 576 The Tribunal did not accept the large demand made by the Unions for a general adjustment in increments of the employees.
Nevertheless, in view of the revision of the scales of wages, it gave certain directions so that the employees may be fitted in the appropriate revised wage scales.
The parties very hotly contested the question of dearness allowance as well as the pattern to be adopted.
As there were different systems of dearness allowance for the operatives and the clerical and subordinate staff, the Unions desired that a common scheme of dearness allowance on a slab system should be adopted.
The Tribunal having regard to the decisions of this Court in Greaves Cotton and Co. and others vs Their Workmen(1) and Bengal Chemical & Pharmaceutical Works Ltd. vs Its Workmen(2) held that there was no justification for having two systems of dearness allowance one for the operatives and the other for the members of the clerical and subordinate staff.
Accordingly, the Tribunal held that all the employees should get the same dearness allowance irrespective of the fact whether they were operatives ,or members of the clerical and subordinate staff.
As the dearness allowance has to be fixed on industry cum region basis, the Tribunal examined the system of dearness allowance followed in the region by the industries belonging to the pharmaceutical units.
The Unions had submitted statements Exs.
DU 1 and MU. 1 containing a list of pharmaceutical units, in support of their contention that such units were adopting a slab system of dearness allowance.
The Company, on the other hand, referred to certain awards of the Industrial Tribunals in support of its stand that slab system of dearness allowance is not considered as an appropriate mode of providing neutralization.
The Unions also relied on certain awards wherein the slab system of dearness allowance had been introduced by the Industrial Tribunals.
Though the Tribunal had held that most of the units referred to in Exs.
DU 1 and MU 1, cannot be, considered for the purpose of being treated as units comparable with the appellant, nevertheless it held that the practice adopted by those units regarding the grant of dearness allowance can be taken into account as providing a guide regarding the system of dearness allowance adopted in the region.
On this basis the Tribunal accepted the statements in Exs.
DU 1 and MU 1 and held that the slab system of dearness allowance was prevalent in a large number of units belonging to pharmaceutical industry.
In this view, the Tribunal further held that slab system of dearness allowance can be adopted, if the financial burden consequent on the adoption of the said system, can be safely borne by the Company.
(1) (2) 577 The Tribunal then proceeded to consider the system obtaining in Burrough Welcome Company regarding the payment of dear ness allowance.
The system in the said Company, which was common for operatives as well as the clerical and subordinate staff, was as follows Basic Salary Dearness allowance per Variationfor month at the Bom points.
bay working class cost of living index 491 500.
Rs. 1 100.
150 percent 5 Per cent Rs. 101 200 1 50 Per cent on the 1st 21 Per cent Rs. 100.
71 Per cent on the balance.
Rs. 201 300 150 per cent on the 1st 11/4 per cent.
Rs. 100.
721 Per cent on the 2nd Rs. 100, and 36 1/4 per cent on the balance.
Minimum Dearness allowance Rs. 4 Rs. 101.
In the said Company the above scale of dearness allowance was however limited only to employees drawing a basic salary upto Rs. 360/ per month.
The appellant accepted before the Tribunal that the scheme of dearness allowance obtaining, in Burroughs wellcome Company would cast a lesser financial burden than the scale of dearness allowance as demanded by the Unions.
In fact, the Company had filed two charts Exs.
C 12 and C 13, showing the burden which it will have to bear if the scheme of dearness allowance as demanded by the Unions was introduced.
, The Company had worked out the demands in different ways and that is why it filed two statements.
According to the appellant the additional financial burden will be about Rs. 878125.00 as per exhibit C 12 and Rs. 1252693.00 as per exhibit C 13.
The Tribunal is of the view that under exhibit C 13, the Company had taken into account a sum of Rs. 186293.00 payable to some members of the staff drawing a salary of over Rs. 200/per month and amongst whom were also included 52 chemists.
According to the Tribunal the 52 chemists are not covered by the Reference and therefore the burden will have to be calculated only in respect of the workmen covered by the Reference and to, whom dearness allowance is being fixed.
On calculation the Tribunal found that about a lakh of rupees payable to 52 chemists and included in exhibit C 13 by the appellant will have to be deducted from Rs. 1252693.00 Accordingly, it held that as per the calculation of the appellant under exhibit C 13, leaving out the 52 chemists, the total burden will only be Rs. 1152693 .00.
Taking 578 into account the tax relief that the Company will get, the Tribunal ultimately held that the additional financial burden that the appellant will have to bear will only be Rs. 555000.00.
As it had already held that the average annual gross profits of the Company are over Rs. 40,00,000.00, the Tribunal held that the Company can easily bear this additional burden.
The Tribunal is further of the view that though the financial impact of the Drugs (Price Control) Order, on the business activities of the Company has had to be seen, the impact will not be such as to make the appel lant 's financial position difficult.
For all these reasons, the Tribunal fixed for the operatives and the clerical and subordinate staff of the appellant dearness allowance on a system prevalent in Burroughs Wellcome Company.
The system of dearness allowance fixed by the Tribunal is as follows : Basic salary Dearness allowance per Variation month at the Bom bay working class cost of living index 521 530.
Rs. 1 100 150 per cent Rs. 101 200 150 per cent on the 1st Rs. 100.
72 1/2 per cent on the balance.
Rs. 201 300 150 Per cent on the 1st 100 Rs.72 1/2 Percenton the 2.
Rs. 100.
36 1/4 per cent.
on the balance.
Minimum dearness allow ance Rs. 101 _ percent _ 1/2 per cent Rs. 4.
The Tribunal has further directed that dearness allowance in accordance with the above scheme will be payable only to em ployees drawing a basic salary upto Rs. 300/ per month.
It will be seen that the Tribunal while adopting the scale of dearness allowance obtaining in Burroughs Wellcome Company, has made a departure in fixing the scale of dearness allowance on the basis of the Bombay Working Class Cost of Living Index 521 to, 530.
The dearness allowance scheme obtaining in Burroughs Wellcome Company was on the Bombay Working Class Cost of Living Index 491 to 500.
The dis rent cost of living index was adopted by the Tribunal in view of the fact that the appellant was Paying incentive wages to its operatives and with a view to lessen the financial burden on the Company.
Another feature of the scheme adopted by the Tribunal is that it puts a ceiling on the employees drawing basic wages upto 579 Rs. 300/ per month alone being eligible for dearness allowance, whereas under the practice originally obtaining in the Company there was no such limit.
The Tribunal held that the revised wage scales and dearness allowance would be effective from October 1, 1969 and directed the Company to pay the arrears within three months from the date of the Award becoming enforceable.
At this stage it may be mentioned that the appellant is not challenging this direction regarding the date from which the wage scales and dearness allowance are to take effect, though it very vehemently attacks the fixation of the scale of revised wage scales and dearness allowance by the Tribunal.
Regarding gratuity, the Company had already a scheme which had been introduced under the Settlement Award in Reference (IT) No. 141 of 1962.
It is not necessary to set out the scheme that was prevalent in the Company because the only.
objection of the appellant to the revised scheme evolved by the Tribunal is in respect of raising the ceiling from 15 months to 17 1/2 months.
The demand in this regard by the Unions was that the ceiling should be raised from 15 months basic wages to 20 months basic wages.
However, the Tribunal did not accept the claim of the Unions in toto.
On the other hand, it adopted the practice obtaining in the Burroughs Wellcome Company and accordingly fixed the ceiling at 17 1/2 months basic wages.
Regarding the notice of change issued to the workmen by the appellant under s.9A of the proposing to alter the existing floor limit of 30% to 75% in the Incentive Bonus Scheme, the Tribunal on the joint application of the parties dated April 10 , 1970 appointed on April 28, 1970 Sri B. Tulpule, as Assessor to examine the question of revising the existing scheme of Incentive Bonus.
The Assessor submitted his report on August 27, 1970 making the following recommendations : "(1) The base performance index for all sections /in the Company 's factory should be revised and raised to 60 per cent.
(2) Consequent upon the revision of the base index as above, an amount of Rs. 100 per day should be added to the basic wages of the workers, this addition being independent of any other revision of the wage structure that the Tribunal may decide upon.
(3) The revised rates of incentive should continue beyond 100 pet cent performance." Though the Unions generally accepted the recommendations, the appellant was opposed, particularly to the second and third 580 recommendations.
The Tribunal, after a consideration of the objection, is, of the view that recommendations Nos. 2 and 3 were beyond the scope of the terms of reference made to him.
Therefore, those two recommendations were negatived.
Regarding the first recommendation, it is stated by the Tribunal that the Unions accepted the same and that the Company also was not opposed to that suggestion made by the Assessor regarding the raising of the base performance index to 60%.
In dealing with this aspect the Assessor in his report had stated as follows "If the base index of any incentive scheme is raised from X to Y, the workers will stop getting the incentive earnings which they used to get for the performance range from X to Y. This is also the main anxiety expressed by both the Unions in the present case.
At the outset I asked the management whether the implication of their proposed change was such a reduction in the workers ' total pay packet, at any given level of performance.
The management categorically assured me that that is not their intention.
Their purpose in proposing the change is stated by them to induce workers to raise their performance above the prevailing level.
" The Tribunal in its Award had stated that the matters men tioned in the above paragraph including the assurance stated to have been given by the appellant were not denied.
Therefore, the Tribunal, in view of the common measure of agreement between both the parties regarding the first recommendation is of the view that if the pay packet of the workman is to be protected at the wage raise base index performance of 60%, some scheme may have to be worked out.
But as the necessary materials for the purpose of evolving a scheme were not available, the Tribunal has thrown out a suggestion that the said question should be dealt with by the appellant in consultation with the Unions and frame a scheme by common consent, if possible.
Accordingly, the Tribunal left the matter to the parties to deal with the matter with the observation that if it is found that no scheme could be framed by consent, the Unions will be free to raise any dispute that may be available to them in that regard.
We have.
exhaustively referred to the questions referred to the Tribunal as well as the decision of the, Tribunal on those points.
In these appeals, as mentioned earlier, the controversy relate to (1) Scale of Dearness Allowance; (2) Fixation of Wage Scales, Classification and Grades; (3) Raising of the ceiling to 17 '2 months basic wages in. the gratuity scheme.
; and (4) the direction given by the Tribunal.
regarding the Incentive Bonus Scheme.
581 As the main points in great controversy between the parties before us relate to the pattern of dearness allowance and the classification and grades of employees and the fixation of the revised wage scales, we will take up for consideration those matters.
The very _first objection of Mr. Tarkunde, learned counsel for the appellant is regarding the manner of ascertaining grosser of its when revising the wage scales and awarding dearness allowance.
We have already pointed out that the Tribunal has proceeded on the basis that the average annual gross profits of the Company are over Rs. 40,00,000.00.
The appellant had submitted balance sheets and profit and loss accounts for the year 1962 63 to 1969 70.
It is enough to refer to the particulars that could be gathered for the five preceding years, namely, 1965 00 to 1969 70.
For those years the figures are as follows Particulars 1965 66 1966 67 1967 68 1968 69 1969 70 Paid up capital 4500000 4 50 000 0 4500000 54 00 00 0 Reserves and Surplus 2152186 2925376442151547856975714988 Sales 21997640 23866647 303593803299445637152031 Depreciation 5449195 55035784 8241111775916719 Development rebate 972426 8266105840110858144511 Provision for taxation 1915000 1590300185050016985001639000 Net Block 4601566 4905509 545821257459977375386 Net Profit 954591 1443489 159709416045011323779 From the above statement it will be seen that the average net profits work out to Rs. 1384691.00 The net profits have been arrived at, by the Company after deducting taxation, depreciation and development rebate.
It is on the basis of the net profits, so arrived at that the appellant appears to have urged before the Tribunal that the wage scales and dearness allowance are to (1),fixed.
The Tribunal rejected this contentions.
On the, other hand, the Tribunal has held that when considering a revision of wage structure what is to be taken into account is not the net profit. ; but gross profits without any deductions having been made for taxa tion, depreciation and development rebate.
It is on that basis.
that the Tribunal held that the average gross profits ' of the Company exceed Rs. 40,00,000.00.
The gross profits without deducting taxation, depreciation and development rebate for the years 1965 66 to 1969 70 will be.
proximately as follows Year Gross profits Rs. "1965 66.
35,11,752 1966 6736 ' 57,000 1961 6843, 37,698 1968 6945, 25,134 1969 7040, 24,009" 9 L1031 Sup.
Cf/72 582 From the above it will be seen that the figure of Rs. 40,00,000.00 arrived at by the Tribunal as average annual grossprofits appears to be prima facie correct.
Mr. Tarkunde, learned counsel for the appellant found con siderable difficulty in challenging the view of the Tribunal that gross profits are to be arrived at without decucting taxation and development rebate.
He rather strenuously urged that there is absolutely no warrant for arriving at gross profits without deducting depreciation.
On the other hand, Mr. K. T. Sule, learned counsel for the respondent No. 1, whose, contentions have been adopted by Mrs. Urmila Kapoor, learned counsel for the second respondent, pointed out that the approach made by the, Tribunal is correct and is also supported by the decisions of this Court.
Mr. Tarkunde referred us to sections 205 and 211 of the , as well as , Schedule VI therein.
We do not think it necessary to% refer to those provisions as, in ouropinion, they have no relevance or bearing when considering a revision of wages and award of dearness allowance under industrial adjudication.
Those provisions are intended for ' a totally different purpose.
We will presently show, by reference to the decisions of this Court that the Tribunal was justified in computing gross profits without deducting taxation, depreciation and development rebate.
In view of the decisions, to which we will immediately refer to, Mr. Tarkunde was prepared to accept the position that, at any rate, taxation and development rebate cannot be deducted, but he still maintained that depreciation has to be deducted.
In Gramophone Company Ltd. vs Its Workmen(1), this Court, in dealing with a gratuity scheme, had to consider the principles applicable for ascertaining the financial capacity of an employer.
In that decision the employer contended that before the real profit for each year can be4 arrived at, the provisions made for taxation and for development reserves should be deducted.
On this basis, it was further contended that if these deductions are made, there will not be any profit left which will enable the Company concerned to frame a gratuity scheme.
This claim for deducting taxation and development rebate reserves was negatived by this Court as follows : "When an industrial tribunal is considering the question of wage structure and gratuity which in our opinion stands more or less on the same footing as wage struc (1)[1964] 583 ture, it has to look at the profits made without considering provision for taxation in the shape of income tax and for reserves.
The provision for income tax and for reserves must in our opinion take second place as compared to provision for wage structure and gratuity, which stands on the same footing as provident fund which is also a retrial benefit.
" It was further observed that if an industry is in a stable condition and the burden of provident fund and gratuity does not result in loss to the employer, that burden will have to be borne by the employer, like the burden of wage structure in the interest of social justice.
It was finally held that the contention on behalf of the Company therein that provision for taxation and provision for reserves should take precedence over provision for gratuity cannot be accented.
From the above decision it is clear that Fixation of wage structure stands more or less on the same footing as framing of a gratuity scheme and the principles applicable for ascertaining the profits are the same : (2) Provision for taxation and provision for reserves cannot take precedence over for gratuity and fixation of wages; and (3) The provision for income tax and for reserves must take second place as compared to provision for wage structure and gratuity.
The above decision categorically rules out any deduction of taxation.
It also excludes from deduction all provision for reserves which will take in depreciation reserve also.
But, Mr. Tarkunde contended that the above decision is an authority for the proposition that the only two items that could be deducted are provision for taxation and provision for development rebate reserve.
If so, the counsel urges that the deduction of depreciation reserve as claimed by the appellant is justified and, that the Tribunal erred in declining that item to be deducted.
We are not inclined to accept this contention of Mr. Tarkunde.
The above decision is, in our opinion, an authority for the proposition that the provision for taxation and provision for reserves, which expression will take in depreciation reserve also, cannot be deducted for the purpose of computing the profits.
At 'any rate the, said decision had no occasion to consider whether depreciation reserve can be deducted or not.
We have already pointed out that the only claim made by the appellant therein was for deducting provision for taxation and for development rebate reserve and that claim was rejected.
Therefore, looked at from any point of view, the above decision is certainly not in favour of the contention of Mr. 584 Tarkunde that depreciation reserve has to be deducted before arriving at profits.
In The Indian Link Chain Manufacturers Ltd. vs Their Work men(1), this Court had occasion to consider the principles applicable to ascertain the financial capacity of a company in fixing wage scales and dearness allowance and framing of a gratuity scheme.
The Principle applicable was stated as follows "It is pertinent to notice that gratuity and wages in industrial adjudication are placed on the same footing and have priority over Income tax and other reserves, as such in considering the financial soundness of an undertaking for the purposes of introduction of a gratuity scheme the profits )that must be taken info account are those computed prior to the deduction of depreciation and other reserves.
" The decision in Gramophone Company vs Its Workmen 2 was quoted with approval in this decision.
The Company in that case had calculated profits after deducting depreciation.
This method was deprecated by this Court as follows : "All these profits it may be mentioned are computed after deducting depreciation and this should betoken into account in considering the desirability of formulating a gratuity scheme for the Appellant.
" In the end the provision made for depreciation and which had been deducted by the Company for calculation of profits was added back.
From the above decision it is clear that profits are to be computed prior to the 'deduction of depreciation and other reserves.
The said decision directly holds that provision for depreciation and other reserves cannot be deducted in computing profits be ascertained for framing a gratuity scheme.
This decision again reiterates the legal position that gratuity and wages in industrial adjudication and placed on the same footing and have priority over Income tax and other reserves.
In fact, as pointed out by us earlier, provision made for depreciation and which had been deducted by the Company for arriving at profits was added back.
by this Court.
Mr. Tarkunde urged that this Court in The Indian Link Chain Manufacturers Ltd. vs Their Workmen(1) has misunderstood and misinterpreted the earlier decision in Gramophone Company Ltd. vs Its Workmen (2 ) .
According to the counsel the error committed by this Court was on proceeding on the basis that the decision in (1) ; (2) [1964]2 L.L.J. 131.
585 Gramophone Company Ltd. vs Its Workmen(1) has laid down that depreciation reserve should not be deducted in computing the profits available for framing a gratuity scheme or when fixing a wage scale, We have no hesitation in rejecting this contention of Mr. Tarkunde.
We have already expressed our views regarding the scope of the decision in Gramophone Company Ltd. vs Its Workmen(1) and no error has been committed by this Court in The Indian Link Chain Manufactures Ltd. vs Their Workmen(2).
On the other hand, the latter decision is directly in point to the effect that provision for depreciation cannot be deducted.
We may also refer to the observation of this Court in Ahme dabad Millowners ' Association Etc.
vs The Textile Labour Association(3) that. . it is the figure of gross profit which is more important, because it is not disputed that wages payable to the employees are a first charge,, and.
all other liabilities take their place after the wages.
" Mr. Tarkunde referred us to, the statements contained in certain leading text books on principles of Accounting, Book Keeping and Accounts and Accountancy regarding the nature of depreciation reserve.
In "Principles of Auditing by F. R. M. De Paula, 8th Edition," it is stated that the main object of providing for depreciation of wasting assets is to keep the original capital intact.
In "Balance Sheets, how to read and understand them, by Philip Tovey,3rd Edition" the distinction between a "Reserve" and "Depreciation" has been stated.
The author says that depreciation should be written of before arriving at the year 's profit and that reserve is built up, by setting aside portions of the profits itself.
The author proceeds to state that depreciation represents the estimated wear and tear which will ultimately reduce the property and plant to scrap value.
In "Book Keeping and Accounts" 'by Cropper, Morr 's and Fison, 19th Edition, when dealing with the Trial Balance, Trading and Profit and Loss Accounts, it is mentioned that depreciation is the term employed by the Accountants to indicate the gradual deterioration both in the value and the usefulness of those assets which, by reason of their nature and uses, steadily decline in value.
Again in "Accountancy" by William Pickles, 3rd Edition the author has defined "Depreciation" as the permanent and continuing diminution in the.
quality, quantity or value of an asset.
it Is further stated that the provision for depreciation does not depend upon what the business can afford, as the debit therefore is an (1) [1964] 2 L.L.J.131, (2) ; (3) ; 586 essential one, constituting not an appropriation of, but a charge against, profits for the period in question.
Based upon the above statements contained in the text books, referred to above, Mr. Tarkunde urged that the principle in Accountancy is that depreciation must be deducted before ascertaining the profits.
In our opinion, the above statements may have considerable bearing in the preparation of profit and loss accounts having due regard to the provisions of the and Mercantile usage; but they have no bearing on the question of fixation of wage structure and dearness allowance in an industrial adjudication.
From what is stated above, it follows that the Tribunal was justified in arriving at gross profits without deducting the provision for Depreciation.
As already mentioned by us, Mr. Tarkunde has accepted that the Tribunal was justified in not deducting the Provision made for taxation and development rebate.
The result is that the average gross profits of the appellant being about Rs. 40,00,000,00, as held by the Tribunal, is correct.
In the fixation of wages and dearness allowance the legal position is well established that it has to be done on an industry cumregion basis having due regard to the financial capacity of the unit under consideration vide Express Newspapers (Private) Ltd., and Another vs The Union of India and others(1), Greaves Cotton and Co. and others vs Their Workmen (2) , and Bengal Chemical & Pharmaceutical Works Ltd. vs Its Workmen(3).
It has been further stated in Greaves Cotton add Co. and others vs Their Workmen (2 ) as follows : "The principle therefore which emerges from these two decisions is that in applying the industry cum region formula for fixing wage scales the Tribunal should lay stress on the industry part of the formula if there are a large number of concerns in the same region carrying on the same industry; in such a case in order that production cost may not be unequal and there may be equal competition, wages should generally be fixed on the basis of the comparable industries, namely, industries of the same kind.
But where the number of industries of the same kind in a particular region is small it is the region part of the industry cum region formula which assumes importance. . (1) (2) ; (3) ; 587 It has been further emphasized in Ahmedabad Millowners ' Association etc.
vs The Textile Labour Association(1) that industrial adjudication should always take into account, when revising the wage structure and granting dearness allowance, the problem of the additional burden to be imposed on the employer and ascertain whether the employer can reasonably be called upon to bear such burden.
The principles to be borne in mind have been stated in the said decision as follows : " It is a long range, plan; and so, in dealing with this problem, the financial position of the employer must be carefully examined.
What has been the progress of the industry in question; what are the prospects of the industry in future; has the industry been making profits; and if yes, what is the extent of profits; what is the nature of demand which the industry expects to secure; what would be the extent of the burden and its gradual increase which the employer may have to face ? These and similar other considerations have to be carefully weighed before a proper wage structure can be reasonably constructed by industrial adjudication. .
As pointed out in Greaves Cotton and Co. and others vs Their Workmen (2) , one of the principles to be adopted in fixing wages and dearness allowance is that the Tribunal should take into account the, wage scale and dearness allowance prevailing in ' comparable concerns carrying on the same industry in the region.
, The factors which have to be taken into account for ascertaining comparable concerns have also been laid down by this Court.
In Workmen of Balmer Lawrie and Co. vs Balmer Lawrie and those principles have been stated as follows "Besides, it is necessary to emphasise that in dealing with the comparable character of industrial undertakings, industrial adjudication does not usually rely on oral evidence alone.
This question is considered in the light of material fact and circumstances which are generally proved by documentary evidence.
What is the total capital invested by the concern, what is the extent of its business, what is the order of the profits made by the concern, what are the, dividends paid, how many employees are employed by the concern, what is its standing in the industry to which it belongs, these and other matters have to be examined by industrial adjudication in determining the question as to whether one concern is com parable with another in the matter of fixing wages.
Now, (1) ; (2) ; (3) ; 588 it is obvious that these questions cannot be decided merely on the interested testimony either of the workmen, or of the employer and his witnesses '" In Workmen of New Egerton Woollen Mills vs New Egerton Woollen Mills and others(1) , the above principles have again been reiterated.
From the decisions, referred to above, it follows that two principal factors which must weigh while fixing or revising wage scales and grades are: (1) How the wages prevailing in the establishment in question compare with those given to the workmen of similar grade and scale by similar establishments in the same industry or in their absence in similar establishments in other industries in the region; and (2) What wage scales the establishment in question can pay without any undue strain on its financial resources.
The same principles substantially apply when fixing or revising the dearness allowance.
The question is whether the Tribunal has adopted the above principles when revising the wage scales and dearness allowance in the case of the appellant.
The Unions had relied on as many as twenty one concerns located in the region of Greater Bombay and belonging to the same pharmaceutical units of industry as, units comparable with the appellant.
The appellant opposed its being compared with those concern,, on the ground that the units relied on by the Unions were companies haying foreign collaborations or connections, and as such possessing several advantages.
The appellant in turn relied on several concerns in the region as comparable units.
Before we refer to the concerns relied on by the Unions and the appellant as comparable concerns, it is necessary to deal with an objection raised by Mr. Tarkunde that no foreign unit doing business in India or no unit in India doing business in collaboration with a foreign concern, can ever be considered for purposes of comparison.
According to the appellant such concerns have distinct advantages of international research facilities, reputation in business which enables such concerns to market their products more easily and thus enable them to pay higher wages to their employees.
In view of the special technical facilities, that may be available to them, their output will be far higher though the number of employees will be much less, and as such they will be able to pay to their lesser number of employees higher wages.
In this connection Mr. Tarkunde relied on certain awards of the Industrial Tribunal (1)[1969] 589 wherein it is held that the comp 'es having foreign collaboration though in the same region and in the same industry, cannot be considered for the purposes of comparison with purely local On the other hand Mr. Sule, has opposed the above position and urged that the question as to who is the employers is absolutely immaterial so long as the tests for the purposes of comparability as laid down 'by this Court, are satisfied and the capacity to bear the financial burden is established.
We will deal with aspects in the first instance.
It must be stated at the outset that the Unions placed reliance on certain information contained in the prospectus of the Company and certain statements contained in the book "Indian, Pharmaceutical Industry" published in 1963 and 1969, to show that the appellant concern is also one which has foreign collaboration and as such it is to be ranked as a concern with foreign attachment.
has recorded a finding in favour of the appellant that it is not a unit having foreign collaboration.
Therefore, this finding is III favour of the appellant.
The question that now arises for consideration is whether in law there is any objection or prohibition in an industrial tribunal, when dealing with comparable units in a region from taking into account concerns having foreign collaboration.
It is no doubt true that some of the concerns relied on by the Unions are concerns working in collaboration with foreign firms.
In Chemical Industries and Pharmaceutical Laboratories Limited (Cipla) Bombay vs Their Workmen(1), it was held by the Industrial Tribunal that the Cipla cannot be compared to Glaxo Laboratories, Raptakos Brett and other pharmaceutical concerns which are either subsidiaries of foreign concerns or are closely linked with them.
It was further held that if any comparis on could be made,in can only be with concerns like Kemp & Company.
Sandu Pharmaceutical, Fair Deal Corporation, Edison Continental Laboratories, Bengal 'Chemicals and such other indigenous concerns.
Again in Alembic Chemical Works Ltd. Baroda vs Its Workmen (2) , the Tribunal held that Alembic cannot be compared to concerns like the Glaxo Laboratories and others who have associations in different degrees and forms with certain foreign concern, of international repute.
On this reasoning the Tribunal relied more on the scales wages prevailing in concerns like the Jhandu Pharmaceutical, Cipla.
Kemp & Co., and such similar concerns although it held that (2) [1958] I.C.R. Bombay, 1305.
(1) [1957] I.C.R Bombay, 1206.
590 Alembic is a much bigger concern, than the said units.
It must be stated that in both these awards concerns with foreign collaboration have been eliminated from consideration on the ground that they cannot be regarded as comparable concerns and to that extent they support Mr. Tarkunde 's contention.
In Reference (IT) No. 223 of 1959, which related to the appellant Company, the workmen placed reliance on Indian units of foreign concerns for being treated as comparable units.
,The appellant, however, pointed out that those units which have international fame and repute in world market were in a position to sell their products more easily and profitably and hence they cannot be treated as comparable units.
The Tribunal, no doubt, accepted the contention of the appellant that the Unions had selected some of the bigger concerns for comparison and held that it would be more appropriate if the appellant is placed somewhere in between the bigger and smaller concerns.
In this view the Tribunal took to the financial capacity of the appellant.
Again in Reference, (IT) No. 402 of 1963, relating to the appellant, wherein the dearness allowance was revised, the appellant had contended that it should not be compared with the units like Ciba, Dumex, Glaxo, Sandoz and the like.
The Tribunal held that the appellant cannot be compared with international pharmaceutical units having branches in Bombay or with foreign concerns like Glaxo, Ciba, Sandoz etc., which though incorporated in India are subsidiaries of foreign companies having all the advantages of connection with respect of home companies in Europe and America.
The Tribunal referred to the award in Reference (IT) No. 223 of 1,959 and held 'that a fair cross section of the industry has to be taken into account for fixing a scale of dearness allowance, which will be within the financial capacity of the appellant.
But, how ever, the Tribunal held that the appellant is a firm of good reputeand standing and that it has very fair prospects.
Though in Reference (IT) No. 223 of 1959, the Tribunal did not specifically eliminate from consideration units having foreign collaboration as such, nevertheless, in Reference (IT) No. 402 of 1963, the Tri bunal has held that the appellant cannot be compared with international pharmaceutical companies having branches in Bombay or with concerns, though, incorporated in India, are subsidiaries of foreign, companies.
From what is stated above, it is no doubt true that in the three awards, one of which specifically relates to the appellant, concerns having foreign collaboration have been eliminated for purposes of comparison.
But no legal principle on the basis of which such a decision has been arrived at has been stated in any of these awards.
591 In our opinion, so long and to the extent that concerns having foreign collaboration are doing business in India and in a particular concerned region, we do not see any reason why they should not be taken into account for purposes of being treated as comparable units, provided the tests for such purposes as laid down by this,, Court are satisfied.
No doubt some of those concerns may be having an advantage in various matters.
But merely because that they possess such advantage in the field of business is not a circum stance for eliminating such concerns for purposes of comparability.
The object of industrial adjudication is, as far as possible, to secure uniformity of service conditions amongst the industrial units in the same region.
If a concern having foreign collaboration properly satisfies the tests of comparability, it would be improper to regard ' such unit as uncomparable merely on the ground that it is a con cern with foreign collaboration or interest and that 'the unit with which it is sought to be compared is entirely of Indian origin and resources.
The object of Industrial.
Law is to improve the service conditions of industrial labour so as to provide for them the ordinary amenities of life with a view to bring about industrial peace which would in 'turn accelerate productivity of the country resulting in its prosperity.
The prosperity of the country, in its turn will help to improve the condition of labour.
The principles regarding fixation of wage scales and dearness allowance have been laid down in several decisions, by this Court and they apply equally to all industries irrespective of the character of the employer.
The worker is interested in his pay packet and given reasonable wages, he can be expected to be a satisfied worker.
There is no justification from the stand point of view of the employees for fixing different wage scales merely because of the fact that some workmen are in the employ of purely local concerns while some others are in the employ of units though in the same region, working in collaboration with, foreign concerns.
As the paramount consideration is the interest of the worker, the character of the employer is irrelevant, provided ' the latter 's financial capacity to bear the burden is established.
In the ultimate analysis the, character of the employer or the destination of profits has no relevance in the fixation of wages and dearness allowance.
We are fortified in the above view by The decision of the Constitution Bench of this Court in Hindustan Antibiotics Ltd. vs The, Workmen and others(1).
In that case on behalf of the appellant it was urged that as it was a government company in the public sector, the principles governing the fixation of wages applicable to companies in the private sector do not have any relevance.
On (1)[1967]1.S.C.R.652. 592 the other hand, on behalf of the workmen it was contended that in fixing the wage structure including dearness allowance the question, who is the employer, is irrelevant and that only the needs of the employee are of paramount importance.
The contention on behalf of the workmen was accepted by this Court and it was held that the same principles that have been laid down by the industrial adjudication and the courts regarding the fixation of wage scales and dearness allowance in respect of companies in the private sector apply with equal force to companies in the public sector also.
It was further held that in the application of the industry cum region principle to be adopted to distinction can be made between one unit and another in the same industry in the fixation of wage scale,; provided the test of financial capacity is satisfied.
It was further held that by and large the acceptance of the principle of industry cum region will be more conducive to industrial relations and that the same principles evolved by the industrial adjudication in regard to private sector undertakings will govern those in the public sector undertakings having a distinct corporate existence.
Though the decision cited above had to deal with a claim for ,differentiation being made on behalf of a company in the public sector and which claim was rejected, in our opinion, the basic principle underlying the said decision will apply even with respect 'to the question whether the units, having collaboration with foreign concerns can be taken into account for purposes of comparison, In our opinion, the above decision warrants the conclusion that such units having foreign collaboration or foreign companies doing 'business in India can be taken into account for purposes of being considered whether they are comparable units.
Of course, the test laid down by this Court for treating one unit as a comparable one, will have to be satisfied, and once that test is fulfilled, there can be no distinction made between such units and purely local units.
Therefore, in our view, the Tribunal, in the case 'before us, was perfectly justified in taking into account for purposes of comparison units having collaboration with foreign concerns and foreign units doing business in India in the same region and being in the same industry.
It follows, therefore, that the principles laid down to the contrary in the awards relied on by Mr. Tarkunde, are erroneous.
Coming to the units relied on by the parties as comparable units.
as mentioned earlier, the Unions relied on as many as 21 concerns as comparable with the appellant.
No doubt some of the units relied on by them were units having collaboration with foreign concerns.
The appellant also, in turn filed statement exhibit C 26.
referring to six companies which could be treated as comparable concerns. 593 The Tribunat rejected most of the units relied on by the Unions on the ground that the information furnished regarding such units.
were not adequate and complete regarding various factors necessary to constitute a comparable unit.
We have also gone through the statements filed by the Unions.
In exhibit DU 2, one of the Unions furnished information regarding the business performance of about nine concerns till the year 1964 65.
Similarly, in exhibit DU 3, another Union had given the average performance of nearly ton units for the years 1962 63 to 1964 65.
As it would be more desirable to consider the financial capacity of the appellant in the light of the trading results disclosed in the balance sheets and profit and loss accounts from the years 1965 66 to 1969 70, it must he considered that the information furnished in Exs.
DU 2 and DU 3 cannot he considered to be upto date and helpful.
The Unions also did not make any further attempt to supplement the informa tion contained in these two exhibits by furnishing information regarding the years subsequent to 1964 65.
No doubt, the Unions have furnished particulars regarding one unit, Burroughs Welcome India) Private Ltd., which will be dealt with later.
Therefore, the rejection by the Tribunal of most of the units relied on by the Unions, was justified.
The appellant Company relied on six units mentioned in exhibit C 26.
Those units are Cipla, Chemo Phama, Zandu, Opil, Sigma and Bengal Chemicals.
But the Company did not furnish information regarding the business performance of these concerns for a period of years in the immediate past.
But it will be noted that the four units referred to in exhibit C 26.
namely, Zandu, Cipla, Opil and Sigma, had been considered by the Industrial Tribunal in its previous award Reference (IT) No. 402 of 1963, when the scale of dearness allowance obtaining in the appellant Company was revised.
On that occasion the Tribunal had held that it was only Cipla which came nearest to the appellant Company and even there the dearness allowance obtaining in Cipla cannot be taken for comparison.
That means that these four units were left out of account and were not treated as units comparable with die appellant.
No fresh materials were placed by the appellant regarding these four units after the decision of the Tribunal in Reference (IT) No. 402 of 1963.
Therefore, the Tribunal in the present case, was justified in rejecting the claim of the appellant that those four units are comparable concerns.
The elimination of the four units.
thus left for consideration only two concerns, namely, Chemo Phama and Bengal Chemicals.
Even here the Unions had furnished statements Exs.
DU 8 and DU 9, regarding these two units in Ex ' DU 8, the business performance of Chemo Phama froth 1965 to 1969 was given and in exhibit DU 9, the business performance of Bengal Chemicals from 1965 to 1970 was given.
The 594 'Unions had also furnished exhibit DU 44 regarding the business performance of the appellant.
A comparison of the statements contained in Exs.
DU 8 and DU 9 with the material relating to the appellant in exhibit DU 44, regarding the paid up capital, reserves and surplus sales, net block, net profits and gross profits, it is quite clear that the business performance of Chemo Phama and Bengal Chemicals do not come anywhere nor that of the appellant.
The appellant in all respects stands on a much higher footing.
The average gross profits of the appellant work out to Rs. 40,11,176.
while the average gross profits of Chemo Phama works out to Rs. 5,31,511 and that of the Bengal Chemicals to Rs. 11,39,553.
Therefore, it is clear that these two units also cannot be treated as concerns comparable with the appellant and hence the wage structure prevailing in those concerns cannot provide any useful guidance.
We have already mentioned that the Tribunal has ultimately held that M/s Burroughs Wellcome (India) Private Limited is a concern comparable with that of the appellant.
It is no doubt a foreign company in the sense that its entire capital is held by foreign company as shown in the statement exhibit C 11, filed by the appellant.
But we have already rejected the contention that such a concern cannot be ruled out of consideration for purpose of comparability.
A very severe attack has been levelled by Mr. Tarkunde in the Tribunal 's treating M/s Burroughs Wellcome Company as a comparable unit.
According to the learned counsel if the various factors relevant for the purpose of comparison are considered, it will be clear that the appellant cannot stand any comparison with this unit.
Mr. Tarkunde further pointed out that instead of taking ,only one unit for purposes of comparison, the Tribunal should have taken fair cross section of the industry in order to find out where exactly the appellant can be fitted in.
It is no doubt true that a fair cross section of the industry should be taken into account.
But in this case when all the other units have been held to be not ,comparable with the appellant, this criticism levelled against the approach made by the Tribunal cannot be accepted.
Regarding Burroughs Wellcome Company, the Unions had sub mitted a statement exhibit DU 2A under a seal of confidential as it was a private limited company.
A comparison of the information ,contained in the said statement exhibit DU 2A regarding the paid up ,capital ', reserves and surplus sales, depreciation, development rebate, provision for taxation, net profits, gross profits, net block and dividend declared for the years 1967 to 1970 with the corresponding items in exhibit DU 4A with respect to the appellant shows that both the units are substantially on a par.
Normally, the 595 statements in exhibit DU 2A could have been extracted in this judgment but for the fact that Burroughs Wellcome Company being a private limited company and the statements having been furnished in a sealed cover, they could not be made public.
The paid up capital.
is identical in both the concerns.
The average sales of Burroughs Wellcome Company and those of the appellant are substantially the same.
The difference between the, net profits of the two is significantly small.
The gross profits of the two units are also close to each other.
No doubt there are some small differences between the two in these items, but they are of no significance.
The various factors which have to be taken into account for he purpose of a unit being treated as a comparable one as laid down by this Court have already been referred to.
If so, all those factors taken into account clearly show that Burroughs Wellcome Company is a unit comparable with the appellant.
No doubt the appellant has relied on the ratio of employees to sales, as well as to debt equity ration and the percentage of profit to sales in respect of the appellant and the Burroughs Wellcome Company.
exhibit C 22 contains the ratio of employees to sales in 1968 69.
Though there are certain other units referred to therein, we will only advert to the particulars regarding the appellant and the Burroughs Wellcome Company, which are as follows Ration of Employee to Sales No. of Per Name of the Company Year SalesEmployees employee sale Rs. Rs. Unichem 68 6932994456 752 43875 Burroughs.
69 25000000 425 58823 A reference to exhibit C 22 will show that the sales of the appellant is higher than that of Burroughs Welcome Co. No doubt the ratio per employee is slightly less in the case of the appellant.
It is also seen that the appellant employs nearly 752 workmen whereas Burroughs Wellcome Co. employs only 425 workmen.
In exhibit C 18, particulars regarding Debt Equity Ratio have been given.
That statement contains particulars regarding the various firms including the appellant.
In 1969 the capital of the appellant was Rs. 101.86 lakhs.
It had borrowed Rs. 95.89 lakhs and the percentage on borrowed funds to capital works out to 94.1 %.
It is no doubt true that there is no borrowed capital in Burroughs Wellcome Co. In exhibit C 18 particulars regarding nine Units have been given and it is seen that except two units, all the other seven units, including the appellant, have borrowed.
In fact it is interesting to note that Glaxo, which has a capital of Rs. 1196.81 lakhs had also borrowed Rs. 26 80 lakhs.
Similarly, 596 Chemo Phama which had a capital of only Rs. 32.05 lakhs had borrowed Rs. 37.08 lakhs and the percentage works out to Rs. 115.7%.
We are referring to these aspects because it was stressed by Mr. Tarkunde that the Debt Equity Ratio in the appellant is very high and that it has to pay a large amount by way of interest on borrowed funds which is not the case with Burroughs Wellcome Company.
But the statements contained in exhibit C 18 themselves clearly show that borrowing for the purpose of business seems to be a usual pattern followed by the companies in the region.
exhibit C 15 is a statement relating to percentage of profit to sales for the years 1965 66 to 1969 70.
No doubt the figures given therein show that the percentage of profits has been fluctuating.
but, in our opinion, the particulars contained in the above exhibits.
relied on by the appellant, do not affect the findings of the Tribunal that Burroughs Wellcome Company is a unit comparable with the appellant.
Another criticism that has been levelled by Mr. Tarkunde is that the Tribunal has not taken into account the prospects of the future business of the appellant.
In this connection the appellant relied on the coming into force with effect from January 1, 1971 of ' the Drugs (Price Control) Order, 1970.
According to Mr. Tarkunde whatever may have been the financial.
position of the appellant in the past, its future business is bound to suffer in view of this price control order.
He referred us to the decision in Williamsons (India) Private, Ltd. vs Its Workinen(1) of this Court wherein it has been held, amongst the various factors which have to be taken into account for the purpose of fixation of wage scales and dearness allowance, the prospect of future business is a very relevant circumstance.
This factor, according to the appellant, has not been taken into account by the Tribunal.
We have earlier referred to the decisions of this Court regarding the principles governing the fixation of wages and dearness allowance.
It is no doubt a long, range plan and the Prospects of future business amongst other factors have also to be taken into account.
The case of the appellant is that in 1963, there has been a price freeze and that has affected its business and therefore the Drugs (Price, Control) Order, 1970 will affect its future business.
We have, already, extracted in the earlier part of the judement the trading results, of the appellant from 1965 66 to 1969 70.
If the price freeze which came into force in 1963 had any affect, then it must have been reflected in the trading results of the appellant.
The (1) 597 trading results of the appellant during the years 1962 63 to 1964 65 are as follows : Particulars1962 63 1963 64 1964 65 Paid up capital 4491000 44992504499500 Reserves and Surplus 476569 1010753 1505353 Sales 10241405 1566588317388705 Net Block 3907400 4371113 4345467 Provision for Taxation 934000 1065000 1515000 Depreciation297243379256390878 Development rebate 33686 100617 22329 Net Profits 442881 703567 877271 A glance of the above statement clearly shows that though the paid up capital remains the same, there has been a steady rise in the reserve and surplus sales and net profits.
Similarly, the net block has also an increase.
There has been no set back in the sales.
On the other hand there has beena steady rise in the sales.
No doubt for the year 1969 70 the profits did go down; but the drop is comparably small and the appellant has not been able to, satisfy.
us that it is due to the price freeze.
Then the question is regarding the impact of the Drugs (Price Control) Order, 1970, which has come into effect from January 1,1971.
In this connection it is necessary to refer to the speech made bythe Chairman of the Board of Directors of the appellant Companyat the Annual General Meeting held on January 9, 1971.
At thisstage it may be mentioned that the Accounting year of the appellant Company is from October 1, to September 30, of the succeeding year.
On January 9, 1971, the Chairman was giving a review of the working of the Company for the year ending September 30, 1970.
He had clearly stated that the impact of the Drugs (Price Control) Order, 1970, which had come into force only recently will be felt by the Company only after the year 1970 71.
The appeal was heard by us from January 3, 1972 and concluded only on January 10, 1972.
As the Company, in the previous years had been having its Annual, General Meetings in early January, of each year, we suggested to the counsel for the appellant that as the approximate trading results for the year commencing from October 1, 1970 to September 30, 1971 would have been available by then, they may be furnished so that it may be possible to find out the impact of the Drugs (Price Control) Order on the trading results of the appellant.
But it was represented that the figures are not available.
It is not necessary for us to cornment except to state that going by the fact that on former occasions the figure had been ready by the first week of January to enable the Annual General Meeting of the Company to be held, it would not have been difficult for the appellant to have furnished at least 1031 Sup.
CI/72 598 the approximate figures, if really the trading results had shown a decline.
The appellant has missed an opportunity 'that was provided to it to establish that the Drugs (Price Control) Order has adversely affected its business.
Under those circumstances, it is not possible for us to disagree with the view of the Tribunal that the impact of the Drugs (Price Control) Order will 'not be such as to affect materially the business prospects of the appellant Company.
We may state that if the Drugs (Price Control) Order, mate rially affects the prosperity of the appellant 's trade, it would be open to it to raise a dispute for the reduction in the wage structure and in case they are able to show that in view of the Drugs (Price Control) Order, their financial position has been weakened to such an extent that they cannot bear the burden of wage structure fixed by the present award, the matter may have to be examined on its merits.
The question of fixation of wage scales need not detain us very long.
We have already extracted the wage scales prevailing in the appellant company as well as the categories of workmen when the reference was made.
We have also referred to the fixation of wage scales by the, Tribunal on a comparison with the wage scale obtaining in Burroughs Wellcome Company.
The wage structure.
as well as the grades that were prevalent in Burroughs Wellcome Co. in pursuance of the settlement dated June 13, 1966 regarding the ,operatives and clerical and subordinate staff have been incorporated ,by the Tribunal in its Award.
We do not think it necessary to reproduce the same.
A comparison of the wage scales in Burrough Wellcome Company and the wage scales fixed by the Tribunal in the Award for the Company will show that the Tribunal has only made some slight variation in view of the fact that it accepted the report of the assessor for the continuance of the existing grades in the Company.
As some of those grades were, not existing in BurToughs Wellcome Company, the Tribunal bad to make some slight changes.
Wherever it was possible the wage structure in Burroughs Wellcome Co. has been retained but the maximum has been raised a little and some slight changes have also been made in the incremental stage.
Once Burrough Wellcome Company is treated as a comparable unit, we are satisfied that the wage scales awarded by the Tribunal cannot be 'considered to be unjustified.
The Tribunal 's finding regarding the financial capacity of the appellant has already been referred to and we accept the same.
it was, however, pointed out by Mr. Tarkunde that in consi dering the comparability of a unit; strength of the labour force has also to be given due importance.
Mr. Tarkunde pointed out that 599 while the appellant employs 752 workmen, there are only 436 in Burroughs Wellcome Co. as is seen from the Statement exhibit C 22.
No doubt to this extent, the two units differ, but when one bears in mind the business performance of both the units,there is not much of a substantial difference.
It may be that because of the fact that Burroughs Wellcome Co. adopts more modem methods of production, it was employing a smaller complement of workers.
Having due regard to all the other tests that have been satisfied, this difference in the strength of labour force alone, in our opinion, cannot be given undue importance.
It is pertinent to note that this Court in Workmen of New Egerton, Woollen Mills vs New Egerton Woollen Mills and others(1) did not disagree with the view of the Industrial Tribunal which had treated the respondent therein and another unit as a comparable unit, notwithstanding the that the respondent was employing at the material time about 3000 workmen whereas the unit which was treated as a comparable unit was having the labour force of only about 1000 men, in view of the fact that all other requirements for comparability Were satisfied.
In fact, in the case before us, the Tribunal has adverted to this difference of labour force of the appellant and Burroughs Wellcome Company, but nevertheless it held that, that by itself is not sufficient to eliminate Burroughs Wellcome Company as a comparable unit.
We agree with this approach made by the Tribunal.
An objection was taken on the basis of section 10(4) of the that the Tribunal has permitted the Unions to revise their demand regarding classification and grades of workmen and that the Tribunal has further committed an error in upholding the grades of Stenographers, Assistants and Store keepers and merging them with that of the Senior Clerks.
We are not inclined to accept this contention advanced on behalf of the appellant.
We have already referred to the fact that as the question of classification and fixing grades were matters cf a technical nature, at the joint request of both the parties, the Tribunal appointed Sri Gadkari, as an assessor.
It was really in view of the stand taken by both the parties before the assessor and the Tribunal, after the report was submitted by the assessor that the Tribunal has accepted the report that the existing grades should continue.
But as the workmen had to be fitted in 'the appropriate grades, the Tribunal was justified in fitting in the categories the workmen and their grades as well as their scales of wages.
The above contention based upon section 10(4) of the , at the most can relate, if at all.
only to the operatives.
The report of Sri Gadkari has already been referred to.
He had suggested the ' retention of the existing categories.
The workmen have necessarily to, be classified for the purpose of being put in particular categories (1)[1969] 2 L.L.J.782.
600 and the wages also have to be suitably fixed depending upon the category in which they are so fitted.
Having due regard to the, nature of the reference, classification though jobwise and the fixing of wages of pay and fitting the workmen in suitable categories were all matters incidental and as such the Tribunal has acted within its jurisdiction in classifying the workmen and fixing the scales of pay after fitting them in particular categories.
In the view above expressed, we do not think it necessary to refer to the decisions referred either by Mr. Tarkunde, learned counsel for the appellant or by Mrs. Urmila Kapoor, on behalf of the respondent No. 2 as to when exactly the matter can be considered to be incidental to the question referred for adjudication.
Before we take up the question of dearness allowance, one other point that requires to be adverted to is the objection taken on behalf of the appellant regarding the raising in the gratuity scheme the ceiling limit from 15 months to 17 21 months ' basic wages.
The Tribunal has adopted the pattern obtaining in Burroughs Wellcome Company.
We do not see any question of principle involved in this matter and therefore we find no merit in the objection raised by the Company.
The pattern of dearness allowance that was in force in the appellant Company at the time of the reference has been indicated already.
We have also referred to the scale of dearness allowance fixed by the Tribunal.
There were different systems of dearness allowance for the operatives and the clerical and subordinate staff.
That such a different system of dearness allowance for the employees working under the same employer is not warranted, is clear from the decisions of this Court in Greaves Cotton & Co. and others vs Their Workmen(1) and Bengal Chemical & Pharmaceutical Works Ltd. vs Its Workmen(2).
Therefore, the Tribunal was justified in devising a uniform scale of dearness allowance applicable to all the employees of the appellant.
The Unions required a common scheme of dearness allowance of slab system to be introduced for all employees.
The appellant resisted the claim on the ground that there was already a scheme of dearness allowance existing in the Company and that there is, no justification for revising the same.
But, nevertheless, the Tribunal has adopted, by and large, the scheme of dearness allowance which was in vogue in 'Burroughs Wellcome Co. Normally, once Burroughs Wellcome Co. is treated as a unit comparable with the appellant, the Tribunal must be considered prima facie to be justified in introducing the pattern obtaining in that unit.
However, it is pointed out on behalf of the appellant that the slab system of dearness allowance does not obtain in any of the pharmaceutical industries in the region.
(1) ; (2) ; 601 The contention that because there was a system of dearness allowance in existence in the Company and therefore there was no justification for revising the same, cannot be accepted.
A similar contention raised in Remington Rand of India vs Its Workmen(1) was rejected by this Court.
In that.
case there was a system of dearness allowance providing for payment of not only a rate of percentage on the basic salary but also a variation in the percentage on the rise or fall of the cost of living index.
The workmen demanded revision of the scale of dearness allowance on the ground that the cost of living index had increased.
The claim was resisted by the Company on the ground that the scheme of dearness allowance then existing in the Company itself provided for an increase in the cost of living index and therefore no revision is required.
This contention was not accepted by this Court.
It was held that a claim made by the Workmen, if otherwise justified, cannot be rejected on the sole ground that a provision is already made in an existing scheme of dearness allowance for adjustment depending upon an increase in the cost of living index.
This Court further held that if it is established that the cost of living shows a tendency to rise very high, the workmen would be entitled to claim and there may be a change in the rate of dearness allowance originally fixed, so, as to provide for more neutralisation.
It was further held that a claim made by the workmen win have to be properly considered and adjudicated upon by the Tribunal.
In fact, in that case, it is seen that there was only a 50 point rise in the cost of living index and nevertheless the revision of the scale of dearness allowance by the Tribunal was upheld.
We may also refer to the decision of this Court in Workmen of Balmer Lawrie and Co. vs Balmer Lawrie and Co.(2) wherein it has been held as follows : "If the paying capacity of the employer increases or the cost of living shows an upward trend, or there are other anomalies, mistakes or errors ', in the award fixing wage structure, or there has been a rise in the wage structure in comparable industries in the region, industrial employees would be justified in making a claim for the reexamination of the wage structure and if such claim is referred for adjudication, the Adjudicator would not normally be justified in rejecting it solely on the ground that enough time has not passed after the making of the award, or that material change in relevant circumstances had not been proved.
It is of course, not possible to lay down any hard and fast rule in the matter.
The question as to revision must be examined, on the merits in each (1) (2) ; 602 individual case that is brought before an adjudicator for his adjudication.
" On the date when the settlement was entered into between the appellant and its workmen on April 20, 1966, the cost of living , index was 630.
From exhibit C 1 it is seen that in August 1969, the cost of living index had gone up to 7 90 and from exhibit DU IO dated December 8, 1970, it is seen that when the second settlement was entered into between Burroughs Welcome, Co. and its workmen, the cost of living index had gone upto 800.1.
It is also seen that at the time of the Award it had gone up further to about 850 points.
Therefore, from the date of the settlement in 1966 the cost of living index had very rapidly gone up by 220 points.
At the time when the demand for revision of wage scales and dearness allowance wag made by the Unions and when the reference order was made by the Government, the cost of living index had gone up very high.
That clearly shows that the workmen had made out a case for revision of wage scales and dearness allowance.
We have earlier referred to the scheme of dearness allowance fixed by the Tribunal in the Award.
The scheme provides for payment of a particular percentage on the basic salary and it also provides for variation on 10 points.
But the dearness allowance has been fixed on the Bombay Working Class Cost of Living Index of 521 530.
Though more or less the same pattern of dearness allowance was obtaining in Burroughs Welcome Co. , the dearness allowance in the latter was fixed at the Bombay Working Class Cost of Living Index of 491 500.
The scale of dearness allowance, as demanded by the Unions, was on the basis of the cost of living index 401 410.
It was accepted by the appellant that the scheme obtaining in Burroughs Welcome Company is more advantageous from the financial point of view than the scheme of dearness allowance demanded by the Unions.
In fact, the Tribunal itself has made a further concession in favour of the appellant by adopting the cost of living index of 521 530 instead of 491 500 as was obtaining in Burroughs Welcome Co. The Tribunal had made this change in the cost of living index in view of the fact that in the appellant Company, there was an Incentive Wages Scheme in and by which operatives 'were getting on an average, about Rs. 28/ per month.
Therefore the financial burden cast on the appellant by the dearness allowance scheme fixed by the Tribunal is such that the appellant can bear the burden.
in order to show that in the Bombay region the pharmaceutical units were adopting the slab system of dearness allowance, the Unions had filed a chart exhibit DU 1.
It is evident from exhibit DU 1, that out of 19 pharmaceutical units, referred to therein, at least 1 1 of them adopt the slab system of dearness allowance which.
has been 603 introduced in the case of the appellant in the Award.
No doubt, it is pointed out by Mr. Tarkunde 'that in the statement filed bay the appellant, exhibit C 25, it will be.
seen that none of the Indian owned units have adopted the slab system.
But whether those units have adopted or not, we have already indicated, that no distinction can be made between a purely local unit and a foreign unit doing business in India or an Indian unit doing business in collaboration with foreign concern.
When once such units can be taken into, account as comparable units, the pattern of dearness allowance, obtaining therein can very well be considered to ascertain the system adopted by the industry as that will show the trend in the region.
As pointed out above, at least 11 units, referred to in exhibit DU 1 have adopted the.
system now introduced in the case of ' the appellant by the Tribunal.
Under those circumstances when such system is prevailing in the industry in the same region, it cannot be held that the Tribunal has committed any error, in introducing a similar pattern in the case of the appellant.
The slab system has been approved by this Court as will be seen by the decisions in Greaves Cotton and Co. and others vs Their Workmen(2) and Bengal Chemical and Pharmaceutical Works Ltd. vs Its Workmen (2) .
Even in Bombay that such a pattern of dearness allowance, as the one introduced in the case of the appellant, is existing is seen by the decisions of this Court in Greaves Cotton and Co. and others vs Their Workmen(2) and Kamani Metals & Alloys Ltd. vs Their Workmen (3).
No doubt the industries therein were not pharmaceutical units.
But that such a system exists in Bombay region is clear from the above decisions.
Mr. Tarkunde referred us to the Award of the Industrial Tri bunal in Reference (IT) No. 411 of 1966 in Voltas Limited, Bombay vs The Workmen Employed under them dated September 30, 1969 wherein the adoption of slab, system has not been approved.
On the other hand, Mrs. Urmila Kapoor, learned counsel for respondent No. 2 has drawn our attention to a number of awards of the Industrial Tribunal rendered during the years 1965 to 1968 wherein the slab system of dearness allowance has been adopted in Bombay region.
It is only necessary to refer to the award in the case of May and Baker Limited, Bombay vs Its Workmen, because that is a pharmaceutical unit.
The award was given in or about June 1967 and it is seen that the dearness allowance on the pattern now given by the Tribunal in respect of the appellant has been adopted.
We have already referred to the fact that in exhibit DU71, it is seen that as many as 11 pharmaceutical unit s in Bombay region have adopted the pattern of granting dearness allowance on the slab (1) ; (3) ; (2) 3.
604 system now incorporated in the present award.
Though most of the units referred to therein could not be treated as units comparable with the appellant because of lack of full information regarding material factors, yet those concerns can be taken into account inasmuch as the system Obtaining in those concerns will show that the slab system is not something new to the pharmaceutical units.
We have already referred to the award in May and Baker Limited, Bombay vs Its Workmen.
These facts clearly show that the scheme of dearness allowance provided in the award before us in respect of the appellant is not anything new.
On the other hand, the Tribunal has only adopted the system prevailing in the region in respect of pharmaceutical units.
So far as the financial burden is concerned we have already referred to the findings recorded by the Tribunal.
Even on the basis that the Tribunal was not justified in proceeding on the assumption that 52 chemists are not covered by the reference, in our opinion, the additional burden that will be cast on the appellant can be easily borne by if.
Therefore, we see no error in the scheme of dearness allowance introduced, in the case of the appellant, by the Tribunal.
The only other point that requires to be considered is in respect of the direction given by the Tribunal regarding the Incentive Bonus scheme in respect of which the appellant had given notice of change under section 9A of the industrial Disputes Act, 1947.
We have already referred to the nature of the scheme that originally existed and the modification sought to be made by the, appellant.
We have also pointed out that the Tribunal has not accepted most of the recommendations made by Sri Tulpule, who was appointed as an a ssessor on the joint application of both the parties.
The Tribunal has stated that it is desirable that a scheme is worked out, if possible, by consent of parties for the purpose of protecting the interest of the workmen at the increased base performance index.
According to Mr. Tarkunde the Tribunal itself should have gone into the matter and evolved a scheme.
No doubt, it would have been desirable if the Tribunal had actually evolved a scheme.
But the Tribunal has stated that the necessary material for that purpose has not been made available and as such it has not been possible to devise a scheme calculated to afford protection to the incentive earning of a workman at the raised base performance index.
In fact, we also suggested to, the counsel that the parties may consider the matter and submit a scheme for that purpose.
But it was represented to us on February 9, 1972 by Mrs. Urmila Kapoor, learned counsel for respondent No. 2, that it has not been possible for the parties to arrive at an agreement in respect of that matter, at present.
Therefore, there is nothing further that could 605 be done by this Court in this regard; and the result is that the observations made by the Tribunal in this regard will have full effect.
In the result, all the conventions of the appellant are rejected and the Award of the Industrial Tribunal in respect of the matters ,in controversy in the appeals are confirmed.
All the appeals are dismissed.
In Civil Appeal No. 1091 of 1971, the appellant will pay the costs of respondents Nos. 1 and 2.
In the other appeals, parties will near their own costs.
The appellant will have three months ' time from today for payment of the amounts due under the award. | The appellant carried on the business of manufacturing and selling pharmaceutical products in Greater Bombay.
In disputes arising bet the appellant and the respondents the Industrial Tribunal had to deal with questions relating to dearness allowance, classification of grades and fixation of wages and the incentive bonus scheme as modified 'by the company.
In appeal against the award of the Tribunal, HELD : (i) The decisions of this Court in Gramophone Company Ltd. vs its Workmen and The Indian Link Chain Manufacturers Ltd. vs Their Workmen show that the Tribunal was justified in computing gross profits without deducting taxation, depreciation and development rebate.
The latter decision is directly in point to the effect that provision for depre ciation cannot be deducted.
[582E., 585B C] Gramophone Company Ltd. vs Its Workmen, and The Indian Link Chain Manufacturers Ltd. vs Their Workmen, , applied.
Ahmedabad Millowners ' Association Etc.
vs The Textile Labour Association, ; , referred to.
(ii)So long and to the extent that concerns having foreign collaboration are doing business in India and in a particular concerned region there is no reason why they should not be taken into account for purposes of being teated as comparable units, provided that the tests for such purposes as laid down by this Court are satisfied.
The object of industrial adjudication is to secure as far as possible uniformity of service conditions among industrial units in the same region,.
if a concern having foreign collaboration properly satisfies the tests of comparability it would be improper to regard such unit as uncomparable merely on the ground that it is a concern with foreign collaboration or interest and that the unit with which it is sought to be compared is entirely of Indian origin and resources.
[591A C] Chemical Industries and Pharmaceutical Laboratories Limited (Cipla) Bombay vs Their Workmen, [1957] I.C.R. Bombay 1206 and Alembic Chemical Works Ltd. Baroda vs Its, Workmen ; , Hindustan Antibiotics Ltd. vs The Workmen and Ors., ; , relied on.
(iii)On the materials before it the Tribunal was justified in treating M/S. Burroughk Wellcome & Co. as a unit comparable with the appellant.
568 The fact that Burroughs Wellcome employed a lesser labour force did not deserve much importance because the business performance of the two companies was equal.
Once Burroughs Wellcome Co. was treated as a comparable unit the wage scales awarded by the Tribunal could not be considered to be unjustified.
[598G 599A D] Workmen of New Egerton Woollen Mills vs New Egerton Woollen Mills and Ors., , applied.
(iv)On the facts of the case it was not possible to disagree with the view of the Tribunal that the impact of the Drugs (Price Control ) Order will not be such as to affect materially the business prospects of the appellant company.
If the Order materially affects the prosperity of the appellant 's trade it would be open to it to raise a dispute for the reduction in the wage structure and in case they are able to show that in view of the Drugs (Price Control) Order their financial position has weakened to such an extent that they cannot bear the burden of the wage structure fixed by the present award, the matter may have to be examined on its merits.
[598B C] Williamsons (India) Private, Ltd. vs Its Workmen, , referred to.
(v)The Tribunal had acted within its jurisdiction in classifying the workmen and fixing the scales of pay after fitting them in particular categories.
The objection based on section 10(4) of the must be rejected.
[599E 600B] (vi)When the Tribunal raised in the gratuity scheme the ceiling limit from 15 months to 17 1/2 months according to the pattern obtaining in Buroughs Wellcome Company there was no question of principle involved justifying an objection by the appellant company.
[60OC D] (vii)There were different systems of dearness allowance for the operators and the clerical and subordinate staff in the appellant company.
That such a different system of dearness allowance for employees working under the same employer is not warranted is clear from the decisions of this Court in the cases of Greaves Cotton & Co. and Bengal Chemical & Pharmaceutical Works Ltd. Therefore the Tribunal was justified in devising a uniform scale of dearness allowance applicable to all the employees of the appellant.
[600E F] Greaves Cotton and Co. and Ors.
vs Their Workmen, ; and Bengal Chemical & Pharmaceutical Works Ltd. vs Its Workmen; , , relied on.
(viii)From the date of the settlement in 1966 the cost of living index had very rapidly gone up by 220 points.
At the time when the demand for revision of wages scales and dearness allowance was made by the Unions and when the reference order was made by the Government, the cost of living index had gone up very high.
That clearly showed that the workmen bad made out a case for revision of wage scales and dearness allowance.
The contention of the appellant that because a system of dearness allowance already existed there should be no revision of the same, could not be accepted.
[6O2C; 601A] Co. ; and Remington and of India vs Its Workmen, , followed.
569 (ix)When the slab, system of dearness allowance was prevailing in the industry in the region the Tribunal committed no error in introducing a similar pattern in the case of the appellant.
[603C D] Kamani Metals & Alloys Ltd. vs Their Workmen, ; , referred to.
(x)In regard to the incentive Bonus Scheme the Tribunal had stated that the necessary material for that purpose had not been made available and as such it had not been possible to devise a scheme calculated to afford protection to the incentive earning of a workman at the raised base performance index.
This Court could do nothing further,in this 'regard and the result would be that observations made by the Tribunal will have full, effect.
[604G H] |
Appeal No. 1113 of 1970.
Appeal from the judgment and order dated April 3, 1970 of the Bombay High Court in Company Appeal No. 1 of 1970.
V. M. Tarkunde, R. L. Mehta and 1.
N. Shroff, for the appellant.
M. C. Chagla and section N. Prasad, for Creditors Nos. 1, 3 to 6 and 10.
A. K. Sen and E. C. Agrawala, for creditor No. 9.
The Judgment of the Court was delivered by Ray, J.
This is an appeal by certificate, from the judgment dated 3 April, 1970 of the High Court of Bombay confirming 203 the order of the learned Single Judge refusing to wind up the respondent company.
The appellants are a partnership firm.
The partners are the Katakias.
They are three brothers.
The appellants carry on partnership business in the name of Madhu Wool Spinning Mills.
The respondent company has the nominal.
capital of Rs. 10,00,000 divided into 2000 shares of Rs. 500 each.
The issued subscribed and fully paid up capital of the company is Rs. 5,51,000 divided into 1,103 Equity shares of Rs. 500 each.
The three Katakia brothers had three shares in the company.
The other 1,100 shares were owned by N.C. Shah and other members described as the group of Bombay Traders.
Prior to the incorporation of the company there was an agreement between the Bombay Traders and the appellants in the month of May, 1965.
The Bombay Traders consisted of two groups known as the Nandkishore and the Valia groups.
The Bombay Traders was floating a new company for the purpose of running a Shoddy Wool Plant.
The Bombay Traders agreed to pay about Rs. 6,00,000 to the appellants for acquisition of machinery and installation charges thereof.
The appellants had imported some machinery and were in the process of importing some more.
The agreement provided that the erection expenses of the machinery would be treated as a loan to the new company.
Another part of the agreement was that the machinery was to be erected in portions of a shed in the compound of Ravi Industries Private Limited.
The company was to pay Rs. 3,100 as the monthly rent of the portion of the shed occupied by them.
The amount which the Bombay Traders would advance as loan to the company was agreed to be converted into Equity capital of the company.
Similar option was given to the appellants to convert the amount spent by them for erection expenses into equity capital.
The company was incorporated in the month of July, 1965.
The appellants allege that the company adopted the agreement between the Bombay Traders and the appellants.
The company however denied that the company adopted the agreement.
The appellants filed a petition for winding up in the month of January, 1970.
The appellants alleged that the company was liable to be wound up under the provisions of section 43 3 (c) of the as the company is unable to pay the following debts.
204 The appellants claimed that they were the creditors of the company for the following sums of money : A.(a) Expenses incurred by the appellants in connection with the erection of the plant and machinery.
Rs. 1,14,344.97 (b) Interest on the sum of Rs. 1,14,344.97 from 1 April, 1966 till 31 December, 1969 at 1% per mensem.
Rs. 51,453.13 (c) Commission on the sum of Rs. 1,14,344.
97 due to the app ellants at the rate of Ipercent per mensem from 1 April 1966 till 13 December,1969.
Rs. 51,453.12 B. (a) Compensation payable by the company to the appellants at the rate of Rs. 3,100 per month for 22 months and 14 days in respect of occupation of the portion of the shed given by the appellants to the company on the basis of leave and licence.
Rs.69,600.00 (b) Interest on the amount of com pensation from time to time by the said company to the appellants till 12 April, 1967.
Rs. 7,857.00 (c) Further interest on compensation from 13 April, 1967 to 31 December, 1969.
Rs. 21,576.00 C. (a) Invoices in respect of 3 machines.
Rs. 85,250.00 (b) Interest on Rs. 85,250 Rs. 37,596.00 (c) Commission at the rate of 1% per cent or Rs.85,250 Rs. 37,596.00 The appellants alleged that the company failed and neglected to show the aforesaid indebtedness in the books of account save and except the sum of Rs. 72,556.01.
The other allegations of the appellants were these.
The company incurred losses upto 31 March, 1969 for the sum of Rs. 6,21,177.53 and thereafter incurred further losses.
The company stopped functioning since about the month of Septem ber, 1969.
The company is indebted to a Director and the firms of M/s Nandkishore & Co. and M/s Bhupendra & Co. in which some of the Directors of the company are interested.
The in , debtedness of the company to the creditors including the appellant 's claim as shown by the company at the figure of Rs. 72,556.01 is for the sum of Rs. 9,56,829.47.
The liability of the company including the share capital amounted to Rs. 14,98,923.3 3.
The liability excluding the share capital of the company is Rs. 9,56,829.47 and the assets of the company on the valuation put by the company on the balance sheet amount to Rs. 8,81,171.96.
The value of the current and liquid assets is about Rs. 2,74,247.38.
The appellants on these allegations alleged that even after the proposed sale of the machinery at Rs. 4,50,000 the company would not be in a position to discharge the indebtedness of the company.
The proposed sale, of machinery for the sum of Rs. 4,50,000 was at a undervalue.
The market value was Rs. 6,00,000.
The Board did not sanction such a sale.
It was alleged that the substratum of the company disappear ed and there was no possibility of the company doing any business at profit.
The company was insolvent and it was just and equitable to wind up the company.
205 When the petition was presented to the High Court of Bombay the learned Single Judge made a preliminary order accepting the petition and directing notice to the company.
When the company appeared all the shareholders and a large number of creditors of the company of the, aggregate value of Rs. 7,50,000 supported the company and opposed winding up.
The company disputed the claims of the appellants under all the heads save the two amounts of Rs. 14,650 and Rs. 36,000 being the amounts of the second and third invoices.
The company produced books of account showing a sum of Rs. 72,556.01 due to the appellants, as on 31 March, 1969.
The company alleged that the appellants had agreed to reduction of the debt to a sum of Rs. 14,850 and to accept payment of the same out of proceeds of sale of the machinery.
The learned Single Judge held that the claims of the appel lants were disputed save that a sum of Rs. 72,556,.01 was payable by 'the company to the appellants and with regard to the sum of Rs. 72,556.01 the company alleged that there was a settlement at Rs. 14,850 whereas the appellants.
denied that there was any such compromise.
The learned Single Judge refused to wind up the company and asked the company to deposit the disputed amount of Rs. 72,556.01 in court.
The further order was that if within six weeks the appellants did not file the suit in respect of the recovery of the amount the company would be able to withdraw the amount and if the suit would be filed the amount would stand credited to the suit.
The High Court on appeal upheld the judgment and order and found that the alleged claims of the appellants were very strongly and substantially denied and disputed.
The first claim for erection of plant and machinery was to tally denied by the company.
The defences were first that the books of the company showed no such transactions; secondly, there was no privity between the company and the persons in whose names the appellants made the claims; thirdly, the alleged claims were barred by limitation; and, fourthly, there was never any demand for the alleged claims either by those persons or by ,the appellants.
The alleged claims for interest and commission were therefore equally baseless according to the defence of the Company.
The second claim for compensation was denied on the grounds ,that the appellants were not entitled to any compensation for use of The portion of the shed 'and the alleged claim was barred by imitation.
As to the claim for compensation the company relied on the resolution of the Board of Directors at which the Katakia brothers were present as Directors The Board resolved 206 confirmation of the arrangement with M/s Ravi Industries for use of the premises for the running of the industry at their shed at a monthly rent of Rs. 4,250: Prima facie the resolution repelled any claim for compensation or interest on compensation.
With regard to the claim of invoices the High Court held that the first invoice for Rs. 34,600 was paid by the company to the appellants.
The receipt for such payment was produced before the learned trial Judge.
The appellants also admitted the same.
As to the other two invoices for Rs. 14,650 and for Rs. 36,000 the amounts appeared in the company 's books.
According to the company the claim of the appellants was for Rs. 72,556.01 and the case of the company was that there was a settlement of the claim at Rs. 14,850.00.
The High Court correctly gave four principal reasons to re ject the claims of the appellants to wind up the company as creditors.
First, that the books of account of the company did not show the alleged claims of the appellants save and except the sum of Rs. 72,556.01.
Second, many of the alleged claims are barred by limitation.
There is no allegation by the appellants to support acknowledgement of any claim to oust the plea of limitation.
Thirdly, the Katakia brothers who were the Directors resigned in the month of August, 1969 and their three shares were transferred in the month of December, 1969 and up to the month of December, 1969 there was not a single letter of demand to the company in respect of any claim.
Fourthly, one of the Katakia brother was the Chairman of the Board of Directors and therefore the Katakias were in the knowledge as to the affairs of the company and the books of accounts and they signed the balance sheets which did not reflect any claim of the appellants except the two invoices for the amounts of Rs. 14,650 and Rs. 36,000.
The High Court characterised the claim of the appellants as tainted by the vice of dishonesty.
The alleged debts of the appellants are disputed, denied, doubted and at least in one instance proved to be dishonest by the production of a receipt granted by the appellants.
The books of the company do not show any of the claims excepting in respect of two invoices for Rs. 14,650 and Rs. 36,000.
It was said by the appellants that the books would not bind the appellants.
The appellants did not give any statutory notice to raise any presumption of inability to pay debt.
The appellants would therefore be required to prove their claim.
This Court in Amalgamated COmmercial Traders (P) Ltd. v.A. C. K. Krishnaswami and Anr.
(1) dealt with a petition to wind up the company on the ground that the company was indebted to the petitioner there for a sum of Rs. 1,750 being the net dividend (1) 35 Company cases 456.
207 amount payable on 25 equity shares which sum the company failed and neglected to pay in spite of notice of demand.
There were other shareholders supporting the winding up on identical grounds.
The company alleged that there was no debt due and that the company Was in a sound financial position.
The resolution of the company declaring a dividend made the payment of the dividend contingent on the receipt of the commission from two sugar mills.
The commission was not received till the month of May, 1960.
The resolution was in the month of December , 1959.
Under section 207 of the a company was required to pay a dividend which had been declared within three months from the date of the declaration.
A company cannot declare a dividend payable beyond three months.
This Court held that the non payment of dividend was bona fide disputed by the company.
It was not a dispute 'to hide ' its inability to pay the debts.
Two rules are well settled.
First if the debt is bona fide disputed and the defence is a substantial one, the court will not wind up the company.
The court has dismissed a petition for winding up where the creditor claimed a sum for goods sold to the company and the company contended that no price had been agreed upon.
and the sum demanded by the, creditor was unreasonable (See London and Paris Banking Corporation (1).
Again, a petition for winding up by a creditor who claimed payment of an agreed sum for work done for the company When the company contended that the work had not been done properly was not allowed.
(See Re. Brighton Club and Norfold Hotel Co. Ltd. (2) Where the debt is undisputed the court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular debt (See Re.
A Company 94 S.J. 369).
Where however there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed the court will make a winding up order without requiring the creditor to quantity the debt precisely (See Re.
Tweeds Garages Ltd. (3) The principles on which the court acts are first that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law and thirdly the company adduces prima facie proof of the facts on which the defence depends.
Another rule which the court follows is that if there is opposition to the making of the winding up order by the creditors the court will consider their wishes and may decline to make the winding up order.
Under section 557 of the Company Act 1956 (1) (3) (2) ; 208 in all matters relating to the winding up of the company the court may ascertain the wishes of the creditors.
The wishes of the shareholders are also considered though perhaps the court may attach greater weight to the views of the creditors.
The law on this point is stated in Palmer 's Company Law, 21st Edition page 742 as follows : "This right to a winding up order is, however, qualified by another rule, viz., that the court will regard the wishes of the majority in value of the creditors, and if, for some good reason, they object to a winding up order, the court in its discretion may refuse the order '.
The wishes of the creditors will however be tested by the court on the grounds as to whether the case of the persons opposing the winding up is reasonable; secondly, whether there are matters which should be inquired into and investigated if a winding up order is made.
It is also well settled that a winding up order will not be made on a creditor 's petition if it would not benefit him or the company 's creditors generally.
The grounds furnished by the creditors opposing the winding up will have an.
important bearing on the reasonableness of the case (See Re. P. & J. Macrae Ltd.(1).
In the present case the claims of the appellants are disputed in fact and in law.
The company has given prima facie evidence that the appellants are not entitled to any claim for erection work, because there was no transaction between the company and the appellants or those persons in whose names the appellants claimed the amounts.
The company has raised the defence of lack Of privity.
The company has raised the defence of limitation.
As to the appellant 's claim for compensation for use of shed the company denies any privity between the company and the appellants.
The company has proved the resolution of the company that the company will pay rent to Ravi Industries for the use of the shed.
As to the three claims of the appellants for invoices one is proved by the company to be utterly unmeritorious.
The company produced a receipt granted by the appellants for the invoice amount.
The falsehood of the appellants ' claim has been exposed.
The company however stated that the indebtedness is for the sum of Rs. 14,850 and the company alleges the agreement between the company and the appellants that payment will be made out of the proceeds of sale.
On these facts and on the principles of law to which reference has been made the High Court was correct in refusing the order for winding up.
Since the inception of the company Jayantilal Katakia a partner of the appellants was the Chairman of the company until 22 August, 1969.
His two brothers were also Directors of the company since its inception till 22 August, 1969.
The Bombay group had also Directors of the company.
(1) 209 The company proved the unanimous resolution of the Board at a meeting held on June, 1969 for sale of machinery of the company.
The Katakia brothers were present at the meeting.
The Katakia brothers thereafter sold their three shares to the Valia group.
The cumulative evidence in support of the case of the company is not only that the Katakia brothers consented to and approved of the sale of machinery but also parted with their shares of the company.
The three shares were sold by the Katakia Brothers shortly after each of them had written a letter on 27 July, 1969 expressly stating that they had no objection to the sale of the machinery and the letter was issued in order to enable the company to hold an Extra ordinary General meeting on the subject.
The company relied on the resolution of the Board meeting on 24 October, 1969 where it was recorded that the Valia group would sell their 367 shares and 3 other shares which they had purchased from the appellants to the Nandkishore group and the appellants would accept Rs. 14,850 in settlement of the sum of Rs. 72,000 due from the company and the company would make that payment out of proceeds of sale of the machinery.
The Board at a meeting held on 17 September, 1969 resolved that the proposal of R. K. Khanna to purchase the machinery be accepted.
On 20 December, 1969 an agreement was signed between R. K. Khanna and the company for the sale of the machinery.
At the Annual General Meeting of the company on 8 January, 1970 the Resolution for sale of the machinery was unanimously passed by the company.
It is in this background that the appellants impeached the proposed sale of the machinery as unauthorised and improvident.
The appellants themselves were parties to the proposed sale.
The appellants themselves wanted to buy the machinery at a higher figure.
These matters are within the province of the management of the company.
Where the shareholders have approved of the sale it cannot be said that the transaction is unauthorised or improvident according to the wishes of the shareholders.
It will appear from the judgment of the High Court that the creditors for the sum of Rs. 7,50,000 supported the company and resisted the appellants ' application for winding up.
There was some controversy as to whether all the creditors appeared or not.
At the hearing of this appeal the company gave a list of the creditors and notices were issued to the creditors.
Apart from the appellants, two other creditors who supported the appellants were Ravi Industries Ltd. whose name appears as one of the creditors as on 2 August, 1971 in the list of creditors furnished by the company and K. section Patel & Co. with a claim for Rs. 44,477.56 though their name does not appear in the list.
Among the creditors who 210 supported the company the largest amount was represented by Nandikshore and Company with a claim for Rs. 4,95,999.
The two creditors who supported the claim of the appellants in regard to the prayer for winding up were Ravi Industries Ltd. with a claim for Rs. 2,97,500 on account of rent and K. section Patel & Co. of Bombay with a claim for Rs.44,477.56.
It may be stated here that this claim of Rs. 44,477.56 was made on account of erection work of machinery and this identical claim was included in the list of expenses claimed by the appellants on account of erection work.
The company disputed the claim.
The High Court correctly found that the appellants could not sustain the claim to support winding up.
It is surprising that a claim of the year 1965 was never pursued until it was included as an item of debt in the petition for winding up the company.
With regard to the claim for rent, the company pursuant to an agreement between the company and Ravi Industries Private Ltd. credited Rowe Industries with the sum of Rs. 1,52,000 with the result that a sum of Rs. 1,45,500 would be payable by the company to Ravi Industries Ltd. in respect of rent.
The company alleges that Ravi Industries Pvt.
Ltd. supported the company in the High Court and that they have taken a completely different position ill this Court.
In this Court the company has also relied on a piece of writing dated 24 September, 1971 wherein Ravi Industries Private Ltd. acknowledged payment of Rs. 1,52,000 to Rowe Industries Pvt. Ltd. and further agreed to write off the amount of Rs. 1,45,500.
Ravi Industries Pvt.
Ltd. is disputing the same.
This appears to be a matter of substantial dispute.
The Court cannot go into these questions to settle debts with doubts.
Counsel for the appellants extracted observations from the judgment of the High Court that it was never in dispute that the company was insolvent and it was therefore contended the company should be wound up.
Broadly stated, the balance sheet shows the share capital of the company to be Rs. 5,51,500, the liabilities to be Rs. 9,77,829.47 and the assets to be Rs. 8,87,177.93.
The assets were less than the liability by Rs. 90,000.
Accumulated losses of the company for five years appear to be Rs. 6,21,17.53.
The plant and machinery which are shown in the balance sheet at Rs. 6,07.544.58 are agreed to be sold at Rs. 4,50,000.
There would then be a short fall in the value of the fixed assets by about Rs. 1,50,000 and if that amount is added to the sum of Rs. 90,000 representing the difference between the assets and liabilities the shortfall in the assets of the company would be about Rs. 2,50,000.
The appellants contended that the shortfall in the assets of the company by about Rs. 2,50,000 after the sale of the machinery would indicate first that the substratum of the company was 211 gone and secondly that the company was insolvent.
An allegation that the substratum of the company is gone is to be alleged and proved as a fact, The sale of the machinery was alleged in the petition for winding up to indicate that the substratum of the company had disappeared.
It was also said that there was no possibility of the company doing business at a profit.
In determining whether or not the substratum of the company has gone, the objects of the company and the case of the company on that question will have to be looked into.
In the present case the, company alleged that with the proceeds of sale the company in , tended to enter into some other profitable business.
The mere fact that the company has suffered trading losses will not destroy its substratum unless there is no reasonable prospect of it ever making a profit in the future, and the court is reluctant to hold that it has no such prospect.
(See Re.
Suburban Hotel Co.(1); and Davis & Co. vs Brunswick (Australia) Ltd. (2 ) The company alleged that out of the proceeds of sale of the machinery the company would have sufficient money for carrying on export business even if the company were to take into consideration the amount of Rs 1,45,000 alleged to be due on account of rent.
Export business, buying and selling yarn and commission agency are some of the business which the company can carry on within its objects.
One of the Directors of the Company is Kishore Nandlal Shah who carries on export business under the name and style of M// 'section Nandkishore & Co. in partnership with others.
Nandkishore & Co. are creditors 'of the company to the extent of Rs. 4,95,000.
The company will not have to meet that claim now.
On the contrary, the Nandkishore group will bring in money to the company.
This Nandkishore group is alleged by the company to help the company in the export business.
The company has not abandoned objects of business.
There is no such allegation or proof.
It cannot in the facts and circumstances of the present case be held that the substratum of the company is gone.
Nor can it be held in the facts and circumstances of the present case that the company is unable to meet the outstandings of any of its admitted creditors.
The company has deposited in court the disputed claims of the appellants.
The company has not ceased carrying on its business.
Therefore, the company will meet the dues as and when they fall due.
The company has reasonable.
prospect of business and resources.
Counsel on behalf of the company contended that the appel lants presented the petition out of improper motive.
Improper motive can be spelt out where the position is presented to coerce the company in satisfying some groundless claims made against it by the petitioner.
The facts and circumstances of the present case indicate that motive.
The appellants were Directors.
They sold, ' (1) (2) [1936] 1 A.F.R. 299.
212 their shares.
They went out of the management of the company in the, month of August, 1969.
They were parties to the proposed sale.
Just when the sale of the machinery was going to be effected the appellants presented a petition for winding up.
In the recent English decision in Mann & Anr.
vs Goldstein & Anr.
(1) it was held that even though it appeared from the evidence that the company was insolvent, as the debts were substantially ,disputed the court restrained the prosecution of the petition as an abuse of the process of the court.
It is apparent that the appellants did not present the petition for any legitimate purpose.
The appeal therefore fails and is dismissed with costs.
The company and the supporting creditors will get one hearing fee.
The amount of Rs. 72,000 which was deposited in court will remain deposited in the court for a period of eight weeks from this date and if in the meantime no suit is filed by the appellants within eight weeks the company will be at liberty to withdraw the amount by filing the necessary application.
In the event of the suit being filed within this period the amount will remain to the credits of the suit.
V.P.S. Appeal dismissed. | The appellants filed a petition for winding up of the respondent company, on the grounds : (1) that the company was unable to pay the debts due to the appellants, (2) that the company showed their indebtedness in their books of account for a much smaller amount, (3) that the company was indebted to other creditors, (4) that the company was effecting an unauthorised sale of its machinery, and (5) that the company had incurred losses and stopped functioning, and therefore the substratum of the company disappeared and there was no possibility of the company doing any business at profit.
The High Court dismissed the petition.
Dismissing the appeal to this Court, HELD : The rules for winding up on a creditor 's petition are if there is a bona fide dispute about a debt and the defence is a substantial one, the court would not ' order winding up.
The defence of the company should be in good faith and one of substance.
if the defence is likely to succeed on a point of law and the company adduced prima facie proof of the facts on which the defence depends, no order of winding up would be made by the Court.
Further under section 557 of the , in all matters relating to winding up of a company the court may ascertain the wishes of the creditors.
If, for some good reason the creditors object to a winding up order, the court, in its discretion, may refuse to pass such an order.
Also, the winding up order will not be made on a creditor 's petition if it would not benefit the creditor or the company 's creditors generally.
[207 D, G H; 208 C D] (1) In the present case, the claims of the appellants were disputed both in fact and in law.
The company had given prima facie evidence that the appellants were not entitled to any claim.
The company had also raised the defence of lack of privity and of limitation.
[208 D F] (2) One of the claims of the appellants was proved by the company to be unmeritorious and 'false, and as regards the admitted debt the company had stated that there was a settlement between the company and the appellants that the appellants would receive a lesser amount and that the company would pay it off out of the proceeds of sale of the company 's properties.
[208 F G] (3) The creditors of the company for the sum of Rs. 7,50,000 supported the company and resisted the appellants ' application for winding up.
[209 G] (4) The cumulative evidence in support of the case of the company is that the appellants consented to any approved of the sale of the machinery.
As shareholders, they had expressly written that they had no objection to the sale of the machinery and the letter was issued in order to enable the company to hold an extraordinary general meeting on the subject.
The company passed a resolution authorising the sale.
The 256 Sup.
Cl/72 202 appellants themselves were parties to the proposed sale and wanted to buy the machinery.
Where the shareholders had approved of the sale it could not be said that the transaction was unauthorised or improvident.[209 A F] (5) In determining whether or not the substratum of the company had gone, the objects of the company and the case of the company on that question would have to be looked into.
In the present case, the company alleged that with the proceeds of sale the Company intend to enter into some other profitable business.
such as export business which was within its objects.
The mere fact that it had suffered trading losses will not destroy its substratum unless there is no reasonable prospect of it ever making a profit in the future.
A court would not draw such an inference normally.
One of its largest creditors, who opposed the winding up petition would help it in the export business.
The company had not abandoned the objects of its business.
Their ,fore, on the facts and circumstances of the present case it could not be held that the substratum of the company had gone.
Nor could it be held that the company was unable to meet the outstandings of any of its admitted creditors.
The company had deposited money in court as per the directions of the Court and had not ceased carrying on its business.
[211A G] (6) On the facts of the case it is apparent that the appellants had presented the petition with improper motives and not for any legitimate purpose.
The appellants were its directors, had full knowledge of the company 's affairs and never made demands 'for their alleged debts.
They sold their shares, went out of management of the company and just when the sale of the machinery was going to be effected presented the petition for winding up.
[211 A; 212 A C] Amalgamated Commercial Traders (P.) Ltd. vs A. C. K. Krishnaswami & Anr., , London & Paris Banking Corporation, , Re.
Brighton Club & Norfold Hotel Co. Ltd., ; , Re. A. Company, 94 S.J. 369, Re.
Tweeds Garages Ltd., (1962) Ch.
406, Re. P. & J. Macrae Ltd., , Re.
Suburban Hotel Co. and Davis & Co.v.
Burnswick (Australia) Ltd., , and Mann & Am .v.
Goldstein & Anr., , referred to. |
minal Appeal No. 3 of 1972.
Appeal by special leave from the judgment and order dated January 25, 1971 of the Madhya Pradesh High Court, Indore Bench in Criminal Appeal No. 391 of 1969.
section K. Gambhir, for the appellant.
M. N. Shroff, for the respondent.
The, Judgment of the Court was delivered by Beg, J. Shiv Govind, the appellant , has obtained Special.
Leave to appeal against only that part of the Judgment and order of the High Court of Madhya Pradesh by which his sentence of one, year 's Rigorous Imprisonment, passed by the Additional Sessions ' Judge, Indore, upon a conviction under Section 366 Indian Penal Code, was enhanced to seven years ' Rigorous Imprisonment 836 and a fine of Rs. 100/ , and, in.
default of payment of fine, to three months ' further rigorous imprisonment.
The appellant, aged about 20 years at the time of the alleged offence of 9th of August, 1969, was the youngest of three persons who were jointly charged and tried for offences punishable under Section 366 and 354 I.P.C. The prosecution case was : Kumari Seema, a girl below 18 years of age, was offered a lift on his bicycle by the accused, Kamal Singh, aged 30 years, while she was returning to her homefrom her School on 9th August, 1969.
The girl hesitated.
But, as she reposed confidence in Kamal Singh, whom she looked upon as her uncle, she accepted the offer.
Kamal Singh took Kumari Seema on his bicycle to the Regal Cinema where she part took of some.
refreshment ordered by Kamal Singh.
Meanwhile, the appellant Shiv Govind and the accused Punani, aged 26, arrived in a car.
Kamal Singh asked Kumari Seema to go with the two younger men in their car.
Seema refused.
Then, Kamal Singh asked her to go on his bicycle to Yashwant Talkies.
She complied with this request.
At this Cinema, Kanial Singh deposited his Cycle at the Cycle stand.
The appellant Shiv Govind and his companion Punam had followed in their car.
The three men succeeded in persuading Seema, despite her initial refusal, to sit in the car and to go for a short pleasure trip in it on the, definite assurance that she will soon be reached home.
After the girl had sat in the car she was driven to a place called Mandow, a number of miles away from Indore, and was made to alight at a tourist 's bungalow.
There two rooms were engaged by the accused.
, Kamal Singh occupied one of the two rooms and the girl was closeted in the other room with the appellant and his companion Punam, who were both drunk.
One of the two youngmen caught hold of the hands of the girl while the other tried to undress her with the object of raping her.
Kumari Seema, at this point, feigned sudden indisposition so that the two youngmen had to bring her out into the gallery for fresh air.
She managed to escape while the accused went inside to fetch some water for her, She rushed into the house of one Babulal Kamdar and complained to him about the incident.
This led to a communication of information of the offences to the Police which went to the tourist 's bungalow.
and arrested the three accused who were brought to Police Station Nalcha where a First Information Report was lodged.
The Trial Court had examined the evidence given in support of the case stated above.
This included medical evidence on the question of the age of the girl, because, while the prosecution alleged that she was below 16 years of age, the accused pleaded that she was above 18 years of age.
Evidently, the case of the accused 837 Was that Kumari Seema was a consenting party to whatever took place.
Although the girl was attending a School, the entry of her age in the School Register was not disclosed.
Despite some discrepancies in the evidence relating to the age of the girl, the trial court came to the conclusion that it was between 16 to 19 years.
It relied mainly on expert evidence of Doctors who had used the ossification test.
The Trial Court had also noticed the discrepancies between the prosecution version, as set out above by Kumari Seema in her evidence in Court.
and the story given out by her in the First lnformation Report where she had stated that she had joined the party of the accused at the crossing of Bijasan Road.
The earlier version suggested that the girl had herself gone to meet the party of the accused by appointment.
The consent of the girl was, however, immaterial in view of the finding of the Trial Court about the age of the girl.
The fact that she was taken to Mandow, where something happened at the tourist 's bungalow which she disapproved of, was corroborated by the evidence of Babulal Kamdar, and Kailash Sharma, in addition to the two police constables of Mandow out post.
The Trial Court which had the advantage, of watching the demeanour of the girl, had come to the conclusion that, although the girl may have tried to improve her version and pretend that she was unwilling to accompany Kamal Singh, who had come in a car for her according to the first version, yet, the charge under Sec.
366 I.P.C., was established against each of the three accused and the charge under Sec.
354 I.P.C. was established against Shiv Govind, appellant, and his companion Punam.
The three accused were, therefore, convicted under Sec. 366, and each was sentenced to one year 's rigorous imprisonment.
The two accused Shiv Govind and Punam were also convicted under Sec.
354 I.P.C., and sentenced to four months rigorous imprisonment, but the two sentences were ordered to run concurrently.
When the case came up in appeal to the High Court, a notice: of enhancement of the sentence under Sec.
366 I.P.C. was issued to each of the three appellants, and their sentences were enhanced, as indicated above, after the appellants had been heard.
It is only Shiv Govind who has appealed to this Court.
Shiv Govind had also applied under Sec.
561A. Criminal Procedure Code to the High Court, after the dismissal of his appeal and enhancement of the sentence, by the High Court, claiming the benefit of Sec. 6 and 11 of the Probation of Offender 's Act.
But this application was rejected by the learned Judge who had enhanced the sentence passed upon the appellant, although he 838 round that the report of the Probation Officer about the conduct of the accused while undergoing the sentence, which was sent far, was favourable to the appellant.
It appears from the two Judg ments given by the learned Judge who enhanced the sentence of the appellant and who subsequently dismissed the application Linder Sec.
561A Criminal Procedure Code also, that the view taken by him was that, having regard to the facts and circumstances and of the case and the offence committed by the appellant, the enhanced sentence was deserved by him.
We have, therefore, examined the Judgment of the High Court Linder appeal before us in order to discover the special reasons Which induced the learned High Court Judge to differ from the ( )pinion of the Trial Court about the appropriate sentence to be imposed upon the appellant.
The only reason given by the learned Judge for enhancing the sentence was that Kumari Seema had reposed confidence in Kamal Singh, whom she regarded as an Uncle, so that she could not expect foul play from him.
The learned Judge thought the girl 's trust and confidence in Kamal Singh explained why she did not protest when she was taken in the car and then made to get down at the tourist 's bungalow.
It seems, however, from the account of the occurrence given in the Judgment under appeal, that the learned Judge was shocked by the plight of Kumari Seema, due to the perfidy of Kamal Singh, and by.
a contemplation of the possible consequences to her if she had not behaved in a particularly.
brave and intelligent manner so as to escape from her predicament.
The learned Judge mentioned that the girl had risked her life to escape.
We, however, find that there was no suggestion in the evidence anywhere that any threat to the life of Kumari Seema was held out.
There was no evidence that the girl had seriously struggled to escape or had raised shouts for help which would have brought people around to her aid.
Nor was there any evidence that the accused tried to obstruct her or to chase her when she escaped from the tourist 's bungalow allegedly by resorting to a ruse.
The High Court was so impressed by the girl 's uncorroborated version of her own heroism, which did not tally with her first version in the First Information Report, that it overlooked the infirmities in the girl 's evidence discussed by the trial court.
We find the trial court 's view of the whole case to be, quite balanced and objective.
We do not think that the severer view of the High Court could be reasonably justified.
It seems clear to us that the High Court had overlooked the principles, laid down by this Court repeatedly, which should 839 govern the exercise of powers of the High Court to enhance sen tences Imposed by trial courts.
In Bed Raj vs The State of Uttar Pradesh.
this Court observed at page 588 589 "A question of a sentence is a matter of discretion and it is well settled that when discretion has been properly exercised along accepted judicial lines, an appellate court should not interfere to the detriment of an accused person except for very strong reasons which must be disclosed on the face of the judgment; See for example the observations in Dalip Singh vs State of Punjab , 156) and Nar Singh vs State of Uttar Pradesh [1955](1) S.C.R. 238, 2411.
In a matter of enhancement there should not be interference when the sentence passed imposes substantial punishment.
Interference is only called for when it is manifestly inadequate.
In our opinion, the lese principles have not been observed.
It is impossible to hold in the circumstances described that the Sessions Judge did not impose a subs tantial sentence, and no adequate reason has been assigned by the learned High Court Judges for considering the sentence manifestly inadequate.
In the circumstances.
bearing all the considerations of this case in mind, we are of opinion that the appeal (which is limited to the question of sentence) should be allowed and that the sentence imposed by the High Court should be set aside and that of the Sessions Court restored".
We think that what was laid down by this Court.
in Bed Raj 's case (Supra) is fully applicable to the case before us.
We may also mention the similar views expressed by this Court in.
Alamgir & A nr., vs The State of Bihar (2).
We may observe that decision of this Court in Nabi Bux and Ors.
vs The State of Madhya Pradesh(: '), is distinguishable from the case before us.
In that case the High Court had enhanced a sentence having regard to all the facts and circumstances justifying the enhancement.
In the case before us we find that the High Court had not noticed a number of facts duly considered by the trial Court so that the exercise of power of enhancement of the sentence under Sec.
366 I.P.C. could not be reasonably justified here.
Consequently, we allow this appeal by setting aside the order of enhancement of sentence by the High Court of Madhya Pradesh and restore the sentence of one year 's rigorous imprisonment (1) [1955] (2) S.C.R. p. 583.
(2) [1959] Supp.
(1) S.C.R. 464.
(3) ; 840 passed upon the appellant by the learned Sessions Judge for the offence under Sec.
366 I.P.C. of which the appellant was convict ed.
The concurrent sentence of four months rigorous imprisonment under Sec.
354 I.P.C., which was not interfered with by the High Court, is maintained.
We understand that the appellant has already undergone more than one year 's imprisonment awarded to him and that he is in jail as his application for bail was rejected.
If this is so, the appellant will be released forthwith unless wanted in some other case.
K.B.N. Appeal allowed. | A question of sentence is a matter of discretion.
It is well settled that when discretion has been properly exercised along accepted judicial lines.
an appellate Court should not interfere to the detriment of an accused person.
Such interference will be justified only by strong reasons Which must be disclosed on the fact of the, judgment.
In a matter of enhancement there should not be interference when the sentence , passed imposes substantial punishment.
lnterference is only called for when it is manifestly inadequate.
[839 B] Where the trial court after taking into account all the circumstances end also the discrepancies in the prosecution version convicted the appellant to one years, imprisonment under section 366, Penal Code, and the High Court in appeal, enhanced the sentence to seven years ' imprisonment.
HELD : that the High Court had not noticed a number of facts duly considered by the trial court and, therefore, the exercise of the power of enhancement could not be justified.
[839 G] Bed Rai vs The State of Uttar Pradesh, ; , and Alamgir & Anr.
vs The State of Bihar, [1959] Supp.
I S.C.R. 464, referred to.
Nabi Bux and ors.
vs The State of Madhya Pradesh, A. 1.
R. , distinguished. |
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