judgement stringlengths 875 654k | summary stringlengths 200 73.4k |
|---|---|
Appeal No. 1695 of 1993.
From the Judgment and Order dated 5.4.1991 of the Bombay High Court in S.C.A. Nos. 27 and 31 of 1988.
G.L. Sanghi Dhruv Mehta, Guru Raikar, S.K. Mehta and Arvind Verma for the Appellants.
BA Masodkar, Dr. R.B. Masodkar and KL.
Taneja for the Respondents.
The Judgment of Court was delivered by AHMADI, J. Special leave granted.
The appellants are the legal representatives of the deceased plaintiff Inacio Martins who died pendente lite.
He had on October 26, 1968 instituted a suit No. 157 of 1968 for a declaration and an injunction to restrain the defendants from dispossessing him from the property known as 'Palmar Oiteral do Predio Aivao ' comprising seven lots of coconut grove situated at Caranzalem belonging to defendant No. 2.
The said suit was dismissed on Match 28, 1974 on the ground that the plaintiff was no more in possession of the suit property and, therefore, a suit for a mere declaration simpliciter could not lie.
On the dismissal of the said suit the original plaintiff filed another suit No. 114/74 on May 6, 1974 for restoration of possession on the ground that he was the lawful tenant of the said property and since he had not been dispossessed,in accordance with law the defen dants who were mere trespassers were liable to be evicted.
The plaintiffs case in the plaint was that he was the lessee in respect of seven lots on an annual rent of Rs. 3600 payable in advance in three instalments; that he had paid the rent upto the end of December, 1967 and the first installment of 1968 but the owner, defendant No. 2, in collusion with defendant No. 1 executed a deed of lease in favour of the latter effective from January 1, 1968 on the strength whereof defendant No. 1 claimed to have assumed possession of the property sometime in the second week of June, 1968 without his tenancy having been lawfully terminated.
The plaintiff, therefore, contended that defendant No. 1 was a trespasser in the property and was liable to be evicted therefrom.
He, therefore, sought possession of the property in respect of which he claimed to be a lessee.
1020 The defendants, besides contending that the suit was barred on the principle of res judicata and/or constructive res judicata as found in Order 2 Rule 2(3) of the Code of Civil Procedure, averred that on the expiry of the lease at the end of December, 1967 the lease stood terminated by efflux of time and defendant No. 2 was, therefore, entitled to let out the property to defendant No. 1 and hence the latter was in lawful possession of the said property The plaintiffs allegation that he was forcibly dispossessed was denied.
The defendants, therefore, contended that the suit was not maintainable and deserved to be dismissed.
The Trial Court upheld the plaintiffs contention that the property was demised to him and he was the lawful tenant thereof till his possession came to be disturbed sometime in June, 1968.
The Trial Court also found that the plaintiff had paid a sum of Rs. 1200 to defendant No.2 through his employee Dattu Kenkro by way of advance rent for the year commencing from January 1, 1968.
The Trial Court, therefore, held that the plaintiff was wrongly dispossessed by defendant No. 1 in collusion with defendant No.2 and decreed the suit for eviction on September 25, 1985.
Against the said decree both the defendants preferred an appeal No. 82/85.
The First Appellate Court concurred with the findings recorded by the Trial Court and dismissed the appeal on March 25, 1986.
Feeling aggrieved by the order of dismissal of the appeal, the defendants preferred separate Second Appeals Nos.
27/88 and 31/88 which came to be allowed on April 5, 1991.
Interfering with the concurrent findings recorded by the two courts below the High Court came to the conclusion that the courts below had applied the wrong test and had based their findings on the question of tenancy and dispossession on mere conjectures.
It, therefore, held that the findings were perverse and it was open to the High Court in Second Appeal to interfere with the said findings.
It also held that the suit was barred by res judicata as well as Order 2 Rule 2(3) of the Code of Civil Procedure.
Lastly it noticed that during the pendency of the suit the Goa, Daman & Diu Agricultural Tenancy Act, 1964 (hereinafter called 'the Act ') was amended by Act 17 of 1976 dated October 14,1976 known as the Fifth Amendment which was brought into effect from April 20, 1976 by which the definition of 'agriculture ' was changed and the expressions 'garden ' and 'garden produce ' were defined by the insertion of sub sections (7A).
& (7B) to suction 2 which rendered the Civil Court without jurisdiction.
The High Court, therefore, held that the decree passed by the Civil Court was unsustainable.
On these findings the High Court allowed the appeals and 1021 reversed the decree of the Trial Court with no order as to costs.
It is against this order of the High Court that the present appeal by special leave is preferred.
Before we deal with the impact of the Act as amended by Act 17 of 1976 we may first deal with the two technical grounds on which the High Court has dismissed the suit.
The first ground on which the High Court dismissed the suit is that the suit was barred by the principle of res judicata in view of the dismissal of the former suit No. 157/68.
That suit was for a declaration that the plaintiff was a lessee and for an injunction to restrain the defendants from interfering with his possession of the suit property.
The foundation for that suit was that the plaintiff who claimed to be a lessee in respect of the demised property apprehended his forcible dispossession therefrom.
With a view to preventing any such action on the part of the defendants he instituted the suit for an injunction to restrain them from so doing.
That suit, however, came to be dismissed as the Trial Court came to the conclusion that the plaintiff was no more in possession of the property in respect of which he claimed to be a lessee.
It was only thereafter that the plaintiff filed the suit for restoration of his possession.
In the subsequent suit the plaintiff contended that he had been forcibly dispossessed sometime in the second week of June, 1968 contrary to law even though his tenancy was subsisting and he had paid the first installment of rent for the year 1968.
He, therefore, contended that the lease stated to have been created in favour of defendant No. 1 by defendant No. 2 was a sham and bogus document set up with a view to supporting their illegal action in dispossessing him.
The High Court, in the backdrop of these facts, came to the conclusion that the subject matter of the second suit was directly and substantially in issue in the previous suit between the same parties and hence regardless of the relief claimed the second suit was clearly barred by res judicata.
This finding of the High Court is difficult to sustain.
Section 11 of the Code of Civil Procedure provides that 'no court shall try any suit or issue in which the matter directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title, in a court competent to try such subsequent suit or the suit in which such issue has been subsequently raised, and has been heard and finally decided by such court '.
It is not the finding of the High Court that in the previous suit the question regarding the tenancy of the plaintiff was determined against the plaintiff.
As the record stands the only ground on which the previous suit 1022 was dismissed was the technical ground that a suit for a mere declaration cannot lie without claiming possession once it is found that the plaintiff had lost possession.
Injunction could not be granted to the plaintiff against dispossession as he had already been dispossessed.
The court came to the conclusion that a mere declaration of his status as a tenant could not be granted unless the consequential relief for possession was prayed.
It was for this technical reason that the suit was dismissed.
It is, therefore, difficult to comprehend how the High Court came to the conclusion that the subject matter of the second suit was directly and substantially in issue in the previous suit.
It would have been a different matter if in the previous suit the court had decided the question of status as lessee against the plaintiff, in which case, perhaps, it could be argued that the second suit based on the factum of tenancy was not maintainable.
It is only when the subject matter of any suit is directly and substantially in issue in the previous suit that the subsequent suit would be barred by res judicata if the competent court trying it had decided the issue regarding tenancy against the plaintiff.
The High Court has concluded against the plaintiff on this point in paragraph 31 which reads as under: Thus it is compelling to acknowledge that the subject matter of the second suit was directly and substantially in issue in the previous suit between the same parties.
The facts of the case clearly reveal that the res invoked in both the suits is the same.
The lite is also the same.
Hence the relief by itself is neither material nor relevant for the direct adjudication of the real issue.
The relief is only a consequence.
Therefore the second suit is to be deemed as barred by res judicata. ." With respect it is difficult to accept this line of reasoning.
As stated earlier, the first suit was dismissed on a technical ground that the suit for a mere declaration without seeking consequential relief of possession could not lie.
In that suit the issue regarding the status of the plaintiff as a lessee was not settled once for all and hence that issue could not be stated to be barred by res judicata in the subsequent suit brought by the lessee for possession the demised property.
We are, therefore, of the opinion that the High Court was wrong in holding that the second suit was barred by res judicata.
1023 The next contention which found favour with the High Court was based on the language of Order 2 Rule 2(3) of the Code of Civil Procedure.
The submission regarding constructive res judicata was also based on this very provision.
Now Order 2 concerns the framing of a suit.
Rule 2 thereof requires that the plaintiff shall include the whole of his claim in the framing of the suit.
Sub rule (1) of Rule 2, inter alia, provides that every suit shall include the whole of the claim which the plaintiff is entitled to make in respect of the cause of action.
If he relinquishes any claim to bring the suit within the jurisdiction of any court he will not be entitled to claim that relief in any subsequent suit.
However, sub rule (3) of Rule 2 provides that a person entitled to more than one relief in respect of the same cause of action may sue for all or any of such reliefs; but if he omits, except with the leave of the court, to sue for all such reliefs he shall not afterwards sue for any relief so omitted.
It is well known that Order 2 Rule 2 CPC is based on the salutary principle that a defendant or defendants should not be twice vexed for the same cause by splitting the claim and the reliefs.
To preclude the plaintiff from so doing it is provided that if he omits any part of the claim or fails to claim a remedy available to him in respect of that cause of action he will thereafter be precluded from so doing in any subsequent litigation that he may commence if he has not obtained the prior permission of the court.
But the Rule does not preclude a second suit based on a distinct cause of action.
It may not be out of place to clarify that the doctrine of res judicata differs from the rule embodied in Order 2 Rule 2, in that, the former places emphasis on the plaintiff 's duty to exhaust all available grounds in support (if his claim while the latter requires the plaintiff to claim all reliefs emanating from the same cause of action.
The High Court is, therefore, clearly wrong in its view that the relief claimed is neither relevant nor material.
Now, in the fact situation of the present case, as we have pointed out earlier, the first suit was for an injunction and not for possession of the demised property.
The first suit was dismissed on the technical ground that since the plaintiff was not in de facto possession no injunction could be granted and a suit for a mere declaration of status without seeking the consequential relief for possession could not lie.
Once it was found that the plaintiff was not in actual physical possession of the demised property, the suit had become infructuous.
The cause of action for the former suit was not based on the allegation that the possession of the plaintiff was forcibly taken sometime in the second week of June, 1968.
The allegation in the former suit was that the plaintiff was a lessee and his 1024 possession was threatened and, therefore, he sought the court 's assistance to protect his possession by a prohibitory injunction.
When in the course of that suit it was found that the plaintiff had in fact been dispossessed, there was no question of granting an injunction and the only relief which the court could have granted was in regard to the declaration sought which the court held could not be granted in view of the provisions of Specific Relief Act.
Therefore, the cause of action for the former suit was based on an apprehension that the defendants were likely to forcibly dispossess the plaintiff.
The cause of action for that suit was not on the premise that he had in fact been illegally and forcibly dispossessed and needed the court 's assistance to be restored to possession.
Therefore, the subsequent suit was based on a distinct cause of action not found in the former suit and hence we do not think that the High Court was right in concluding that the suit was barred by Order 2 Rule 2(3) of the Code of Civil Procedure.
It may be that the subject matter of the suit was the very same property but the cause of action was distinct and so also the relief claimed in the subsequent.
suit was not identical to the relief claimed in the previous suit.
The High Court was, therefore, wrong in thinking that the difference in the reliefs claimed in the two suits was immaterial and irrelevant.
In the previous suit the relief for possession was not claimed whereas in the second suit the relief was for restoration of possession.
That makes all the difference.
We are, therefore, of the opinion that the High Court was completely wrong in the view that it took based on the language of Order 2 Rule 2(3) of the Civil Procedure Code.
The Act was enacted on 16th October, 1964 to provide for the regulation of the terms of tenancy with respect to agricultural lands in the Union Territory of Goa, Daman & Diu and for matters connected therewith.
The definition of the various terms employed in the statute have been set out in section 2 thereof The expression 'agriculture ' is defined in sub section (1A) to include horticulture and raising of food crops, grass or garden produce, but not allied pursuits, meaning thereby rearing or maintaining plough bulls, breeding of livestock, dairy farming, poultry farming, grazing on grounds reserved for the purpose and such other pursuits connected with agriculture as may be prescribed.
Sub sections (7A) and (7B) which came to be incorporated by the Fifth Amendment read as under : "7A. 'Garden ' means land used primarily for growing 1025 coconut trees, arecanut trees, cashewnut trees or mango trees; 7B. 'garden produce ' means any produce from a garden.
" It will be seen from the aforesaid definitions that land used primarily for growing coconut trees falls within the expression 'garden ' and any produce therefrom would be covered by the expression 'garden produce ' Since garden produce is included within the definition of agriculture in sub section (1A) of section 2 it is clear that land used primarily for growing coconut could be described as agricultural land.
Sub section (11) (i) defines land inter alia to mean land which is used for agriculture or which is capable of being so used but is left fallow.
Section 2(23) defines a tenant to mean 'a person who on or after the date of commencement of this Act holds land on lease and cultivates it personally and includes a person who is deemed to be a tenant under this Act '.
Section 7 posits that if any question arises whether any person is a tenant or should be deemed to be a tenant under the Act, the Mamlatdar shall after holding an enquiry decide such question.
Section 8(1) stipulates that no tenancy of any land shall be terminated and no person holding as tenant shall be liable to be evicted therefrom save as provided under the Act.
Sub section (2) of section 8 next provides that where any person as is referred to in section 4 (deemed tenant) has been evicted from the land on or after 1st July, 1962 such person shall be entitled to recover immediate possession of the land in the manner prescribed by or under the Act unless the landlord proves that the termination of tenancy was in the manner authorised by section 9.
Even in cases of threatened wrongful possession section 8A says that any tenant in possession of any land or dwelling house who apprehends that he may be dispossessed contrary to the provisions of this Act may apply in the prescribed manner to the Mamlatdar for an order safeguarding his right to possession.
Section 9 lays down the modes of termination of tenancy which are (a) by the tenant surrendering his right to the landlord in the manner provided in section 10; or (b) by the landlord terminating the tenancy on the grounds specified in section 11; or (c) under any other specific provision of the Act.
Section 18 lays down the procedure for taking possession.
It says that a tenant entitled to possession of any land under any of the provisions of the Act may apply in writing for such possession to the Mamlatdar.
It will be seen from the aforesaid provisions that the forum created for determination of the question whether a person is a 1026 tenant or a deemed tenant under the Act is the Mamlatdar.
Ever where a tenant apprehends that his possession is likely to be interfered with contrary to the provisions of the Act he can make an application in the prescribed manner to the Mamlatdar for safeguarding the, same.
So also where a tenant is evicted illegally, section 8(2) permits him to approach the Mamlatdar for recovery of possession.
Unless the tenancy is terminated in the manner provided by section 9, the law precludes the landowner from terminating the tenancy and obtaining possession of the land from the tenant.
Section 58 bars the jurisdiction of courts.
Sub section (2) thereof provides that save as otherwise provided in the Act no court shall have jurisdiction to settle, decide or deal with any question which is by or under this Act required to be settled, decided or dealt with by the Mamlatdar and no order passed by him under the Act shall be questioned in any civil or criminal court.
It will thus be seen that the Act sets up an independent machinery and invests the Mamlatdar with jurisdiction to decide questions such as : (i) Whether any person is a tenant or should be deemed to be a tenant under the Act? (ii) Whether the possession of any tenant in regard to any land or dwelling house is threatened and if so, whether an order safeguarding the same is required? (iii) Whether the tenancy of any deemed tenant is legally terminated and if no, whether the tenant evicted from the land held by him as such is entitled to restoration of possession? The jurisdiction of the civil court is specifically barred by sub section (2) of Section 58 from settling, deciding or dealing with any question which is by or under the Act required to be settled, decided and dealt with by the Mamlatdar.
There can, therefore, be no doubt that after the Fifth Amendment became effective in regard to land used primarily for growing coconut trees and garden produce, the jurisdiction of the civil court was ousted by virtue of section 58(2) of the Act.
The suit in question was instituted on May 6, 1974 i.e. before the Fifth Amendment was brought into force.
Thus the amendment came into force during the pendency of the suit.
The question, therefore, is what is the effect of the Fifth Amendment on pending litigation? No provision is 1027 made in the Act in that behalf.
The High Court concluded that since 'there is nothing in the language of sections 7 and 58 of the.
Act which is primarily a welfare legislation to indicate that it should not be applied retrospectively there is no question that its applicability should be necessarily prospective.
Proceeding further the High Court takes the view that even after the Fifth Amendment came into force the plaintiff had not applied to the Mamlatdar for possession of the land within the period allowed by Section 18 of the Act and had, therefore, allowed the first defendant to become a deemed purchaser of the suit property on the strength of his tenancy.
Since the civil court had lost jurisdiction to decide the suit, the High Court dismissed it.
We may now proceed to examine whether this view taken by the High Court is correct.
From the above discussion it emerges that the Civil Court undoubtedly had jurisdiction under section 9 of the Code of Civil Procedure to try and grant eviction till the Fifth Amendment became effective.
After that amendment came into force, the provisions of the Act became applicable to the lands in question which were primarily used for growing coconut trees and receiving produce therefrom.
By virtue of section 7 any question whether a person is a tenant or a deemed tenant was required to be decided by the Mamlatdar and the jurisdiction of the Civil Court stood ousted by section 58(2) of the Act.
The question is whether this subsequent change in the law deprived the Civil Court of jurisdiction which it undoubtedly possessed on the date of the institution of the suit.
Three situations, therefore, develop in the context of the provisions of the Act as amended by the Fifth Amendment, namely, (i) the Civil Court retains jurisdiction or (ii) the Civil Court is precluded from deciding, even incidentally, questions failing within the ambit of section 7 of the Act or (iii) the Civil Court 's jurisdiction is wholly ousted.
Since the Act is silent as to the fate of pending litigation after the Fifth Amendment the situation arising on the amendment of the Act must be decided on first principles.
If a suit is filed to recover possession of agricultural land from a trespasser and no dispute arises, the adjudication whereof is required to be done by the special machinery set up under the Act, the Civil Court will continue to have jurisdiction.
If, however, the defendant raises a dispute which is required to be resolved by the special machinery under the Act, a question will arise what procedure the Civil Court should adopt.
There may arise a situation where the entire dispute pending before the Civil Court can be adjudicated by the special machinery only and not the Civil Court, what procedure the 1028 Civil Court follow in such a situation? In the case of the first mentioned situation there is no difficulty as the Civil Court will continue to have jurisdiction to settle and decide the dispute and grant appropriate relief The problem arises in the two other situations where the jurisdiction of the Civil Court is partly or wholly ousted.
Take the case of suit where possession of agricultural land is sought on the plea that the defendant is a trespasser and the defendant contends that he is a tenant.
The question of the defendant 's tenancy in respect of agricultural land would be within the exclusive jurisdiction of the Mamlatdar under section 7 read with section 58(2) of the Act.
In such a situation what procedure should the Civil Court follow ? Now take a case where the entire dispute falls within the exclusive jurisdiction of the special machinery under the Act and had the litigation commenced after the Fifth Amendment was brought into force it could not have been instituted in a Civil Court.
In that case what procedure should the Civil Court follow? These are the questions which arise for determination.
Before we answer those questions we must decide on the impact of the Fifth Amendment on pending litigation.
The question whether the Fifth Amendment is prospective or retrospective really recedes in the background if we examine the question from the angle whether the Civil Court can decide any question falling within the jurisdiction of the special forum under the Act in a pending litigation in the absence of an express provision in that behalf.
If the question of tenancy in regard to agricultural land cannot be decided by the Civil Court under the Act and there is no express saving clause permitting the Civil Court to decide the same, it is obvious that any decision rendered by the Civil Court would be without jurisdiction.
A similar situation did arise in the context of another statute.
In Shah Yograj Kuverji Oil Mills and Ginning Factory vs Subhash Chandra Yograj Sinha, ; = ; the facts were that the landlord had filed a suit for eviction on April 25, 1957 in the regular court, i.e., the Court of the Joint Civil Judge (Junior Division), Erandol, which admittedly had jurisdiction to pass a decree for possession of the demised premises.
However, during the pendency of the suit, a notification was issued under section 6 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, (hereinafter called 'the Rent Act ') applying Part II of the Act to areas where the property in question was situate.
The tenants claimed protection of section 12 in Part 11 of the Rent Act which deprived the landlord of the right of possession under certain circumstance 1029 The question which arose for consideration was whether the tenants were entitled to the protection of section 12 in pending cases and if yes, its effect.
Since section 12 of the Rent Act was held to be prospective, the question which arose for consideration was whether its protection could be extended to tenants in pending litigation.
This court pointed out that the point of time when sub section (1) of Section 12 operates is when the court is called upon to pass a decree for eviction.
Thus, said this Court the language of the sub section applies equally to suits pending when Part 11 comes into force and those to be filed subsequently.
The contention of the landlord that the operation of section 12(1) is limited to suits filed after the Rent Act comes into force in a particular area was not accepted.
Applying the same principle to the facts of the present case, we have no hesitation in concluding that the provisions of the Fifth Amendment would apply to pending suits also.
However, the Act does not preclude the institution of a suit by a tenant for restoration of possession from a trespasser.
If the defendant who is sued as a trespasser raises a plea of tenancy, a question arises whether his plea of tenancy can be decided by the Civil Court as incidental to the grant of relief for possession or is the Civil Court precluded from deciding the same in view of section 7 read section 58(2) of the Act.
As pointed out earlier, section 7 in terms states that if any question arises whether any person is a tenant or should be deemed to be a tenant under the Act, the Mamlatdar shall decide such question.
The jurisdiction is, therefore, vested in the Mamlatdar under section 7 of the Act and section 58(2) specifically bars the jurisdiction of all other courts to settle, decide or deal with any question which is by or under the Act required to be settled, decided or dealt with by the Mamlatdar.
Section 8(2) has limited operation where a person referred to in section 4 has been evicted on or after 1st July, 1962.
In that case he would be entitled to recover immediate possession of the land in the manner prescribed by or under the Act unless it is shown that his tenancy was terminated in the manner authorised by section 9.
In the present case, the plaintiff came to court contending that even though his lease was not terminated as provided by section 9 of the Act, defendant No.1 had dispossessed him by an act of trespass.
He, therefore, sought possession of the demised property from the trespasser, defendant No.1.
He impleaded the owner of the land as defendant No.2 on the plea that she had colluded with defendant No.1.
Defendant No.1 raised a contention in his written statement that he was lawfully inducted as a tenant in the lands in question 1030 by the owner, defendant No.2.
In other words, he disputed the plaintiff 's contention that, he was a trespasser and pleaded tenancy.
If his plea was found to be well founded, he would be entitled to retain possession but not otherwise.
Therefore, the question which arose in the suit was whether defendant No.1 proved that he was a tenant in respect of the land in question.
This question could not be gone into by the Civil Court in view of the clear language of section 7 read with section 58(2) of the Act.
What procedure should the court follow in such situations? It would not stand to reason to non suit the plaintiff who had filed the suit in a competent court having jurisdiction to try the same merely because of the subsequent change in law.
The proper course, therefore, would be one which was followed by the Bombay High Court in Bhimaji Shankar Kulkami vs Dundappa Vithappa Udapudi & Anr., ; = ; That was a case arising under the provisions of the Bombay Tenancy and Agricultural Lands Act, 1948.
The lands in question were agricultural lands.
Section 29(2) of that law provided that no landlord shall obtain possession of any land or dwelling house held by a tenant except under an order of the Mamlatdar on an application made in that behalf in the prescribed form.
Section 70(b) next provided that for the purposes of the Act, one of the duties and functions to be performed by the Mamlatdar is to decide whether a person is a tenant or a protected tenant or a permanent tenant.
Section 85(1) laid down that no Civil Court shall have jurisdiction to settle, decide or deal with any question which is required to be settled, decided or dealt with by the Mamlatdar under the statute.
The law was silent as to how a dispute of this nature raised in a suit filed for eviction on the footing that the defendant is a trespasser should be dealt withby the Civil Court.
This question squarely arose for consideration by the Bombay High Court in Dhondi Tukaram vs Hari Dadu AIR 1954 Bom 100 ILR wherein that court observed as under: "Therefore, we hold that in a suit filed against the defendant on the footing that he is a trespasser if he raises the plea that he is a tenant or a protected tenant, the Civil Court would have no jurisdiction to deal with that plea. .
We would, however, like to add that in all such cases where the Civil Court cannot entertain the plea and accepts the objection that it has no jurisdiction to try it, it should not proceed to dismiss the suit straightaway.
We think that the proper procedure to adopt in such cases 1031 would be to direct the party who raises such a plea to obtain a decision from the Mamlatdar within a reasonable time.
If the decision of the Mamlatdar is in favour of the party raising the plea, the suit for possession would have to be dismissed, because it would not be open to the Civil Court to give any relief to the landlord by way of possession of the agricultural land.
If, on the other hand, the Mamlatdar rejects the plea raised under the Tenancy Act, the Civil Court would be entitled to deal with the dispute on the footing that the defendant is a trespasser.
" Pursuant to the court 's recommendation, the Bombay Legislature introduced section 85A which provided that if in any suit instituted in a Civil Court issues which are required to be settled, decided and dealt with by any authority patent to settle, decide and deal with the same arises, the Civil Court shall stay the suit and refer such issues to such competent authority for determination under the statute.
Unfortunately even under the Act with which we are concerned the Legislature though aware of section 85A has not chosen to make any provision for dealing with such situations.
We are, therefore, of the opinion that it would be just and fair that the issue whether defendant No.1 was a tenant in respect of the lands in question should be referred to the Mamlatdar for decision and after his decision is received by the Civil Court if the issue is held against defendant No.1, the Civil Court may consider passing of a decree in eviction but if on the other hand he is held to be tenant, the Civil Court may be required to dismiss the suit.
One further situation which may arise under the provisions of the Act may be taken note of.
The impact of the Fifth Amendment may give rise to a situation where the remedy lies entirely under the Act and may have to be taken in the manner prescribed by or under the Act.
For example, where a person who is a deemed tenant under section 4 of the Act if evicted from the land on or after ' 1st July, 1962 his remedy under section 8(2) is to approach the authority under the Act for recovery of possession of the land of which he has been dispossessed.
In such a situation the remedy may not be the one available in the case of a tenant other than a deemed tenant whose case is not governed by section 8(2) of the Act.
But in the case of a deemed tenant who has been evicted from the land on or after 1st July, 1962 since a remedy has been provided under 1032 the Act, the Jurisdiction of the Civil Courts stands wholly barred by virtue of Section 58 (2) of the Act.
In such a situation the Civil Court would not be competent to pass any order for restoration of possession to the deemed tenant.
His remedy would, therefore, to be entirely under the Act.
This is just by way of an illustration.
If such a situation arises what procedure should the court follow in a pending suit which was instituted in a competent court having jurisdiction at the date of its institution.
It would seem unfair to non suit the plaintiff altogether for no fault of his own.
We think, in such a situation where the entire dispute falls outside the Civil Court 's jurisdiction on account of the change in law the proper course would be to follow in spirit the procedure outlined in Order 7 Rules 10 and 10A of the Code of Civil Procedure.
Since the paper book in this appeal does not contain the original plaint and the written statement and counsel were unable to enlighten us on the actual nature of the pleadings we have tried to indicate the procedure to be followed by the Civil Court on illustrative fact situations.
In the circumstances, we are left with no alternative but to remit the matter to the Trial Court with a direction to follow the course that may be found appropriate in the fact situation arising out of the pleadings in this case and the nature of the questions required to be determined for grant or refusal of relief claimed in the suit.
We would like to make it clear that the hypothetical situations may or may not apply to the fact situation that may emanate of the pleadings in this case and it would be for the Trial Court to determine the course of action to be adopted in the light of the guidelines indicated hereinabove.
In view of the foregoing discussion, we allow this appeal, set aside the order of the High Court which in either case lacked jurisdiction to decide the question regarding tenancy on merits and remit the matter to the Trial Court for further orders in the light of the observation hereinabove made.
Having regard to the peculiar facts and circumstance, of the case, we make no order as to costs.
R.P. Appeal allowed. | The plaintiff, predecessor in interest of the appellants, flied a suit for a declaration and an injunction to restrain the defendant respondents from dispossessing him from a certain property comprising of a coconut grove.
The trial court dismissed the suit holding that the, plaintiff was no more in possession of the suit property, and, therefore, a suit for a mere declaration simplicitor could not lie.
Consequently, the plaintiff flied another suit for restoration of possession.
His case was that he was a tenant of the suit property, whereof defendant No. 2 was the owners ' and 1016 that he was forcibly dispossessed by defendant No. 1, in collusion with defendant No. 2, without his tenancy having been lawfully terminated.
It was alleged that the defendants were trespassers and liable to be evicted.
The defendants, besides raising the pleas of res judicata and/or constructive res judicata purported to be based on Order 2 Rule 2(3) of the Code of Civil Procedure, contended that defendant No. 1 was in lawful possession of the suit property as the same was let out to him by defendant No. 2 after the lease in favour of the plaintiff stood terminated by efflux of time, and the suit, as such, was not maintainable.
The trial court decreed the suit holding that the suit property was demised to the plaintiff as he was the lawful tenant thereof, and defendant No. 1 in collusion with defendant No. 2 wrongfully dispossessed him.
The appeal riled by the defendants was dismissed by the first appellate court.
The second appeals filed by the defendants were allowed by the High Court holding that the suit was barred by res judicata as well as Order 2 Rule 2(3) C.P.C.
The High Court also held that during the pendency of the suit as a result of the amendment of the Goa, Daman and Diu Agricultural Tenancy Act, 1964 by Act 17 of 1976, known as the Fifth Amendment, the definition of 'agriculture ' was changed and the suit property came to be covered within the expression 'agricultural land ' which rendered the civil court without jurisdiction and the decree passed by it unsustainable.
Aggrieved, the heirs and legal representatives of the plaintiff, filed the appeal by special leave.
Allowing the appeal, this Court, HELD: 1.1 A subsequent suit would be barred by res judicata only when the subject matter of the suit was directly and substantially in issue in the previous suit.
[p. 1022 C] 1.2.
The first suit was dismissed on a technical ground that the suit for a mere declaration without seeking consequential relief of possession could not lie.
In that suit the issue regarding the status of the plaintiff as a lessee was not settled once for all and hence that issue could not be stated to be barred by res judicata in the subsequent suit brought by the lessee for possession of the demised property.
The High Court was not right in holding 1017 that the second suit was barred by res judicata.
1022 F H] 2.1.
Order 2 Rule 2 CPC is based on,the salutory principle that a defendant or defendants should not be twice vexed for the same cause by splitting the claim and the reliefs.
It does not preclude a second suit based.
on a distinct cause of action.
[p. 1023 C E] 2.2.
The doctrine of res judicata differs from the rule embodied In Order 2 Rule 2, in that, the former places emphasis on the plaintiff 's duty to exhaust all available grounds in support of his claim while the latter requires the plaintiff to claim all reliefs emanating from the same cause of action.
[p. 1023 E] 2.3.
The cause of action for the former suit was based on an apprehension that the defendants were likely to forcibly dispossess the plaintiff.
The suit was for an injunction and not for possession of the demised property.
It was not on the premise that the plaintiff had in fact been illegally and forcibly dispossessed and needed the court 's assistance to be restored to possession.
Therefore, the subsequent suit was based on a distinct cause of action not found in the former suit.
The High Court was not right in concluding that the suit was barred by Order 2 Role 2(3) of the Code of Civil Procedure, and that the difference in the reliefs claimed in the two suits was immaterial and irrelevant.
In the previous suit, the relief for possession was not claimed whereas in the second suit the relief was for restoration of possession.
That makes all the difference.
[pp. 1023 F, 1024 B D] 3.1.
The impact of the Fifth Amendment on pending litigation is that the question of tenancy in regard to agricultural land cannot be decided by the civil court under the Act and there being no express saying clause permitting the civil court to decide the same, any decision rendered by the civil court would be without jurisdiction.
The change in law deprived the civil court of jurisdiction which it undoubtedly possessed on the date of the institution of the suit.
Thus, the provisions of the Fifth Amendment would apply to pending suits also.
[pp. 1027 D E; 1028 D E; 1029 C] Shah Bhojraj Kuverji Oil Mills and Ginning Factory vs Subhash Chandra Yograj Sinha; , , relied on.
The Act does not preclude the institution of a suit by a tenant 1018 for restoration of possession from a trespasser.
[p. 1029 C] 3.3.
If a suit Is riled to recover possession of agricultural land from a trespasser and no dispute arises, the adjudication whereof is required to be done by the special machinery set up under the Act, the civil court will continue to have jurisdiction.
[p. 1027 F G] 3A.
If possession of agricultural land is sought on the plea that the defendant is a trespasser and the defendant contends that he is a tenant, the claim of tenancy by defendant cannot be gone into by the civil court in view of the clear language of S.7 read with section 58(2) of the Act In such a situation, it would not stand to reason to non suit the plaintiff who had flied the suit in a competent court having jurisdiction to try the same, merely because of the subsequent change in law.
The proper course, therefore, would be that the issue whether the defendant was a tenant should be referred to the Mamlatdar for decision and, after his decision is received by the civil court, if the issue is held against the defendant, the civil court may consider passing of a. decree.
for eviction but if, on the other hand, he is held to be a tenant, the civil court may be required to dismiss the suit [pp. 1029 F H; 1030 A B; 1031 D E] Bhimaji Shankar Kulkam vs Dundappa Vithappa Udapudi & Anr., ; =. ; and Dhondi Tukaram vs Hari Dadu, AIR 1954 Bom.
100 = ILR , relied on.
The impact of Fifth Amendment may give rise to a situation where a deemed tenant under s.4 of the Act is evicted from the land on or after 1st July, 1962; his remedy under s.8(2) is to approach the authority under the Act for recovery of possession of the land of which he has been disposed, and jurisdiction of the civil court stands wholly barred by virtue of s.58(2) of the Act as it would not be competent to pass any order for restoration of possession to the deemed tenant.
If such a situation arises in a pending suit which was instituted in a competent court having jurisdiction at the date of its institution, it would be unfair to non suit the plaintiff altogether for no fault of his own and the proper course would be to follow in spirit the procedure outlined in Order 7, Rules 10 and 10A, C.P.C. [pp. 1031 F H; 1032 A B] 4.
The High Court lacked jurisdiction to decide the question regarding tenancy on merits.
Its order is set aside and the matter is remitted to 1019 the trial court to determine the course of action to be adopted in accordance with the guideline indicated hereinabove.
[p. 1032 D F] |
ivil Appeal Nos.
1219 20(NM) of 1987.
From the Judgment and Order dated 17.3.
1987 of the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi in Appeal No. CD/BOM 398 & 399 of 1984.
M.S. Ganesh for the Appellants.
The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J.
These two appeals are under Section 130E(b) of the (hereinafter called the Act) from the orders passed by the Customs, Excise & Gold (Control) Appellate Tribunal (hereinafter called `the CEGAT).
The questions involved in these two appeals are identical.
The appellants ' claim to be the citizens of India is not disputed.
At the material time in 1983 they were based in Hong Kong and Singapore respectively.
In February, 1993, when the appellants came to India, they were charged with alleged offences under Sections 112 and 114 of the Act and also simultaneously with the alleged offences under the Foreign Exchange Regulation Act, 1973 (hereinafter called `the FERA ').The
Enforcement authorities recorded under Section 40 of the FERA the appellants ' statements at the time of their arrest.
It is alleged that these statements were obtained under duress and by using third degree methods against them, who soon thereafter retracted their statements.
No statements were, however.
recorded by the Customs authorities under the corresponding Section 108 of the Act.
In the FERA proceedings.
the Enforcement Directorate, it is stated, applied that there was no evidence against the appellant Vijay Prakash Mehta and the Directorate had no objection to his discharge.
Accordingly, by an order dated 29.10.1985, of the Additional Chief Metropolitan Magistrate, 8th Court, Esplanade, Bombay, has was discharged and his bailbond was cancelled.
So far as the appellant J.D. Mehta is concerned, he had replied to the show cause notice issued by the Enforcement Directorate and the mater is pending adjudication.
In the meantime the proceedings under Sections 111 to 114 & 118 of the Act resulted in the order dated 19.1.1984 of the Addl.
Collector of Customs (Preventive) Bombay, whereby he imposed a penalty of Rs. 3,00,000 on each of the appellants.
It may be mentioned that each of the appellants was alleged to have PG NO 437 been caught red handed with the foreign exchange to the tune of Rs. 11,90,648.
The appellants had admitted their part in the systematic illegal export of foreign exchange from India during the past several years.
Against the said order dated 19.1.
1984, the appellants preferred their respective appeals to the Appellate Tribunal under Section 129A of the Act.
The Tribunal reduced the amount of penalty to be deposited, in an application made under Section 129E of the Act.
pending hearing of the appeal, to Rs. 1 lakh for each of the appellants.
It is alleged that since neither of the appellants were in any financial position to deposit even Rs. 1 lakh, they sought further reduction.
The Appellate Tribunal, after considering the facts and circumstances of the case and taking: into consideration all the relevant material facts and factors, by its order dated 17th February, 1987, declined to do so and dismissed the appeals for non compliance with the provisions of Section 129E of the Act.
Aggrieved thereby the appellants have appealed to this Court.
Section 129E of the Act provides as follows.
"Where in any appeal under this Chapter, the decision or order appealed against relates to any duty demanded in respect of goods which are not under the control of the customs authorities or any penalty levied under this Act.
the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the proper officer the duty demanded or the penalty levied: Provided that where in any particular case.
the Collector (Appeals) or the Appellate Tribunal is of opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the Collector (Appeals) or, as the case may be, the Appellate Tribunal may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interests of revenue.
" The aforesaid Section provides a conditional right of appeal in respect of an appeal against the duty demanded or penalty levied.
Although the Section does not expressly provide for rejection of the appeal for non deposit of duty or penalty, yet it makes it obligatory on the appellant to deposit the duty or penalty, pending the appeal, failing which the Appellate Tribunal is fully competent to reject the appeal.
See, in this connection, the observations of this Court in respect of Section 129 prior to substitution PG NO 438 of Chapter XV by the Finance Act, 1980 in Navin Chandra Chhotelal vs Central Board of Excise & Customs & Ors. ; The proviso, however,gives power to the Appellate Authority to dispense with such deposit unconditionally or subject to such conditions in cases of undue hardships.
It is a matter of judicial discretion of the Appellate Authority.
The case of the appellants was that they had not gone out of India and had no assets in India.
Their passports were impounded at the time of arrest.
Their visa had lapsed and could not be renewed.
They had no money, hence, the right of appeal could be illusory unless they are permitted to deposit only Rs.60,000 each which they contend they are able to procure with the assistance of their father.
In the impugned order the Tribunal noted the several abortive and defective attempts made to get extension of time to deposit the security.
Firstly.
the prayer was to accept the deposit of Rs.35,000 and secondly, to accept the deposit of Rs.60,000 in 2 months.
The Tribunal took into account the probability of the prima facie case of the appellants.
The appeals were filed two years ago.
After taking into consideration these factors, the Tribunal rejected the prayer for reduction.
It was contended that this was wrong Shri M. section Ganesh.
learned advocate for the petitioners.
pleaded that in a situation of this type the condition for deposit of penalty was bad as it whittled down the appellants right of appeal.
This, in our opinion is incorrect Shri Ganesh tried to contend that the right of appeal is being whittled down by the procedure followed in this case, He drew our attention to certain observations of this Court in Hoosein Kasam Dada (India) Ltd. V. The State of Madhya Pradesh & Ors., ; There this Court held that when the right to appeal vests, change of law after initiation of proceedings in lower court would not divest the vested rights of the appellant.
The right of appeal is a matter of substantive right and not merely a matter of procedure, and this right becomes vested in a party when the proceedings are first initiated in, and before a decision is given by the inferior court and such a right cannot be taken away except by express enactment or necessary intendment.
The aforesaid observations, in our opinion.
have no application to the instant case.
Here the right that was granted, w as a right held with a condition.
There was o question of change of that right.
In the instant case the only substantive right is the right of appeal as contemplated under Sections 129A and 129E of the Act and that right is a conditional one and the Legislature in its wisdom has imposed that condition.
No question of whittling PG NO 439 down that right by an alteration of procedure arises in this case.
Right to appeal is neither an absolute right nor an ingredient of natural justice the principles of which must be followed in all judicial and quasi judicial adjudications.
The right to appeal is a statutory right and it can be circumscribed by the conditions in the grant.
Counsel referred us to the decision of this Court in Collector of Customs & Excise, Cochin & Ors.
vs A.S. Bava, [l968] 1 SCR 82.
There this Court found that Section 35 of the Central Excises & Salt Act, 1944 (Excises Act) gave a right to appeal.
Under Section 12 of the Act, the Central Government was authorised to apply to appeals under the Excises Act the provisions of the dealing with the procedure relating to appeals.
In exercise of that power the provisions of Section 129 of the Act were made applicable to appeals under the Excises Act.
The Section required an appellant to deposit, pending the appeal, the duty or penalty imposed, and empowered the Appellate Authority, in his discretion, to dispense with such deposit pending the appeal in any particular case.
The respondent therein filed an appeal against the duty imposed on him under the Excises Act and prayed for dispensation of the deposit.
The Collector, who was the appellate authority, rejected the prayer and when no deposit was made within the time fixed, dismissed the appeal.
The respondent filed a petition in the High Court which was allowed, and the Collector was directed to hear the appeal on merits.
This Court held that Section 35 of the Excises Act gave a right of appeal and Section 129 of the Act whittled down that substantive right and, as such, Section 129 could not be regarded as "Procedure relating to appeals" within Section 12 of the Excises Act.
These observations cannot be applied to the facts of this case.
Here we are concerned with the right given under Section 129 A of the Act as controlled by Section 129E of the Act, and that right is with a condition and thus a conditional right.
The petitioner in this case has no absolute right of stay.
He could obtain stay of realisation of tax levied or penalty imposed in an appeal subject to the limitation of Section 129E.
The proviso gives a discretion to the authority to dispense with the obligation to deposit in case of "undue hardships".
That discretion must be exercised on relevant materials, honestly, bona fide and objectively.
Once that position is established it cannot be contended that there was any improper exercise of the jurisdiction by the Appellate Authority.
In this case it is manifest that the order of the Tribunal was passed honestly, PG NO 440 bona fide and having regard to the plea of "undue hardship ' as canvassed by the appellant.
There was no error of jurisdiction or misdirection.
Though in a different context the public policy involved in not granting interim stay has been explained by this Court in Asstt.
Collector of Central Excise West Bengal vs Dunlop India Ltd., It is not the law that adjudication by itself following the rules of natural justice would be violative of any right constitutional or statutory, without any right of appeal, as such.
If the statute gives a right to appeal upon certain conditions, it is upon fulfilment of those conditions that the right becomes vested and exercisable to the appellant.
The proviso to Section l29E of the Act gives a discretion to the Tribunal in cases of undue hardships to condone the obligation to deposit or to reduce.
It is a discretion vested in an obligation to act judicially and properly.
In the facts and circumstances of the case and all the relevant factors, namely, the probability of the prima facie case of the appellants, the conduct of the parties, have been taken into consideration by the Tribunal.
The purpose of the Section is to act in terrorem to make the people comply with the provisions of law.
In that view of the matter, we are unable to accept the submission that there was improper rejection and non consideration of material and relevant facts.
If that is the position then the appeals have no merit and are accordingly rejected.
P.S.S. Appeals dismissed. | Section 129A of the confers right of appeal to the Appellate Tribunal.
Where, however, the order appealed against relates to duty demanded in respect of goods which are not under the control of the customs authorities or any penalty levied under the Act, section 129E requires the aggrieved person to deposit with the proper officer the duty demanded or the penalty levied, pending the appeal.
The proviso thereto, however, empowers the Appellate Authority to dispense with such deposit in case of under hardship.
The appellants, Indian citizens based in Hong Kong and Singapore respectively, were caught red handed, while on a visit to India, with huge amounts of foreign exchange.
They admitted their part in systematic illegal export of foreign exchange from the country over the past several years.
In proceedings under sections 111 to 114 and 118 of the Act the Addl.
Collector of Customs imposed a penalty of Ks.3 lacs on each of them.
They preferred appeals to the Appellate Tribunal under section 129A. In an application made under section 129E the Tribunal reduced the amount of penalty to be deposited to Rs. 1 lac for each of them.
The appellants sought further reduction.
Their case was that they had not gone out of the country and had no assets in India.
Their passports were impounded at the time of arrest.
Their visas had lapsed and could not be renewed.
They had no money and that in a situation of this type the condition for deposit of penalty was bad as it whittled down the appellants ' right of appeal.
The Tribunal after considering the relevant factors declined to reduce the penalty further and dismissed the appeal for non compliance with the provisions of section 129E. Dismissing the appeals under section 130E(b) of the .
HELD: Right to appeal is neither an absolute right nor an ingredient of natural justice the principles of which PG NO 434 PG NO 435 must be followed in all judicial and quasi judicial adjudications.
The right to appeal is a statutory right and it can be circumscribed by the conditions in the grant.
[439A B] 2.
It is not the law that adjudication by itself following the rules of natural justice would be violative of any right, constitutional or statutory, without any right of appeal, as such.
If a statute gives a right to appeal upon certain conditions, it is upon fulfilment of those conditions that the right becomes vested and exercisable to the appellant.
[440C] 3.
The purpose of section 129E of the is to act in terrorem to make the people comply with the provisions of law.
The right of appeal provided therein is a conditional one.
The petitioner could obtain stay of realisation of tax levied or penalty imposed in an appeal subject to the limitations contemplated therein.
Although the section does not expressly provide for rejection of the appeal for non deposit of duty or penalty yet it makes it obligatory on the appellant to deposit the same pending the appeal? failing which the Appellate Tribunal is fully competent to reject the appeal.
The proviso thereto gives a discretion to the authority in cases of undue hardships to condone the obligation to deposit or reduce.
It is a discretion vested in an obligation to act judicially and properly.
[440E, 439F, 437G, 440C] In the instant case, the order of the Tribunal was passed honestly, bona fide and having regafd to the plea of `undue hardship ' as canvassed by the appellants.
All the relevant factors, namely, the probability of the prima facie case of the appellants and the conduct of the parties were taken into consideration.
The Tribunal noted the several abortive and defective attempts made to get extension of time to deposit the security.
Firstly, the prayer was to accept Rs.35,000 and secondly to accept Rs. 60,000 in two months .
It also noted the fact that the appeals were filed two years ago.
It could not therefore, be said that there was any improper exercise of jurisdiction or misdirection by the Appellate Authority.
[439H,440A,D,438C] Navin Chandra Chhotelal vs Central Board of Excise & Customs & Ors.
, ; , referred to.
Hoosein Kasam Dada (India) Ltd. vs The State of Madhya Pradesh & Ors., ; and Collector of Customs & Excise, Cochin & Ors.
vs A.S. Bava, , distinguished.
PG NO 436 |
Appeal No. 228 (NT) of 1987.
From the Judgment and Order dated 8.4.1982 of the Karnataka High Court in S.T.R.P.No. 100/81.
M. Veerappa and K.H. Nobin Singh for the Appellant.
The judgment of the Court was delivered by KULDIPSINGH,J.
The question for consideration in this appeal is whether the mandate, under Section 20 (3) of the Karnataka Sales Tax Act, 1957 (the Act), to pay the undisputed tax before the appeal is entertained, is also applicable to the additional tax payable under Section 6B of the Act.
In other words whether it is obligatory under the Act to deposit the tax and the additional tax before the appeal is entertained.
The respondent assessee challenged the best judgment assess ment made against him for the year 1972 73 before the First Appellate Authority which was dismissed in limine on the ground that the respondent failed to pay the tax "not disputed in appeal".
The second appeal filed by the assessee before the Karnataka Appellate Tribunal was also dismissed.
On a revision petition under the Act the Karnataka High Court reversed the findings of the authorities below on the ground that unpaid "not disputed ' tax was the additional tax which was different than the tax envisaged under Section 20 (3) of the Act.
The High Court allowed the revision petition of the assessee and remanded 83 the matter to the appellate authority to dispose of the appeal in accordance with law.
This appeal by way of special leave against the judgment of the High Court is by the State of Karnataka.
Before the appellate authority it was the admitted case of the parties that no part of the undisputed tax levied under Section 5 (1) of the Act had remained unpaid.
It was only the undisputed additional levy under Section 6B of the Act which had not been paid.
Section 20 (1) of the Act confers a right of appeal.
Sub section 2 of Section 20 refers to the period of limitation.
Sub Section 3 (A) of section 20 is as under: "No appeal against an order of assessment shall be entertained by the appellate authority unless it is accompanied by satisfactory proof of the payment of the tax and penalty not disputed in the appeal." The High court on the interpretation of various provisions of the Act came to the conclusion that the additional tax under Section 613 is a levy distinct from the impost under section 5 (1) of the Act.
The High Court thus came to the conclusion that the nonpayment of the additional tax would not bar the entertainment of the appeal under the Act.
The findings of the High Court are based on the following reasoning: "Though the tax under section 6B is and impost of a similar nature, it is a levy distinct from the impost under Section 5(1) or under Section 6.
This is the clear outcome of the scheme of Section 6B and the effect of Section 6B(2) of the Act.
Section 6B(2) by providing for the application of the provisions of the 'Act ' to the tax under Section 6B as they apply to the sales or purchase tax under the Act, recognises the distinction between the additional tax on the one hand and the other imposts under the 'Act ' on the other. .
Section 20(1) creates and confers a right of appeal.
Sub Section (3) of Section 20 seeks to restrict that right and subject it to certain conditions.
It appears us 84 that the "tax" in Section 20 (3) on the payment of which the right of appeal is mad e dependent should receive a construction which would advance that right and one which would not make that right dependent upon or subject to payment of a "tax" which is distinct from the tax constituting the subject matter of the appeal. . .
In the present case, the appeal is one directed against the main impost and no part of the assessment relating to the additional tax, is the subject matter of the appeal.
That being so, the view that non payment of the additional tax would bar the entertainment of the appeal is not unjustified.
" We are not inclined to agree with the view taken by the High Court, Section 6B of the Act as it stood at the relevant time reads as under: "6 B. Levy of additional tax.
(1) There shall be levied and collected from every dealer liable to pay tax under section 5 or under section 6 (and from every dealer liable to pay tax under Section 25 B) an additional tax at the rate of ten paise in the rupee on the sales tax or purchase tax or both payable by such dealer; Provided that in respect of the sale or purchase of any of the declared goods mentioned in the Fourth Schedule, the tax together with the additional tax shall not exceed four percent of the sale or purchase price thereof.
(2)The provisions of this Act and the rules made thereunder including those relating to refund or exemption from tax shall, so far as may be, apply in relation to the levy, assessment and collection of the additional sales tax or purchase tax or both, as they apply in relation to the levy assessment and collection of sales tax or purchase tax under this Act.
" 85 It is obvious that the additional tax is leviable at the rate of ten paise in the rupee on the sales tax or purchase tax or both, payable by such dealer.
The additional tax is computed with reference to the tax payable by the dealer.
When once the assessing authority determines the sales tax or purchase tax under the Act the additional tax is levied automatically and becomes part and parcel of the assessment order.
The expression "tax" has been defined to mean a tax leviable under the provisions of the Act and as such includes the additional tax levied under section 6B of the Act.
When Section 20(3) talks of "payment of the tax and penalty not disputed in the appeal" it obviously includes the additional tax.
On the plain language of Section 20(3) of the Act it is not possible to make any distinction between the tax and the addition tax and the only conclusion which can be drawn is that the undisputed "tax" which includes additional tax has to be deposited before the appeal is entertained.
The fact that the quantum of the additional tax is determined with reference to the sales tax/purchase tax impost would not alter its character.
The additional tax is nothing but an enhancement in the rate of the sales tax/purchase tax under the Act.
As soon as the assessing authority determines the levy of sales tax/purchase tax the additional tax under Section 6B become part of the assessment order.
Similarly if the main impost under Section 5 (1) is successfully challenged, the reasoning sustaining the challenge would also ipso facto affect the validity of the additional impost under Section 6B of the Act.
We are, therefore, of the view that the High court was not justified in holding that additional tax under Section 6B was not a tax for the purposes of Section 20 (3) of the Act.
We allow the appeal , set aside the judgment of the High court and dismiss the revision petition filed by the assessee before the High Court.
No costs.
U.R. Appeal allowed. | The respondent assessee challenged the best judgment assess ment for the %,ear 1972 73.
The First Appellate Authority dismissed it its limine on the ground that the respondent had failed to pay the tax " not disputed In appeal".
A second appeal was dismissed by the Karnataka Appellate Tribunal.
The High Court allowed the revision petition of the assessee on the ground that the additional tax payable under section 6B was distinct from the tax in S.20 (3) on the payment of which the right of appeal is made dependent.
In the appeal by the State to this Court the question was whether the mandate unders.
20(3) to pay the undisputed tax before the appeal is entertained is also applicable to additional tax payable under s.6B of the Act.
Allowing the appeal, this Court, HELD: 1.
The expression 'tax ' has been defined to mean a tax leviable under the provisions of the Act and as such includes the additional tax levied under section 6B of the Act.
When Section 20 (3) talks of "payment of the tax and penalty not disputed in the appeal" it obviously includes the additional tax.
(85 B) On the plain language of section 20 (3), the only conclusion which can he drawn is that the undisputed 'tax ' which includes additional tax has to he deposited before the appeal is entertained.
(85 C) 82 2.
The fact that the quantum in of the additional tax is determined with reference to the sales tax, purchase tax imposts would not alter its character.
The additional tax is nothing but an enhancement in the rate of the sales tax/purchase tax under the Act.
As soon as the assessing authority determines the levy of sales tax/purchase tax the additional tax under Section 6B become .
part of the assessment order.
Similarly if the main impost under Section 5 (1) is successfully challenged, the reasoning sustaining the challenge would also ipso facto affect the validity (if the additional impost under Section 6B of the Act.
(85 D E) |
N: Criminal Appeal No. 13 of 1951.
Appeal by special leave from the judgment and order of the High Court of Madras (Rajamannar C.J. and Balakrishna Ayyar J.) dated 10 th April, 1950, in Contempt Application No. 10 of 1949.
426 S.P. Sinha (S.S. Prakasam, with him), for the appellant.
R. Ganapathy Iyer, for the respondent.
February 14.
The Judgment of the Court was delivered by MUKHERJEA J.
This appeal has come up before us on special leave granted by this court on May 23, 1950, and it is directed against a judgment of a Division Bench of the Madras High Court dated April 10, 1950, by which the learned Judges found the appellant guilty of contempt of court and sentenced him to serve simple imprisonment for three months.
The appellant is the publisher and managing editor of a Telugu Weekly known as "Praja Rajyam" which is edited and published at Nellore in the State of Madras.
In the issue of the said paper dated 10th February, 1949, an article appeared under the caption "Is the Sub Magistrate, Kovvur, corrupt?" The purport of the article was that Surya Narayan Murthi, the stationary Sub Magistrate of Kovvur, was known to the people of the locality to be a bribe taker and to be in the habit of harassing litigants in various ways.
He was said to have a broker, through whom negotiations in connec tion with these corrupt practices were carried on.
Several specific instances were cited of cases tried by that offi cer, where it was rumoured that he had either taken bribes or had put the parties to undue harassment, because they were obdurate enough to refuse the demands of his broker.
The article, which is a short one, concludes with the fol lowing paragraph: "There are party factions in many villages in Kovvur Taluk.
Taking advantage of those parties many wealthy persons make attempt to get the opposite party punished either by giving bribes or making recommendations.
To appoint Magistrates who run after parties for a Taluk like this. . is to betray the public.
It is tantamount to failure of justice.
Will the Collector enquire into the matter and allay the public of their fears?" 427 The attention of the State Government being drawn to this article, an application was filed by the AdvocateGener al of Madras before the High Court on November 14, 1949, under section 2 of the Contempt of Courts Act (Act XII of 1926) praying that suitable action might be taken against the appellant as well as three other persons, of whom two were respectively the editor and sub editor of the paper, while the third was the owner of the Press where the paper was printed.
On receiving notice, the appellant appeared before the High Court and filed an affidavit taking sole responsibility for the article objected to and asserting that the article was published because of his anxiety to uphold the highest traditions of the judiciary in the land and to create popular confidence in courts, the duty of which was to dispense justice without fear or favour and without any discrimination of caste, creed or community.
It was said that before the article was published, numerous complaints had reached him from various quarters imputing corruption and disreputable conduct to this Magistrate and the only desire of the appellant was to draw the attention of the higher authorities to the state of public opinion in the matter and to invite an enquiry into the truth or otherwise of the allegations which were not asserted as facts but were based only on hearsay.
The High Court after hearing the parties came to the conclusion that the publication in question did amount to contempt of court, as it was calculated to lower the pres tige and dignity of courts and bring into disrepute the administration of justice.
As the appellant was not prepared to substantiate the allegations which he made and which he admitted to be based on hearsay and did not think it proper even to express any regret for what he had done, the court sentenced him to simple imprisonment for three months.
The other three respondents, through their counsel, tendered unqualified apology to the court and the learned Judges considered that no further action against them was necessary.
428 The propriety of the decision of the High Court so far as it relates to the appellant has been challenged before us in this appeal and Mr. Sinha, who appeared in support of the same, raised before us a two fold contention; his first and main contention is that as the contempt in this case was said to have been committed in respect of a court subordi nate to the High Court and the allegations made in the article in question constitute an offence under section 499 of the Indian Penal Code, the jurisdiction of the High Court to take cognizance of such a case is expressly barred under section 2 (3) of the Contempt of Courts Act.
The other contention advanced by the learned counsel relates to the merits of the case and it is urged that in publishing the article objected to, the appellant acted in perfect good faith, and as the article amounted to nothing else but a demand for enquiry into the conduct of a particular person who was believed to be guilty of corrupt practices in the discharge of his judicial duties, there was no contempt of court either intended or committed by the appellant.
So far as the first point is concerned, the determina tion of the question raised by the appellant would depend upon the proper interpretation to be put upon section 2(3) of the Contempt of Courts Act which runs as follows : "No High Court shall take cognizance of a contempt alleged to have been committed in respect of a court subor dinate to it where such contempt is an offence punishable under the Indian Penal Code.
" According to Mr. Sinha, what the sub section means is that if the act by which a party is alleged to have commit ted contempt of a subordinate court constitutes offence of any description whatsoever punishable under the Indian Penal Code, the High Court is precluded from taking cognizance of it.
It is said that in the present case the allegations made in the article in question amount to an offence of defama tion as defined by section 499 of the Indian Penal Code and consequently the jurisdiction of the High Court is barred.
Reliance 429 is placed in support of this proposition upon the decision of the Nagpur High Court in Kisan Krishna Ji vs Nagpur Conference of Society of St. Vincent de Paul(1).
This con tention, though somewhat plausible at first sight, does not appear to us to be sound.
In our opinion, the sub section referred to above excludes the jurisdiction of High Court only.
in cases where the acts alleged to constitute contempt of a subordinate court are punishable as contempt under specific provisions of the Indian Penal Code but not where these acts merely amount to offences of other description for which punishment has been provided for in the Indian Penal Code.
This would be clear from the language of the sub section which uses the words "where such contempt is an offence" and does not say "where the act alleged to consti tute such contempt is an offence".
It is argued that if such was the intention of the Legislature, it could have express ly said that the High Court 's jurisdiction will be ousted only when the contempt is punishable as such under the Indian Penal Code.
It seems to us that the reason for not using such language in the sub section may be that the expression "contempt of court" has not been used as descrip tion of any offence in the Indian Penal Code, though certain acts, which would be punishable as contempt of court in England, are made offences under it.
It may be pointed out in this connection that al though the powers of the High Courts in India established under the Letters Patent to exercise jurisdiction as Superi or Courts of Record in punishing contempt of their authority or processes have never been doubted, it was a controversial point prior to the passing of the Contempt of Courts Act, 1926, as to whether the High Court could, like the Court of King 's Bench in England, punish contempt of courts subordi nate to it in exercise of its inherent jurisdiction.
The doubt has been removed by Act XII of 1926 which expressly declares the right of the High Court to protect subordinate courts against contempt, but (1) (1943) A.I.R. 1943 Nag.
430 subject to this restriction, that cases of contempt which have already been provided for in the Indian Penal Code should not be taken cognizance of by the High Court.
This seems to be the principle underlying section 2(3)of the Contempt of Courts Act.
What these cases are need not be exhaustively determined for purposes of the present case, but some light is undoubtedly thrown upon this matter by the provision of section 480 of the Criminal Procedure Code, which empowers any civil, criminal or revenue court to punish summarily a person who is found guilty of committing any offence under sections 176, 178, 179, 180 or section 228 of the Indian Penal Code in the view or presence of the court.
We are not prepared to say, as has been said by the Patna High Court in Jnanendra prasad vs Gopal(1), that the only section of the Indian Penal Code which deals with contempt committed against a court of justice or judicial officer is section 228.
Offences under sections 175, 178, 179 and 180 may also, as section 480 of the Criminal Proce dure Code shows, amount to contempt of court if the "public servant" referred to in these sections happens to be a judicial officer in a particular case.
It is well known that the aim of the contempt proceeding is "to deter men from offering any indignities to a court of justice" and an essential feature of the proceeding is the exercise of a summary power by the court itself in regard to the delin quent.
In the cases mentioned in section 480 of the Indian Penal Code, the court has been expressly given summary powers to punish a person who is guilty of offending its dignity in the manner indicated in the section.
The court is competent also under section 482 of the Criminal Proce dure Code to forward any case of this description to a Magistrate having jurisdiction to try it, if it considers that the offender deserves a higher punishment than what can be inflicted under section 480.
Again, the court is enti tled under section 484 to discharge the offender on his submitting an apology, although it has already adjudged him to punishment under section Pat.
172. 431 or forwarded his case for trial under section 482.
The mode of purging contempt by tendering apology is a further char acteristic of a contempt proceeding.
It seems, therefore, that there are offences which are punishable as contempt under the Indian Penal Code and as subordinate courts can sufficiently vindicate their dignity under the provisions of criminal law in such cases the legislature deemed it proper to exclude them from the jurisdiction of the High Court under section 2(3) of the Contempt of Courts Act;but it would not be correct to ' say that the High Court 's juris diction is excluded even in cases where the act complained of, which is alleged to constitute contempt, is otherwise an offence under the Indian Penal Code.
This view has been taken and, in our opinion quite rightly, in a number of decisions by the Calcutta,(1) Patna,(2) Allahabad(3) and Lahore(4) High Courts.
The only authority which Mr. Sinha could cite in support of his contention is the decision of the Nagpur High Court in Kisan Krishna Ji vs Nagpur Conference of Society of St. Vincent de Paul(").
The authority is undoubtedly in his favour as it proceeds upon the assumption that the idea underlying the provision of section 2(3) of the Contempt of Courts Act is that if a person can be punished by some other tribunal, then the High Court should not entertain any proceeding for contempt.
It is to be noticed that the learned Judge, who decided this case, himself took the opposite view in the case of Subordinate Judge, First Class, Hoshangabad vs Jawaharlal(6) and definitely held that the prohibition contained in section 2(3) of the Contempt of Courts Act refers to offences punishable as contempt of court by the Indian Penal Code and not to offences punishable otherwise than as contempt.
This decision was neither noticed nor dissented from in the subsequent case, and it is quite possible that (1) Narayan Chandra vs Panehu Pramanik (A.I.R. ; Naresh Kumar.v.
Umaromar (A.I.R. 1951 Cal.
(2)Kaulashia vs Emperor (12 Pat. 1).
(3) State vs Brahma Prakash (A.I.R. 1950 All. 556); Emperor vs Jagannath (A.I.R. 1938 All. 358).
(4) Bennett Coleman vs G. section Monga (I.L.R. (5) A.I.R. 1943 Nag.
(6) A.I.R. 1940 Nag.
56 432 the attention of the learned judge was not drawn to this earlier pronouncement of his, in which case the matter would certainly have been more fully discussed.
We think further that the decision of the Calcutta High Court in V.M. Bason vs A. H. Skone(1) which was the basis of the decision of the learned Judge in the subsequent case does not really support the view taken in it.
In the Calcutta case what happened was, that a clerk of the Attorney, who appeared for the respondent decreeholder, went to serve a notice under Order 21, Rule 37(1), of the Civil Procedure Code upon the appellant judgment debtor.
The judgmentdebtor refused to take the notice and abused and assaulted the Attorney 's clerk.
Upon that, contempt proceedings were started against him and Mr. Justice C.C. Ghosh, sitting on the Original Side of the High Court of Calcutta, held the appellant guilty of contempt and fined him Rs. 200.
On appeal, this judgment was affirmed by the appellate Bench and there was a general observation made by Chief Justice Sanderson at the close of his judgment that it is not desirable to invoke the special inherent jurisdiction of the High Court by way of proceeding for contempt if ordinary proceedings in a Magistrate 's court are sufficient to meet the requirements of a case.
This was not a case under section 2(3) of the Contempt of Courts Act at all and no question either arose or was decided as to whether if an act is otherwise punishable as an offence under the Indian Penal Code the jurisdiction of the High Court under that section would be ousted.
Undoubtedly the High Court had jurisdiction in that case and whether such jurisdiction, which is certainly of a special character and is exercised summarily, should be called in to aid in the circumstances of a particular case would depend upon the discretion of the court.
This has, however, no bearing on the point that has arisen for consideration before us.
We would hold, therefore, that the right view was taken by the learned Judge of the Nagpur High Court in the earlier case and not in the later one, (1) I.L R. 433 It is next urged by Mr. Sinha that even assuming that this view is correct, the language of section 499 of the Indian Penal Code is wide enough to cover a case of contempt of court.
What is said is, that if a libel is published against a judge in respect of his judicial functions, that also is defamation within the meaning of section 499 of the Indian Penal Code and as such libel constitutes a contempt of court, it may be said with perfect propriety that libel on a judge is punishable as contempt under the Indian Penal Code.
We do not think that this contention can be accepted as sound.
A libellous reflection upon the conduct of a judge in respect of his judicial duties may certainly come under section 499 of the Indian Penal Code and it may be open to the judge to take steps against the libeller in the ordinary way for vindication of his character and personal dignity as a judge; but such libel may or may not amount to contempt of court.
As the Privy Council observed in Surendra Nath Banerjee vs The Chief Justice and Judges of the High Court,(1) "although contempt may include defamation, yet an offence of contempt is something more than mere defamation and is of a different character.
" When the act of defaming a judge is calculated to obstruct or interfere with the due course of justice or proper administration of law, it would certainly amount to contempt.
TIle offence of con tempt is really a wrong done to the public by weakening the authority and influence of courts of law which exist for their good.
As was said by Willmot, C.J.(2) "attacks upon the judges excite in the minds of the people a general dissatisfaction with all judicial determi nations. and whenever man 's allegiance to the laws is so fundamentally shaken it is the most fatal and dangerous obstruction of justice and in my opinion calls out for a more rapid and immediate redress than any other obstruction whatsoever; not for the sake of the judges as private indi viduals but because they are the channels by which the King 's justice is conveyed to the people".
(1) I.L.R. at 131.
(2) Willmot 's Opinions page 256; Rex vs Davies 30 at p. 40 41. 434 What is made punishable in the Indian Penal Code is the offence of defamation as defamation and not as.
contempt of court.
If the defamation of a subordinate court amounts to contempt of court, proceedings can certainly be taken under section 2 of the Contempt of Courts Act, quite apart from the fact that other remedy may be open to the aggrieved officer under section 499 of the Indian Penal Code.
But a libel attacking the integrity of a judge may not in the circumstances of a particular case amount to a contempt at all, although it may be the subject matter of a libel pro ceeding.
This is clear from the observation of the Judicial Committee in the case of The Matter of a Special Reference from the Bahama Islands(1).
The first contention of Mr. Sinha, therefore, fails.
The second point raised by the learned counsel does not appear to us to have any real substance.
The article in question is a scurrilous attack on the integrity and honesty of a judicial officer.
Specific instances have been given where the officer is alleged to have taken bribes or behaved with impropriety to the litigants who did not satisfy his dishonest demands.
If the allegations were true, obviously it would be to the benefit of the public to bring these matters into light.
But if they were false, they cannot but undermine the confidence of the public in the administration of justice and bring judiciary into disrepute.
The appel lant, though he took sole responsibility regarding the publication of the article, was not in a position to sub stantiate by evidence any of the allegations made therein.
He admitted that the statement was based on hearsay.
Ru mours may have reached him from various sources, but before he published the article it was incumbent upon him as a reasonable man to attempt to verify the informations he received and ascertain, as far as he could.
whether the facts were true or mere concocted lies.
He does not appear to have made any endeavour in this direction.
As the appel lant did not act with reasonable care and caution, he cannot be said to have acted (1) 435 bona fide, even if good faith can be held to be a defence at all in a proceeding for contempt.
What is more, he did not express any regret for what he had done either in the High Court or before us and his behaviour does not show the least trace of contrition.
In these circumstances, we think that the appeal cannot succeed and must be dismissed.
Appeal dismissed. | Sub sec.
(3) of section 2 of the Contempt of Courts Act, 1926, excludes the jurisdiction of the High Court to take cognisance of a contempt alleged to have been committed in respect of a Court subordinate to it only in cases where the acts alleged to constitute contempt are punishable as con tempt under specific provisions of the Indian Penal Code, but not where these acts merely amount to offences of other description for which punishment has been provided for in the Indian Penal Code.
The fact that defamation of a judge of a subordinate Court constitutes an offence under sec.
499 of the Indian Penal Code does not, therefore, oust the jurisdiction of the High Court to take cognisance of the act as a contempt of court.
Defamatory statements about the conduct of a judge even in respect of his judicial duties do not necessarily consti tute contempt of Court.
It is only when the defamation is calculated to obstruct or interfere with the due course of justice or proper administration of justice that it amounts to contempt.
Kisan Krishna Ji vs Nagpur Conference of Society of St. Vincent de Paul (A.I.R. 1943 Nag.
334) disapproved.
V.M. Bason vs A.H. Skone ([.L.R. explained.
Subordi nate Judge.
First Class Hoshangabad vs Jawaharlal (A.I.R. , Narayan Chandra vs Panchu Pramanick (A. L R. , Naresh Kumar vs Umaromal (A.I.R. 1951 Cal. 489), Kaulashia vs Emperor (I.L.R. 12 Pat. 1), State vs Brahma Prakash (A.I.R. 1950 All. 556), Emperor vs Jagannath (A.I.R. 1938 All.
358), Bennet Colman vs C.S. Monga (I.L.R. approved. |
iminal Appeals Nos. 150 and 185 of 1961.
Appeals by special leave from the judgment and order dated June 19, 1961 of the former Bombay High Court in Criminal Appeals Nos. 218 and 242 of 1961 respectively.
section Mohan Kumarmangalam, R. K. Garg and M. K. Ramamurthi, for the appellant (in Cr. A. No. 150/61).
B. M. Mistry, Ravinder Narain and J. B. Dadachanji, for the appellant (in Cr. A. No. 185 of 1961).
B. K. Khanna, B. R. G. K. Achar and R. H. Dhebar, for the respondent (in both the appeals).
February 26, 1964.
The Judgment of the Court was delivered by RAGHUBAR DAYAL J.
Shiv Prasad Chunilal Jain, appellant in Criminal Appeal No. 150 of 1961 was accused No. 3 and Pyarelal Ishwardas Kapoor, appellant in Criminal Appeal No. 185 of 1961 was accused No. 2, at the Sessions Trial before the Additional Sessions Judge, Greater Bombay.
Along with them was a third accused, Rameshwarnath Brijmohan Shukla who was accused No. 1 at the trial.
As the two appeals arise from a common judgment, we would dispose of them by one judgment.
The appellants would be referred to as accused No. 3 and accused No. 2 respectively.
The facts leading to the conviction of the appellants are that a large quantity of iron angles was consigned early in February 1959 from Gobind Garh to Raypuram under railway receipt No. 597481, They were despatched in an open wagon bearing E.R. No. 69667.
The labels of the wagon were changed at Itarsi railway station and it was diverted to Wadi Bunder under a label showing that the iron angles had been despatched from Baran to Wadi Bunder under railway receipt No. 43352 dated February 6, 1959.
This wagon reached Wadi Bunder on February 16, 1959.
On February 17 it was unloaded by Baburao 923 Gawade, P.W.I and Shridhar, P.W. 14.
On February 18, accused No. 1 obtained the delivery sheet of the bill and signed it in the name of Shri Datta.
He also obtained delivery of the iron angles from the railway and signed the Railway Delivery Book in the name of Shri Datta.
The railway authorities delivered these on the presentation of the forged receipt No. 43352 and on payment of the charges amounting to Rs. 1,500/ .
These iron angles were then transported to the godown of the National Transport Company at Sewri and stored there.
The entries in the book showed their receipt in the account of accused No. 3 and also contained a further entry indicating the goods to be received in the account of accused No. 2.
The latter entry was made on the receipt of a chit, Exhibit Z8, from accused No. 1 saying that the goods be entered in the name of accused No. 2.
On February 24, 1959 the accused No. 2 signed an application, Exhibit K, addressed to the head office of the National Transport Company for delivering the goods.
Accused No. 1 obtained the goods from the godown of that company on February 26 and March 3, 1959.
A complaint by the original consignee about the nonreceipt of the iron angles sent from Gobind Garh led to an enquiry and eventual prosecution of the three accused.
Six charges were framed.
The first charge was against all the accused for an offence punishable under sections 471 and 467 read with section 34 I.P.C. and stated that in furtherance of their common intention to cheat the railway administration, accused No. 1 had fraudulently or 'dishonestly used the forged railway receipt No. 43352.
The second charge was framed in the alternative.
Firstly it charged all the accused for an offence under section 467 read with section 34 I.P.C. on account of accused No. 1 having forged the bill portion.
In the alternative, accused No. 1 was charged with the offence under section 467 I.P.C. and the other accused Nos. 2 and 3 were charged under section 467 read with section 109 I.P.C. for having abetted accused No. 1 in the commission of that offence.
924 Charges Nos. 3 to 6 were similarly framed in the alternative, i.e., in the first instance all the three accused were charged with certain offences read with section 34 I.P.C. while in the alternative accused No. 1 was charged of the specific offence and the other two accused were charged with that offence read with section 109 I.P.C. The accused were tried by the Additional Sessions Judge, Greater Bombay, with the aid of a jury.
The jury returned a unanimous verdict of guilty against all the accused for the various offences read with section 34 I.P.C.
The verdict of the jury was not recorded with respect to the five alternative charges against accused No. 1 regarding substantive offences and against accused Nos. 2 and 3 with respect to the various offences read with section 109 I.P.C. The Sessions Judge accepted the verdict of the jury and convicted them of the various offences read with section 34 I.P.C. Their appeals to the High Court were unsuccessful and therefore accused Nos. 2 and 3 have preferred these appeals after obtaining special leave from this Court.
The main contention for the appellants is that the learned Sessions Judge misdirected the jury with respect to the requirements of section 34 I.P.C.
The contention is that the various offences were actually committed by accused No. 1 on February 18, that neither accused No. 2 nor accused No. 3 was present when he presented the forged railway receipt, did other criminal acts and took delivery of the iron angles and that therefore even if they had agreed with accused No. 1 for the cheating of the railway administration by obtaining the iron angles dishonestly by presenting the forged receipt, they might have abetted the commission of the various offences, but could not be guilty of those offences with the aid of section 34 I.P.C. whose provisions, it is contended, do not apply in the circumstances of the 'Case.
It is contended that for the applicability of section 34 against an accused, it is necessary that that accused had actually participated in the commission of the crime either by doing something which forms part of the criminal act or by at least doing something which would indicate that be was a participant in the commission of that criminal act 'at the time it was committed.
Reliance is placed on the 925 cases reported as Barendra Kumar Ghosh vs The King Emperor(1) and Shreekantiah Ramayya Munipalli vs The State of Bombay(2).
The learned Sessions Judge in the instant case had told the jury : "In case you come to the conclusion that there was a common intention in the minds of all the three accused and accused No. 1 was acting in furtherance of that common intention, all the accused would be answerable for the offences proved against accused No. 1 by virtue of the provisions of section 34 of the Indian Penal Code, and it would be no answer to the charge to say that the acts were done by accused No. 1 alone.
Therefore, you have first, to consider for yourselves what offences are proved against accused No. 1.
You have next to ask yourselves whether it is proved (and it can also be proved by circumstantial evidence) that there was a common intention in the minds of all the three accused and the acts done by accused No. 1 were done in furtherance of that common intention.
If your answer is 'yes ' all the three accused would be guilty of the charges proved against accused No. 1 by virtue of section 34 of the Indian Penal Code.
" It is contended that in thus putting the case to the jury the learned Sessions Judge was in error as he did not take into consideration the fact that accused Nos. 2 and 3 were not present at all at the time when the various offences were actually committed by accused No. 1.
The two cases relied upon by the appellants support their contention.
In Shreekantiah 's case(2), three persons were convicted on several charges under section 409 read with section 34 I.P.C. for committing criminal breach of trust of certain goods entrusted to them as government servants in charge of the stores depot (1) L.R. 52 I.A. 40.
(2) ; 926 at Dehu Road near Poona.
The stores had illegally passed out of the depot and were handed over to a person who was not authorised to get them from the depot.
It was alleged that those accused had conspired to defraud the Government of those properties and that it was in pursuance of that conspiracy that they had arranged to sell the goods to the other person.
Accused No. 1 in that case was not present when the goods were loaded nor was he present when they were allowed to pass out of the gates, that is to say, he was not present when the offence was committed.
Bose J., delivering the judgment of the Court, said at p. 1189 : "If he was not present, he 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.
" In considering the misdirection in the charge to the jury and the requirements of section 34 I.P.C. the learned Judge said at p. 1188 : "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." Shreekantiah 's case(1) is practically similar to the present case.
Both accused No. 2 and accused No.
3 deny their presence at the railway station on February 18 when the various offences were committed.
None deposed that accused No. 3 was then present.
The presence of accused No. 2 was, however, stated by Babu Rao Gawade, P.W. 1.
(1) ; 927 He had not stated so in his statement before the police during investigation and the summing up by the learned Sessions Judge was that, under those circumstances, it was for the jury to consider whether to believe the statement of the s witness in Court or not.
It cannot be said as there was other evidence against accused No. 2 as well about his connection with this criminal transaction whether the jury believed his presence at the railway station on February 18 or not.
In Jaikrishnadas Manohardas Desai vs The State of Bombay(1), Shreekantiah 's case(2) came up for consideration and was distinguished, on facts.
In that case, the two accused, who were directors of a company, were convicted of an offence under section 409 read with section 34 I.P.C. for committing criminal breach of trust with respect to certain cloth supplied to them.
It was alleged that one of the accused was not working at that factory during the period when the goods must have been removed and that therefore he could not be made liable for the misappropriation of the goods by taking recourse to the provisions of section 34 I.P.C. Shah J., delivering the judgment of the Court, said at p. 326: "But the essence of liability under section 34 is to be found in the existence of a common intention animating the offenders leading to the doing of a criminal act in furtherance of the common intention and presence of the offender sought to be rendered liable under section 34 is not, on the words of the statute, one of the conditions of its applicability. .
A common intention a meeting of minds to commit an offence and participation in the commission of the offence in furtherance of that common intention invite the application of section 34.
But this participation need not in all cases be by physical presence.
In offences involving physical violence, normally presence at the scene of offence of the offenders sought to be rendered liable on the principle of joint liability may be necessary, but such is not the case in respect of other offences where the offence ' consists of diverse acts which may be (1) (2) ; 928 done at different times and places.
In Shree Kantiah 's case(1), misappropriation was com mitted by removing the goods from a Government depot and on the occasion of the removal of the goods, the first accused was not present.
It was therefore doubtful whether he had participated in the commission of the offence, and this Court in those circumstances held that participation by the first accused was not established.
The observations in Shree Kantiah 's case(1) in so far as they deal with section 34 of the Indian Penal Code must, in our judgment, be read in the light of the facts established and are not intended to lay down a principle of universal application." Accused No. 1, in the present case, alone did the various acts on February 18, 1959 which constituted the offences of which he was convicted.
Accused Nos. 2 and 3 took no part in the actual commission of those acts.
Whatever they might have done prior to the doing of those acts, did not form an ingredient of the offences committed by accused No. 1.
They cannot be said to have participated in the commission of the criminal act which amounted to those various offences.
They cannot be therefore held liable, by virtue of section 34 I.P.C., for the acts committed by accused No. 1 alone, even if those acts had been committed in furtherance of the common intention of all the three accused.
The result, therefore, is that the conviction of the appellants, viz., accused Nos. 2 and 3, for the various offences read with section 34 I.P.C. is to be set aside.
We did not hear, at first, the learned counsel for the appellants, on the alternative offences of abetment being made out against the appellants and with respect to which the verdict of the jury was not recorded by the Sessions Judge.
We did not consider it necessary to remit the case for further proceedings with respect to those charges and preferred to dispose of the case finally after giving a further hearing to the learned counsel for the appellants.
We accordingly heard them on the charges relating to the appellants abetting accused No. 1 in the commission of the (1) ; 929 various offences, subject matter of charges Nos. 2 to 6 and now deal with that matter.
We need not discuss the evidence on the record and would just note the various facts which are established from the evidence or which are admitted by the accused.
The relevant facts having a bearing on the question of accused No. 2 abetting the commission of the offences com mitted,by accused No. 1 are : 1.
Accused No. 1 is the servant of accused No. 3 at whose shop accused No. 2, who is a broker, sits.
Accused No. 2 deals in non ferrous goods.
Accused No. 2 went with Baburam Gavade, P.W. 1, a clearing agent, on February 17, 1959, to see the goods.
The godown register showed the angle irons to be received in the account of Shiv Prasad Bimal Kumar and Pyare Lal, accused No. 2.
Accused No. 2 wrote the letter Exhibit K to the National Transport Company for issuing, the delivery order with respect to the angle irons in order to enable him to take delivery thereof.
Accused No. 2 was in possession of the note, Exhibit Z 7 which he delivered to the police during the investigation.
The relevant facts having a bearing on the alleged abetment of the offences by accused No. 3 are 1.
Accused No. 1 is an employee of accused No. 3. 2.
The angle irons were stored at the depot of the National Transport Company at the instance of, accused No. 1. 3 The books of the godown noted their receipt in the account of accused No. 3, though the account Showed further that they were received in the, account of accused No. 2.
This further entry was,made on receipt of Exhibit Z 8 from .lm0 134 159 S.C. 59 930 accused No. 1 when the last lot was delivered at the godown on February 18.
The entire writing on Exhibit Z 7 except the signature of an unknown person and the date below it, was written by accused No. 3.
That document reads: "To Piaraya Lal c/o M/s. Sheopershad Bimal Kumar, Bombay.
No. 43351, dated 4 2 59 Ashoknagar to Carnac Bridge.
No. 43352, dated 6 2 59 Baran to Wadi Bunder.
I have received the material of the above RR which I have handed over to you for clearance.
Sd./ Yashwant 24 2 1959.
" Besides these circumstances, it is urged for the State that the effect of the diversion of the wagon from its right course at Itarsi railway station indicates that the people responsible for it must have a fairly large and influential organization with funds and that such a diversion could no$ have been merely at the instance of accused No. 1, all employee of accused No. 3, who is a substantial merchant About Rs. 1,5001/ were paid as charges to the railway authorities before the angle irons could be taken delivery of Accused No. 1 could not have been in a position to make that payment.
It is further urged that accused No. 1 would not have stored the goods with the National Transport Company unless the storage was on account of his master, accused No. 3.
Accused No. 2 admits his going to see the goods on February 17, but states that he lost his interest in the good$ as they were iron angles and his line of business was in non ferrous goods.
He explains his singing the letter Exhibit 931 K by saying that he did so at the instance of accused No. 3 who represented to him that accused No. 1 had, by mistake, stored the goods in the name of accused No. 2 and of accused No. 3 showing him the document Exhibit Z 7 which he retained with himself.
Accused No. 3 states that he had nothing to do with this matter and that he wrote Exhibit Z 7 at the instance of accused No. 2 who asked him to do so, he himself being unable to write in English or Hindi.
We now discuss the evidence to determine whether the accused Nos. 2 and 3 abetted the commission of the offences committed by accused No. 1.
Exhibit Z 7, as originally written, does not, appear to have had the first line, viz., the writing of 'To, Piaraya Lal C/o '.
This was written subsequently.
This is clear, as urged for accused No. 2, from the facts that it appears to have been written with a different pen and, possibly, with different ink also, and because the word 'C/o ' has been written at an unusual place.
In ordinary writing, it should have been in line with the latter expression 'M/s. Sheopershad Bimal Kumar '.
It follows therefore that this document was first written by accused No. 3 to show that a third person had entrusted him with the railway receipt No. 43352, dated February 6, 1959, and that that person had received the material to which the railway receipt related.
In this original form, the only conclusion possible from the original contents of the document can be that M/s. Sheopersbad Bimal Kumar, of which accused No. 3 is the proprietor, received this receipt from the third person in order to clear the good.
& from the railways.
This would amply explain accused No. 1 taking delivery of the goods on February 18 and storing them with the National Transport Company in the account of accused No. 3 and the entries in the godown register.
Himmatlal, P.W. 13, is the godown keeper.
He issued the receipt Exhibit PI which records: "We have today received the under mentioned goods for storage with us in our godown No. IPL on behalf of and under lien to Shiv Prasad Bimal Kumar.
" 932 This is a clear indication of the fact that the goods were stored on behalf of Sheopershad Bimal Kumar, i.e., accused No. 3.
The words 'under lien ' are of great significance in this respect and show that the storage was not shown to be on behalf of accused No. 3 merely because the angle irons were sent by accused No. 1 who was an employee of accused No. 3.
The expression 'under lien ' points to there being some specified transaction between accused No. 3 and the National Transport Company for the storing of the articles.
This note further confirms the statement of Himmatlal that he had all first written in the accounts that the goods were received on account of Sheopershad Bimal Kumar and that it was on receipt of Exhibit Z 8 from accused No. 1 that he noted the words 'Account Pyare Lal ' in the entries with respect to those goods.
The circumstance that accused No. 3 was in a better position to finance the transaction than accused No. 1, is also consistent with the aforesaid conclusion from the original contents of Exhibit Z 7.
Apart from the apparent later noting of the first line in this document, Exhibit Z 7, there appears no good reason why the receipt should have been written in this form if it was to be written at the instance of accused No. 2.
There was no reason to give the address of Pyare Lal as c/o M/s. Sheopershad Bimal Kumar.
The later entry in this document must have been therefore for a purpose And that could have only been to show that the railway receipt No. 43352 was dealt with by accused No. 2 and not by accused No. 3.
Mention may be made here of the fact that certain witnesses who had, during their police statements, referred to certain actions of accused No. 3, stated in Court that those acts were committed by accused No. 2.
No reliance can be placed on any of the statements of those witnesses and this fact is just mentioned to show that it fits in with the very first attempt in converting the document originally prepared to show that accused No. 3 had dealt with this forged railway receipt into a document showing that it was 933 not accused No. 3 but accused No. 2 who dealt with that receipt.
Accused No. 2 has been acting as a broker.
He signed Exhibit K.
He must be conversant with the language in which he signed.
It was not necessary that the receipt Exhibit Z 7 should have been written in English or in Hindi even if accused No. 2 did not know any of those languages.
We are therefore not prepared to accept the explanation of accused No. 3 with respect to his recording the document Exhibit Z 7.
We hold, as admitted by him, that he had written this document.
It makes reference to the forged receipt of which advantage was taken in getting delivery of the iron angles.
Accused No. 3, writing such a receipt, clearly points to his being concerned with the taking delivery of the iron angles, by accused No. 1, his employee.
Once the forged receipt is traced to accused No. 3, from his own writing, the natural conclusion is that it was he who passed it on to his employee accused No. 1 for the purpose of getting delivery of those goods from the railway authorities.
He thus aided accused No. 1 in obtaining delivery of those goods, and in his committing the various offences for achieving that object.
The further fact that the receipt was endorsed in the name of Datta and not in the name of accused No. 1, also proves that accused No. 3 must have known that the receipt he was dealing with was not a genuine receipt for the goods which were to be taken delivery of.
If he had believed the receipt to be a genuine one, he would have endorsed it or got it endorsed in the true name of his employee.
His employee too would not have taken delivery under a false name.
We are therefore of opinion that it is established from these various circumstances and facts that accused No. 3 had abetted the commission of the offences, the subject matter of charges Nos. 2 to 6, by accused No. 1.
The points in favour of accused No. 2 are that he does not deal in non ferrous metals and therefore he would not have taken any interest in the transaction after he had found out on February 17 that the goods were ferrous and not non ferrous.
The fact that the goods were not stored in his name in the accounts of the godown of the National Trans 934 port Company, but were stored in the first instance in the name of No. 3, also goes in his favour.
If accused No. 3 had nothing to do with it and accused No. 1 was simply acting for accused No. 2, he would have sent instructions in the very first instance to Himmatlal that goods were to be stored in the account of accused No. 2.
He did not do so.
He sent intimation for storing the goods in the name of Pyarelal with the last lorry transporting the iron angles to the godown.
Pyarelal had no previous dealings with the National Transport Company.
In this connection, the exact direction given by accused No. 1 is of some significance.
The direction given by him in Exhibit Z 8 was 'Please give a receipt in the name of a/c Pyare Lal '.
The request was not that the goods were of Pyare Lal and so be stored on his account.
That should have been the natural direction.
The receipt would have then been issued in the name of Pyare Lal and of nobody else.
The direction given by accused No. 1 therefore indicates that for certain purposes he desired the receipt alone to be in the name of Pyare Lal.
Naturally, Himmatlal had to make some entry in the books of the godown which would be consistent with a receipt issued in the name of Pyare Lal.
Himmatlal therefore noted the words 'account Pyare Lal ' below the original note 'account Sheopershad Bimal Kumar ', but saw no reason to make a statement in the receipt Exhibit P that the goods were stored on behalf of Pyare Lal and noted in it that they were stored on behalf and under lien to Sheopershad Bimal Kumar.
Accused No. 2 signed the letter Exhibit K for the issue of the delivery order.
His explanation is that he did so when accused No. 3 insisted and told him that his employee had by mistake stored the goods in his name.
Ordinarily, this should not have been believed by accused No. 2 as there was no reason why accused No. 1 should store the goods in his name by mistake.
He could have and might have suspected something not straight, but could shake off such suspicion by his being shown the receipt Exhibit Z 7, which showed that the goods had been cleared by A 3 on behalf of certain person who had passed on that receipt.
He was under an obligation to accused No. 3 and it is possible that he could 935 not have strongly resisted the request of accused No. 3 sign the letter Exhibit K.
Accused No. 3 had necessar to obtain a letter signed by Pyare Lal when the goods has not been shown to be stored in his account but were not in the account of Pyare Lal or of both Sheopershad Bin Kumar and Pyare Lal.
It is significant that accused No. 2 himself did not to take delivery of the goods.
It was accused No. 1 was took the delivery in two lots and each time signed the receipt in the name of Pyare Lal.
If accused No. 2 was also a party to the dishonest obtain ing of the goods from the railway, there would not ha been any occasion for such duplication of names on who behalf the goods were stored with the National Transport Company or for such a document as Exhibit Z 7 commitment into existence or for accused No. 2 keeping the document with himself.
He kept it with himself for his protection an produced it for that purpose during investigation.
It may be that when accused No. 3 tried to dispel his doubts wh.
he was requested to sign the letter Exhibit K, accused No. himself suggested the receipt Exhibit Z 7 to be address, 'in his name, as only then that receipt could be of any he to him.
In these circumstances, we are of opinion that the complicity of accused No. 2 in the commission of the varios offences by accused No. 1 is not established beyond reason able doubt.
We therefore allow the appeal of Pyare Lal and acquired him of the offences he was convicted of.
We dismiss tl.
appeal of accused No. 3, Shiv Prasad Chunilal Jain, by alter his conviction for the various offences read with section 3, I.P.C. to those offences read with section 109 I.P.C., and mainta.
the sentences.
Appeal No. 185 allowed at, Appeal No. 150 dismisses Conviction altered and sentence maintained. | In a trial by jury the appellants were jointly charged along with accused No. 1 with an offence punishable under sections 471 and 467 read with section 34 of the Indian Penal Code.
The first charge was that in 921 furtherance of their common intention to cheat the railway administration, accused No. 1 had fraudulently or dishonestly used the forged railway receipt.
The second charge was framed in the alternative.
Firstly it charged all the accused under section 467 read with section 34 I.P.C. on account of accused No. 1 having forged the bill portion.
In the alternative, accused No. 1 was charged under section 467 I.P.C. and the appellants were charged under section 467 read with section 109 I.P.C. for having abetted accused No. 1 in the commission of that offence.
Similarly charges Nos.
3 to 6 were framed in the alternative.
The jury returned a unani nious verdict of guilty against all the accused for the various offences read with section 34 I.P.C.
The verdict of the jury was not recorded with respect to the five alternative charges against accused No. 1 regarding substantive offences and against appellants with respect to various offences read with section 109 I.P.C.
The Sessions Judge accepted the verdict of the jury and convicted them of the various offences read with section 34 P.C.
Their appeals to the High Court also failed.
On appeal by Special Leave the appellants mainly contended that the learned Sessions Judge misdirected the jury with respect to the requirements of section 34 I.P.C.
It was urged that the various offences were actually committed by accused No. 1, that the appellants were not present when accused No. 1 presented the forged railway receipts, did other criminal acts and took 'delivery of the goods and that therefore even if they had agreed with accused No. 1 for the cheating of the railway by obtaining the goods dishonestly by presenting the forged receipt.
they might have abetted the commission of the various offences, but could not lye guilty of those offences with the aid of section 34 I.P.C. whose provisions do not apply in the circumstances of the case.
For the applicability of section 34 against an accused, it is necessary that that accused had actually participated in the commission of the crime either by doing something which forms part of the criminal act or by at least doing something which would indicate that he was a participant in the commission of that criminal act at the time, it was committed.
Held: In the present case, accused No. 1 alone did the various acts which constituted the offences of which he was convicted.
The appellants took no part in the actual commission of those acts.
Whatever they might have done prior to the doing of those acts, did not form an ingredient of the offences committed by accused No. 1.
They could not be said to have participated in the commission of the criminal act which amounted to those various offences.
They could not be therefore held liable, by virtue of section 34 I.P.C., for the acts committed by accused No. 1 alone, even if those acts had been committed in furtherance of the common intention of all the three accused.
Therefore, the conviction of the appellants, for the various offences read with section 34 I.P.C. must be set aside.
Barendra Kumar Ghosh vs The King Emperor, (1929) L.R. 52 I.A. 40, Shree Kantiah Ramayya Munipalli vs State of Bombay ; and Jaikrishnadas Manohardas Desai vs State of Bombay , referred to. |
Appeal No. 205 of 1958.
Appeal by special leave from the judgment and order dated October 23, 1956, of the Industrial Tribunal, Assam in Reference No. 16 of 1956.
M.C. Setalvad, Attorney General for India, section N. Mukherjee and B. N. Ghosh, for the appellant.
C.B. Agarwala and K. P. Gupta, for the respondents.
May 6.
The Judgment of the Court was delivered by WANCHOO J.
This is an appeal by special leave in an industrial matter.
The appellant is the Phulbari Tea Estate (hereinafter called the company).
The case relates to the dismissal of one workman namely, B. N. Das (hereinafter called Das), which had been taken up by the Assam Chah Karmchari Sangh.
which is a registered trade union.
A reference "Was made by the Government of Assam on March 8, 1956, to the Industrial Tribunal on the question whether the dismissal of Das was justified; and if not, whether he was entitled to reinstatement with or without compensation or any other relief in lieu thereof.
Das was dismissed by the company on March 12, 1955.
The charge against him was that on the night of February 6/7, 1955, he along with one Samson, also an employee of the company, committed theft of two wheels complete with tyres and tubes from the company 's lorry, 5 34 which amounted to gross misconduct under the Standing Orders.
The case was reported to the police and 'Das as well as Samson were arrested.
Das remained in jail up to February 25, 1955, when he was released on bail.
He reported for duty on February 28 ; but the manager suspended him for ten days from March 1.
Thereafter, he was served with a charge sheet on March 10, 1955, asking him to show cause why he should not be dismissed for gross misconduct as mentioned above.
He gave a reply on March 11, that as the case was sub judice in the criminal court, the question of dismissal did not arise at that stage and the allegations against him would have to be proved in the court.
On March 12, the manager held an enquiry, which was followed by dismissal, on that very day.
We shall mention later in detail what happened at the enquiry, as that is the main point which requires consideration in this appeal.
To continue the narrative, however, the police submitted a final report and the magistrate discharged Das on March 23, 1955.
Thereafter, his case was taken up by the union and eventually reference was made to the Tribunal on March 8, 1956.
The Tribunal came to the conclusion that the dismissal of Das was not justified on the ground of proper procedure not having been followed and also for want of legal evidence.
It went on to say that normally Das would have been entitled to reinstatement but in the peculiar circumstances of this case it was of opinion that he should be granted the alternative relief for compensation.
Consequently, it ordered that Das would be entitled to his pay and allowances from February 28, to March 11, 1955 and full pay and allowances from March 12, till the date of payment.
It also ordered that he would be entitled to fifteen day 's pay for every completed year of service along with all benefits that accrued to him till the date of final payment.
This award, was given on October 23, 1956, and was in due course published and came into force.
Thereupon, there was an application to this Court for special leave to appeal, which was granted; and that is how the matter has come up before us.
35 Two points have been urged before us on behalf of the company, namely (1)the Tribunal was not a competent tribunal under section 7 of the , No. XIV of 1947 (hereinafter called the Act) as it then stood; and (2)the award of the Tribunal is not sustainable in law as it shows as if the Tribunal was sitting in appeal on the enquiry held by the company, and this it was not entitled to do.
Reference in this case was made on March 8, 1956, before the amending Act No. XXXVI of 1956 came into force.
At the relevant time, therefore, section 7 of the Act, which provided the qualifications of a tribunal, required that where it was one member tribunal, he (a) should be or should have been a Judge of a High Court, or (b) should be or should have been a district judge, or (c) should be qualified for appointment as a Judge of a High Court.
The contention is that Shri Hazarika who was the tribunal in this case, was not qualified under this provision.
This contention was not raised before the Tribunal and therefore the facts necessary to establish whether Shri Hazarika was qualified to be appointed as a tribunal or not were not gone into.
Shri Hazarika was an Additional District & Sessions Judge, Lower Assam Division, at the time the reference was made.
Assuming that he was not qualified under clause (a) above, he might well have been qualified under clause (b), if he had been a District Judge elsewhere before he became an Ad ditional District Judge in this particular division.
Further even if he had never been a District Judge, he might be qualified for appointment as Judge of a High Court.
These matters needed investigation and were not investigated because this question was not raised before the Tribunal.
In the circumstance, we are not prepared to allow the company to raise this question before us for the first time and so we reject the contention under this head.
The Tribunal gave two reasons for holding that the dismissal was unjustified; namely (1) that 36 proper procedure had not been followed, and (2) that legal evidence was wanting.
So far as the second reason is concerned, there is force in the criticism on behalf of the company that the Tribunal had proceeded as if it was sitting in appeal on the enquiry held by the company.
But considering that the Tribunal Was also of opinion that proper procedure had not been followed we have still to see whether that finding of the Tribunal justifies the conclusion at which it arrived.
We may in this connection set out in detail what happened at the enquiry on March 12, as appears from the testimony of the manager and the documents produced by him before the Tribunal.
They show that when the enquiry was held on March 12, certain persons, whose statements had been recorded by the manager in the absence of Das during the course of what may be called investigation by the company were present.
The first ques tion that Das was asked on that day was whether he had anything to say in connection with the disappearance of two lorry wheels and tyres from the garage.
He replied that he had nothing to say, adding that he knew nothing about the theft.
He was then told that the people who had given evidence against him were present and he should ask them what they had to say.
He replied that he would put no questions to them.
Then the witnesses present were asked whether the evidence they had given before the manager was correct or not; and if that was not correct, they were at liberty to amend it.
They all replied that the evidence they had given before the manager was correct.
This was all that had happened at the enquiry on March 12, and thereafter the order of dismissal was passed by the manager.
The manager 's testimony shows that the witnesses who were present at the enquiry were not examined in the presence of Das.
It also does not show that copies of the statements made by the witnesses were supplied to Das before he was asked to question them.
Further his evidence does not show that the statements which had been recorded were read over to Das at the enquiry before he was asked to question the witnesses.
It is 37 true that the statements which were recorded were produced on behalf of the company before the Tribunal; but the witnesses were not produced so that they might be cross examined even at that stage on behalf of Das.
The question is whether in these circumstances it can be said that an enquiry as required by principles of natural justice was made in this case.
We may in this connection refer to Union of India vs T. R. Varma (1).
That was a case relating to the dismissal of a public servant and the question was whether the enquiry held under article 311 of the Constitution of India was in accordance with the principles of natural justice.
This Court, speaking through Venkatarama Ayyar J. observed as follows in that connection at p. 507: " Stating it broadly and without intending it to be exhaustive, it may be observed that rules of natural justice require that a party should have the opportunity of adducing all relevant evidence on which he relies, that the evidence of the opponent should be taken in his presence, and that he should be given the opportunity of cross examining the witnesses examined by that party, and that no materials should be relied on against him without his being given an opportunity of explaining them.
" It will be immediately clear that these principles were not followed in the enquiry which took place on March 12, inasmuch as the witnesses on which the company relied were not examined in the presence of Das.
It is true that the principles laid down in that case are not meant to be exhaustive.
In another case New Prakash Transport Co. Ltd. vs New Suwarna Transport Co. Ltd. (2), this Court held that "rules of natural justice vary with the varying constitutions of statutory bodies and the rules prescribed by the legislature under which they have to act, and the question whether in a particular case they have been contravened must be judged not by any preconceived notion of what they may be but in the light of the provisions of the relevant Act ".
In that case, it (1) [1958] S.C.R. 499.
(2) 38 was held that " the reading out of the contents of the police report by the Chairman at the hearing of the appeal was enough compliance with the rules of natural justice as there was nothing in the rules requiring a copy of it to be furnished to any of the parties.
That was, however, a case in which the police officer making the report was not required to be crossexamined; on the other hand, the party concerned was informed about the material sought to be used against him and was given an opportunity to explain it.
The narration of facts as to what happened on March 12, which we have given above, shows that even this was not done in this case, for there is no evidence that copies of the statements, of witnesses who had given evidence against Das were supplied to him or even that the statements made by the witnesses to the manager were read out in extensor to Das before he was asked to question them.
In these circumstances one of the basic principles of natural justice in an enquiry of this nature was not observed, and, there fore, the finding of the Tribunal that proper procedure had not been followed is justified and is not open to challenge.
The defect in the conduct of the enquiry could have been cured if the company had produced the witnesses before the Tribunal and given an opportunity to Das to cross examine them there.
In Messrs. Sasa Musa Sugar Works (Private) Ltd. vs Shobrati Khan (1), we had occasion to point out that even where the employer did not hold ail enquiry before applying under section 33 of the Act for permission to dismiss an employee, he could make good the defect by producing all relevant evidence which would have, been examined at the enquiry, before the tribunal, in which case the tribunal would consider the evidence and decide whether permission should be granted or not.
The same principle would apply in case of adjudication under section 15 of the Act, and if there was defect in the enquiry by the employer he could make good that defect by producing necessary evidence before the tribunal.
But even that was not done in this case, for all that the company did (1) C. As.
746 & 747 Of 1957 decided on 29 4 1059.
39 before the Tribunal was to produce the statements recorded by the manager during what we have called investigation.
This left the matters where they were and Das had never an opportunity of questioning the witnesses after knowing in full what they had stated against, him.
In these circumstances we are of opinion that the finding of the Tribunal that the enquiry in this case was not proper is correct and must stand.
We therefore dismiss the appeal.
We should, however, like to make it clear that the order of the Tribunal fixing grant of compensation till the date of payment must be taken to be limited to the sum of Rs. 11,125, which has been deposited in this Court in pursuance of this Court 's order of April 22, 1957 and Das will not be entitled to anything more, as further stay of payment was pursuant to the order of this Court.
In the circumstances we are of opinion that the parties should bear their own costs of this Court.
Appeal dismissed. | Two workmen Das and another were arrested by the police on the complaint of the appellant company for an alleged theft.
The manager held an enquiry and dismissed Das from service for gross misconduct.
At the enquiry, Das stated that he had nothing to say and knew nothing about the theft.
Certain persons whose statements had been recorded by the manager at the investigation stage in the absence of Das, were present at the said enquiry.
Das was told to ask those persons what they had to say, though he was neither supplied with the copies of the statements made by them nor the statements were read over to him at the time of the enquiry.
Das replied that he would not put any.
questions to them.
Thereupon these witnesses were asked whether the evidence they had given before the manager was correct, and if not, they were at liberty to amend it, to which they replied that the evidence they had given was correct.
Some time later, the Magistrate on the final report of the police discharged Das.
Thereafter the Union had the matter referred to the Tribunal.
Before the Tribunal the company produced only the statements of the witnesses but did not produce the witnesses themselves.
The Tribunal found in favour of the workman.
The company came up in appeal by special leave to the Supreme Court, where, for the first time it raised the question of the qualification and competency of the one member Tribunal under section 7 Of the Act.
Held, that the question whether the Tribunal was a competent one under section 7 of the , prior to the amending Act 36 of 956, must be raised before the Tribunal itself as it was a matter of investigation and could not be raised for the first time before the Supreme Court.
Held further, that the basic principle of natural justice in an enquiry was that the opponent must be given the opportunity of questioning the witnesses after knowing in full what they had to state against him.
The witnesses on whom the party relied should generally be examined in the presence of the opponent and he must also be informed about the material sought to be used against him, and given an opportunity to explain it, 33 Union of India vs T. R. Varma [1958] S.C.R. 499, followed.
New Prakash Transport Co. Ltd. vs New Suwvarna Transport Co. Ltd. , referred to.
Held, further, that if there was defect in the conduct of the enquiry by the employer it could be cured if all the relevant evidence including the witnesses who were not examined in the presence of the workman were produced before the Tribunal, thereby giving the party an opportunity to cross examine them, and leaving it to the Tribunal to consider the evidence and decide the case on merits.
Sasa Musa Sugar Works (P) Ltd. vs Shobrati Khan C.As.
746 & 747 Of 1957 decided on 29 4 1959, followed. |
Appeal No. 281 of 1955.
Appeal from the judgment and order dated March 18, 1954, of the Bombay High Court in Income tax Reference No. 35 of 1953.
K. N. Rajagopal Sastri and D. Gupta, for the appellant.
R. J. Kolah and Ram Ditta Mal, for the respondent.
May 8.
The Judgment of the Court was delivered by HIDAYATULLAH J.
This appeal on a certificate of fitness granted by the High Court of Judicature at Bombay has been filed by the Commissioner of Income tax, Bombay against Ranchhoddas Karsondas of Bombay (hereinafter referred to, as the assessee) under section 66A of the Indian Income tax Act.
The facts leading tip to this appeal are as follows For the assessment year 1945 46, a public notice under section 22(1) of the Income tax Act (hereinafter called the Act) was issued, requiring every person whose total income during the previous year exceeded the maximum amount which was not chargeable to income tax to furnish, within such period not being less than sixty days as might be specified in the notice, a return of his income in the prescribed form and verified in the prescribed manner.
This notice was published on or about May 1, 1945.
The assessee did not make a return of his income.
The Income tax Officer, while examining the books of account of a partnership called the " Assar Syndicate " of which the assessee was a partner, found that in the account year corresponding to the assessment year 1945 46, there were six cash credits aggregating to Rs. 59,026 in the name of the assessee 's wife.
Before, however, the Income tax 116 Officer could take any action, the assessee submitted a " voluntary " return on January 5, 1950 of his income for the accounting year 1944 45 (assessment year 1945 46) showing a total net income of Rs. 1,935.
He added a footnote to the return to the following effect: " My wife has sold her old ornaments and deposited the sum of Rs. 59,026 in the firm of Assar Syndicate in which I am a partner." The Income tax Officer did not act on this return, but on February 27, 1950 he issued a notice purporting to be under section 34 of the Act calling upon the assessee to submit his return.
This notice was served on the assessee on March 3,1950, and in answer thereto, the assessee submitted a similar return on March 14, 1950 showing the same income and adding the same footnote.
The Income tax Officer then issued and served upon the assessee notices under sections 22(4) and 23(2) of the Act asking him to produce his books of account and to tender any evidence he cared to lead.
It appears from the record that these notices were complied with, but on February 26, 1951 the Income tax Officer included the sum of Rs. 59,026 in the total income of the assessee and assessed him on it for the assessment year 1945 46.
The assessee appealed, in turn, to the Appellate Assistant Commissioner and the Income tax Appellate Tribunal.
His contentions were three, viz., that the amount of Rs. 59,026 could not and should not have been included in his income, that the amended section 34 of the Act had no retrospective effect, and that the assessment completed on February 26, 1951 was invalid, inasmuch as it was completed four years after.
the end of the relevant assessment year.
Both the Appellate Assistant Commissioner as well as the Tribunal rejected his contentions, but the Tribunal on being moved by him, raised and referred two questions of law under section 66(1) of the Act to the High Court of Judicature, Bombay, for its decision.
These questions were: " (1) Whether the notice issued under Section 34 of the Act by the Income tax Officer on 27 2 1950, 117 after the assessee had filed a voluntary return was valid in law? (2) Whether the assessment made on 26 2 1951 is valid in law? This reference was heard by the High Court on March 18, 1954, and by a judgment delivered on the same day, Chagla, C.J., and Tendolkar, J., answered ' both the questions in the negative.
Before the High Court, it was again contended by the assessee that since he had submitted a return under section 22(3) of the Act on January 5, 1950, the assessment, if any, had to be completed before March 31, 1950, as required by section 34(3) of the Act.
He also contended that he was entitled under section 22(3) to make a " voluntary " return on the date he did, and with a voluntary return before the Income tax Officer, there was no scope for the issuance of a notice under section 34.
The High Court upheld the contentions of the assessee, and gave its opinion that the Department ought to have issued a notice under section 22(2) within the assessment year, and if no return was made within the time fixed by the notice, the Department should have proceeded under section 23(4) to a 'best judgment ' assessment.
The other alternative for the Department was to issue a notice under section 34 of the Act, if the period for sending a notice under section 22(2) had expired.
But it could not issue a notice under section 34 after a return was already made before it, and the benefit of the extended period of limitation for assessment available under the first proviso to sub section
(3) of section 34 of one year from the service of the notice under sub section
(1) of that section was not available in this case.
The High Court granted a certificate of fitness, and hence this appeal.
The arguments which were urged before the High Court were all raised in this Court by the parties.
The case of the Department was supplemented by an argument that, inasmuch as the assessee had suppressed his income or given incorrect particulars thereof, the period during which action under section 34 could be taken was the extended one of 8 years.
In the arguments before us, our attention was drawn to a cleavage of opinion between the Bombay High 118 Court on the one hand and the Calcutta High Court on the other.
While the Bombay High Court seems to be of the view that a " voluntary " return showing a nontaxable income is still a good return for all purposes under the Act, the Calcutta High Court is of the view that what section 22(1) of the Act requires is a return of taxable income and not a return of income, which shows a loss or is below the taxable limit.
It appears that at one time the Calcutta High Court also entertained the view that such a return was no return at all, but it was explained later that this meant that the return was ineffective for the purposes of section 22(1) of the Act, though it might be a " return " being in the prescribed form.
The Bombay High Court also entertains the view that the assessment proceedings commence with the issue of a public notice, and that section 34 of the Act cannot apply, where in answer to the public notice a return is made whether of taxable income or not.
The view of the Calcutta High Court is that assessment proceedings commence either with a notice under section 22(2) of the Act or with the filing of a return showing taxable income.
We are not here concerned with the quantum but only with the legality of the assessment.
The side issue whether, in point of fact, the cash credits in the name of the wife, represented the income (if the husband does not survive for decision.
Thus, the only question is whether the notice issued under section 34 of the Act on February 27, 1950 (after the assessee filed his " voluntary " return on January 5, 1950) and the assessment thereon, were valid in law.
Section 34(3) of the Act provides that no assessment except the assessment within el.
(a) of sub section
(1) thereof or under section 23 to which el.
(c) of sub section
(1) of section 28 applies, shall be made after the expiry of four years from the end of the year in which income, profits or gains were first assessable.
A proviso, however, allows one year from the date of the service of the notice for the completion of the assessment.
It reads, omitting matters not relevant here: " . where a notice under sub section (1) has been issued within the time therein limited, the assessment or reassessment to be made in pursuance of such 119 notice may be made before the expiry of one year from the date of the service of the notice even if such period exceeds the period of .
four years .
" It is, therefore, quite clear that the extra period is available only if a notice under sub section
(1) of section 34 has been issued within the time therein limited.
This takes us to section 34(1).
Section 34(1), omitting parts not relevant, reads: " (1)If . . . . . . . (a) the Income tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under section 22, for any year.
I or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income tax have escaped assessment for any year . he may in cases falling under clause (a) at any time within eight years and in cases falliny under clause (b) at any time within four years of the end of that year, serve on the assessee.
a notice .
and may proceed to assess such income.
" It would appear from this that if the return filed on January 5, 1950, was a return of income, there was no failure or omission on the part of the assessee, so as to bring the matter within section 34(1)(a) of the Act, and subs.
(3) of section 34 would then apply to the case limiting the period to four years.
In that event, the assessment should have been completed on or before March 31, 1950.
But if the return made by the assessee was no return at all, then the conditions under the first subsection of section 34 obtained, and the assessment could be completed within one year of the date of service of the notice (March 3, 1950), i.e. on or before March 2, 1951.
In that event, the assessment would be valid.
The validity of the return in this context is tied to the validity of the notice and also vice versa.
120 Section 22 of the Act (omitting the parts not relevant) may now be quoted: " (1) The Income tax Officer shall, on or before the 1st day of May, in each year, give notice, by publication in the press. , requiring every person whose total income during the previous year exceeded the maximum amount which is not chargeable to income tax to furnish, within such period not being less than sixty days. a return. setting forth. his total income and total world income during that year: (2) In the case of any person whose total income is, in the Income tax Officer 's opinion, of such an amount as to render such person liable to income tax, the Income tax Officer may serve a notice upon him requiring him to furnish, within such period, not being less than thirty days. a return . setting forth . his total income and total world income during the previous year: (3) If any person has not furnished a return within the time allowed by or under sub section (1) or sub section (2), or having furnished a return under either of those sub sections, discovers any omission or wrong statement therein, he may furnish a return or a revised return, as the case may be at any time before the assessment is made.
" It will be seen from this, that, as the Bombay High Court correctly pointed out, there is a time limit provided in sub sections
(1) and (2) and the failure or omission occurs when that period passes, but sub s (3) allows a locus poenitentiae before the assessment is actually made.
There is no dispute that a return could be filed in this case, late though it was.
The controversy centres round the fact that the return, when it was filed, disclosed an income which was below the maximum not chargeable to tax, and the question is whether in such an event the Income tax Officer was precluded from issuing a notice under section 34 of the Act.
There has been in the past a well marked difference of opinion between the Bombay and the Calcutta High 121 Courts, the leading cases in Bombay being Harakchand Makanji & Co. vs Commissioner of Income tax (1), All India Groundnut Syndicate Ltd. vs Commissioner of Income tax(2) and the decision under appeal here, while the Calcutta view is to be found in Commissioner of Agricultural Income tax vs Sultan Ali Gharami (3), R. K. Das & Co. vs Commissioner of Income tax (4) and Commissioner of Income tax vs Govindlal Dutta (5).
To these may be added P. section Rama Iyer vs Commissioner of Income tax (6), in which the Madras High Court has accepted the Bombay view.
No useful purpose will be served in discussing these cases in detail.
In some of them, the point need not have been taken up for decision, though it was.
We shall refer very briefly to the two rival views and the grounds on which they are rested, and in doing so, we begin with the Calcutta decisions.
In Sultan Ali Gharami 's case (3), a notice under section 24(1) of the Bengal Agricultural Income tax Act (corresponding to section 22(1) of the Act) was issued.
No return was filed.
Three years later, a notice under section 24(2) of that Act (corresponding to section 22(2) of the Act) was served, and a return showing an income below the taxable minimum was filed.
The contention was that without a notice under section 24(2) within the assessment year or a notice under section 38(1) (corresponding to section 34 (1) of the Act) the best judgment ' assessment was bad.
The contention further was that the return could be taken to be under section 24(1) or section 24(3).
Chakravarti, J. (as he then was) and Das Gupta, J., held that a person who had no assessable income was not placed under a duty to file a return, that the return whether filed under section 24(1) or section 24(3) which had failed to show an assessable income could not possibly be 'treated ' as a return under section 24(1) or even section 24(3)when filed in answer to a notice under section 24(2).
They further observed at p. 442: " A return under section on 24(1) is a return filed by a person who decides for himself that he had an assessable income in the previous year and by filing (1) (1948) 16 , (4) (1056) (2) (1954) 25 1.
T. R. R (5) (1957) 33 ; (3) 16 122 the return he offers that income for assessment.
A person who had no assessable income in the previous year is placed under no duty by a notice under section 24(1) to furnish a return and a person who thinks, rightly or wrongly, that he had no assessable income will furnish none.
A return under section 24(1), whether filed within the time allowed under the section or filed subsequently under the provisions of section 24(3), will therefore show an assessable income.
A return which showed no assessable income, could not possibly be 'treated ' as a return filed under section 24(1) or a return called for under that section but filed under section 24(3), when in fact it was filed in response to a notice under section 24(2).
" The opinion here expressed was criticised in the judgment under appeal, and in the next case, R. K. Das & Co vs Commissioner of Income tax(1), the Calcutta High Court (Chakravarti, C.J., and Sarkar, J.) explained what was really meant.
It is not necessary to refer to the facts of that case.
This is what Chakravarti, C.J., observed at p. 449: " It should be remembered ', I observed 'that the return in the present case is being sought to be treated as a return under section 24(1), belatedly filed. ' And then I went on to say that a return under section 24(1) would only be filed by a person who thought that he had a taxable income and therefore a return showing an income below the taxable limit could not be held, on a construction thereof, to be a return under section 24(1) and consequently the return in the case we were then considering could not be treated as such a return filed under section 24(3).
To say that, was not to say that even a return filed in, compliance with a notice under section 22(2), if filed belatedly under section 22(3) could not be a return showing an income below the taxable limit.
" This left the matter somewhat ambiguous as to what was really meant, and in Commissioner of Income tax vs Govindlal Dutta(2),Chakravarti, C. J., and Guha, J., (1) (2) 123 again explained the true import of the law laid down.
They referred to section 22(1) of the Act as it stood prior to the amendment of 1953, and observed that under that section a person was required to file a return only if his total income during the preceding year exceeded the maximum amount which was not chargeable to tax.
The return contemplated was thus only a return of income and not a return of loss and not even a return of income, but a return of taxable income.
Not only had a person no duty but he had even no right to file a return voluntarily, if he had suffered a loss, to 'report ' that loss.
The learned Judges concluded that it was a complete mistake to think that section 22(3) provided for the filing of a voluntary return showing loss, at any time, before assessment.
That section, they opined, contemplated the filing of a return of taxable income, and a return not showing such income was not a return at all in law.
The Calcutta view, as shown above, really proceeds upon the wording of section 22(1).
It lays down that the public notice requires only persons having an income above the taxable limit to make a return.
A person who has no such income need not make a return, and if he does make a return, it is not a return which need be considered, being not a return in law.
It is a little difficult to understand how the existence of a return can be ignored, once it has been filed.
A return showing income below the taxable limit can be made even in answer to a notice under section 22(2).
The notice under section 22(1) requires in a general way what a notice under section 22(2) requires of an individual.
If a return of income below the taxable limit is a good return in answer to a notice under section 22(2), there is no reason to think that a return of a similar kind in answer to a public notice is no return at all.
The conclusion does not follow from the words of section 22(1).
No doubt, under that sub section only those persons are required to make a return, whose income is above taxable limits, but a person may legitimately consider himself entitled to certain deductions and allowances, and yet file a return to be on the safe side.
He may show his income and the 124 deductions and allowances he claims.
But it may be that on a correct processing his income may be found to be above the exempted limit.
No doubt, it is futile for a person not liable to tax to rush in with a return, but the return in law is not a mere scrap of paper.
It is a return, such as the assessee considers, represents his true income.
We are unable (and we say this with due respect) to accept the view adumbrated in the Calcutta cases.
The contrary view is expressed by the Bombay High Court in the earlier case of Harakchand Makanji & Co. vs Commissioner of Income tax (1) and in the judgment under appeal.
That view was accepted by the Madras High Court in P. section Rama Iyer vs Commissioner of Income tax (2) and also, in our opinion, is the sounder view of the two.
In the earlier of the two Bombay cases, Chagla, C. J., and Tendolkar, J., held (as stated in the head note): " Notice under section 34 is only necessary if at the end of the assessment year no return has been made by the assessee, and the authorities wished to proceed under section 22(2), but where the assessee himself chooses voluntarily to make a return, no question can arise under section 34 of assessment escaping, and therefore there is no necessity to serve any notice under section 34.
" This represents the law applicable to the facts as they are to be found in this case.
In the assessment year no return of income was filed, nor was any notice served under section 22(2).
There was, however, the general notice under section 22(1).
A return in answer to that notice could be filed under section 22(3) before assessment, and for this there is no limit of time.
It was filed on January 5, 1950.
There was nothing to prevent the Income tax Officer from taking up the return and proceeding to assess the income of the assessee.
It was open to him, if there was sufficient justification for it, to hold that the amount noted in the footnote was really the assessee 's income, in which case an assessable income would have been found and the tax could be charged thereon.
If the Income tax Officer had acted on that return and assessed the assessee (1) (2) 125 before March 31, 1950, the assessment would have been valid.
He chose to ignore the return, and served on the assessee a notice under section 34(1).
This notice was improper, because with the return already filed there was neither an omission nor a failure on the part of the assessee, nor was there any question of assessment 'escaping '.
The notice under section 34(1) was, therefore, invalid and the consequent assessment equally so.
We accordingly agree with the judgment under appeal.
Before leaving this case, we may refer to two other arguments, which were raised.
Mr. Rajagopala Sastri pointed out that an assessee might file the 'voluntary ' return on the last day showing income less than the taxable limit, and the Department would, in that case, be driven to complete the assessment proceedings within a few hours or lose the right to send a notice under section 34(1).
An argument ab inconvenienti is not a decisive argument.
The Income tax Officer could have avoided the result by issuing a notice under section 23(2) and not remaining inactive until the period was about to expire.
Further, all laws of limitation lead to some inconvenience and hard cases.
The remedy is for the legislature to amend the law suitably.
The Courts can administer the laws as they find them, and they are seldom required to be astute to defeat the law of limitation.
This argument is thus no answer to the clear meaning and implications of the Act.
The other argument was that the return was not a true one, and fell within the mischief of cl.
(c) of sub s.(1) of section 28, and that, therefore, the period during which action could be taken was the extended one of 8 years.
The short answer to that is that this was not a part of the Department 's case at any prior stage, and cannot be allowed to be raised now.
In our opinion, the answers given by the High Court of Bombay were correct in all the circumstances of this case.
The appeal thus fails, and is dismissed with costs.
Appeal dismissed. | A public notice under section 22(1) of the Income tax Act, 1922 was published on May 1, 1045, requiring every person whose total income exceeded the maximum amount which was not chargeable to income tax to file returns for the assessment year 1945 46.
On January 5, 1950, the assessee submitted a voluntary return showing an income of Rs. 1,935 for the assessment year 1945 46 and added a footnote to the return that his wife had sold her old ornaments and deposited a sum of Rs. 59,026 with the Assar Syndicate in which he was a partner.
The Income tax Officer, who had discovered these credits while examining the accounts of the Assar Syndicate, ignored the voluntary return, and, on February 27, 1950, issued a notice under section 34(1) of the Act calling upon the assessee to submit his return.
On March 14, 1950, the assessee submitted an identical return.
The Income tax Officer made the assessment on February 26, 1951, and included the sum of Rs. 59,026 in the total income of the assessee.
The assessee contended that the assessment was invalid as it was completed more than four years after the end of the assessment year in violation Of section 34(1)(b).
The appellant contended that the voluntary return was no return as it did not disclose any taxable income and the assessment was valid under the proviso to section 34(3) Of the Act, having been made within one year of the notice issued under section 34(1).
Held, that the assessment was invalid.
The voluntary return filed by the assessee, even though it did riot disclose any taxable income, was a good return and could not be ignored.
As such no question arose under section 34(1) of income escaping assessment and the Income tax Officer was not justified in issuing the notice under section 34(1).
The proviso to section 34(3) was applicable only when there was a Proper notice issued under section 34(1) and the appellant could not take advantage of the time allowed by this proviso.
The assessment was clearly made beyond four years of the end of the assessment year 1945 46 and was time barred.
Harakchand Makanji & Co. vs Commissioner of Income tax, All India Groundnut Syndicate Ltd. vs 115 Commissioner of Income tax, (1953) 25 I.T.R. go and P. section Rama Iyer vs Commissioner of Income tax, (1957) 33 I.T.R. 458, approved.
Commissioner of Agricultural Income tax vs Sultan Ali Gharami ; B. K. Das & Co. vs Commissioner of Income tax, and Commissioner of Income tax vs Govindlal Dutta (1957) 33 ; , disapproved. |
ION: Criminal Appeal No. 32 of 1958.
Appeal by special leave from the judgment and order dated April 25, 1957, of the Allahabad High Court in Criminal Appeal No. 992 of 1954, arising out of the judgment and order dated January 25, 1954, of the Additional Sessions Judge, Gorakhpur in Sessions Trial No. 71 of 1953.
section P. Sinha and section D. Sekhri, for the appellant.
G. C. Mathur and C. P. Lal (for G. N. Dikshit), for the respondent.
September 3.
The Judgment of the Court was delivered by WANCHOO J.
This is an appeal by special leave against the judgment of the Allahabad High Court in a criminal matter.
The facts of the case, as found by the High Court, are no longer in dispute and the 648 question that is raised in this appeal is whether the appellant had exceeded the right of private defence of person.
The relevant facts for our purposes are these.
Gopal deceased was married to the sister of the appellant.
The appellant and his father Badri were living in a railway quarter at Gorakhpur.
Gopal 's sister was married to one Banarsi, who was also living in another railway quarter nearby.
Gopal had been living for some time with his father in law.
They did not, however, pull on well together and Gopal shifted to the house of Banarsi.
Badri persuaded Gopal to come back to his house but the relations remained strained and eventually Gopal shifted again to the quarter of Banarsi about 15 days before the present occurrence which took place on June 11, 1953, at about 10 p.m. Gopal 's wife had continued to live with her father as she was unwilling to go with Gopal.
Her father Badri and her brother Vishwanath appellant sided with her and refused to let her go with Gopal.
Gopal also suspected that she had been carrying on with one Moti who used to visit Badri 's quarter.
Consequently, Gopal was keen to take away his wife, the more so as he had got a job in the local department some months before and wanted to lead an independent life.
On June 11, there was some quarrel between the appellant and Gopal about the girl; but nothing untoward happened then and the appellant went back to his quarter and Gopal went away to Bansari 's quarter.
Gopal asked Banarsi 's sons to help him in bringing back his wife.
Banarsi also arrived and then all four of them went to Badri 's quarter to bring back the girl.
On reaching the place, Banarsi and his two sons stood outside while Gopal went in.
In the meantime, Badri came out and was asked by Banarsi to let the girl go with her husband.
Badri was not agreeable to it and asked Banarsi not to interfere in other people 's affairs.
While Badri and Banarsi were talking, Gopal came out of the quarter dragging his reluctant wife behind him.
The girl caught hold of the door as she was being taken out and a tug of war followed between her and Gopal.
The appellant was also there and shouted to his father 649 that Gopal was adamant.
Badri, thereupon replied that if Gopal was adamant he should be beaten (tomaro).
On this the appellant took out a knife from his pocket and stabbed Gopal once.
The knife penetrated into the heart and Gopal fell down senseless.
Steps were taken to revive Gopal but without success.
Thereupon, Gopal was taken to the hospital by Badri and the appellant and Banarsi and his sons and some others, but Gopal died by the time they reached the hospital.
On these facts the Sessions Judge was of opinion that Badri who had merely asked the appellant to beat Gopal could not have realised that the appellant would take out a knife from his pocket and stab Gopal.
Badri was, therefore, acquitted of abetment.
The Sessions Judge was further of opinion that the appellant had the right of private defence of person, and that this right extended even to the causing of death as it arose on account of an assault on his sister which was with intent to abduct her.
He was further of opinion that more harm than the circumstances of the case required was not caused; and therefore the appellant was also acquitted.
The State then appealed to the High Court against the acquittal of both accused.
The High Court upheld the acquittal of Badri.
The acquittal of the appellant was set aside on the ground that the case was not covered by the fifth clause of section 100 and the right of private defence of person in this case did not extend to the voluntary causing of death to the assailant and therefore it was exceeded.
The High Court relied on an earlier decision of its own in Emperor vs Ram Saiya (1).
The appellant was therefore convicted under section 304, Part 11, of the Penal code and sentenced to three years ' rigorous imprisonment.
He applied for a certificate to enable him to appeal to this Court but this was refused.
Thereupon he applied to this Court for special leave which was granted; and that is how the matter has come up before us.
The main question therefore that falls for consideration in this appeal is whether the decision in Ram (1) I.L.R. 1948 All.
650 Saiya 's case (1) is correct.
It appears that four other high Courts have taken a view which is different on that taken in Ram Saiya 's case (1 ), namely Jagat singh vs King Emperor (2) Daroga Lokar vs Emperor Lohar vs The State (4) and Dayaram Laxman vs State 'here is, however, no discussion of the point in these our cases and we need not refer to them further.
the view taken in Ram Saiya 's case (1) is that the lord " abducting " used in the fifth clause of section 100 of the Penal Code refers to such abducting as is an offence under that Code and not merely to the act of abduction as defined in section 362 thereof.
Mere abduction is not an offence and, therefore, cannot give rise of any right of private defence and the extended right of private defence given by section 100 only arises if the offence which occasions the exercise of the right is of the Of the kinds mentioned in section 100.
Section 97 gives the right of private defence of person against any offence affecting the human body.
Section 99 lays down that the right of private defence a no case extends to the inflicting of more harm than it is necessary to inflict for the purpose of defence.
Section 100 with which we are concerned is in these terms: " The right of private defence of the body extends, under the restrictions mentioned in the last preceding section, to the voluntary causing of death or of any other harm to the assailant, if the offence which occasions the exercise of the right be of any of the descriptions hereinafter enumerated, namely " First Such an assault as may reasonably cause the apprehension that death will otherwise be the consequence of such assault; Secondly Such an assault as may reasonably cause the apprehension that grievous hurt will otherwise be the consequence of such assault; Thirdly An assault with the intention of committing rape ; (1) I.L.R. 1948 All.
(3) A.I. R. 1930 Pat.
347 (2).
(2) A.I.R. 1923 Lab.
155 (1).
(4) 1 (5) A 1.
R. 1953 Madhya Bharat 182.
651 Fourthly An assault with the intention of gratifying unnatural lust; Fifthly An assault with the intention of kidnapping or.
abducting; Sixthly An assault with the intention of wrongfully confining a person under circumstances which may reasonably cause him to apprehend that he will be unable to have recourse to the public authorities for his release.
" The right of private defence of person only arises if there is an offence affecting the human body.
Offences affecting the human body are to be found in Ch.
XVI from section 299 to section 377 of the Penal Code and include offences in the nature of use of criminal force and assault.
Abduction is also in Ch.
XVI and is defined in section 362.
Abduction takes place whenever a person by force compels or by any deceitful means induces another person to go from any place.
But abduction pure and simple is not an offence under the Penal Code.
Only abduction with certain intent is punishable as an offence.
If the intention is that the person abducted may be murdered or so disposed of as to be put in danger of being murdered, section 364 applies.
If the intention is to cause secret and wrongful confinement, section 365 applies.
If the abducted person is a woman and the intention is that she may be compelled or is likely to be compelled to marry any person against her will or may be forced or seduced to illicit intercourse or is likely to be so forced or seduced, section 366 applies.
If the intention is to cause grievous hurt or so dispose of the person abducted as to put him in danger of being subjected to grievous hurt, or slavery or the unnatural lust of any person, section 367 applies.
If the abducted person is a child under the age of ten and the intention is to take dishonestly any movable property from its person, section 369 applies.
It is said that unless an offence under one of these sections is likely to be committed, the fifth clause of section 100 can have no application.
On a plain reading, however, of that clause there does not seem to be any reason for holding that the word " abducting " used there means anything more than what is defined as " abduction " in section 362.
652 It is true that the right of private defence of person arises only if an offence against the human body is committed.
Section 100 gives an extended right of private defence of person in cases where.
the offence which occasions the exercise of the right is of any of the descriptions enumerated therein.
Each of the six clauses of section 100 talks of an assault and assault is an offence against the human body; (see section 352).
So before the extended right under section 100 arises there has to be the offence of assault and this assault has to be of one of the six types mentioned in the six clauses of the section.
The view in Ram Saiya 's case (1) seems to overlook that in each of the six clauses enumerated in section 100, there is an offence against the human body, namely, assault.
So the right of private defence arises against that offence, and what section 100 lays down is that if the assault is of an aggravated nature, as enumerat ed in that section, the right of private defence extends even to the causing of death.
The fact that when describing the nature of the assault some of the clauses in section 100 use words which are themselves offences, as for example, " grievous hurt ", " rape ", " kidnapping ", " wrongfully confining ", does not mean that the intention with which the assault is committed must always be an offence in itself.
In some other clauses, the words used to indicate the intention do not themselves amount to an offence under the Penal Code.
For example, the first clause says that the assault must be such as may reasonably cause the apprehension of death.
Now death is not an offence anywhere in the Penal Code.
Therefore, when the word " abducting " is used in the fifth clause, that word by itself reed not be an offence in order that clause may be taken advantage of by or on behalf of a person who is assaulted with intent to abduct.
All that the clause requires is that there should be an assault which is an offence against the human body and that assault should be with the intention of abducting, and whenever these elements are present the clause will be applicable.
Further the definition of " abduction " is in two parts, namely, (i) abduction where a person is compelled, (1) I.L.R. 1948 All.
653 by force to go from any place and (ii) abduction where a person is induced by any deceitful means to go from any place.
Now the fifth clause of section 100 contemplates only that kind of abduction in which force is used and where the assault is with the intention of abducting, the right of private defence that arises by reason of such assault extends even up to the causing of death.
It would in our opinion be not right to expect from a person who is being abducted by force to pause and consider whether the abductor has further intention as provided in one of the sections of the Penal Code quoted above, before he takes steps to defend himself, even to the extent of causing death of the person abducting.
The framers of the Code knew that abduction by itself was not an offence unless there was some further intention coupled with it.
Even so in the fifth clause of section 100 the word " abducting " has been used without any further qualification to the effect that the abducting must be of the kind mentioned in section 364 onwards.
We are therefore of opinion that the view taken in Ram Saiya 's case (1) is not correct and the fifth clause must be given full effect according to its plain meaning.
Therefore, when the appellant 's sister was being abducted, even though by her husband, and there was an assault on her and she was being compelled by force to go away from her father 's place, the appellant would have the right of private defence of the body of his sister against an assault with the intention of abducting her by force and that right would extend to the causing of death.
The next question is whether the appellant was within the restrictions prescribed by section 99.
It was urged that the right of private defence never extends to the inflicting of more harm than what is necessary for the purpose of defending and that in this case the appellant inflicted more harm than was necessary.
We are of opinion that this is not so.
The appellant gave only one blow with a knife which he happened to have in his pocket.
It is unfortunate that the blow landed right into the heart and therefore Gopal died.
But considering that the appellant had given (1) I.L.R. 1948 All.
83 654 only one below with an ordinary knife which, if it had been a little this way or that, could not have been fatal, it cannot be said that he inflicted more harm than was necessary for the purpose of defence.
As has been pointed out in Amjad Khan vs The State (1), " these things cannot be weighed in too fine a set of scales or in golden scale" '.
We, therefore, allow the appeal and hold that the appellant had the right of private defence of person under the fifth clause of section 100 and did not cause more harm than was necessary and acquit him.
Appeal allowed. | The relations between one G and his wife were strained and she went to live with her father B and her brother V, the appellant.
G, with three others, went to the quarter of B and he went inside and came out dragging his reluctant wife behind him.
She caught hold of the door and G started pulling her.
At this the appellant shouted to his father that G was adamant and thereupon B replied that he should be beaten.
The appellant took out a knife from his pocket and stabbed G once.
The knife penetrated the heart of G and he died.
B and the appellant were 647 tried for the murder of G; B was acquitted and the appellant was convicted under section 304 Part II Indian Penal Code and sentenced to three years rigorous imprisonment.
The appellant contended that he had acted in the right of private defence of person under section 100 fifthly Indian Penal Code, which extended to the causing of death as G had assaulted his wife with the intention of abducting her.
The respondent urged that section 100 fifthly applied only when the abduction was of such a nature as was punishable under the Penal Code.
Held, that the appellant had the right of private defence of the body of his sister which extended to the causing of death of G.
The extended right under section 100 arose when there was the offence of assault of one of the types mentioned in the six clauses of that section.
It was not necessary that the intention with which the assault was committed must always bean offence itself.
The word " abduction " used.
in the fifth clause of section 100 meant nothing more than what was defined as " abduction " in section 362, and it was not necessary, to get the protection of this clause, that the abduction must be of a type punishable under the Penal Code.
Further, the appellant had not inflicted more harm than was necessary and was not guilty of any offence.
Emperor vs Ram Saiya, I.L.R. 1948 All.
i65, overruled.
jagat Singh vs King Emperor, A.I.R. 1923 Lah.
155, Daroga Lohar vs Emperor, A.I.R. 1930 Pat.
347, Sakha vs The State, I.L.R and Dayaram Laxman vs State, A.I.R I953 Madhya Bharat 52, referred to. |
Civil Appeal No. 254 of 1954.
Appeal by special leave from the judgment and order dated February 19, 1952, of the Patna High Court in Misc.
Case No. 244 of 1949.
B. Sen, section K. Majumdar and I. N. Shrojj, for the appellant.
M. C. Setalvad, Attorney General for India, B. K. Saran and R. C. Prasad, for the respondent.
May 15.
The Judgment of the Court was delivered by HIDAYATULLAH J.
This appeal, with the special leave of this Court, has been filed by Maharajadhiraja 334 Sir Kameshwar Singh of Darbhanga (hereinafter referred to as the assessee) against the judgment of the High Court of Patna dated February 19, 1952, by which the High Court answered in the affirmative the following: two questions referred to it under section 25(1) of the Bihar Agricultural : (1) " Whether in view of the circumstances of the case, and particularly the manner in which, after due consideration, the learned Agricultural Incometax Officer in his first judgment dated the 5th January, 1946, had held that the assessee was not liable to be assessed for the receipt on account of the zarpeshgi lease, the learned Agricultural Incometax Officer has jurisdiction to revise his own order under section 26 of the Act; and (2) Whether if he had the jurisdiction to revise his own order, under section 26 of the Act, the income from the zarpeshgi lease of the assessee was taxable under the Act.
" The facts of the case lie within a very narrow com.
For the assessment year 1944 45 which corresponded to the year of account 1351 Fasli, the assessee returned Rs. 37,43,520 as his agricultural income.
He claimed a deduction of Rs. 9,42,137 3 10 1/2 on account of land revenue, rent etc., including a sum of Rs. 2,82,192 shown to have been paid to the Tekari Raj from which two leasehold properties were taken on zarpeshgi lease by indentures dated August 15, 1931, and January 31, 1936, respectively.
The amount was sought to be deducted as a capital receipt.
The Agricultural Income tax Officer of Darbhanga by his order dated December 28, 1945 accepted this contention, and exempted the amount from payment of agricultural income tax.
He observed: " Out of Rs. 9,42,137 3 10 1/2 claimed on account of Land Revenue and rent, Rs. 2,82,192 is shown as payment to Tekari Raj and then taken towards the realisation of Zarpeshgi Loan to self.
I have gone through the bond of Gaya Zarpeshgi Lease.
This payment is allowed to the assessee, as it is a capital income according to the terms of the bond.
At the 335 same time, I think, this amount of Rs. 2,82,192 should be treated as income to Tekari Raj and assessed in Gaya Circle along with other income of Tekari Raj as it is credited to that Raj by the assessee and then set off against the Zarpeshgi loan advanced to Tekari Raj.
" The assessment was approved by the Assistant Commissioner of Agricultural Income tax on January 4, 1946, and on the day following, the Income tax Officer passed his formal order and issued a demand notice.
The assessee paid two instalments out of three, when on March 22, 1946, the Agricultural Income tax Officer recorded the following order : " It appears that some agricultural income from Gaya Zarpeshgi lease which should have been taxed for the year 1944 45 (1351 Fasli) has escaped assessment.
Issue notice under section 26 fixing the 20th May 1947.
" After the assessee appeared, a supplementary assessment order was passed and Rs. 39,512 6 0 were assessed as tax on Rs. 2,52,879.
In deciding the matter, the Agricultural Income tax Officer gave the following reasons: According to the terms of the lease the assessee is to remain in possession and enjoy the usufruct of the lands given in lease for a fixed number of years on payment of an annual thica rent of Rs. 1,000 to the lessor and thus satisfy himself for the entire amount of consideration money of the zarpeshgi lease in question.
In fact, by this zarpeshgi lease the assessee has been given the grant of lands for a fixed term on a fixed rent.
Whatever income is derived from these lands during the tenure of this lease, is the income of the assessee and as such it should be taxed in the hands of the assessee and not in the hands of the lessor." The Agricultural Income tax Officer purported to act under section 26 of the Bihar Agricultural (hereinafter referred to as the Act).
The assessee appealed.
The Commissioner of Agricultural Income tax reversed the decision.
He pointed 336 out that the agricultural income from Tekari Raj property was returned by the assessee but was held to be exempt and thus could not be said ' to have escaped assessment so as to bring the case within section 26 of the Act.
The Province of Bihar (as it was then called) ,moved the Board of Revenue, Bihar which by a resolution dated February 7, 1948, referred the two questions to the High Court of Patna.
The Board did not express any opinion on the two questions.
In the High Court, both the questions were answered in favour of the State of Bihar.
Leave having been refused by the High Court, the assessee applied for, and obtained special leave from this Court.
Section 26 of the Act, under which the Agricultural Income tax Officer purported to act is substantially the same as section 34 of the Indian , prior to its amendment.
Necessarily, therefore, the rulings on the interpretation of the latter section were freely cited by the contending parties.
Section 26 of the Act reads as follows: " If for any reason any agricultural income chargeable to agricultural income tax has escaped assessment for any financial year, or has been assessed at too low a rate, the Agricultural Income tax Officer may, at any time within one year of the end of that financial year, serve on the person liable to pay agricultural income tax on such agricultural income or, in the case of a company, on the principal officer thereof, " a notice containing all or any of the requirements which may be included in a notice under subsection (2) of section 17, and may proceed to assess or re assess such income, and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that subsection: Provided that the tax shall be charged at the rate at which it would have been charged if such income had not escaped assessment or full assessment, as the case may be. " For facility of reference, the previous section 34 before the amendment in 1948 of the Indian may likewise be quoted here.
It read: 337 If in consequence of definite information which has come into his possession the Income tax Officer discovers that income, profits or gains chargeable to income tax have escaped assessment in any year, or have been under assessed, or have been assessed at too low a rate, or have been the subject of excessive relief under this Act the Income tax Officer may, in any case in which he has reason to believe that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars thereof, at any time within eight years, and in any other case at any time within four years of the end of that year, serve on the person liable to pay tax on such income, profits or gains, or in the case of a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub section (2) of section 22, and may proceed to assess or re assess such income, profits or gains, and 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: Provided that the tax shall be charged at the rate at which it would have been charged had the income, profits or gains not escaped assessment, or full assessment, as the case may be:. .
The short question is whether income which was returned but was held to be exempt from tax could be said to have " escaped assessment " so that the Agricultural Income tax Officer could exercise his powers under section 26 of the Act to tax it.
This question arising under section 34 of the Indian has been considered on many an occasion by the High Courts and also by the Privy Council and this Court.
The Patna High Court has correctly pointed out that the preponderance of opinion is in favour of holding that such income can be said to have escaped assessment.
The High Court in deciding that the Agricultural Income tax Officer had jurisdiction to revise his earlier assessment referred to the opening words of section 26, namely, " for any reason " and observed that it was 43 338 not necessary to give a restricted meaning to the word "escaped ", and that if an item of income was not charged to tax due to a mistake or oversight on the part of the taxing authorities, that item could well come within the term " escaped ".
According to the High Court, the phrase " escaped assessment " was not confined to cases where there had been an inadvertent omission, but in view of the later part of the section "where income . has been assessed at too low a rate", included a case where there was a deliberate action.
Learned counsel for the assessee contends that the generality of the words " any reasonhas no bearing upon the construction of the wordsescaped assessment ", that the word " assessment "does not connote the final determination to tax income but the entire process by which the result is reached, and that inasmuch as the income was actually returned and held to be exempt, there was no question of an "escaped assessment " because it passed through the processing of income.
He also contends that the later part of the section which deals with assessment at too low a rate cannot be called in aid to decide when income can be said to have escaped assessment.
He submits that the section has no application to cases where income is returned but is held to be not liable to tax and relied upon the following cases; Maharaja Bikram Kishore vs Province of Assam (1), Commissioner of Income tax vs Day Brothers (2), Madan Mohan Lal vs Commissioner of Income tax (3) (per Dalip Singh, J.) and Chimanram Motilal (Gold and Silver), Bombay vs Commissioner Of Income tax (Central), Bombay (4) (per Kania, J., as he then was).
The learned Attorney General drew the attention of the Court to other cases in which the view has been taken that even if income is returned and deliberately not charged to tax, the condition required for the application of the section is fulfilled.
He cited the following cases in support of his contention: AngloPersian Oil Co. (India) Ltd. vs Commissioner of IncometaX (5), P. C. Mullick and D. 0.
Aich, In re( '), The (1)[1949] (2)[1936] (3)[19351 (4) BOM.
(5) [1933] [ I.T.R. 129.
(6) 339 Commissioner of Income tax vs Raja of Parlakimedi (1) Chimanram Moti Lal (Gold and Silver), Bombay vs Commissioner of Income tax (Central), Bombay (2) and Madan Mohan Lal vs Commissioner of Income tax (3).
The learned Attorney General also relied strongly upon a recent decision of this Court in Kamal Singh vs Commissioner of Income tax, Bihar and Orissa (4), where Gajendragadkar, J., after a review of all the authorities, held that section 34 of the Indian Income tax Act was applicable to a case where an item of income was returned but deliberately and after consideration, was held to be not liable to tax.
Learned counsel for the assessee contends that the point was left open in that case, and refers to Messrs. Chatturam Horilram Ltd. vs Commissioner of Income ' tax, Bihar and Orissa(5) as having held the contrary.
Before referring to the other authorities of the High Courts, it will be proper to see if the two cases of the Supreme Court are in point or not, and if so, which of them.
In Kamal Singh 's case (4), the point arose under the following circumstances.
The father of the appellant in that case was assessed to income tax for the year 1945 46.
The total income assessed to incometax was Rs. 1,00,000 which included a sum of RE;.
93,604 received by him on account of interest on arrears of rent due to him after deduction of collection charges.
It was urged before the Income tax Officer that this interest was not assessable to income tax being agricultural "income, in view of the decision of the Patna High Court in Kamakshya Narain Singh vs Commissioner of Income tax(6).
The Income tax Officer did not accept this contention on the ground that an appeal was pending against the Patna High Court 's decision, before the Privy Council.
On appeal, the Appellate Assistant Commissioner held that the Income tax Officer was bound to follow the decision of the High Court, and he set aside the order and directed the Income tax Officer to make a fresh assessment.
The Income tax Officer thereupon deducted the amount (1) Mad.
(2) Bom.
(3) (4) ; (5) [1955] 2 S C.R. 290.
(6) [I946] 340 and brought only the remaining income (after some minor adjustments) to tax.
His order was passed on August 20, 1946.
In the year 1948, the Privy Council reversed the Patna High Court 's decision.
The judgment of the Privy Council is reported in Commissioner of Income tax vs Kamakshya Narain Singh( ').
The Income tax Officer then issued a notice under section 34 of the Indian , and after hearing the party assessed the sum of Rs. 93,604.
After sundry procedure which it is not necessary to detail, the matter reached this Court, and the question which was before it was " whether in the circumstances of the case, the assessment order under section 34 of the Act of the interest on arrears of rent is legal.
" Two questions were involved.
The first was whether the word " information " was wide enough to include knowledge about the state of the law or about a decision on a point of law.
With that point we are.
, not concerned in this case.
The second was, when income could be said to have escaped assessment.
Emphasis was laid on the word " assessment " in the arguments, and it was contended that it denoted not merely the order of assessment, but included " all steps taken for the purpose of levying of tax and during the process of taxation.
" It was also contended that " escaped " meant that the income must have eluded observation, search etc., or, in other words, eluded the notice of the Income tax Officer.
Gajendragadkar, J., however, did not confine the phrase to such a narrow meaning.
He observed; " Even if the assesse has submitted a return of his income, cases may well occur where the whole of the income has not been assessed and such part of the income as has not been assessed can well be regarded as having escaped assessment.
In the present case, the rents received by the assessee from his agricultural lands were brought to the notice of the Income tax Officer; the question as to whether the said amount can be assessed in law was considered and it was ultimately held that the relevant decision of the Patna High Court 'Which was binding on (1)[1948) 341 the department justified the assessee 's claim that the said income was not liable to be assessed to tax.
There is no doubt that a part of the assessee 's income had not been assessed and, in that sense, it has clearly escaped assessment.
Can it be said that, because the matter was considered and decided on ' the merits in the light of the binding authority of the decision of the Patna High Court, no income has escaped assessment when the said Patna High Court decision has been subsequently reversed by the Privy Council? We see no justification for holding that cases of income escaping assessment must always be cases where income has not been assessed owing to inadvertence or oversight or owing to the fact that no return has been submitted.
In our opinion, even in a case where a return has been ,submitted, if the Income tax Officer erroneously fails to tax a part of assessable income, it is a case where the said part of the income has escaped assessment.
The appellant 's attempt to put a very narrow and artificial limitation on the meaning of the word "escape ' in section 34(1)(b) cannot therefore succeed.
" The assessee seeks to distinguish that case on the ground that this Court,laid down the law in the special circumstances where ' a new interpretation to the law was given, and that it was not a case of the Incometax Officer changing his mind.
He contends that there was at least some information which had come to the Income tax Officer, on which his subsequent action could be rested.
The learned counsel argued that Gajendragadkar, J., had expressly left the question open, where there was no information but the Incometax Officer merely changed his mind without any information from an external source.
Reference in this connection is made to the following observations in the judgment: " It appears that, in construing the scope and effect of the provisions of section 34, the High Courts have had occasion to decide whether it would be open to the Income tax Officer to take action under a. 34 on the ground that he thinks that his original decision in making the order of assessment was 342 wrong without any fresh information from an external source or whether the successor of the Income tax Officer can act under section 34 on the ground that the order of assessment passed by his predecessor was erroneous, and divergent views have been expressed on this point.
Mr. Rajagopala Sastri, for the respondent, suggested that under the provisions of section 34 as amended in 1948, it would be open to the Income tax Officer to act under the said section even if he merely changed his mind without any information from an external source and came to the conclusion that, in a particular case, he had erroneously allowed an assessee 's income to escape assessment.
We do not propose to express any opinion on this point in the present appeal.
" We may say at once that the words of section 26 of the Act do not involve possessing of or coming by some fresh information.
The section says: " If for any reason any agricultural income chargeable to agricultural income tax has escaped assessment for any financial year the Agricultural Income tax Officer may proceed to assess such income The use of the words "any reason" which are of wide import dispenses with those conditions by which section 34 of the Indian is circumscribed.
The point which was thus left over by Gajendragadkar, J., cannot arise in the context of the Act we are dealing with.
In view of this clear opinion, it is hardly necessary for us to consider again the cases which Preceded the decision of this Court.
The most important of them are considered in the judgment of Gajendragadkar, J. Most of the cases are also considered in the judgment of Harries, C. J., and Mukherjea, J. (as he then was) in Maharaja Bikram Kishore vs Province of Assam (1).
In all the cases where a contrary view was taken, reliance was placed upon the decision of the Privy Council in Rajendra Nath Mukerjee vs Income tax Commissioner( ') particularly a passage wherein it was observed: (1) , (2) (1933) L.R. 61 I.A. 10, 16.
343 "The fact that section 34 requires a notice to be served calling for a return of income which had escaped assessment strongly suggests that income which has already been duly returned for assessment cannot be said to have 'escaped ' assessment within the statutory meaning.
" The facts of the case were entirely different.
The income was returned, and was not yet processed when the notice under section 34 was issued.
The key to the case is furnished by the approval by their Lordships of the observations of Rankin, C.J., in In re: Lachhiram Basantlal (1) that: " Income has not escaped assessment if there are pending at the time proceedings for the assessment of the assessees ' income which have not yet terminated in a final assessment thereof.
" Their Lordships held that the expression "has escaped assessment" should not be read as equivalent to "has not been assessed" because so to do "gives too arrow a meaning to the word 'assessment ' and too wide a meaning to the word escaped '." That those observations were related to the facts then before their Lordships is clear from the following passage: " To say that the income of Burn & Co., which in January, 1928, was returned for assessment and which was accepted as correctly returned, though it was erroneously included in the assessment of Martin & Co. ', has escaped ' assessment in 1927 28 seems to their Lordships an inadmissible reading. .
Their Lordships find it sufficient for the disposal of the appeal to hold, as they do that the income of Burn & Co., did not 'escape assessment ' in the year 1927 28 within the meaning of section 34.
" It was in the context of the pendency of assessment proceedings that the remarks were made, and the matter is decisively cleared of any doubt by the following passage: " It may be that if no notice calling for a return under section 22 is issued within the tax year then section Cal.
909, 912.
344 provides the only means available to the Crown of remedying the omission, but that is a different matter.
" In our opinion, the error in the cases relied upon by the assessee arises in using the dicta in the above case, shorn of the context in which they were made and applying them to facts, where they cannot.
The judgment of Gajendragadkar, J., has dealt with the matter, if we may say so respectfully, very adequately and we do not consider it necessary to cover the same ground again.
The preponderance of opinion in the High Courts is also to accept the contrary view, and we think rightly.
The learned counsel for the assessee argued that the decision of this Court in Messrs. Chatturam Horilram Ltd. vs Commissioner of Income tax, Bihar& Orissa (1) discloses a different view, and that we should follow it in preference to the later view of Gajendragadkar, J.
We do not think that in the case last cited the point was the same.
The same case was relied upon before the Bench of Venkatarama Aiyar, Gajendragadkar and Sarkar, JJ., and Gajondragadkar, J., distinguished it This is what he observed: Mr. Sastri has also relied on the decision of this Court in Messrs. Chatturam Horilram Ltd. vs Commissioner of Income tax, Bihar & Orissa (1) in support of his construction of section 34.
In Chatturam 's case (1) the assessee had been assessed to income tax which was reduced on appeal and was set aside by the Income Tax Appellate Tribunal on the ground that the Indian Finance Act of 1939, was not in force during the assessment year in Chota Nagpur.
On a reference the decision of the tribunal was upheld by the High Court.
Subsequently the Governor of Bihar promulgated the Bihar Regulation IV of 1942 and thereby brought into force the Indian Finance Act of 1939, in Chota Nagpur retrospectively as from March 30, 1939.
This ordinance was assented to by the Governor General.
On February 8, 1944, the Income Tax Officer passed an order in pursuance of which proceedings were taken against (1)[1955] 2 S.C.R. 290.
345 the assessee under the provisions of section 34 and they resulted in the assessment of the assessee to incometax.
The contention which was raised by the assessee in his appeal to this Court was that the notice issued against him under section 34 was invalid.
This Court held that the income, profits or gains sought to be assessed were chargeable to income tax and that it was a case of chargeable income escaping assessment within the meaning of section 34 and was not a case of mere non assessment of income tax.
So far as the decision is concerned, it is in substance inconsistent with the argument raised by Mr. Sastri.
He, however, relies on the observations made by Jagannadhadas, J., that 'the contention of the learned counsel for the appellant that the escapement from assessment is not to be equated to non assessment simpliciter is not without force ' and he points out that the reason given by the learned Judge in support of the final decisions was that though earlier assessment proceedings had been taken they had failed to result in a valid assessment owing to some lacuna other than that attributable to the assessing authorities notwithstanding the chargeability of income to the tax.
Mr. Sastri says that it is only in cases where income can be shown to have escaped assessment owing to some lacuna other than that attributable to the assessing authorities that section 34 can be invoked.
We do not think that a fair reading of the judgment can lead to this conclusion.
The observations on which reliance is placed by Mr. Sastri have naturally been made in reference to the facts with which the Court was dealing and they must obviously be read in the context of those facts.
It would be unreasonable to suggest that these observations were intended to confine the application of section 34 only to cases where income escapes assessment owing to reasons other than those attributable to the assessing authorities.
Indeed Jagannadbadas J., has taken the precaution of adding that it was unnecessary to lay down what exactly constitutes escapment from assessment and that it would be sufficient to place their decision on 44 346 the narrow ground to which we have just referred.
We are satisfied that this decision is of no assistance to the appellant 's case.
" For the reasons we have given, we are of opinion that the Agricultural Income tax Officer was competent under section 26 of the Act to assess an item of income which he had omitted to tax earlier, even though in the return that income was included and the Agricultural Income tax Officer then thought that it was exempt.
The answer given by the High Court was therefore correct.
This brings us to the second question.
The income was received from the leasehold properties, and was agricultural income.
The contention of the assessee is that it may be agricultural income in the hands of the Tekari Raj but in his hands it was capital receipt and in repayment of the loan of about Rs. 17,00,000 paid to Ram Bhuwaneshwari Kuer.
The State of Bihar, however, denies that there was a loan or a mortgage at all.
The assessee, it is contended, was placed in possession for a number of years on a rent of Rs. 1,000 per year and the amount paid was premium and not a loan.
The documents in question are two.
They are plainly indentures of lease between the Rani and the.
assessee.
From these documents it is clear that in consideration of a payment of Rs. 17,16,000 the lessee was placed in possession of the leasehold property for 28 years.
There is no express term which makes the sum a loan returnable either by repayment or by the enjoyment of the usufruct.
There is no interest fixed or right of redemption granted.
There is no provision for any Personal liability in case any amount remained outstanding at the end of the term of 28 years.
These are the tests to apply to find out whether the transaction was one of zarpeshgi lease or a lease with a mortgage.
See Mulla 's ' Transfer of Property Act, 4th Edition, page 352.
The learned counsel for the assessee in his careful argument took us through the two documents and endeavoured to prove that the relation of debtor and creditor subsisted between the parties.
He referred 347 us to cl. 4, which embodies a provision entitling the lessee to deduct 12 1/2 per cent.
of the gross aggregate amount payable by the mokarraridars as expenses of collection and other charges incidental thereto after payment of rent reserved to the I lessor ' and to appropriate to himself the remainder.
He submitted that the payment to the lessor was not a premium but a loan and the intention was that the lessee or creditor would be thus repaid.
The clause by itself may admit of diverse constructions, and possibly one such construction may be the one suggested, but that is not the true purport of the clause read in the context of the rest of the instrument.
To interpret this clause the instrument must be read as a whole, and when so viewed, it is found that it provides for an exemption of the lessor from the liability for collection charges.
It places beyond doubt that the collection charges were not to be debited to the lessor but were to be borne by the lessee.
Unless such a provision was included in the instrument, it might have been a matter of some dispute as to who was to be responsible for this expenditure.
The learned counsel for the assessee next drew our attention to the last clause of the instrument of January 31, 1936.
That, however, was a special covenant, and the provision therein was in relation to matters not covered by the instrument.
That the income from this leasehold property which was land, would fall within the definition of " agricultural income " was not seriously contested before us.
The case of the assessee rests upon the claim that this was a money lending transaction and the receipts represented a capital return.
If, however, the payment to the lessor was premium and not a loan, the income, being agricultural, from these leasehold properties was assessable under the Act.
We are of opinion that it was so, and that the Agricultural Income tax Officer was right when he assessed it to agricultural income tax.
The income was not the income of money lending, and this does not depend upon the character of the recipient.
The Thika 348 profits were clearly agricultural income being actually derived from land.
The answer to the question by the High Court was thus correct.
The result is that the appeal must fail, and it is accordingly dismissed with costs.
Appeal dismissed. | In his return of agricultural income for the assessment year I944 45 the appellant showed a sum of Rs. 2,82,192, which he had paid to the Tekari Rai for two lease hold properties taken on Zarpeshgi lease, as one of the items of the total amount of deduction claimed by him as capital receipt.
The Agricultural Income tax Officer accepted his claim and exempted the amount from Payment of agricultural income tax.
The Assistant Commissioner of Agricultural Income tax affirmed the decision.
A demand notice was issued and the assessee paid two instalments.
Thereafter, the Agricultural Income tax Officer served on the assessee a notice under section 26 of the Bihar Agricultural , to the effect that income from the said Zarpeshgi lease had escaped assessment and after he appeared, passed a 333 supplementary assessment order and assessed Rs. 39,5I2 6 o as tax.
The assessee appealed.
The Commissioner of Agricultural Income tax reversed the said decision.
The Province of Bihar moved the Board of Revenue and the two questions it referred to the High Court under section 25(1) Of the Act were, (1) whether in the facts and circumstances of the case, the Agricultural Income tax Officer had jurisdiction to revise his own order under section 26 of the Act and (2) if so, whether the income from the Zarpeshgi lease was taxable under the Act.
The High Court answered both the questions in favour of the State of Bihar.
Hence this appeal by the assessee by special leave.
Held, that under section 26 of the Bihar Agricultural , the Agricultural Income tax Officer had the power to revise his own order and assess an item of income which, even though shown in the return, he had earlier omitted to tax under a misapprehension that it was not taxable.
The use of the words " any reason " in section 26 of the Act made the section wider than section 34 Of the Indian by dispensing with the conditions which circumscribed the section.
Kamal Singh vs Commissioner of Income tax, Bihar & Orissa, ; , applied.
Messrs. Chatturam Hoyilyam Ltd. vs Commissioner of Income tax, Bihar and Orissa, ; , distinguished.
Case law discussed.
Since the appellant had failed to prove his case that the income in question was income from his money lending business or that the payment made to the lessor was not by way of premium but as a loan, the income from the lease hold property which was admittedly agricultural in character, must be held to be liable to tax under the Act, irrespective of the character of the recipient. |
ION: Criminal Appeal No. 11 of 1959.
Appeal by special leave from the judgment and order dated April 30,1958, of the Bombay High Court in Criminal Application No. 508 of 1958.
K. M. Desai and 1.
N. Shroff, for the appellant.
Ganpat Rai, for respondents Nos. 1 to 4 and 6.
K.L. Hathi and B. H. Dhebar, for respondent No. 5, 76 598 1959.
August 27.
The Judgment of the Court was delivered by SARKAR J.
The appellant is an unmarried Sunni Moslem woman.
She has an infant female illegitimate child called Anjum.
The appellant made an application to the High Court at Bombay under section 491 of the Code of Criminal Procedure for the recovery of the custody of the child from the respondents.
That the application was refused.
Hence this appeal.
The appellant 's case is as follows: She is the daughter of one Panna Bai.
The respondent Kaniz Begum is Panna Bai 's sister.
Kaniz Begum, whom it will be convenient to refer as the respondent, took the appellant over from Panna Bai and brought her up.
Prior to 1951 the respondent had put her in the keeping of two persons and had thereby made pecuniary gain for herself.
In 1951 the appellant met one Trivedi and since then she was been living continuously in his exclusive keeping.
The appellant stayed with Trivedi at Jabalpur up to 1954.
On September 4, 1952, the child Anjum was born to her by the said Trivedi.
In November 1953 she bore another child to him of the name of Yusuf alias Babul.
In 1954 the appellant with her said two children, her mother who had been living with her, and Trivedi left Jabalpur and came to live in Bombay.
After coming to Bombay, Trivedi for sometime lived with his relatives as he could not find independent accommodation.
During this time, the appellant with her children and mother stayed with the respondent who was then living in Bombay, but Trivedi used to visit the appellant daily at the, residence of the respondent.
In January 1956 the appellant bore a third child to Trivedi called Unus alias Chandu.
After the birth of Unus, Trivedi took the appellant, her mother and the two younger children to a hill station near Bombay called Khandala and the party stayed there for three or four months.
At the time the appellant had gone to Kandala, the respondent went to Pakistan on a temporary visa and she took the child Anjum with her presumably with the consent of the appellant, 599 After returning from Khandala, Trivedi was able to secure a flat for himself in Marine Drive, Bombay and the appellant with her mother and two sons began to stay with him there.
In April 1937 Trivedi moved into another flat in Warden Road, Bombay, with the appellant, her two younger children and mother and has since then been living there with them.
After the respondent returned from Pakistan with Anjum, the appellant who had then moved into the flat in Marine Drive, asked the respondent to send Anjum to her but the respondent refused to do so.
Since then the respondent has been refusing to restore the custody of the child Anjum to the appellant.
In these circumstances, the appellant made her application under section 491 of the Code of Criminal Procedure on April 18, 1958.
She stated that she apprehended that the respondent would remove Anjum to Pakistan any day and there was already a visa for Anjum available for that purpose.
She also stated that in view of the relationship between the parties she had not earlier taken the matter to court.
On the date of the application the respondent was away in Pakistan.
She had not however taken the child Anjum with her but had left her in her flat at Bombay in charge of her cousin Suggi and an Aya, Rozi Bhangera.
The appellant stated that the respondent had asked her sister Bibi Banoo and the latter 's husband Mahomed Yakub Munshi to look after the child.
The appellant had therefore made these four persons only the respondents to her application.
Later, on the respondent 's arrival back in Bombay, she also was made a party to the application.
The other respondents contended in the High Court that they had nothing to do with the child and had been made parties to the application unnecessarily.
They have not appeared in this appeal It is clear however that they did not make over the custody of the child Anjum to the appellant when the application was made and the affidavits filed by them leave no doubt that their sympathies are with the respondent Kaniz Begum.
The state of Bombay was also 'Made a respondent to the application, but that was a mere matter of form.
The State has no interest 600 in the case and has not taken any part in the proceedings.
The respondent opposed the application denying the correctness of some of the allegations made in the petition of the appellant.
She denied that Trivedi was the father of the child Anjum and said that the father was a Shia Moslem called Samin Naqui.
She said that the appellant 's mother had given the appellant to her to: bring up when very young as she had not the means to do so herself and since then the appellant had been living with her all along and left her flat in company with Trivedi only during her temporary absence in Pakistan in 1956.
She denied that she had made the appellant live in the keeping of any person as alleged by the latter.
She contended that she had intended that the appellant would marry and live a clean and respectable life but other influences operated upon her and she went to live with Trivedi as his mistress.
She denied that she had prevented the appellant access to the child Anjum as the latter stated.
She contended that she was looking after the child Anjum with great care and solicitude, and had put her in a good school and kept a special Aya for her.
She also said that she was well off and had enough means to look after the child well.
She contended that it was not in the interest of the child to live with the appellant because she was living in the keeping of a man who might turn her out and she would then have to seek the protection of another man.
She said that she had no child of her own and was fond of Anjum whom she had been treating as her own child.
The learned Judges of the High Court observed that the case raised various controversial questions specially as to the paternity of the child, as to whether the respondent had made the appellant live in the keeping of different persons and also as to whether she had prevented the appellant from having access to the to the child.
The learned Judges observed that it was not the function of a court in an application under section 491 to record findings on such controversial facts and that, in these circumstances, the proper forum for the appellant was to move a civil court under the 601 Guardian and Wards Act for the custody of the child.
The learned Judges further observed that they were prima facie satisfied that the child was not illegally and improperly detained by the respondents.
They therefore dismissed the appellant 's application.
We are unable to appreciate the view the learned Judges of the High Court.
It seems to us that the controversial facts referred to by them were wholly irrelevant to the decision of the application.
We have not been able to find one single fact relevant to the issue in this case which is in controversy.
The facts, which are abundantly clear and beyond dispute are these.
The child Anjum is the illegitimate daughter of the appellant who is a moslem woman.
The child was at the date of the application less than six years ' old and now she is just over seven years old.
The appellant is a singing girl by profession and so is the respondent.
The appellant stated in her affidavit that the respondent was in the keeping of a man and this the respondent has not denied.
It is not the respondent 's case that she is a married woman leading a respectable life.
In fact she admits that she allowed Trivedi to live in her flat with the appellant as his mistress and took money from him for " Lodging and Boarding Charges ".
Trivedi has sworn an affidavit acknowledging the paternity of the child and undertaking to bring her up properly as his own child.
He is a man of sufficient means and the appellant has been for a considerable time living with him as his mistress.
On these undisputed facts the position in law is perfectly clear.
Under the Mohammedan law which applies to this case, the appellant is entitled to the custody of Anjum who is her illegitimate daughter, no matter who the father of Anjum is.
The respondent has no legal right whatsoever to the custody of the child.
Her refusal to make over the child to the appellant therefore resulted in an illegal detention of the child within the meaning of section 491.
This position is clearly recognised in the English cases concerning writs of habeas corpus for the production of infants.
602 In The Queen vs Clarke (1) Lord Campbell,, C. J., said at p. 193: " But with respect to a child under guardianship for nurture, the child is supposed to be unlawfully imprisoned when unlawfully detained from the custody of the guardian; and when delivered to him, the child is supposed to be set at liberty.
" The courts in our country have consistently taken the same view.
For this purpose the Indian cases hereinafter cited may be referred to.
The terms of section 491 would clearly be applicable to the case and the appellant entitled to the order she asked.
We therefore think that the learned Judges of the High Court were clearly wrong in their view that the child Anjum was not being illegally or improperly detained.
The learned Judges have 'not given any reason in support of their view and we are clear in our mind that view is unsustainable in law.
Before making the order the court is certainly called upon to consider the welfare of the infant concerned.
Now there is no reason to think that it is in the interest of the child Anjum to keep her with the respondent.
In this connection it is relevant to state that at some stage of the proceedings in the High Court the parties appeared to have arrived at a settlement whereby it had been agreed that the child Anjum would be in the custody of the appellant and the respondent would have access to the child.
The learned Judges of the High Court however were not prepared to make an order in terms of this settlement because, as they said, " It did not appear to be in the interest and welfare of the minor ".
Here again they give no reason for their view.
Both parties belong to the community of singing girls.
The atmosphere in the home of either is the same.
The appellant as the mother can be expected to take better care of the child than the respondent.
Trivedi has acknowledged the paternity of the child.
So in law the child can claim to be maintained by him.
She has no such right against the respondent.
We have not been able to find a single reason how the interests of the child (1) ; 603 would be better served if she was left in the custody of the respondent and not with the appellant.
We further see no reason why the appellant should have been asked to proceed under the Guardian and Wards Act for recovering the custody of the child.
She had of course the right to do so.
But she had also a clear right to an order for the custody of the child under section 491 of the Code.
The fact that she had a right under the Guardians and Wards Act is no justification for denying her the right under section 491.
That is well established as will appear from the cases hereinafter cited.
The learned Advocate for the respondent said, we ,should not interfere with the order of the High Court as it was a discretionary order.
The learned Judges however have not given any reason which led them to exercise their discretion in the way they did.
We are not satisfied that the discretion was judicially exercised.
We are clear in our view that the judgment of the High Court was wrong and should be set aside.
It is further well established in England that in issuing a writ of habeas corpus a court has power in the case of an infant to direct its custody to be placed with a certain person.
In The King vs Greenhill (1) Lord Denman, C. J., said: " When an infant is brought before the Court by habeas corpus, if he be of an age to exercise a choice, the Court leaves him to elect where he will 'go.
If he be not of that age, and a want of direction would only expose him to dangers or seductions, the Court must make an order for his being placed in the proper custody.
" See also The Queen vs Clarke (2).
In Halsbury 's Laws of England, Vol.
IX, article 1201 at p. 702 it is said; " Where, as frequently occurs in the case of infants, conflicting claims for the custody of the same individual are raised, such claims may be enquired into on the return to a writ of habeas (1) ; , 640; III E.R. 922, 927.
(2) ; ; 604 corpus, and the custody awarded to the proper person." Section 491 is expressly concerned with the directions of the nature of a habeas corpus.
The English principles applicable to the issue of a writ of habeas corpus, therefore, apply here.
In fact the Courts in our country have always exercised the power to direct under section 491 in a fit case that the custody of an infant be delivered to the applicant: see Rama Iyer vs Nataraja Iyer (1), Zara Bibi vs Abdul Razzak (2 ), and Subbuswami Goundan vs Kamakshi Ammal (3).
If the courts did not have this power, the remedy under section 491 would in the case of infants often become infructuous.
We, therefore, set aside the judgment and order of the High Court and direct the respondents other than the State of Bombay to make over the custody of the child Anjum to the appellant.
Let the child be produced by the respondents before the Registrar, Appellate Side, High Court of Bombay, and the Registrar will than make over custody to the appellant.
The passport in respect of the child Anjum deposited in this Court by the respondents may be made over to the Advocate on record for the appellant.
The injunction restraining the removal of the child Anjum outside Greater Bombay will continue till she is delivered to the appellant.
Appeal allowed.
(1) A.I.R. 1948 Mad.
(2) (1910) XII Bom, L.R. 891 (3) Mad. | An unmarried Sunni Muslim mother of an illegitimate female child made an application under section 49I Of the Code of Criminal Procedure for the recovery of the child from the respondents.
Held, that under the Mohammedan Law the mother of an illegitimate female infant child is entitled to its custody.
The refusal to restore such a child to the custody of its mother would result in an illegal detention of the child within the meaning of section 49I of the Criminal Procedure Code.
A dispute as to the paternity of the child is irrelevant for the purpose of the application.
The Supreme Court will interfere with the discretionary powers of the High Court if the discretion was not judicially exercised.
Held, also, that before making the order for the custody of the child the court is called upon to consider its welfare.
Held, further, that the fact that a person has a remedy under the Guardian and Wards Act, is no justification for denying him the remedy under section 49I Of the Criminal Procedure Code.
Held, further, that in issuing writs of habeas corpus the courts have power in the case of an infant to direct its custody to be placed with a certain person.
The Queen vs Clarke, ; and The King vs Greenhill, , relied on.
Zara Bibi vs Abdul Razzak, (1910) XII Bom.
L.R. 891; Subbuswami Gounden vs K. Kamakshi Ammal, Mad.
72 and Rama Iyer vs Nata Raja lyer, A.I.R. 1948 Mad.
294, referred to. |
minal Appeal No. 143 of 1957.
Appeal from the judgment and order dated the 8th May, 1957, of the Allahabad High Court, in Criminal Reference No. 149 of 1956, arising out of the judgment and order dated the 14th January, 1956, of the First Additional Sessions Judge, Agra, in Sessions Trial No. 141 of 1954 and Criminal Misc.
No. 1 of 1956.
G. section Pathak and Mohan Behari Lal, for the appellants.
G. C. Mathur, C. P. Lal and G. N. Dikshit, for the respondent No. 1.
Janardan Sharma, for respondent No. 2. 1959.
September 14.
The Judgment of the Court was delivered by WANCHOO J.
This is an appeal oil a certificate granted by the Allahabad High Court in a criminal matter.
The facts of the case may be set out in some 738 detail to bring out the point raised in this appeal.
A complaint was filed by Rajendra Kumar Jain against the four appellants and three others under sections 409, 465, 467, 471 and 477A of the Indian Penal Code.
It is not necessary for present purposes to set out the details of the complaint.
Suffice it to say that after the statement of the complainant under section 200 of the Code of Criminal Procedure hereinafter referred to as the Code) summonses were issued to the accused persons requiring them to answer a charge under section 406 of the Penal Code.
Prosecution witnesses were then examined and cross examined and the statements of the accused persons recorded.
The Magistrate then heard argu ments on the question of framing of charges which were concluded on September 23, 1954.
It was then ordered that the case should be put up on September 30, 1954, for orders.
On that date the Magistrate framed charges against the four appellants under sections 409 and 465 read with section 471 and 477A of the Penal Code.
On the same date the Magistrate ordered commitment of the four appellants to the Court of Session on these charges.
The remaining three accused were discharged.
There was then a revision petition by Rajendra Kumar Jain against the discharge of one of the three accused, namely, Bhajan Lal.
When the matter came up before the First Additional Sessions Judge Agra, he ordered suo motu on April 9, 1955, after a perusal of the commitment order that Bhajan Lal be committed to the Court of Session to stand his trial.
In view of this order he dismissed the revision petition as infructuous.
Thereupon Bhajan Lal went in revision to the High Court.
That petition was heard by Roy, J., and he set aside the order of commitment of Bhajan Lal and one of the reasons given by him for doing so was that a Magistrate was not empowered to frame a charge and make an order of commitment until he had taken all such evidence as the accused might produce before him.
As Bhajan Lal had not been called upon to produce evidence in defence the order of commitment made by the Sessions Judge was held to be not in accordance with law.
This order was passed on 739 October 6, 1955.
Thereupon on January 7, 1956, the four appellants filed a revision petition before the Sessions Judge praying that the order of commitment passed against them be quashed and the main reason advanced in support of this petition was that the learned Magistrate had not observed the mandatory provisions of law laid down in sections 208 to 213 of the Code which were essential for a valid commitment.
This petition came up before the same First Additional Sessions Judge and he made a reference to the High Court that as the procedure followed by the Magistrate was irregular the order of commitment, dated September 30, 1954, was bad in law, and should be quashed.
This reference came up for bearing before another learned Judge of the High Court, namely, Chowdhry, J., and he took the view that the Magistrate had not failed to comply with the provisions of section 208 and that non compliance with the provisions of sections 211 and 212 was curable under section 537 of the Code.
He, therefore, rejected the reference.
There was then an application for a certificate to appeal to this Court which was allowed, particularly, as the view taken by Chowdhry, J., was in conflict with the view taken by Roy, J., already referred to.
The main contention of the appellants before us is that as the case began before the Magistrate as a warrant case under section 406 of the Penal Code, it was incumbent upon the Magistrate, when he decided, in view of the provisions of section 347 (1) of the Code, that the case should be committed to the Court of Session, to follow the procedure provided in Ch.
XVIII of the Code and inasmuch as he had failed to comply with sections 208 to 213 of the Code the commitment was bad in law and should be quashed.
The first question that falls for consideration, therefore, is whether the Magistrate when he began this case, was proceeding in the manner provided for the trial of warrant cases.
Section 347 (1) of the Code comes into play when at any stage of the proceedings in any trial before a Magistrate, it appears to him that the ease ought to be tried by the Court of 740 Session; he has then to commit the accused under the provisions herein before contained.
The Sessions Judge who made the reference held that the case before the Magistrate proceeded from the beginning as if it was a trial of a warrant case.
It was on that basis that the Sessions Judge held that when the Magistrate made up his mind that the case ought to be committed to the Court of Sessions in view of the provisions of section 347(1) of the Code it was his duty to observe the procedure laid down in Ch.
XVIII, particularly, under sections 208, 211 and 212 of the Code.
The order of reference was sent to the Magistrate for explanation, if any, and the Magistrate replied that he had no explanation to submit.
He did not say in his explanation that he was not proceeding as in a warrant case and that the proceedings before him throughout were proceedings in the nature of an inquiry under Ch.
XVIII.
When, however, the matter came up before the High Court, Chowdhry, J., was of opinion that though the Magistrate was competent to try the case as summonses has been issued under section 406 1.
P. C. only, it was open to him to hold an inquiry under Ch.
XVIII from the very beginning in view of the provisions of section 207 which empower a Magistrate to follow the procedure provided in Ch.
XVIII in cases exclusively triable by a Court of Session and also in cases which are not exclusively triable by the Court of Session but which in the opinion of the Magistrate ought to be tried by such Court.
The High Court was further of the view that the offence mentioned in the summons should be deemed to have given notice to the accused that it was optional with the Magistrate to hold an inquiry with a view to commit them to the Court of Session or to try them himself as in a warrant case because column 8 of Schedule 11 of the Code says that a case under section 406 is triable by a Court of Session, Presidency Magistrate or Magistrate of the first or second class.
Therefore, according to the High Court the matter was at large whether the Magistrate was going to adopt one procedure or the other despite the issue of summonses under section 406 of the Penal Code and that 741 nothing had happened to induce the belief in the accused that they would be tried as in a warrant case.
The High Court, therefore, held that the case was proceeded with from the beginning as if it was an inquiry under Ch.
XVIII and on that view it held that there was no non compliance with section 208 of the Code.
As for non compliance with sections 211 and 213, the High Court was of the view that it was curable under section 537 of the Code as no prejudice was caused.
We must say with respect that this view of the nature of the proceedings before the Magistrate is not correct.
It is true that it is open to a Magistrate to hold an inquiry from the beginning under Chapter XVIII in a case not exclusively triable by the Court of Session.
But the mere fact that the Magistrate has such power does not necessarily indicate to the accused that he is holding an inquiry under Ch.
XVIII rather than a trial before himself.
Where the case is not exclusively triable by the Court of Session, the accused would naturally conclude that the proceedings before the Magistrate are in nature of a trial and not an inquiry under Ch.
XVIII.
If the Magistrate intends to use his powers under section 207 and hold an inquiry from the beginning in a case not exclusively triable by the Court of Session, the only way in which the accused 'Can know that he is holding an inquiry and not a trial is by the Magistrate informing the accused that he is holding an inquiry under Ch.
XVIII and not trial.
If he fails to do so, the accused can reasonably conclude that a trial is being held.
In this case undoubtedly the Magistrate did not indicate to the accused from the beginning that his proceedings were in the nature of an inquiry under Ch.
XVIII.
Therefore the accused would naturally conclude that the proceedings before him were in the nature of a trial of a warrant case as the summonses that they had received were under section 406 of the Penal Code only.
The fact that in the complaint section 467, which is exclusively triable by a Court of Session, was mentioned is of no consequence for the summonses.
to the accused were only for a trial under section 406 of the Penal Code.
It must, therefore, be held that the proceedings before 742 the Magistrate began as in the trial of a warrant case and if the Magistrate at a subsequent stage of the proceedings was of the view that the case should be committed to the Court of Session, he would have to act under section 347 (1) of the Code.
We have been at pains to refer to this aspect of the matter for considerations would be different if the case was exclusively triable by the Court of Session and began from the outset as an inquiry under Ch.
XVIII.
What we shall say hereafter must, therefore, be taken to apply only to a case which began as a proceeding in a warrant or summons case and in which the Magistrate at a later stage takes action under section 347 (1).
This brings us to a consideration of the duty of the Magistrate who takes action under section 347 (1) of the Code.
That section reads as follows: " If in any inquiry before a Magistrate or in any trial before a Magistrate, before signing judgment, it appears to him at any stage of the proceedings that the case is one which ought to be tried by the Court of Session or High Court, and if he his empowered to commit for trial, he shall commit the accused under the provisions hereinbefore contained.
" The first question that has to be decided is the meaning of the words " under the provisions hereinbefore contained ".
These words have been the subject of decision by a number of High Courts and the High Courts are unanimous that they mean that if the Magistrate decides at some stage of the trial to commit the accused, he has to follow the provisions contained in Ch.
XVIII.
It is not necessary to refer to those decisions for the words themselves are quite clear.
They lay down that if the Magistrate comes to the conclusion that the accused ought to be committed for trial, he shall commit in accordance with the provisions contained in the earlier part of the Code, namely, in Ch.
XVIII.
This of course does not mean that the Magistrate must begin over again from the beginning.
All that he has to do when he decides that the case ought to be committed is to inform the accused and see that the provisions of Ch.
XVIII are complied with so far as they have not been complied 743 with up to the stage at which he decides that there ought to be a commitment.
Now the procedure under, Ch.
XVIII is laid down in sections 208 to 213 of ' the Code.
The Magistrate begins by hearing the complainant, if any, and takes all evidence that may be produced in support of the prosecution or on behalf of the accused or as the Magistrate may call himself.
The Magistrate is also required to issue process to compel the attendance of any witness or the production of any document or other thing if the complainant or officer conducting the prosecution of the accused applies to him.
After the evidence under section 208 has been taken the Magistrate then examines the accused for the purpose of enabling him to explain any circumstances appearing in evidence against him under section 209.
Thereafter if he is of opinion that there are not sufficient grounds for committing the accused for trial, lie can discharge him unless it appears to him ' that such person should be tried before himself or some other Magistrate in which case he has to proceed accordingly.
On the other hand, if the Magistrate is of opinion after taking the evidence and examining the accused that there are sufficient grounds for committing the accused for trial, he has to frame a charge under section 210 declaring with what offence the accused is charged.
The charge is then read over and explained to the accused and a copy thereof, if he so requires, is furnished to him free of cost.
After the charge is framed the Magistrate calls upon the accused under section 211 to furnish a list of persons orally or in writing whom he wishes to be summoned to give evidence on his trial.
The Magistrate may also allow the accused to furnish a further list at a later stage in his discretion.
Section 212 gives power to the Magistrate in his discretion to summon and examine any witness named in any list under section 211.
Then comes section 213 which lays down that if the accused has refused to give a list as required by section 211 or if he has given one and the witnesses, if any, included therein whom the Magistrate desires to examine, have been summoned and examined under section 212 the Magistrate may make an order committing the accused for trial by the High Court or the 744 Court of Session and shall also briefly record the reasons for such commitment.
On the other hand, if he is satisfied after hearing the witnesses for the defence that there are not sufficient grounds for committing the accused, he may cancel the charge and discharge the accused.
It will be seen from this analysis of the provisions relating to commitment that section 208 gives a right to the accused to produce evidence in defence before the Magistrate examines him under section 209 and proceeds to frame a charge under section 210.
Now when a Magistrate makes up his mind to commit a case not exclusively triable by the Court of Session under the power given to him under section 347 (1) of the Code, he has to follow this procedure.
But as we have said earlier it is not necessary that the Magistrate should begin from the beginning again when he so makes up his mind.
The Magistrate may make up his mind at any stage of the trial before him and generally speaking four contingencies may arise.
Firstly, he may make up his mind after the trial is practically over and the witnesses for the prosecution have been examined and crossexamined after the charge, the accused has be en examined both under sections 253 and 342 of the Code and and all the defence evidence has been taken.
In such a 'case sections 208, 209 and 210 have been complied with and all that the Magistrate has to do is to intimate to the accused that he intends to commit him for trial and ask him to give the list of witnesses under section 211 and proceed thereafter as provided in Ch.
XVIII.
Secondly, the Magistrate may make up his mind after all the witnesses for the prosecution have been examined and cross examined and the charge has been framed but no defence has been taken.
In such a case that part of section 208 which lays down that all the evidence for the prosecution shall be taken, has been complied with and the Magistrate may then proceed to comply with the rest of section 208 and take the defence evidence and then proceed further under sections 209 to 213 and amend the charge so as to make it conformable to a charge in an inquiry under Ch.
XVIII or cancel it.
Thirdly, the Magistrate may make up his mind after 745 some of the prosecution witnesses have been examined and cross examined and a charge has been framed.
In such a case he has to examine the rest of the prosecution witnesses under section 208 and take the defence evidence, if any, produced by the accused and then proceed under sections 209 to 213 amending or cancelling the charge already framed as indicated earlier.
Lastly, the Magistrate may have only just begun taking evidence for the prosecution and may not have framed a charge.
In such a case he takes the rest of the prosecution evidence and complies with the provisions from sections 208 to 213.
But in each of these four contingencies it is the duty of the Magistrate to intimate to the accused that he has made up his mind to commit in view of the provisions of section 347(1) and then proceed in the manner indicated above.
It is necessary that the accused should know when the Magistrate makes up his mind to commit so that their right under section 208 to produce defence, if any, before commitment is made is safeguarded.
Now what happened in this case was this.
The Magistrate had apparently taken all the prosecution evidence and the prosecution witnesses had been examined and cross examined; the Magistrate had framed no charges upto September 30, 1954.
He had heard arguments on the question whether any charges should be framed and had fixed September 30,1954, for orders in this respect.
When, therefore, he decided on September 30,1954, that the case ought to be committed to the Court of Session, the proper course for him was to refrain from framing any charges and intimate to the accused that he intended to commit them for trial.
He then should have called upon them to produce defence evidence, if any, under section 208 and then proceeded further under Ch.
XVIII.
The Magistrate, however, failed to inform the accused that he had made up his mind to proceed under section 347 (1) and to commit them for trial.
What he did on September 30, 1954, was to frame charges forthwith and record an order committing the accused to the Court of Session under section 213 of the Code.
He thus deprived them of their right to lead defence evidence, if any, under section 208.
It may be that if he had told them that he was 746 going to proceed under section 347 (1) and commit them for trial and asked them if there was any defence evidence to be produced, they might have said that they did not wish to produce any defence before him at that stage.
But what the accused would have said if the Magistrate had proceeded in this manner is irrelevant in considering the question whether the commitment in this case was bad in law inasmuch as it did not comply with section 208 so far as giving the accused an opportunity to lead defence evidence, if any, was concerned.
The fact remains, therefore, that in this case the Magistrate when he decided to act under section 347 (1) did not intimate that decision to the accused and proceeded forthwith to commit them for trial under section 213, thus depriving them of the right to produce defence evidence, if any, under section 208.
The next question which falls for consideration is the effect of this non compliance with section 208 of the Code and whether it is curable under section 537 of the Code.
The effect of Don compliance with various provisions of the Code and whether such non compliance is curable under section 537 have been the subject of a large number of cases before various High Courts and also before their Lordships of the Judicial Committee of the Privy Council.
It is not necessary to refer to this mass of authorities.
One of the earliest of these case decided by the Privy Council is Subramania Iyer vs King Emperor (1), while one of the latest is Pulukuri Kotayya vs King Emperor(2).
The law was summed up by their Lordships of the Judicial Committee in Pulukuri Kotayya 's case (2 ) at p. 75 in these words: When a trial is conducted in a maner different from that prescribed by the Code (as in N.A. Subramania Iyer 's case (1), the trial is bad, and no question of curing an irregularity arises; but if the trial is conducted substantially in the manner prescribed by the Code, but some irregularity occurs in the " course of such conduct, the irregularity can be cured under section 537, and none the less so because the irregularity involves ' as must nearly always be the case, a breach of one or more of the very comprehensive provisions of the code.
The distinction (1) (1901) L.R. 28 I.A. 257.
(2) (1948) L.R. 74 I.A. 65.
747 drawn in many of the cases in India between an illegality and an irregularity is one of degree rather than of kind.
This view finds support in the decision of their Lordships ' Board in Abdul Rehman vs The King Emperor(1) where failure to comply with sections 360 of the Code of Criminal Procedure was held to be cured by section 535 and 537.
" These observations were quoted with approval by this Court in Narain Rao vs The State of Andhra Pradesh(2).
It seems, therefore, fruitless to consider whether the non compliance with section 208 in this case is an illegality which cannot be cured under section 537 or an irregularity which is curable thereunder.
As the stage of trial has not been reached in this case, no question arises of considering whether the trial has been conducted in a manner different from that prescribed by the Code.
What we have to see is whether the breach of section 208 which has occurred in this case is such that the Court will presume prejudice to the accused by the mere fact of the breach.
If such presumption can be made, the breach would obviously be not curable under section 537 of the Code, even assuming that that section applies.
The question, therefore which eventually emerges is whether this breach of section 208 is of such a character that the Court will presume that there has been prejudice to the accused by the mere fact of the breach.
Now the accused has a right under section 208 to produce evidence in defence, if any, before the Magistrate proceeds to decide whether a charge should be framed or not.
The Magistrate 's decision whether the charge should be framed or not is bound to be affected one way or the other if evidence is produced by the accused, for the Magistrate 'Would then be bound to consider the effect of that evidence on the question of framing the charge.
If the accused is denied the opportunity of leading that evidence which he has a right to do under section 208, it seems to us that the denial of such right is sufficient to cause prejudice to the accused and section 537 would have no application to a case of this kind.
The possibility that the accused may not have produced defence if asked by the Magistrate whether he would do so, (1) (1926) L.R. 54 I.A. 96, (2) 748 is of no consequence, so far as this conclusion is concerned.
If this is the reply expected, it makes it all the more incumbent on the Magistrate to inform the accused that he was intending to commit the case and ask him if he wished to produce evidence.
If the accused did not want to do so, the Magistrate would have done his duty and his way would be clear to proceed further with his intention to commit the accused.
But when the Magistrate did not intimate to the appellants in this case that he was intending to commit them for trial and proceeded to frame charges and pass the order of commitment forthwith on September 30, he was denying to them their right to produce defence under section 208 of the Code.
The denial of that right is in our opinion in itself sufficient to cause prejudice to the accused and failure of justice inasmuch as the accused were prevented from leading evidence which might have induced the Magistrate not to frame a charge against them or cancel it.
We are, therefore, of opinion that the breach of section 208 which took place in this case was such as was bound to cause a failure of justice and there is, therefore, no question of the application of section 537 in these circumstances.
The commitment is, therefore, bad in law and must be quashed on this ground alone.
In the petition of appeal the appellants have referred also to breach of provisions of sections 211, 212 and 213 of the Code.
As we have come to the conclusion that the breach 'of section 208 in this case is sufficient to invalidate the commitment it is not necessary to consider the effect of the further breach of sections 211, 212 and 213.
What we have said in this case wit respect to the effect of the breach of section 208 may not be taken as applying to the breach of sections 211, 212 and 213 for the considerations arising out of those breaches may be different.
We, therefore, allow the appeal, quash the order of commitment as well as the charges framed and send the case back to the Magistrate to proceed in the manner indicated above according to law.
Appeal allowed. | A complaint was filed against seven persons under SS. 409, 465, 467, 471 and 477A of the Indian Penal Code.
After examining the complainant summonses were issued to the accused to answer a charge under section 406. 'The trial started as in a warrant case; prosecution witnesses were examined and cross examined and the statements of the accused were recorded, and the Magistrate heard arguments on the question of framing charges.
Thereafter, he framed charges under SS. 409 and 465 read with SS. 471 and 477A, and without giving previous intimation of his intention to do so, passed an order committing the appellants to the Court of Sessions.
The appellants, contended that the commitment was illegal because the case having begun as a warrant case it was incumbent upon the Magistrate, when he decided to commit the case to the Court of Session, to follow the procedure provided in Ch.
XVIII Code of Criminal Procedure, but he failed to comply with the provisions of SS. 208 to 213 of.
737 that Chapter.
The complainant urged that even if the provi sions of SS. 208 to 213 had not been complied with no prejudice was caused to the appellants and the commitment could not be( quashed.
Held, that the commitment order was illegal as the Magistrate had failed to comply with the provisions of section 208 of the Code of Criminal Procedure.
The proceedings having begun as in a warrant case, if the Magistrate, at a subsequent stage, was of the view that the case should be committed to the Court of Sessions, he had to act under section 347(1) of the Code and to follow the procedure prescribed for inquiries under Ch.
XVIII of the Code.
When, in the present case, the Magistrate decided to commit the case, he should have refrained from framing the charge and should have informed the accused of his intention to commit and should have called upon the accused to produce defence evidence, if any.
The failure of the Magistrate to intimate his decision to commit to the accused deprived them of the right to produce defence evidence, if any, under section 208.
The denial of this right was itself sufficient to cause prejudice to the accused and failure of justice inasmuch as the accused were prevented from leading evidence which might have induced the Magistrate not to frame the charge against them.
Subramania Iyer vs King Emperor, (1901) L.R. 28 I.A. 257 Pulukuri Kotayya vs King Emperor, (1948) L.R. 74 I.A. 65, and ' Narain Rao vs The State of Andhra Pradesh, , referred to. |
ON: Criminal Appeal No. 116 of 1957.
Appeal by special leave from the judgment and order dated the February 10, 1955, of the Calcutta High Court, in Criminal Revision No. 930 of 1954, arising out of the judgment and order dated July 13, 1954, of the Sub Divisional Magistrate, Darjeeling in G. R. case No. 108 of 1950.
Sukumar Ghose, for the appellant.
N. R. Khanna and T. M. Sen, for the respondent.
October 27.
The judgment of Jafer Imam, J. L. Kapur and K. N. Wanchoo was delivered by Kapur, J., Sarkar, J. delivered a separate judgment.
KAPUR J.
This appeal by special leave raises a question of the application of section 403 of the Criminal 60 Procedure Code.
The circumstances in which this question arises are these: A complaint was filed against one section K. Bose and the appellant under sections 120 B, 409, Indian Penal Code and section 5(2) of the Prevention of Corruption Act (2 of 1947) in the Court of the Sub Divisional Magistrate, Darjeeling.
Against the appellant the complaint was instituted on March 2, 1950.
As the West Bengal Criminal Law Amendment (Special Courts) Act (West Bengal 21 of 1949) (hereinafter referred to as the Act) came into force on June 23, 1949, the case was allotted to the Special Judge at Alipore, Mr. S.C. Dutt Gupta who, on July 11, 1951, found section K. Bose guilty but acquitted the appellant.
section K. Bose took an appeal to the High Court at Calcutta.
In another case J. K. Gupta vs The State of West Bengal (1) a Special Bench of the Calcutta High Court held that section 4(1) of the Act was ultra vires.
Following this judgment a Division Bench of that Court (Trevor Harries, C.J., and section R. Das Gupta, J.) passed the following order in section K. Bose 's appeal: The appeal must, therefore, be allowed.
The conviction and sentence are set aside and the appellant must be regarded as an under trial prisoner awaiting retrial, if Government so decides.
He will continue on the same bail until such retrial.
" On April 9, 1952, the West Bengal Criminal Law Amendment (Special Courts Amending) Ordinance 1952 (West Bengal Ord.
8 of 1952) came into force and was replaced by West Bengal Act XII of 1952 on July 30, 1952.
By a Notification No. 2047J Mr. J. C. Lodh was appointed as the Special Judge at Alipore and on May 26, 1952, a petition of complaint was filed against both the appellant and S.K. Bose.
It was stated therein that the High Court had held that the allotment of the case to the previous Special Court and all proceedings thereafter were invalid and "all such cases have been directed to be retried according to law" and prayed for cognizance to be taken of the offences which the appellant and section K. Bose were accused of.
It may be pointed out that as far as the (1) 61 appellant was concerned the High Court had given no such direction.
The Special Judge then summoned the appellant who on June 19, 1952, pleaded the bar of section 403, Criminal Procedure Code, basing it on his acquittal by the Special Judge, Mr. section C. Dutt Gupta.
The Special Judge overruled this plea on the ground of want of jurisdiction of the previous Special Judge to try the offences because section 4(1) of the Act had been declared ultra vires by the High Court.
Against this order the appellant moved the High Court under Articles 226 & 227 and under section 439 of the Criminal Procedure Code for quashing the proceedings before the Special Judge.
On August 22, 1952 Notification No. 2047J. was superseded by Notification No. 4673J. and Mr. J. C. Lodh ceased to have jurisdiction and he passed an order on August 26 that as the Court had no jurisdiction to continue the trial the "case be filed and the accused be held underwater prisoner pending a retrial according to law.
" The appellant thereupon amended his petition in the High Court.
On March 19, 1953, the High Court (Chunder, J.), dismissed, the application and discharged the rule.
It held that as the Act "creating the" Special Judge 's Court has been declared ultra vires, the decision of that Court had no binding force and that the High Court " did not discharge the accused persons altogether but directed that they were to be held as undertrial prisoners, leaving it to the Government to decide what further steps the Government would take.
" Here again there was an error because whatever might be the legal consequence of the order of the High Court in S.K. Bose 's appeal there was no specific order as to the appellant.
The West Bengal Criminal Law Amendment (Special Courts) Amending Act (West Bengal Act 22 of 1952) having come into force, by a notification dated December 22, 1952, the case of the appellant and section K. Bose was allotted to the Special Judge at Darjeeling and a fresh complaint was filed on March 27, 1953 in that Court and it issued process against both the accused.
The appellant again took objection to the restarting 62 of the proceedings.
section K. Bose, the other accused,took a revision to the High Court (Criminal Revision No. 578 of 1953).
On April 8, 1954 the High Court (Das Gupta & Debabrata Mookerjee, JJ), quashed the proceedings in the High Court of the Special Judge at Darjeeling on the ground that the Amendment Act (XXII of 1952) was inapplicable to the facts of the case.
The High Court held: "The position in law therefore was that the proceedings against the petitioner were pending in appeal before this Court on the 9th April, 1952; the appeal was disposed of on that date and a retrial was ordered.
There has not therefore been a, termination of those proceedings.
If consequently the Special Courts Act does not apply to those proceedings and those proceedings cannot be tried by a Special Court, that position cannot be escaped by filing a fresh petition of complaint '.
The filing of fresh petition of complaint will not institute fresh proceedings distinct from the proceedings that were pending in appeal.
So long as these proceedings have not been disposed of in accordance with law, fresh proceedings cannot be instituted against the petitioner.
The result in my opinion is that the Special Court Judge, Darjeeling has no jurisdiction to try the case instituted before him on a complaint on the 27th of March, 1953.
I would accordingly quash the proceedings in his Court and order that the proceedings now pending against the petitioner in the Court of the Sub Divisional Magistrate, Darjeeling should now be disposed of in accordance with law.
" On May 31, 1954 the Sub Divisional Magistrate, Darjeeling, issued process against the appellant to appear on June 21, 1954, and on the same day the case was transferred to Mr. section P. Kar, Magistrate.
The appellant then applied to the Sub Divisional Magistrate for the quashing of proceedings on the ground that he had been acquitted by a Court of competent jurisdiction because the Supreme Court in Kedar Nath Bajoria vs The State of West Bengal (1) had declared s.4(1) of the Act to be intra vires of the Constitution.
The (1) ; 63 learned Magistrate dismissed this petition oil the ground that the order of the High Court dated April 8, 1954, which directed the trial of the appellant: was passed after the judgment of the Supreme Court and that he was bound by the order of the, High Court.
Against this order the appellant took a revision to the High Court and the matter was heard by Guha Roy and section K. Sen, JJ.
Guha Roy, J., held that the order of Chunder, J., in Criminal Revision No. 965 of 1952 operated as a bar; that the proceedings before the Sub Divisional Magistrate at Darjeeling were really a con tinuation of the proceedings before Mr. J. C. Lodh, Special Judge and that the appellant was bound by the decision of Chunder, J. section K. Sen, J., agreed and held that the order of acquittal was by a Court which was not of competent jurisdiction and therefore it (the acquital) was no longer in existence when Chunder, J., passed the order on March 19, 1953, and the petitioner could not get the benefit under section 403 of the Criminal Precedure Code or the "subsequent change in the law introduced by the Supreme Court decision " in Kedar Nath Bajoria vs The State of West Bengal(1).
The result was that the appellant 's prayer for quashing the pro ceedings was rejected and the appellant has come in appeal by special leave against this decision of the High Court.
Under section 403(1) of the Code of Criminal Procedure a person once tried and acquitted for an offence is not liable to be tried again for the same offence or on the same facts.
It is this provision of the Code which the appellant relies on in support of his appeal and submits that as he was acquitted by a court of competent jurisdiction and which acquittal remains operative he cannot be tried again for the same offence.
Under the decision of this Court in Kedar Nath Bajoria vs The State of West Bengal (1) section 4 (1) of the Act is intra vires and the court of the Special Judge, Alipore, Mr. section C. Dutt Gupta, who passed the original order of acquittal of the appellant was a court of competent jurisdiction and if there is no other impediment in the way of the appellant the previous acquittal (1) ; 64 must operate as a complete bar to his being tried again on the some facts and for the same offences.
But it was contended on behalf of the State that in his order Chunder, J., had held that the appellant could not plead the bar of section 403 as the order of acquittal by the Special Judge Mr. section C. Dutt Gupta, was not by a court of competent jurisdiction; and as the order had become final whether it was right or wrong it barred the raising of that question, i.e., applicability of section 403 even in this Court.
It therefore becomes necessary to determine the effect of the order of Chunder, J. The Special Judge Mr. section C. Dutt Gupta, acquitted the appellant and convicted the co accused section K. Bose who alone took an appeal to the High Court.
That Court held section 4(1) of the Act to be ultra vires and set aside his conviction and left it to Government to decide as to whether he should again be tried or not.
By filing the proceedings again the Government decided that the appellant and section K. Bose should be retried.
No argument was raised before us as to the effect of that order on the appellant 's case and the argument has proceeded on the basis that on that view of the law the acquittal of the appellant was by a court without jurisdiction and therefore even if no appeal was taken as against the appellant the order of acquittal would be no more than an order of discharge(Yusofalli Mulla Noorbhoy vs The King (3) ).
But the appellant contended that in view of the decision of this Court in Kedar Nath Bajoria vs The State of West Bengal (2) where the Act was declared intra vires and section 4(1) of the Act a good provision, the decision of the High Court to the contrary could no longer impede the efficacy of his plea and he was entitled to plead section 403, Criminal Procedure Code, as a bar to his being tried on the same facts and for the offences of which he was acquitted.
It was also contended that the verdict of acquittal was given by a court of competent jurisdiction and that verdict has never been reversed and the acquittal is still in force.
It is not necessary in this appeal to decide whether it was open to the High Court to take a different view (1) (1949) 76 I.A 158, 168, 169.
(2) ; 65 of the effect of the order of acquittal passed by Mr. section C. Dutt Gupta because of the pronouncement by this Court in Kedar Nath Bajoria 's case (1).
What we have to decide in this appeal is whether the order of Chunder, J., has the effect of debarring the appellant from the benefit of obtaining a review by this Court of that decision.
It is also not necessary to discuss the scope of res judicata and the extent of its application to criminal proceedings and its limitation to decisions of courts of competent jurisdiction.
Except where the statute so requires it is not imperative upon a party to appeal against every error, defect or irregularity in any order by which he may conceive himself aggrieved under the penalty, if he does not So do, of forfeiting for ever the benefit of consideration by this Court.
Nothing would be more detrimental to the expeditious administration of justice than the establishment of a rule which would impose upon a party the necessity of appealing against every such order.
It was so held in Moheshur Singh vs The Bengal Government (2) where a party had not appealed from the order of Sudan, Commissioner, granting a review of judgment.
In our opinion, it would make no difference as far as this Court is concerned whether an intermediate order complained of is passed by the trial court and is not taken to the High Court in revision or it is taken in revision to the High Court and is there confirmed.
We think it unnecessary in this case to express any opinion as to the effect of that order qua the revision in the High Court itself, but when the matter properly comes to this Court in appeal in such circumstances as this case it is open to this Court unless there is any statute which provides differently to review the order passed by the High Court as much as it would have been if the original order passed by the trial court had not been taken to the High Court in revision.
In civil cases this principle was accepted by the Privy Council.
See Alexander John Forbes vs Ameeroonissa Begum (3) where an order of remand had not been appealed (1) ; (2) (1859) 7 M.I.A. 283, 302.
(3) (1865) 10 M.I.A. 340, 352.
9 66 against; Sheonath vs Ram Nath (1) where the order was a step in the procedure that leads to a final decree; Shah Mukhun Lal vs Baboo Sree Kishen Singh (2) where the question as to interest was decided in an interlocutory decree not appealed from.
These cases are decisions on general principles and are not based on any particular statute or regulation peculiar to procedure in civil cases.
We do not see why the principle of these cases should, in the absence of any law to the contrary, not be equally applicable to matters of a criminal nature.
Chunder, J., in his judgment in Criminal Revision No. 965 of 1952 dated March 19, 1953 said: " There must be a judicium before there can be res judicata.
If a judicium created by an Act is not a judicium at all because the Act is ultra vires there can be no res decided by it.
Because there is no judicium there can be no decision which will have a binding force.
" It only means this that for an order of acquittal to be binding it must be pronounced by a Court of competent jurisdiction.
In the judgment of the High Court in Criminal Revision No. 930 of 1954 now under appeal section K. Sen, J., was of the opinion that as the acquittal was not by a Court of competent jurisdiction the Government regarded it as set aside and it was no longer in force when Chunder, J., passed his order on March 19, 1953, and " consequently the petitioner " (Dow the appellant) " could no longer get the benefit thereof under section 403 Cr. P. C. on a subsequent change in the law introduced by the Supreme Court decision in Kedar Nath Bajoria vs The State of West Bengal (3).
Following Kedar Nath Bajoria 's case (3) we are of the opinion that section 4(1) of the Act was not ultra vires and the judgment of the Calcutta High Court in J.K. Gupta vs State of West Bengal (4) was erroneous and the acquittal by the Special Judge Mr. section C. Dutt Gupta was an order made by a court of competent jurisdiction; as such it was binding unless set aside in appeal and it was never set aside in appeal.
The observations (1) (1865) 10 M.I.A., 413.
(2) (1868) 12 M.I.A. 157.
(3) ; (4) 67 of the Privy Council in Yusofalli Mulla Noorbhoy vs The King Emperor (1): " If the orders of acquittal were passed by a court of competent jurisdiction, though wrongly, they would be binding unless set aside in appeal " would be applicable to the case of the appellant.
If the trial court was not a court of competent jurisdiction the acquittal would be no more than a discharge; but if it was by a court of competent jurisdiction it is binding unless lawfully set aside.
The plea of the appellant effectively falls within section 403 Criminal Procedure Code.
We have held that the trial in the court of Mr. section C. Dutt Gupta being a trial before a court competent to pass a valid order the prosecution is bound to accept the correctness of the verdict of acquittal and is precluded from challenging it.
As was said by Lord Mcdermott in Sambasivam vs Public Prosecutor, Federation of Malaya (2) in regard to a verdict pronounced by a competent court and after a lawful trial: " the verdict is binding and conclusive in all subsequent proceedings between the parties to the adjudication.
" This passage was quoted with approval by this Court in Pritam Singh vs The State of Punjab(3).
In our opinion the order of Chunder, J., was based on an erroneous view of the vires of section 4(1) of the Act.
The first trial of the appellant was before a court of competent jurisdiction and the verdict of acquittal was not a nullity; its efficacy was not impaired by any binding order of the High Court; and at this stage when the matter is properly before this court and the proceedings are a continuation of the proceedings before Mr. J. C. Lodh, it is not precluded from rectifying any error or defect in the order of the High Court and giving effect to the plea set up under section 403.
The trial before Mr. section C. Dutt Gupta being a lawful one which resulted in acquittal and which has never been set aside, another trial would place the appellant in (1) (1949) L.R. 76 I.A. 158, 168, 169.
(2) [1950] A .C. 458, 479.
(3) A.I.R. 1956 S.C. 415,420.
68 jeopardy a second time which would contravene section 403 of the Criminal Procedure Code.
We therefore allow this appeal, set aside the order of the Calcutta High Court directing the complaint to be proceeded within the court of the Sub Divisional Magistrate and the proceedings against the appellant are quashed.
SARKARJ.
In my view this appeal fails.
On March 2, 1950, the appellant and one Bose were prosecuted for certain offenses under the West Bengal Criminal Law Amendment (Special Courts) Act, 1949.
The case was heard by Mr. Dutta Gupta who, on July 11, 1951, acquitted the appellant but convicted Bose.
Bose appealed to the High Court at Calcutta.
The High Court, following its own earlier decision in J. K. Gupta & Ors.
vs The State of West Bengal (1), found that the Act was invalid as it offended article 14 of the Constitution.
The High Court thereupon held that Bose 's conviction under the Act could not be sustained and set it aside.
This judgment was passed on April 9, 1952.
On the same day the Government of West Bengal passed an Ordinance amending the Act, which Ordinance was later replaced by another Act.
Under the Act as amended, fresh proceedings in respect of the same offenses were started both against the appellant and Bose on May 26, 1952, in the Court of Mr. Lodh who was empowered by the Government under the Act as amended, to deal with it.
On June 19, 1952, the appellant made an application to Mr. Lodh for an order that the prosecution against him be quashed as he had earlier been acquitted of the same offences by Mr. Dutta Gupta.
This application was rejected by Mr. Lodh.
On September 2, 1952 the appellant moved the High Court at Calcutta by revision petition No. 965 of 1952 against the order of Mr. Lodh.
This petition was disposed of by Chunder, J., by order dated March 19, 1953, whereby the learned Judge held that the proceedings could not be quashed as, in view of the judgment of the High Court dated (1) 69 April 9, 1952, it must be held that Mr. Dutta Gupta was not a court of competent jurisdiction and the acquittal by him was of no effect.
Before the revision petition No. 965 of 1952 was filed, the Government had withdrawn the case against the appellant and Bose from Mr. Lodh.
It is said that the revision petition was filed in ignorance of such withdrawal.
After withdrawing the case from Mr. Lodh the Government by Notifications dated December 22, 1952 and March 24, 1953, assigned it for trial under the Act as amended, to a court at Darjeeling.
A fresh petition of complaint was thereupon filed against the appellant and Bose in that Court.
Bose then moved the High Court at Calcutta by a revision petition for quashing the proceedings on the ground that the Act as amended did not apply to him.
On April 8, 1954 the High Court allowed Bose 's application and quashed the proceedings holding that the amended Act did not apply to any proceeding pending on the date of the commencement of the Ordinance, namely, April 9, 1952, in any court other than a court constituted under the Act and that on that date the proceeding against Bose was pending in the High Court which was not a court under the Act.
While the revision petition mentioned in the preceding paragraph was pending in the High Court, this Court on May 22, 1953 delivered judgment in Kedar Nath Bajoria vs State of West Bengal (1), whereby it held that the judgment of the High Court at Calcutta in J. K. Gupta vs The State of West Bengal(2), was wrong and that the Act was constitutionally valid.
After the decision of the High Court of April 8, 1954, proceedings againt the appellant and Bose were started afresh in the Court of the Sub Divisional Magistrate, Darjeeling under the provisions of the Code of Criminal Procedure.
On June 21, 1954 the appellant applied to the Sub Divisional Magistrate, Darjeeling for an order quashing the proceeding against him as in view of the judgment of this Court in Kedar Nath Bajoria 's case(1), to which reference has (1) ; (2) 70 been earlier made, it had to be held that his acquittal by Mr. Dutta Gupta was an acquittal by a court of competent jurisdiction and that therefore the appellant could not be tried for the same offence over again.
The Sub Divisional Magistrate dismissed this application by his order passed on July 13, 1954 holding that he was bound by the order of the High Court dated April 8, 1954 which directed the case to be tried and which was passed after the judgment of this Court in Kedar Nath Bajoria 's case (1), had been delivered.
The appellant them moved the High Court at Calcutta in revision against this order of the Sub Divisional Magistrate by criminal revision petition No. 930 of 1954.
The High Court by its judgment dated February 10, 1955 dismissed this revision case holding that notwithstanding the judgment of this Court in Kedar Nath Bajoria 's case (1), the judgment of Chunder, J., dated March 19, 1953 was binding on the appellant and it bad therefore to be held that the acquittal of the appellant by Mr. Dutta Gupta no longer remained in force after the judgment of Chunder, J., It is from this judgment that the present appeal arises.
In my opinion the view taken by the High Court is right.
The question is whether the appellant is entitled to an order quashing the prosecution against him as he bad earlier been acquitted by Mr. Dutta Gupta.
The appellant contends, relying on the principle of autrefois acquit, that he is.
That principle is enacted in section 403 of the Code of Criminal Procedure.
It then comes to this: Is the appellant entitled to the benefit of section 403 ? The principle stated in the section is that when a person has once been tried by a court of competent jurisdiction for an offence and convicted or acquitted of it, he shall not while the conviction or acquittal remains in force, be tried again for the same offence.
In order, therefore, that the appellant may have the benefit of the section he must have been tried by a court of competent jurisdiction.
Furthermore, such acquittal must be in force.
(1) ; 71 It is said that notwithstanding the judgment of the High Court in J. K. Gupta 's case (1) it must now be held in view of the judgment of this Court in Kedar Nath Bajoria 's case(2) that the acquittal by Mr. Dutta Gupta was an acquittal by a court of competent jurisdiction.
It seems to me that the judgment in Kedar Nath Bajoria 's case(") is really irrelevant.
If the Court of Mr. Dutta Gupta, was in law a court of competent jurisdiction, it would remain such whether this Court declared it to be so or not.
Any court before which a plea of autrefois acquit is taken, must decide for itself and of course in coming to its decision it must follow such precedents as are binding upon it whether the Court which had earlier acquitted the accused was a court of competent jurisdiction.
Its power to decide that question is not derived from a decision of a higher court pronouncing upon the question of the competence of the Court which earlier acquitted ' the accused.
Therefore it seems to me that Kedar Nath Bajoria 's Case (2), does not decide the case before us.
Now, in order to get the benefit of section 403, the appellant has to show that the Court of Mr. Dutta Gupta, which acquitted him was a court of competent jurisdiction.
But another prior question arises in this case.
That is this: Is it open to the appellant in view of the order of Chunder, J., to contend that the Court of Mr. Dutta Gupta was a court of competent jurisdiction ? In other words, can he at all raise the question whether the Court of Mr. Dutta Gupta was a court of competent jurisdiction ? Is he not bound by the judgment of Chunder, J., to the position that Mr. Dutta Gupta did not constitute a court of competent jurisdiction ? It is no doubt true that if it is open to the appellant to contend that the Court of Mr. Dutta Gupta was a court of competent jurisdiction, the decision of this Court in Kedar Nath Bajoria 's case (2) would help him to establish that contention.
If it is Dot so open to him that decision does not avail him at all.
It seems to me that the judgment of Chunder, J., prevents the appellant from raising the question that (1) (2) ; 72 the Court of Mr. Dutta Gupta, was a court of com petent,jurisdiction.
That question was directly raised by the appellant by revision petition No. 965 of 1952 of in which the judgment of Chunder, J., was passed.
Chunder, J., held that the Court of Mr. Dutta Gupta, was not a court of competent jurisdiction.
He bad fall jurisdiction to decide the petition and the question.
His jurisdiction to do so was never questioned.
The decision of Chunder, J., is a final judgment and must have effect as such.
It must be treated as binding on the appellant.
It is no doubt true that Kedar Nath Bajoria 's case (1) shows that Chunder, J. 's, judgment was wrong.
That however does not make his decision lose its force as a final judgment.
A final judgment does not lose its force as such because a superior court in a different case subsequently takes a view which shows that judgment to be wrong.
A final judgment however wrong is still a final judgment.
Its binding force does not depend upon its correctness. ' In order to dispel any doubt as to the jurisdiction of Chunder, J., to decide the criminal revision petition No. 965 of 1952, I wish to observe here that there is nothing in the order of the High Court dated April 8, 1954 to show that he did not have such jurisdiction.
That order only held that in view of section 12 of the Act as amended, the Court at Darjeeling constituted under the Act had no jurisdiction to try the case against Bose as it had been pending on the specified date in a court which was not a court constituted under the Act.
That reasoning does not apply to the case against the appellant in which the criminal revision petition NO.
965 of 1952 had been moved for that case was not pending on that date in any court at all.
Then it seems to me clear that the decision of Chunder, J., being a final judgment and binding on the appellant, he cannot be heard to contend that the Court of Mr. Dutta Gupta by which he was acquitted was a court of competent jurisdiction.
That result follows from the rule of res judicata which applies to all final judgments.
The rule is not a matter of (1) ; 73 technicality.
It is based on fundamental principles expressed in the maxims, interest reipublicae ut sit finie litium, and nemo debet bis vexari pro una et eadem causa: see Halsbury 's Laws of England, (3rd Ed.),vol. 15 p.177.
Brett, M.R. said in In re May. The doctrine of res judicata is not a technical doctrine applicable only to records.
It is a very substantial doctrine, and it is one of the most fundamental doctrines of all Courts, that there must be an end of litigation, and that the parties have no right of their own accord, after having tried a question between them and obtained a decision of a Court, to start that litigation over again on precisely the same questions.
" I feel no doubt that the principle of the finality of judgment obtains in criminal law as well as it does in civil law.
Section 403 of the Code is no doubt based on the same principle.
But I find no reason to confine its application within the limits of the section.
I find clear support for this view in the judgment of the Privy Council in Sambasivam vs Public Prosecutor, Federation of Malaya(2)where it was said at p. 479: " The effect of a verdict of acquittal pronounced by a competent court on a lawful charge and after a lawful trial is not completely stated by saying that the person acquitted cannot be tried again for the same offence.
To that it must be added that the verdict is binding and conclusive on all subsequent proceedings between the parties to the adjudication.
The maxim " Res judicata pro veritate aceipitur " is no less applicable to criminal than to civil proceedings.
" Then it is said that the order of Chunder, J., was an interlocutory order to which the principle of res judicata does not apply.
I am unable to agree that order was an interlocutory order.
It plainly decided the right of the appellant; it decided that the appellant had no right not to be prosecuted again.
It is clear law that the principle of res judicata applies to all orders which finally determine the rights of the (1)(1885) , 518. 10 (2) 74 parties: see Halsbury 's Laws of England (3rd Ed.) p. 177.
The case of Ram Kirpal Sukul vs Mussumat Rup Kuari (1) is of great assistance.
There in the course of execution proceedings it had been decided by the District Judge, Mr. Probyn, that the decree under execution awarded future mesne profits.
It 'Was held by the Judicial Committee that in the later stages in the course of the same execution proceeding the question whether the decree had awarded mesne profits could not, in view of Mr. Probyn 's decision, be reopened and canvassed again.
It was observed at pp.
42 43, " The decree of the Sudder Court was a written document.
Mr. Probyn had jurisdiction to execute that decree, and it was consequently within his jurisdiction, and it was his duty to put a construction upon it.
He had as much jurisdiction, upon examining the terms of the decree, to decide that it did award mesne profits as he would have had to decide that it did not.
The High Court assumed jurisdiction to decide that the decree did not award mesne profits, but, whether their construction was right or wrong, they erred in deciding that it did not, because the parties were bound by the decision of Mr. Probyn, who, whether right or wrong, had decided that it did, a decision which, not having been 'appealed, was final and binding upon the parties and those claiming under them.
It is not necessary, nor would it be correct, for their Lordships to put their construction upon the decree of the Sudder Court.
If the Subordinate Judge and the Judge were bound by the order of Mr. Probyn in proceedings between the same parties on the 'same judgment, the High Court were bound by it and so also are their Lordships in adjudicating between the same parties.
Applying the reasoning adopted in Ram Kirpal 's case(1) it would appear that the order of Chunder, J., cannot now be questioned before us and the appellant is bound by it.
(1) (1885) L.R. 11 I.A. 37. 75 As the appellant cannot contend that his acquittal by Mr. Dutta Gupta was an acquittal by a court of competent jurisdiction, he cannot plead section 403 in support of this appeal.
I appreciate that the view that I have taken is hard on the appellant.
But it does not seem to me that he was entirely without a remedy.
I would have been prepared to give relief to the appellant if he had appealed from the judgment of Chunder J. and for that purpose I would have felt no difficulty in extending the time to appeal.
As it is, I feel that the appeal must be dismissed.
ORDER OF COURT.
In accordance with the opinion of the majority the appeal is allowed, the order of the Calcutta High Court directing the complaint to be proceeded within the Court of the Sub Divisional Magistrate is set aside, and the proceedings against the appellant are quashed. | A complaint was filed against the appellant and one Bose before the Sub Divisional Magistrate, Darjeeling.
Under the W.B. Criminal Law Amendment (Special Courts) Act, 1949 the case was allotted to Mr. Dutta Gupta, Special judge, Alipur, who by order dated July 11, 1951, acquitted the appellant but convicted Bose.
Bose appealed to the High Court which held the Act to be ultra vires and quashed the conviction.
The Act was amended and another complaint was then filed against the appellant and Bose before Mr. Lodh, Special judge, Alipur.
The appellant pleaded the bar of section 403 Code of Criminal Procedure on account of his acquittal by Mr. Dutta Gupta but the Special judge overruled the plea.
The appellant went to the High Court in revision and on March 19, 1953, Chunder, J., held that the acquittal was not by a competent Court as the Act creating the court had been declared ultra vires and dismissed the application.
In the meantime the case was withdrawn from Mr. Lodh and was allotted to the Special judge, Darjeeling, and a fresh complaint was filed against both accused.
On an application made by Bose the High Court quashed these proceedings and directed the proceedings pending in the Court of the Sub Divisional Magistrate, Darjeeling, to be disposed of in accordance with law.
By this time the Supreme Court had held in Kedar Nath Bajoria vs The State of West Bengal that the Act was intra vires.
The appellant again raised the plea of the bar of section 403 Code of Criminal Procedure, contending that in view of the decision of the Supreme Court his acquittal was by a competent Court.
The plea was rejected by the Magistrates and a revision application was dismissed by the High Court on the ground that the appellant was bound by the decision of Chunder, J., holding that the acquittal was by a Court not of competent jurisdiction.
The appellant appealed by special leave.
Held (Sarkar, J., dissenting), that in view of the decision of the Supreme Court in Kedar Nath Bajoria 's case the trial before Mr. Dutta Gupta, Special judge was a lawful one and the acquittal of the appellant which was never set aside was a bar to another trial.
It was open to the appellant to challenge in this appeal the order made by Chunder, J., on March 19, 1953.
Except 59 where the statute so required, it was not imperative upon a party to appeal against every error, defect or irregularity in any order by which he may be aggrieved and by not doing so he did not forfeit his right to have the matter considered by the Supreme Court.
So far as the Supreme Court was concerned it made no difference whether the intermediate order complained of was passed by the Trial Court and was not taken to the High Court or it was taken to the High Court and was confirmed by it.
Kedar Nath Bajoria vs The State of West Bengal, ; , followed.
Maharaja Moheshur Singh vs The Bengal Government, (1859) 7 M.I.A. 283, Alexander John Forbes vs Ameeroonissa Begum, (1865) 10 M.I.A. 340, Sheonath vs Ram Nath, (1865) 10 M.I.A. 413 and Shah Mukhun Lal vs Baboo Sree Kishen Singh, (1868) 12 M.I.A. 157, referred to.
Sambasivam vs Public Prosecutor, Federation of Malaya, and Pritam Singh vs The State of Punjab, A.I.R. 1956 S.C. 415, applied.
Sarkar J.
The judgment of Chunder, J., prevented the appel lant from raising the question that the Court of Mr. Dutta Gupta was a court of competent jurisdiction.
That decision was a final judgment and it did not lose its force as such because a Superior Court in a different case subsequently took a view which showed that the judgment was wrong.
That decision was not an interlocutory order as it decided that the appellant had no right not to be prosecuted again.
The principle of finality of judgment obtained in criminal law as well as it did in civil law.
In re May, , Sambasivam vs Public Prosecutor, Federation of Malaya, and Ram Kirpal Shukul vs Mussumat Rup Kuari, (1883) L.R. 11 I.A. 37, referred to. |
Criminal Appeal No. 139 of 1987.
From the Judgment and Order dated 25.4.
1986 of the Madhya Pradesh High Court in Misc.
Criminal Case No. 1 135 of 1985.
Shanti Bhushan, K.M. Tiwari, L.P. Gaur and Ms. Rani Jethmalani for the Appellant.
U.R. Lalit (not present), P.S. Poti, S.K. Gambhir, Sanjay Sarin, S.N. Khare and T.C. Sharma for the Respondents.
`The Judgment of the Court was delivered by JAGANNATHA SHETTY, J.
We grant special leave and proceed to dispose of the appeal.
The appeal is directed against the order of the High Court of Madhya Pradesh dated April 35, 1986 quashing the final order made under sec.
145 of Cr.
P.C. in respect of a shop premises.
The shop was in possession of one Asgarali son of Akbar Ali as, mortgagee since October 17, 1969.
On August 7, 1982, Asgarali was said to have leased out the shop to the petitioner and also delivered possession thereof.
The entering of possession by the petitioner became a subject matter of dispute.
Apprehending breach of peace, the police initiated proceedings under sec.
145 Cr.
P.C. before the Additional District Magistrate, Ujjain.
In that proceedings, the petitioner was party No. 2 and respondent PG NO 586 No. 2 was party No. 1, On August 13, 1982 the Magistrate made a preliminary order.
The proceedings continued for about three years.
On May 17, 1985, the Magistrate made the final order in the following terms: "Hence I believe that the party No. 2, Jhummamal alias Devandass S/o Jethanand had the occupation within two months from 13.8.
1982 on which summons were issued by the court under sec.
145 sub sec.
Hence I order that party No. 2 Jhummamal is entitled for the occupation of the shop unless he is evicted by procedure established by law.
And I issue injunction that there should not be any obstacle in handing over the possession to Jhummamal.
And if there are locks placed by Motilal or his accomplices, the same should be broken open.
And the goods, if any, found in the shop should be handed over to a responsible person after making a panchnama.
" It will be seen from the above order that the petitioner is entitled to restoration of possession since he was dispossessed forcibly and wrongfully within the terms of proviso to sec.
145(4) of Cr.
P.C. But unfortunately, the petitioner could not be put into possession.
On July 15, 1985, the respondent filed a suit for injunction.
On August 14, 1985, he obtained temporary injunction against the appellant.
But upon appeal that temporary injunction was vacated.
The learned First Additional District Judge, who delivered the Judgment in that appeal, has recorded the following findings: "Consequently it is clear from the above analysis that Asgar Ali was in possession of the disputed shop till 7. 8.82.
It seems to be his prima facie right to rent out the shop.
That it seems that he received the rent in advance executed the rent deed and transferred the possession to appellant/Jhummamal.
As it is mentioned above the First Information Report lodged by Kanhayalal on behalf of Jhummamal in which it is stated that Jhummamal obtained possession on 9.8.82, does not seem right, when only respondent has demanded possession in his petition dated 13.8.82.
Hence I believe that Jhummamal obtained the possession of the disputed shop in the capacity as tenant.
Respondent and his brothers put their locks later on.
And PG NO 587 as in my opinion on the date of occurrence of incident, Jhummamal was in possession of the shop, respondent,plaintiff does not have a prima facie case in his favour Hence, I believe that the temporary injunction order passed by the lower court is not just and as per law.
Consequently while disagreeing with the order passed by the lower court, I accept the appeal and quash the order passed by the lower court.
" In between the parties, there were also certain criminal proceedings regarding the theft from and house trespass on the same premises.
A couple of days before the preliminary order was made under sec.
145 Cr.
P.C. a relation of the appellant filed report before the Police complaining against the respondent.
On that report the respondent was prosecuted under secs.
380 and 454 of the IPC.
On February 22 1984, he was convicted of the said offences.
But upon appeal, he as acquitted by the Additional District Judge.
The revision against the order of acquittal was also dismissed by the High Court.
It may also be relevant to state that the respondent challenged the final order under sec.
145(6) of the Cr.
P.C. in a revision before the sessions Judge.
On September 27, 1985, that revision was dismissed.
After becoming unsuccessfull in the proceedings under sec.
145 Cr.
P.C. and also before civil court in the suit to or injunction.
the respondent moved the High Court under sec.
482 of Cr.
P.C. to quash the proceedings under sec.
145 Cr.
The High Court accepted the petition and quashed the proceedings by following the judgment of this Court in Ram Sumer Puri ,Mahant vs State of U. P.[1985] 1 SCC 427.The operative portion of the High Court order is as follows; "In view of the fact that civil proceedings in respect of the disputed premises is pending before the competent civil court, where interim reliefs have been prayed for and obtained, the reappears to be no justification for continuing with the proceedings u/s 145 Cr.
P.C. pending before the S.D.M. Shri Tiwari learned counsel submitted that in case the plaintiff 's suit is either withdrawn or dismissed, he would be left with no remedy.
This submission cannot be accepted PG NO 588 in view of the Supreme Court judgment as reported in Ram Sumer Puri vs State of U.P. AIR 1985 SC 472.
Section 145 is intended to provide a special remedy for the prevention of breach of peace arising out of a dispute relating to immovable property.
Its primary object is to maintain the public peace and not to decide disputes between the contending parties or adjudicate upon the rights of the parties to possession.
Now, that the civil court is seized of the matters it is desirable that such parallel proceedings in respect of the same subject matter and dispute should not be allowed to continue in the criminal court as it amounts to an abuse of the process of the court which is one of the grounds for invoking section 482 Cr.
For the foregoing reasons, this petition deserves to be allowed.
It is accordingly allowed.
The proceedings u/s 145 Cr.
P.C. pending before the Sub Divisional Magistrate Ujjain, along with the orders passed therein is, therefore, quashed.
" The validity of the aforesaid order has been called into question in this appeal.
It will be obvious from the order of the High Court that the decision of this Court in Ram Sumer 's case has been totally misunder stood.
In that case, a title suit for possession and injunction in respect of certain property was instituted before the civil court.
The suit was dismissed on February 28, 1981.
The matter was taken up in appeal.
When the appeal was pending for disposal, proceedings under sec.
145 Cr.
P.C. were initiated with regard to the same property.
In that proceedings, the Magistrate passed a preliminary order under sec.
145(1) of the Cr.
P.C. and also attached the property.
The aggrieved party challenged that order in a revision petition before the Allahabad High Court.
The High Court refused to interfere with that order.
But this Court quashed the proceedings under sec.
145 Cr.
P.C. observing : There is no scope to doubt ar dispute the position that the decree of the civil court is binding on the criminal court in a matter like the one before us.
Counsel for respondents 2 5 was not in a position to challenge the proposition that parallel proceedings should not be permitted to continue and in the event of a decree of the civil court, the criminal court should not be allowed to PG NO 589 invoke its jurisdiction particularly when possession is being examined by the civil court and parties are in a position to approach the civil court for interim orders such as injunction or appointment of receiver for adequate protection of the property during pendency of the dispute.
Multiplicity of litigation is not in the interest of the parties nor should public time be allowed to be wasted over meaningless litigation.
We are therefore, satisfied that parallel proceedings should flat continue and the order of the learned Magistrate should be quashed.
We fail to understand how the High Court in this case took advantage of the decision of this Court in Ram Sumer 's case.
The ratio of the said decision is that a party should not be permitted to litigate before the criminal court when the civil suit is pending in respect of the same subject matter.
That does not mean that a concluded order under sec.
145 Cr.
P.C. made by the Magistrate of competent jurisdiction be set at naught merely because the unsuccessful party has approached the civil court.
An order made under sec.
145 Cr.
P.C. deals only with the factum of possession of the party as on a particular day.
It confers no title to remain in possession of the disputed property.
The order is subject to decision of the civil court.
The unsuccessful party therefore must get relief only in the civil court.
He may move the civil court with properly constituted suit.
for may file a suit for declaration and prove a better right to possession.
The civil court has jurisdiction to give a finding different from that which the Magistrate has reached.
Counsel for the respondent, however, suggested that having regard to the nature of dispute and the rights of parties relating to the property in question, we should not exercise our extraordinary jurisdiction under article 136 of the Constitution.
We do not think that the contention could be accepted in view of the patently erroneous order of the High Court.
In the result, we allow the appeal, set aside that order of the High Court and restore that of the Magistrate.
The parties may work out their rights as per law.
P.S.S. Appeal allowed. | The mortgagee in possession leased out the shop to the appellant and delivered possession.
His entering of possession became a subject matter of dispute with respondent No. 2 in which the appellant was dispossessed.
In the proceedings initiated under section 145 Cr.
P.C. the,Magistrate found that the appellant was entitled to restoration of possession since he was dispossessed forcibly and wrongfully within the terms of proviso to section 145 (4) Cr.
The respondent filed a suit and obtained temporary injunction against the appellant.
That injunction was vacated by the Additional District Judge who found that the appellant was in possession of the shop on the date of occurrence of incident.
The respondents revision application challenging the final order under s,145(6) Cr.
P.C. was dismissed by the Sessions Judge.
Accepting respondents petition under section 482 Cr.
P.C., for quashing the proceedings under section 145 the High Court, following the judgment in Rum Sumer Puri Mahant vs Srate of U. P., , took the view that since the civil proceedings in respect of the disputed premises were pending before the competent civil court where interim reliefs have been prayed for and obtained, there was no justification for continuing the proceedings under section 145 Cr.
P.C. pending before the SDM.
Allowing the appeal by special leave, HELD: The High Court was in error in quashing the proceedings under section 145 Cr.
P.C. pending before the Sub Divisional Magistrate.
[589F, 587EF] An order made under section 145 Cr.
P.C. deals only with the factum of possession of the party as on a particular day.
It PG NO 584 PG NO 585 confers no title to remain in possession of the disputed property.
The order is subject to decision of the civil court.
The unsuccessful party therefore must get relief only in the civil court.
He may move the civil court with properly constituted suit.
He may file a suit for declaration and prove a better right to possession.
The civil court has jurisdiction to give a finding different from that which the Magistrate has reached.
[589D E] The ratio of the decision in Ram Sumer Puri Mahant vs State of U.P. is that a party should not be permitted to Litigate before the criminal court when the civil suit is pending in respect of the same subject matter.
That does not mean that a concluded order under section 145 Cr.
P.C. made by the Magistrate of competent jurisdiction, as in the instant case, should be set at naught merely because the unsuccessful party has approached the civil court.
[589C D] |
Civil Appeal No. 478 of 1957.
Appeal from the judgment and decree dated August 17, 1954, of the Punjab High Court, Circuit Bench at Delhi, in Regular First Appeal No. 76 of 1952, arising out of the judgment and decree dated December 15, 1951, of the Court of Sub Judge, 1st Class, Delhi in Suit No. 169 of 1949/409 of 1950.
77 Ganapathy Iyer and D. Gupta, for the appellant.
Gurbachan Singh and Harbans Singh, for the respondent.
October 28.
The Judgment of the Court was delivered by SUBBA RAO J.
This appeal on a certificate granted by the High Court of Judicature for Punjab at Chandigarh is directed against its judgment confirming that of the Subordinate Judge, First class, Delhi, in a suit filed by the respondent against the appellant for the recovery of compensation in respect of non delivery of goods entrusted by the former to the latter for transit to New Delhi.
On August 15, 1947, India was constituted into two Dominions, India and Pakistan; and soon thereafter civil disturbances broke out in both the Dominions, The respondent and others, who were in government employment at Quetta, found themselves caught in the disturbances and took refuge with their household effects in a government camp.
The respondent collected the goods of himself and of sixteen other officers, and on September 4, 1947, booked them at Quetta Railway Station to New Delhi by a passenger train as per parcel way bill No. 317909.
Under the said bill the respondent was both the consignor and consignee.
The N. W. Railway (hereinafter called the Receiving Railway) ends at the Pakistan frontier and the E. P. Railway (hereinafter called the Forwarding Railway) begins from the point where the other line ends; and the first railway station at the frontier inside the Indian territory is Khem Karan.
The wagon containing the goods of the respondent and others, which was 'duly seated and labelled indicating its destination as New Delhi, reached Khem Karan from Kasur, Pakistan, before November 1, 1947, and the said wagon was intact and the entries in the " inward summary." tallied with the entries on the labels.
Thereafter it traveled on its onward march to Amritsar and reached that place on November 1, 1947.
There also the wagon was found to be intact and the label showed that it was bound to New Delhi from Quetta.
On November 2, 1947, it reached Ludhiana and remained 78 there between November 2, 1947 and January 14, 1948; and the " vehicle summary " showed that the wagon bad a label showing that it was going from Lahore to some unknown destination.
It is said that the said wagon arrived in the unloading shed at New Delhi on February 13, 1948, and it was unloaded on February 20, 1948; but no immediate information of the said fact was given to the respondent.
Indeed, when the respondent made an anxious enquiry by his letter dated February 23, 1948, the Chief Administrative Officer informed him that necessary action would be taken and he would be addressed again on the subject.
After further correspondence, on June 7, 1949, the Chief Administrative Officer wrote to the respondent to make arrangements to take delivery of packages lying at New Delhi Station, but when the respondent went there to take delivery of the goods, he was told that the goods were not traceable.
On July 24, 1948, the respondent was asked to contact one Mr. Krishan Lal, Assistant Claims Inspector, and take delivery of the goods.
Only a few articles, fifteen in number and weighing about 61 maunds, were offered to him subject to the condition of payment of Rs. 1,067 8 0 on account of freight, and the respondent refused to take delivery of them.
After further correspondence, the respondent made a claim against the Forwarding Railway in a sum of Rs. 1,62,123 with interest as compensation for the non delivery of the goods entrusted to the said Railway, and, as the demand was not complied with, he filed a suit against the Dominion of India in the Court of the Senior Subordinate Judge, Delhi, for recovery of the said amount.
The defendant raised various pleas, both technical and substantive to non suit the plaintiff.
The learned Subordinate Judge raised as many as 15 issues on the pleadings and held that the suit was within time, that the notice issued complied with the provisions of the relevant statutes, that the respondent had locus stand to file the suit and that the respondent had made out his claim only to the extent of Rs. 80,000; in the result, the suit was decreed for a sum of Rs. 80,000 with proportionate costs.
79 The appellant carried the matter on appeal to the High Court of Punjab, which practically accepted all the findings arrived at by the learned Subordinate Judge and dismissed the appeal.
In this Court the appellant questions the correctness of the said decree.
Learned Counsel for the appellant raised before us the following points: (1) there was no privity of contract between the respondent and the Forwarding Railway, and if he had any claim it was only against the Receiving Railway; (2) the suit was barred by limitation both under article 30 and Art 31 of the Indian Limitation Act and it was not saved by any acknowledgement or acknowledgements of the claim made within section 19 of the Limitation Act; and (3) the notice given by the respondent under section 77 of the Indian Railways Act, 1890, did not comply with the provisions of the said section inasmuch as the claim for compensation made thereunder was not preferred within six months from the date of the delivery of the goods for carriage by the Railway.
The third point may be taken up first and disposed of shortly.
Before the learned Subordinate Judge it was conceded by the learned Counsel for the defendant that the notice, exhibit P 32, fully satisfied the requirements of section 77 of the Indian Railways Act, and on that concession it was held that a valid notice under section 77 of the said Act bad been given by the respondent.
In the High Court no attempt was made to question the factum of this concession; nor was it questioned by the appellant in its application for special leave.
As the question was a mixed one of fact and law, we would not be justified to allow the appellant at this very late stage to reopen the closed matter.
We, therefore, reject this contention.
The learned Counsel for the appellant elaborates his first point thus : The Receiving Railway, the argument, proceeds, entered into an agreement with the respondent to carry the goods for consideration to their destination i.e., New Delhi, and in carrying out the terms of the contract it might have employed the agency of the Forwarding Railway, but the consignor was not in any way concerned with it and if loss was 80 caused to him by the default or neligence of the Receiving Railway, he could only look to it for compensation and he had no cause of action against the Forwarding Railway.
This argument is not a new one but one raised before and the Courts offered different solutions based on the peculiar facts of each case.
The decided cases were based upon one or other of the following principles: (i) the Receiving Railway is the agent of the Forwarding Railway; (ii) both the Railways constitute a partnership and each acts as the agent of the other; (iii) the Receiving Railway is the agent of the consignor in entrusting the goods to the Forwarding Railway: an instructive and exhaustive discussion on the said three principles in their application to varying situations is found in Kulu Ram Maigraj vs The Madras Railway Company (1), G. I. P. Railway Co. vs Radhakisan Khushaldas (2 ), and Bristol And Exeter Railway vs Collins (3); (iv) the Receiving Railway, which is the bailee of the goods, is authorized by the consignor to appoint the Forwarding Railway as a sub bailee, and, after such appointment, direct relationship of bailment is constituted between the consignor and the sub bailee; and (v) in the case of through booked traffic the consignor of the goods is given an option under 'section 80 of the Indian Railways.
Act to recover compensation either from the Railway Administration to which the goods are delivered or from the Railway Administration in whose jurisdiction the loss, injury.
destruction or deterioration occurs.
Some of the aforesaid principles cannot obviously be applied to the present case.
The statutory liability under section 80 of the Indian Railways Act cannot be invoked, as that section applies only to a case of through booked traffic involving two or more Railway Administration in India; whereas in the present case the Receiving Railway is situated in Pakistan and the Forwarding Railway in the Indian territory.
India and Pakistan are two independent sovereign powers, and by the doctrine of lex loci contractus, section 80, cannot (1) I.L.R. (2) I.L.R. (3) VII H L.C. 194.
81 apply beyond the territories of India; nor can the respondent rely upon the first two principles.
There is no allegation, much less proof, that there was any treaty arrangement between these two states governing the rights inter se in the matter of through booked traffic.
This process of elimination leads us to the consideration of the applicability of principles (iii) and (iv) to the facts of the present case.
The problem presented can only be solved by invoking the correct principle of law to mould the relief on the basis of the facts found.
We shall first consider the scope of the fourth principle and its applicability to the facts of this case.
Section 72 of the Indian Railways Act says that the responsibility of a railway administration for the loss, destruction or deterioration of animals or goods delivered to the administration to be carried by railway shall, subject to the other provisions of the Act, be that of a bailee under sections 151, 152 and 161 of the .
Section 148 of the defines " bailment " thus: " A 'bailment ' is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them." G.W. Patson in the book "Bailment in the Common Law" says, at p. 42, thus: " If a bailee of a res sub bails it by authority, then according to the intention of the parties, the third person may become the immediate bailee of 'the owner, or he may become a sub bailee of the original bailee".
At p. 44 the learned author illustrates the principle by giving as an example a carrier of goods entrusting them to another carrier for part of the journey.
One of the illustrations given by Byles J. in Bristol.
And Exeter Railway vs Collins (1) is rather instructive and it (1) VII H.L.C. 194,212, 11 82 visualises a situation which may be approximated to.
the present one and it is as follows: The carrier receiving the goods may, therefore, for the convenience of the public or his customers, adopt a third species of contract.
He may say, We do not choose to undertake responsibilities for negligence and accidents beyond our limits of carriage, where we have no means of preventing such negligence or accident; and we will not, therefore, undertake the carriage of your goods from A. to B., but we will be carriers as far as our line extends, or our vehicles go, and we will be carriers no further; but to protect you against the inconveniences and trouble to which you might be exposed if we only undertook to carry to the end of our line of carriage, we will undertake to forward the goods by the next carriers, and on so doing our liability shall cease, and our character of carriers shall be at an end; and for the purpose of so forwarding and of saving the trouble of two payments, we will take the whole fare, or you may pay as one charge at the end; but if we receive it we will receive it only as your agents for the purpose of ultimately paying the next carriers.
" We may add to the illustration the further fact that the Forwarding Railway is in India, a foreign country in relation to the country in which the Receiving Railway is situate.
Relying upon the said passages, an argument is advanced to the effect that the consignor i.e., the respondent, authorised his bailee, namely, the Receiving Railway, to entrust the goods to the Forwarding Railway during their transit through India to their destination and the facts disclosed in the case sustain in the said plea.
There is no document executed between the respondent and the Receiving Railway hereunder the Receiving Railway was expressly authorized to create the Forwarding Railway the immediate bailee of the owner of the goods.
exhibit P 50, the railway receipt dated September 4, 1947, does not expressly confer any such power.
But the facts found in the case irresistibly lead to that conclusion.
There 83 was no treaty between the two countries in the matter of through booked traffic; at any rate, none has been placed before us.
What we find is only that the Receiving Railway received the goods of the respondent and delivered the wagon containing the said goods to the care of the Forwarding Railway, and the latter took over charge of the wagon, carried it to New Delhi and offered to deliver the goods not lost to the respondent on payment of the railway freight.
In the absence of any contract between the two Governments or the, Railways, the legal basis on which the conduct of the respondent and the Railways can be sustained is that of the respondent delivered the goods to the Receiving Railway with an authority to create the Forwarding Railway as his immediate bailee from the point the wagon was put on its rails.
The same result could be achieved by approaching the case from a different perspective.
Section 194 of the says : " Where an agent, holding an express or implied authority to name another person to act for the principal in the business of the agency, has named another person accordingly, such person is not a sub `agent, but an agent of the principal for such part of the business of the agency as is entrusted to him.
" The principle embodied in this section is clearly stated by Thesiger L. J. in De Buasche vs Alt (1) at p. 310 thus : " But the exigencies of business do from time to time render necessary the carrying out of the instructions of a principal by a person other than the agent originally instructed for the purpose, and where that is the case, the reason of the thing requires that the rule should be relaxed, so as, on the one hand, to enable the agent to appoint what has been termed " a sub agent " or " substitute " ; and, on the other hand, to constitute, in the interests and for the protection of the principal, a direct privity of contract between him and such substitute.
" The aforesaid facts clearly indicate that the respondent appointed the Receiving Railway as his agent to 1. , 310.
84 carrv his goods on the railway to a place in India with whom Pakistan had no treaty arrangement in the matter of through booked traffic.
In that situation the authority in the agent must necessarily be implied to appoint the Forwarding Railway to act for the consignor during that part of the journey of the goods by the Indian Railway; and, if so, by force of the said section, the Forwarding Railway would be an agent of the consignor.
If no such agency can be implied, in our view, a tacit agreement between the Receiving Railway and the Forwarding Railway to carry the respondent 's goods to their destination may be implied from the facts found and the conduct of all the parties concerned.
If the Receiving Railway was not an agent of the Forwarding Railway, and if there was no arrangement between the two Governments, the position in law would be that the foreign railway administration, having regard to the exigencies of the situation obtaining during those critical days, brought the wagon containing the goods of the respondent and left it with the Forwarding Railway; and the latter consciously took over the responsibility of the bailee, carried the wagon to New Delhi and offered to deliver the goods to the respondent.
The respondent also accepted that relationship and sought to make the Forwarding Railway responsible for the loss as his bailee.
On these facts and also on the basis of the course of conduct of the parties, we have no difficulty in implying a contract of bailment between the respondent and the Forwarding Railway.
We may also state that section 71 of the permits the recognition of a contract of bailment implied by law under circumstances which are of lesser significance than those present in this case.
The said section reads: A person who finds goods belonging to another and takes them into his custody, is subject to the same responsiblity as a bailee.
" If a finder of goods, therefore, accepts the responsibility of the goods, he is placed vis a vis the owner of the goods in the same position as a bailee.
If it be held 85 that the Railway Administration in Pakistan for reasons of policy or otherwise left the wagon containing the goods within the borders of India and that the Forwarding Railway Administration took them into their custody, it cannot be denied that their responsibility in regard to the said goods would be that of a bailee.
It is true there is an essential distinction between a, contract established from the conduct of the parties and a quasi contract implied by law; the former, though not one expressed in words, is implied from the conduct and particular facts and the latter is only implied by law, a statutory fiction recognized by law.
The fiction cannot be enlarged by analogy or otherwise.
As we have held that the Receiving Railway was authorized by the respondent to engage the Forwarding Railway as his agent or as his bailee, this section need not be invoked.
But we would have had no difficulty to rely upon it if the Forwarding Railway was equated to a finder of goods within the meaning of the section.
If so, the next question that arises is what is the extent of the liability of the appellant in respect of the goods of the respondent entrusted to it for transit to New Delhi.
We have held that, in the circumstances of the present case, the application of the provisions of section 80 of the Indian Railways Act is excluded.
If so, the liability of the Forwarding Railway is governed by section 72 of the said Act.
Under that section the responsibility of a railway administration for the loss, destruction or deterioration of animals or goods delivered to the administration to be carried by railway shall, subject to the other provisions of the Act, be that of a bailee under sections 151, 152 and 161 of the .
Under section 151 of the , the bailee is bound to take such care of the goods bailed to him as a man of ordinary prudence would under similar circumstances take of his own goods of the same bulk, quality and value of the goods bailed; and under section 152 thereof, in the absence of any special contract, he is not responsible for the loss, destruction or deterioration of the thing bailed, if he has taken such amount 86 of care of it as described in section 151.
In other words, the liability under these sections is one for negligence only in the absence of a special contract.
Generally goods are consigned under a risk note under which the Railway Company is absolved of all liability or its liability is modified.
No such risk note is forth coming in the present case.
The question, therefore, reduces itself to an enquiry whether, on the facts, the Forwarding Railway observed the standard of diligence required of an average prudent men.
The facts found by the High Court as well as by the Subordinate Judge leave no room to doubt that the Forwarding Railway was guilty of negligence in handling the goods entrusted to its care.
The wagon reached Khem Karan intact.
D. W. 4 deposed that he received from the guard of the train that brought the wagon to the station the inward summary and that on checking the train with the aid of that summary he found that the wagon was intact according to the summary.
He also found the seals and labels of the wagon intact and that the 'inward summary ' tallied with the entries on the labels.
It may, therefore, be taken that when the Forwarding Railway took over charge of the goods they were intact.
The evidence of P. W. 1,Thakar Das, establishes that even at Amritsar the wagon was intact.
But, thereafter in its onward march towards New Delhi it does not appear on the evidence that the necessary care was bestowed by the railway authorities in respect of the said wagon.
The said wagon remained in the yard of Ludhiana Station between November 2, 1947, and January 14, 1948 and also it appears from the evidence that when it reached that place the label showed that its destination was unknown.
What happened during these months is shrouded in mystery.
It is said that the said wagon arrived at New Delhi on February 13, 1948, and that the Goods Clerk, Ram Chander, unloaded the goods in the presence of the head watchman, Ramji Lal and head constable, Niranjan Singh, when it was discovered that only 15 packages were in the wagon and the rest were lost.
The Goods Clerk, Ram Chander (D.W, 4), the head watchman, Ramji Lal (D. W. 7), 87 the Assistant Train Clerk, Krishan Lal (D. W. 8), and the head constable, Niranjan Singh (D. W. 16), speak to the said facts, but curiously no contemporaneous relevant record disclosing the said facts was filed in the present case.
We cannot act upon the oral evidence of these interested witnesses in the absence of such record.
No information was given to the respondent about the arrival at New Delhi of the said wagon.
Only on June 7, 1948, i.e., nearly four months after the alleged arrival of the wagon, the respondent received a letter from the Chief Administrative Officer asking him to effect delivery of the packages lying in New Delhi Station; but to his surprise, when the respondent went to take delivery no goods were to be found there.
Only on August 18, 1948 the appellant offered to the respondent a negligible part of the goods in a damaged condition subject to the payment of the railway freight, and the respondent refuse to take delivery of the same.
From the said facts it is not possible to hold that the railway administration bestowed such care on the goods as is expected of an average prudent man.
We, therefore, hold that the Forwarding Railway was guilty of negligence.
Then remains the question of limitation.
The relevant articles are articles 30 and 31 of the Indian Limitation Act.
They read: Description of suit period of Time from limitation.
wich period begins to run 30 Against carrier for compensation for losing or injuring One year When the loss or injury goods.
occurs.
Against a carrier for compensation for non delivery of, or One year When the goods ought delay in delivering to be delivered.
goods.
Article 30 applies to a suit by a person claiming com pensation against the railway for its losing or injuring his goods; and article 31 for compensation for nondelivery or delay in delivering the goods.
The learned Counsel for the appellant argued that article 30 would apply to the suit claim, whereas the 88 learned Counsel for the respondent contended that article 31 would be more appropriate to the suit claim.
We shall assume that article 30 governed the suit claim and proceed to consider the question on that basis.
The question now is, when does the period of limitation under article 30 start to run against the claimant ? The third column against article 30 mentions that the said claim should be made within one year from the date when the loss or injury occurs.
The burden is upon the defendant who seeks to non suit the plaintiff on the ground of limitation to establish that the loss occurred beyond one year from the date of the suit.
The proposition is self evident and no citation is called for.
Has the defendant, therefore, on whom the burden rests to prove that the loss occurred beyond the prescribed period, established that fact in this case ? The suit was filed on August 4, 1949.
In the plaint the plaintiff has stated that loss to the goods has taken place on the defendant railway, and, therefore, delivery has not been effected.
Though in the written statement there was a vague 'denial of this fact the evidence already noticed by us established beyond any reasonable doubt that the goods were lost by the Forwarding Railway when they were in its custody.
But there is no clear evidence adduced by the defendant to prove when the goods were lost.
It is argued that the goods must have been lost by the said Railway at the latest on February 20, 1948, when the goods are alleged to have been unloaded from the wagon at the New Delhi Station; but we have already discussed the relevant evidence on that question and we have held that the defendant did not place before the Court any contemporaneous record to prove when the goods were taken out of the wagon.
Indeed, the learned Subordinate Judge in a considered judgment held that it had not been established by the Forwarding Railway that the goods were lost beyond the period of limitation.
The correctness of this finding was not canvassed in the High Court, and for the reasons already mentioned, on this material produced, there was every justification for the findings.
If so, it follows that the 89 suit was well within time.
In this view it is not necessary to express our opinion on the question whether there was a subsequent acknowledgment of the appellant 's liability within the meaning of art 19 of the Indian Limitation Act.
In the result, the appeal fails and is dismissed with costs.
Appeal dismissed. | The respondent booked certain goods on September 4, 1947, with the N. W. Railway at Quebec in Pakistan to New Delhi.
The wagon containing the goods was received at the Indian border station of Khem Karan on November 1, 1947, duly sealed and labelled indicating its destination as New Delhi.
It reached New Delhi on February 3, 1948, and was unloaded on February 20, 1948, but no immediate information was sent to the respondent.
On June 7, 1948, the respondent was asked by the E. P. Railway to take delivery of the goods lying at New Delhi station but when the respondent went there the goods were not traceable.
Again, on July 24, 1948, the respondent was asked to take delivery of the goods when only a small portion of the goods 76 were offered to him subject to the payment of Rs. 1,067 8 0 as freight but the respondent refused to take delivery.
On August 4,1949, the respondent filed a suit for Rs. 1,62,123 with interest as compensation for non delivery of goods against the Dominion of India.
The trial court found that the E. P. Railway was guilty of negligence in handling the goods and decreed the suit for Rs. 80,000, and on appeal the High Court confirmed the decree.
The appellant contended that there was no privity of contract between the respondent and the E. P. Railway and he could only have a claim against the N. W. Railway in Pakistan, and that the suit was barred by limitation.
Held, that there was an implied contract of bailment between the respondent and the E. P. Railway and that Railway was liable for the loss.
The conduct of the parties indicated that the respondent delivered the goods to the N. W. Railway with an authority to create the E. P. Railway as his immediate bailer from the point the wagon was put on its rails.
The N. W. Railway must be deemed to have had implied authority to appoint the E. P. Railway to act for the consignor during the journey of goods by the E. P. Railway and by force of section 194 of the , the E. P. Railway became an agent of the consignor.
The N. W. Railway left the wagon with the E. P. Railway and the latter consciously took over the responsibility of the bailer, carried the wagon to New Delhi and offered to deliver the goods to the respondent.
The respondent also accepted this relationship.
From these facts, even if an agency could, not be implied, a tacit agreement between the two Railways to carry the respondents goods to New Delhi could be implied resulting in a contract of bailment between the E. P. Railway and respondent.
Kulu Ram Maigraj vs The Madras Railway Company, I.L.R. , G.I.P. Railway Co. vs Radhakisan Kushaldas, I.L.R. , Bristol and Exeter Railway vs Collins, VII H.L.C. 194 and De Bussche vs Alt, (1878) L.R. 8 Ch.
D. 386, referred to.
Held, further that the suit was not barred by limitation.
Even if article 30 of the Indian Limitation Act applied, as contended for by the appellant, the burden was on the appellant, who sought to non suit the respondent, to establish that the loss occurred beyond one year from the date of the suit.
Thus the appellant had failed to establish by any clear evidence. |
Appeals Nos. 422 & 423 of 1958.
433 Appeals from the judgment and decree dated November 22, 1957, of the Allahabad High Court (Lucknow Bench), Lucknow, in Civil Misc.
Applications Nos. 54 and 56 of 1957.
Niamatullah, section N. Andley and J. B. Dadachanji for O. N. Srivastava, for the appellant.
H. N. Sanyal, Additional Solicitor General of India, Bishun Singh and C. P. Lal, for the respondent.
December 14.
The Judgment of section K. Das and A. K. Sarkar, JJ. was delivered by ' Sarkar, J. Subba Rao, J. delivered a separate judgment.
SARKAR J. Raja Udit Narain Singh was the proprietor of Ramnagar estate, a big taluqdari in district Barabanki in Uttar Pradesh, formerly known as the United Provinces of Agra and Oudh and for short U.P., an abbreviation still in use.
Ramnagar estate was governed by the Oudh Estates Act (1 of 1869), and in the absence of any disposition by the holder for the time being, it appears to have devolved according to the rule of primogeniture.
Raja Udit Narain died in 1927 leaving two sons of whom the older was Raja Harnam and the younger Kanwar Sarnam.
Kanwar Sarnam died in 1928 leaving the respondent his only son, and a widow, Parbati Kuer.
Raja Harnam died thereafter in 1935 without issue, leaving the appellant his sole widow.
After the death of Raja Harnam disputes arose between the respondent, who was then a minor and was represented by his certificated guardian, his mother Parbati Kuer, and the appellant, a reference to which has now to be made.
The appellant 's contentions appear to have been as follows : Raja Udit Narain left a will bequeathing certain villages of Ramnagar estate to Raja Harnam absolutely and the rest of it, as set out in a schedule to the will, to him for life and after him to Kanwar Sarnam for life and thereafter or failing the latter, to the respondent absolutely.
The will declared that village Bichelka had been given to her for life as " runumal " 434 or wedding present and that she would have a maintenance of Rs. 500, per month out of the estate.
The schedule to the will did not mention five of the villages of Ramnagar estate with regard to which Raja Udit Narain died intestate and these thereupon devolved on Raja Harnam under the rule of primogeniture that applied to the estate.
After Raja Udit Narain 's death, Raja Harnam went into possession of the estate and executed a will leaving all the properties over which he had a power of disposition, including the seven villages bequeathed to him absolutely by Raja Udit Narain and the five villages not disposed of by his will, to her in absolute right.
Thereafter, Raja Harnam executed a deed of gift in her favour giving her most of the immovable properties covered by his will and several house properties in Lucknow.
On these allegations the appellant made a claim to all the properties said to have been given to her by the, aforesaid wills and the gift of Raja Harnam.
Parbati Kuer, on behalf of her son, the respondent, challenged the factum and validity of the wills and the gift said to have been made by Raja Harnam and resisted the appellant 's claim.
And so the disputes between the parties arose.
The Deputy Commissioner of Barabanki intervened to restore peace and brought about a family arrangement, into which the parties entered on January 22, 1935, settling the disputes on the terms therein contained.
Under this family arrangement certain properties came to the appellant but it is not necessary for the purposes of these appeals to refer to them in detail.
The peace created by the family arrangement did not last long.
The respondent after attaining majority on September 12, 1940, repudiated the family arrangement on grounds to which it is unnecessary to refer.
On September 6, 1943, he filed a suit against the appellant to set aside the family arrangement and recover from her the properties of the estate in her possession.
The defence of the appellant to the suit was that the family arrangement was binding on the respondent.
However, to cover the eventuality of the 435 family arrangement being found to be void or voidable, the appellant herself filed a suit against respondent claiming title to various properties of the estate under the will of Raja Udit Narain and the will and gift of Raja Harnam.
The respondent contested this suit.
With the particulars of the claims and defences in the suits or their soundness we are not concerned in these appeals, and a reference to them will not be necessary.
While these two suits were pending, the appellant was on November 12, 1945, declared by the District Judge of Lucknow under the provisions of the Lunacy Act, 1912, to be a person of unsound mind.
Thereupon the Court of Wards assumed superintendence of the properties of the appellant under the provisions of the U.P. Court of Wards Act, hereinafter referred to as the Act, and placed them in the charge of the Deputy Commissioner of Barabanki district in which most of these properties were situate.
The Court of Wards gave to these properties the name Ganeshpur estate.
Upon such assumption of charge the cause titles of the two suits were amended and in the place of the appellant 's name, the name " Deputy Commissioner, Barabanki I/C Court of Wards, Ganeshpur estate " was substituted, such amendment being required by the provisions of section 55 of the Act the terms of which we shall presently set out.
The letters " I/C " in the substituted name were an abbreviation of the words " in charge of.
" Thereafter, the respondent 's suit was dismissed by a decree dated June 3, 1947, except as to his claim to two villages, it being found that in them Raja Harnam had only a life estate and to them the appellant had no claim after his death, and that these had been given to her by the family arrangement by mistake.
As the family arrangement was substantially upheld by the decree in the respondent 's suit, the appellant 's suit became unnecessary for it bad been founded on the basis that the family arrangement was void or could be avoided.
It had therefore to be dismissed.
Two appeals were filed from the decisions in these two suits in the High Court at Lucknow, one by the Deputy 436 Commissioner of Barabanki representing the estate of the appellant against the decree dismissing the appellant 's suit, being F.C.A. No. 99 of 1947, and the other by the respondent, being F.C.A. No. 2 of 1948, against the decree dismissing his suit.
F.C.A. No. 99 appears to have been filed merely as a matter of safety, to be proceeded with only in case the respondent 's appeal, F.C.A. No. 2 of 1948, succeeded.
While the appeals were pending, the respondent made an application under the Act to have his estate placed under the charge of the Court of Wards.
That application was accepted and the superintendence of his estate was taken over by the Court of Wards on February 8, 1950.
The respondent 's estate was also placed by the Court of Wards in the charge of the Deputy Commissioner, Barabanki, as the estate was within his jurisdiction.
The Court of Wards retained for it its old name of Ramnagar estate.
The cause titles of the appeals had again to be amended in view of section 55 of the Act and for the name of the respondent, the name " Deputy Commissioner Barabanki I/C Court of Wards Ramnagar estate " was substituted.
The cause titles of the appeals then became, Deputy Commissioner, Barabanki I/C Court of Wards Ganeshpur estate Appellant versus Deputy Commissioner, Barabanki I/C Court of Wards Ramnagar estate Respondent AND Deputy Commissioner, BarabankiI/C Court of Wards Ramnagar estate Appellant versus Deputy Commissioner, BarabankiI/C Court of Wards Ganeshpur estate . Respondent.
The position thus was that the estates of both the appellant and the respondent came under the superintendence of the same Court of Wards and were placed in the charge of the same Deputy Commissioner in whose name each party sued and was sued in the appeals.
This situation was the occasion for the 437 proceedings to be referred to presently, from which these appeals arise.
Before coming to these proceedings, certain other facts have however to be stated.
On December 3, 1951, the Court of Wards passed a resolution settling the appeals on certain terms as it thought that such settlement was in the best interests of the two contending wards, particularly in view of the heavy costs of the litigation and the then impending legislation for abolition of zemindaries.
Thereafter, under the instructions of the Court of Wards, the lawyers appearing for the parties in the appeals presented to the High Court on April 28,1952, petitions for recording compromises in the appeals and for passing decrees in accordance therewith.
On May 2, 1952, the High Court passed orders directing the compromises to be recorded and decrees to be passed in the appeals in terms thereof.
The appeals were thus disposed of and the proceedings therein terminated.
When the appeals were so compromised, the paperbooks in respect of them were in the course of preparation.
It is not necessary to encumber this judgment by setting out the terms of the compromise.
It is however of some importance to state that the petitions embodying the compromise were signed twice by Mr. K. A. P. Stevenson, once as Deputy Commissioner Barabanki, I/C Court of Wards, Ramnagar estate, district Barabanki (Appellant in F.C.A. No. 2 of 1948 and respondent in F.C.A. No. 99 of 1947)" and again as " I/C Court of Wards, Ganeshpur estate, district Barabanki (Respondent in F.C.A. No. 2 of 1948 and appellant in F.C.A. No. 99 of 1947)".
Obviously, Mr. Stevenson, the Deputy Commissioner, Barabanki, signed each petition once as representing the appellant and again as representing the respondent.
It is also of some interest to note that the petitions were presented in Court by Sri Sita Ram, Advocate for the appellant 's estate and Sri Bishun Singh, Advocate for the respondent 's estate.
Some more events happened before the proceedings out of which these appeals arise were started.
Shortly after the compromise decrees had been passed, ail Act 56 438 abolishing zemindaries came into force in U.P. and the zemindary estates of the parties vested in the Government of U.P.
Thereupon the Court of Wards ceased to function.
In anticipation of this situation the estates of the parties were released by the Court of Wards.
In view, however, of the appellant 's mental incapacity, an order was passed by the District Judge of Lucknow, on April 27, 1953, in the lunacy proceedings, placing her estate in the charge of the Deputy Commissioner, Barabanki and one Mr. M. L. Sarin and appointing them as the guardians of her person and property.
A few years later, the appellant recovered from her affliction and an order was passed by the District Judge, Lucknow on October 6, 1956, declaring her to be of sound mind.
Her aforesaid guardians were thereupon discharged and she was put in possession of her properties.
After the appellant had regained her mental competence, she began to entertain a feeling that the compromise in the appeals had not done full justice to her and she set about to find a way to get out of it.
On January 14, 1957, the appellant made two applications to the High Court at Lucknow, one in each of the said appeals Nos. 99 of 1947 and 2 of 1948, for an order that the work of the preparation of the paperbooks of the said appeals be resumed under Chapter XIII of the Rules of the High Court from the stage at which it was interrupted by the compromise decrees, as those decrees were a nullity and did not terminate the appeals which must therefore be deemed to be pending.
These applications were heard together by the High Court and dismissed by its judgment and orders dated November 22, 1957.
It is against this judgment and the orders that the present appeals have been brought.
These appeals were consolidated by an order made by the High Court and they have been heard together in this Court.
It is not the appellant 's case that the compromise was brought about by fraud or was otherwise vitiated on similar grounds and is therefore liable to be set aside.
No avoidance of the compromise is sought.
In fact, the appellant had initially alleged in her petitions 439 that the compromise had been brought about by fraud and collusion.
She however amended the petitions by deleting the paragraphs containing these allegations and chose to proceed on the purely legal basis that the compromise was a nullity.
It is for this reason that we have not referred to the terms of the compromise.
No question arises in those appeals as to their fairness or as to whether they should be avoided on any equitable ground.
If the compromise decrees were a nullity as the appellant contends, then she would no doubt be entitled to proceed on the basis as if they bad never been made and in that view her applications would be competent and should succeed.
The question is whether the compromise decrees were a nullity.
The appellant first says that the compromise decrees were a nullity as the terms of section 56 of the Act which are mandatory, had not been complied with.
That section reads thus: Section 56: When in any suit or proceeding two or more wards being parties have conflicting interests, the Court of Wards shall appoint for each such ward a representative and the said representative shall thereupon conduct or defend the case on behalf of the ward whom he represents, subject to the general control of the Court of Wards.
It is true that no representative had been appointed under this section for either party for the purposes of the two appeals.
It is said that this omission to appoint representatives made the compromise decrees a nullity as the terms of the section are imperative.
The question then is, is section 56 imperative ? In our view, it is not.
It, no doubt, says that " the Court of Wards shall appoint .
a representative.
" But it is well known that the use of the word " shall " is not conclusive of the question whether a provision is mandatory: see Hari Vishnu Kamath vs Syed Ahmad Ishaque (1).
The intention of the legislature has to be gathered from the whole statute.
Several grounds are suggested why section 56 should be held to be imperative.
First, it is said that otherwise, (1)[1955] 1 S.C.R. 1104.
440 in view of section 55, it would be otiose.
Section 55 is in these terms: Section 55: No ward shall sue or be sued nor shall any proceedings be taken in the civil court otherwise than by and in the name of the Collector in charge of his property or such other person as the Court of Wards may appoint in this behalf.
It is said that the concluding words of section 55 give the Court of Wards a discretionary power to appoint a representative and therefore if section 56 was only directory, then it would also give the same discretionary power to appoint a representative and thus become otiose.
The contention seems to us to be ill founded.
In order that one section may be rendered otiose by a certain interpretation of another, that interpretation must make the two sections deal with the same subject matter, the two must then be serving the same purpose.
The argument is founded on the basis that read as an imperative provision section 56 would not be otiose, that is, then it would be serving a purpose different from that which section 55 served.
Now, we do not appreciate how section 56 becomes otiose by being read as a directory provision while it would not be so if read as a mandatory provision.
Surely, the subject matter of a statutory provision is not changed whether it is read as directory or as mandatory.
If it was not otiose as a mandatory provision, it would no more be so as a directory provision.
Another fallacy in this argument is that it assumes that by reading section 56 as a directory provision a discretion is conferred on the Court of Wards to appoint or not to appoint representatives for the wards, as it pleases.
A provision giving a discretionary power leaves the donee of the power to use or not to use it at his discretion.
A directory provision however gives no discretionary power free to do or not to do the thing directed.
A directory provision is intended to be obeyed but a failure to obey it does not render a thing duly done in disobedience of it, a nullity.
Therefore, it seems to us to be wrong to say that by reading section 56 as merely directory any discretion is conferred on the Court of Wards.
441 It also seems clear to us that sections 55 and 56 deal with entirely different matters.
Section 55 deals only with the name in which a ward may sue or be sued.
Section 56 deals with appointment of representatives for two or more wards who are parties to a litigation and have conflicting interests, to defend or conduct the case on behalf of the wards, and section 56 would apply whether the wards were sued in the names of the Collectors in charge of their properties or in the names of persons appointed for the purpose by the Court of Wards.
There is nothing to show that the represen tatives appointed under section 56 are to be named in the record of the case as representing the wards.
The section does not say so Section 56 contemplates a stage where two or more wards are already parties to a litigation.
It therefore contemplates the wards suing or being sued in the names of the Collectors in charge of their properties or of other persons appointed under section 55.
Notwithstanding this, section 56 does not provide that the representatives appointed under it shall replace the Collector or the person appointed under section 55 on the record of the litigation.
Therefore it seems to us clear that if section 56 is read as a directory provision, section 55 would not become otiose.
Next it is said that sections 57 and 58 of the Act also deal with the appointment by the Court of Wards of representatives for the wards in certain proceedings between them but in these sections the words used are respectively "shall be lawful for the Court of Wards to appoint" and "may appoint", while the word used in section 56 is "shall" and that this distinction clearly indicates that the intention of the legislature is to make section 56 imperative.
This argument also does not appear to us to be sound.
We are not satisfied that because a statute uses in some provisions the word "shall" and in others the words "shall be lawful" or "may", it necessarily indicates thereby that the provisions containing the word "shall" are to be understood as mandatory provisions.
We think that each provision has to be considered by itself, and the context in which the word "shall" occurs in it, the object of the provision 442 and other considerations may lead to the view that in spite of the use of the word "shall", it is a directory provision.
It seems to us that sections 57 and 58 rather indicate that if the appointments there contemplated are merely directory, the appointments provided by section 56 are also directory.
Section 57 empowers the Court of Wards when any question arises between two or more wards of such nature that an adjudication upon it by a court is expedient, to appoint a representative for each ward and require the representatives so appointed to prepare a statement containing the point or points for determination and to file the statement in a civil court in the form of a case for the opinion of the court.
The section further provides that the civil court shall proceed to hear and dispose of the case in the manner prescribed by the Code of Civil Procedure for the hearing and disposal of suits and also that the case shall be conducted by the representatives appointed for the wards subject to the general control of the Court of Wards.
Section 58 empowers the Court of Wards when it thinks that a dispute which has arisen between two or more wards is a fit subject for reference to arbitration, to appoint a representative for each ward and require the representatives to submit the dispute to the arbitration of a person or persons approved by it.
It would appear therefore that the position of a ward is the same whether the case is governed by section 56, section 57 or section 58.
In each case one ward has a dispute with another; in each their interests conflict.
In the first two cases, the conflict is submitted to the decision of a civil court and in the third, to arbitration.
There is no reason to think that the legislature intended that the interests of the wards required more protection in a case falling under section 56 than in a case falling under section 57 or section 58.
If, therefore, as the argument concedes, the appointment of representatives was not intended by the legislature to be obligatory under sections 57 and 58, no more could the legislature have intended the appointment of representatives under section 56 obligatory.
This leads us to the argument based on the object of a. 56.
It is said that the object of the section is to 443 protect the interests of the wards.
Unless the terms of the section are obeyed, it is contended, the wards ' interests will suffer.
So, it is said that section 56 must be construed as a mandatory provision.
This argument overlooks that part of section 56 which makes the representatives appointed under it subject to the general control of the Court of Wards in the discharge of their functions.
It is clear, therefore, that it is the intention of the legislature that the interests of the wards should really be in the charge of the Court of Wards in spite of the appointment of the representatives and in spite of the conflicting interests of the wards.
It follows that the direction to appoint representatives has not been inserted in section 56 to protect the conflicting interests of the wards or to ensure such interests being properly looked after by taking them out of the charge of the Court of Wards.
It would indeed be against the whole concept of the Court of Wards Act to hold that it contemplated a situation where the interests of the wards would be taken out of the hands of the Court of Wards while it retained charge of their estates.
We are, therefore, inclined to agree with the view of the learned Judges of the High Court that " The reason for incorporating section 56 in the Act appears to have been with the idea of avoiding any embarrassment to the officers of the Court of Wards who may have had the task in certain cases of representing rival interests.
" There is thus nothing in the object with which section 56 was enacted to lead us to hold that its terms were intended to be imperative.
We may look at the matter from another point of view.
Under section 15 of the Act, the Court of Wards, upon assuming the superintendence of any property, is to nominate a collector or other person to be in charge of it.
Usually it is the Collector of the district, sometimes called the Deputy Commissioner, in which the largest part of the property is situate who is nominated for the purpose.
In the present case, as it happened, the estates of both the appellant and the respondent were situate in the same district of Barabanki and had, therefore, been put in charge of 444 the same officer, namely, the Deputy Commissioner of that district.
Now, it may so happen in another case that the estates of the wards are in charge of different Collectors or Deputy Commissioners.
To such a case also section 56 would be applicable if the two wards happened to be parties to a litigation with conflicting interests.
It would be strange if in such a case any decree that came to be passed had to be held to be a nullity because the terms of that section had not been complied with.
It could not, of course, then be said that the interests of the wards had been prejudiced by the omission to appoint representatives under section 56, for, there would in such a case be no difficulty for the Collectors to look after the interests of their respective wards in the best way possible.
This view of the matter also seems to indicate that section 56 is not imperative.
We have now examined all the arguments advanced in support of the view that section 56 is an imperative provision.
We find them without any force.
The question whether a statute is imperative or otherwise is after all one of intention of the legislature.
The rules of interpretation are for discovering that intention.
We have not found any rule which would lead us to hold that section 56 was intended to be an imperative provision.
The section serves no purpose except the removal of practical inconvenience in the conduct of a suit or its defence.
By providing that the representatives shall be subject to the control of the Court of Wards, the section makes it clear that in spite of the appointment of the representatives the Court of Wards retains all powers in respect of the litigation.
Such powers are given to the Court of Wards by the Act itself.
Under section 38, the Court of Wards has the right to do all things which it may judge to be for the advantage of the ward.
One of such powers is to conduct a litigation on behalf of a ward, in any manner it thinks best in the interests of the ward it could therefore compel the representatives to settle the litigation on terms decided by it.
If it could so compel the representatives, it would be insensible to suggest that it could not itself effect the settlement.
445 Clearly, the Court of Wards could itself settle a litigation in which two of its wards were involved even where representatives had been appointed under section 56.
The appointment of representatives could not hence have been intended to be obligatory.
In our view.
therefore, the section is clearly directory.
The failure to observe the provisions of the section did not render the compromise decrees in this case a nullity.
It is then said that there was in law no compromise in this case, A compromise, it is said, is a contract and in order that there may be a contract 'there must be two parties to it which there was not in this case.
It is contended that there was only one party in the present compromise, namely, the Deputy Commissioner, Barabanki.
It is true that there must be two parties to make a contract.
But it seems to us that the contention that there was only one party to the compromise proceeds on a misconception of its real nature.
It overlooks that the compromise was really between the two wards, the appellant and the respondent.
The compromise was brought about by the Court of Wards in exercise of its statutory powers.
That the Court of Wards could make a compromise on behalf of a ward is clear and not in dispute.
It does not lose its powers when it has two wards and can therefore make a compromise between them.
When it does so, it makes a contract between the two of them.
Therefore, to the present compromise there were two parties.
The act expressly contemplates a right in the Court of Wards to make a contract between two of its Wards.
Thus under section 61(1) of the Act, a contract executed by the Court of Wards for a ward may be executed in its own name or on behalf of the ward.
Under sub sec.
(3) of that section, when the transferor and transferee are both its wards, the Court of Wards shall have power to enter into convenants on behalf of the transferor and the transferee respectively.
Sub section (2) of section 61 provides that the convenants made by the Court of Wards on behalf of a ward shall be binding on the ward.
If the Court of Wards did not have the power to make a contract between two of its wards, it would 57 446 often be impossible to carry on the management of the wards ' properties beneficiently.
The power of the Court of Wards to make a contract for a ward is a statutory power.
We find nothing in the Act to indicate that such power does not exist for making a contract between two wards.
It is true that the cause titles of the appeals showed the Deputy Commissioner, Barabanki, as both the appellant and the respondent.
But that did not make the Deputy Commissioner himself a party to the appeals.
There, of course, cannot be a litigation unless there are two parties to it.
It will be remembered that in the cause titles the Deputy Commissioner, Barabanki, was described once as in charge of Ganeshpur estate and again as in charge of Ramnagar estate.
This indicates that the Deputy Commissioner was mentioned in the cause titles as representing the the two real parties, i.e., the appellant and the respondent.
Then again the Deputy Commissioner, Barabanki, was brought on the record because of section 55 of the Act.
The terms of that section have been set out earlier and they leave no doubt that the person Suing Or being sued is the ward and that the ward is suing or being sued in the name of the Collector.
Therefore also when the appeals were compromised, the compromise was between the parties to the appeals, namely, the appellant and the respondent.
It was not a compromise which the Deputy Commissioner, Barabanki, made with himself though he alone signed the compromise petition.
The contention that there was no compromise in this case because there were not two parties, must hence fail.
It is lastly said that the compromise decrees were a nullity in view of the principles embodied in Or.
XXXII of the Code of Civil Procedure.
That order deals with minors and persons of unsound mind and requires that when any such person is a party to a suit, the Court will appoint some one to be his guardian for the suit.
It is true that it is necessary that the person appointed as guardian should have no interest in the litigation against the person under disability.
It is 447 contended on behalf of the appellant that she was a person of unsound mind and so some disinterested person should have been appointed her guardian for the appeals and that the Deputy Commissioner, Barabanki, was not such a disinterested person as he was also interested in the respondent, the opposing party in the appeals.
It is said that the decrees passed in the appeals without another guardian having been appointed for the appellant are a nullity.
Now, Or.
XXXII, r.4(2) provides that where a person under disability has a guardian declared by a competent authority, no other person shall be appointed his guardian unless the Court considers for reasons to be recorded, that it is for the welfare of the person under disability that another person should be appointed as his guardian.
Section 27 of the Act gives the Court of Wards the power to appoint a guardian for a ward who is of unsound mind.
The Deputy Commissioner, Barabanki, was in fact appointed the guardian of the appellant under the Act when upon her lunacy, her estate came under the superintendence of the Court of Wards.
Her estate was in his charge.
Therefore, under the provisions of Or.
XXXII, r. 4, the Deputy Commissioner, Barabanki, was entitled to act as the appellant 's guardian for the appeals and the Court had not made any order a pointing another person to be her guardian.
The Court of Wards is a statutory body and was created to look after the interests of the wards.
Its constitution is such that it can be trusted to be impartial.
Its position is wholly different from that of a private guardian.
No fault can be found with the Court in having left the interests of the appellant in charge of the Court of Wards though it was also in charge of the interests of the respondent.
Indeed, it is at least arguable if the civil court could have by any order that it might have made, prevented the Court of Wards from discharging its statutory duty of looking after the interests of its ward.
Therefore it seems to us that the failure of the Court to appoint another person as the guardian of the appellant for the suits or the appeals did not make the compromise decrees a nullity.
448 One other point raised on behalf of the appellant remains to be considered.
It is said that in fact there was no compromise between the two wards.
Now, this is a question of fact and was not raised in the High Court.
The respondent had no chance of meeting the allegation of fact now made.
We also have not the advantage of the views of the High Court on this question of fact.
It would be unfair to the respondent to allow such a question to be raised now.
However that may be, we are satisfied that there was in fact a compromise made between the two wards by the Court of Wards.
Our attention has been drawn to the resolution passed by the Court of Wards directing the compromise to be made.
That, in our opinion, brought about the compromise between the two wards; it was the only way in which the Court of Wards could have brought about the compromise.
We may also point out that the compromise petitions were signed by the Deputy Commissioner, Barabanki, twice, once for each of the parties, and had been 'put into court by the lawyers respectively engaged for the parties for the purpose.
We, therefore, think that the contention that there was in fact no compromise is entirely without force.
In our opinion, these appeals must fail and they are therefore dismissed with costs.
SUBBA RAO J. I have had the advantage of perusing the judgment of my learned brother, Sarkar, J.
I regret my inability to agree with him.
The facts of the case and the progressive stages of the litigation are fully stated in the judgment of my learned brother, and it is not necessary to restate them here in detail.
It would suffice if the factual basis giving rise to the main controversy in the case be stated.
The appellant was the owner of Ganesbpur estate and the respondent of Ramnagar estate.
Both of them became wards of the Court of Wards and both the estates were under the management of the Deputy Commissioner, Barabanki.
Between the two estates there was litigation and at the crucial point of time, 449 two appeals, being F.C.A. No. 99 of 1947 and F.C.A. No. 2 of 1948, were pending on the file of the High Court at Allahabad.
The cause titles in the appeals give the following array of parties F.C.A. No. 99 of 1947 Deputy Commissioner, Barabanki, I/C Court of Wards, Ganeshpur estate, district Barabanki.
Appellant versus Deputy Commissioner, Barabanki, I/C Court of Wards, Ramnagar estate, district Barabanki.
Respondent F.C.A. No. 2 of 1948 Deputy Commissioner, Barabanki, I/C Court of Wards, Ramnagar estate, district Barabanki.
Appellant versus Deputy Commissioner, Barabanki, I/C Court of Wards, Ganeshpur estate, district Barabanki.
Respondent It is clear from the said array of parties in the appeals that the same person represented both the estates, and the Deputy Commissioner, Barabanki, was both the appellant and respondent.
It appears that the Court of Wards effected a settlement between the two wards in respect of the outstanding disputes between them, and, presumably as directed by the Court of Wards, the Deputy Commissioner, Barabanki, filed a petition in the High Court for recording the compromise.
The petition was signed by Sri K. A. P. Stevenson, I.A.S., Deputy Commissioner, Barabanki, on behalf of both the estates.
On May 2, 1952, the High Court passed a decree in terms of the said compromise.
The said facts give rise to a short but difficult question, namely, whether the compromise effected was a nullity entitling the appellant to ignore it and to have the appeals disposed of on merits.
The main argument of Mr. Niamatullah, the learned Counsel for the appellant, may be summarized thus: Section 56 of the U.P. Court of Wards Act, 1912 450 (hereinafter called the Act) imposes a statutory duty on the Court of Wards to appoint separate representatives when in a suit there are conflicting claims between two of its wards, and the Court has no jurisdiction to proceed with such a suit and make any order or decree on merits or on compromise unless such an appointment is made.
In the present case, admittedly no such appointment was made and the compromise petition was filed by the Deputy Commissioner, Barabanki, in his dual capacity as the appellant as well as the respondent, and, therefore, the decree made therein was a nullity.
If it was a nullity, the argument proceeds, the Court should ignore it and dispose of the appeals as if they were still on its file.
This argument, if accepted, would entail the acceptance of the appeals.
As I propose to do so, it is unnecessary to particularize the other contentions of the learned Counsel or give my findings thereon.
For the same reason, the counter argument of the learned Additional Solicitor General may conveniently be confined only to the said argument.
While conceding that the application under section 151 of the Civil Procedure Code was maintainable if the decree was a nullity, the learned Counsel for the respondent contends that notwithstanding the non compliance of the provisions of section 56 of the Act, the High Court had jurisdiction to record the compromise lawfully effected by the Court of Wards, and therefore, the decree was not a nullity and could not be ignored.
The question falls to be decided on a true interpretation of the provisions of section 56 of the Act.
Section 56 appears in Chapter VII of the Act dealing with suits.
It would be convenient at the outset to read sections 55 and 56 of the Act.
section 55: "No ward shall sue or be sued nor shall any proceedings be taken in the civil court otherwise than by and in the name of the Collector in charge of his property or such other person as the Court of Wards may appoint in this behalf.
" section 56: " When in any suit or proceeding two or more wards being parties have conflicting interests, 451 the Court of Wards shall appoint for each such ward a representative and the said representative shall thereupon conduct or defend the case on behalf the ward whom he represents, subject to the general control of the Court of Wards.
" These two sections are placed in juxtaposition and they appear to be complementary to each other.
Section 55 prescribes the mode or proceeding by or against the ward in a court.
Ordinarily, he should sue or be sued in the name of the Collector in charge of his pro.
perty.
It also visualizes the contingency when a Court of Wards may appoint in its discretion some other person instead of the Collector for the Purpose of this section.
56 deals with a particular situation, namely, when there are conflicting interests between the wards who are parties to a suit, and, in that event, a duty is cast on the Court of Wards to appoint separate representatives for each such ward.
The object of section 56 is selfevident; for, in the contingency contemplated by that section, an anomalous situation is created, if the general rule prescribed by section 55 is followed, for both the plaintiff and the defendant would be the Collector, a procedure that cannot be tolerated by any civilised jurisprudence.
That apart, the procedure is obviously detrimental to the interests of the wards, for there is every danger of their respective interests not being protected and properly represented in the court.
To avoid this anomaly and obvious prejudice to the parties, section 56 has been enacted.
A combined reading of the said provisions therefore indicates that the procedure, laid down in section 55 must, in the contingency contemplated by section 56, give way to the procedure prescribed by the latter section.
The next question is what does the word " representative " in section 56 mean ? Does it mean, as the learned, Additional Solicitor General contends, an agent who is entrusted with the duty of assisting the Collector, or., as the learned Counsel for the appellant argues, one who represents the ward in a suit by being brought on record as his representative ? The word " representative " has in law different meanings.
To represent means " to stand in place of " and a representative 452 is one, who stands in the place of another.
The word " reprsentative " with prefixes like legal ' or personal ' added or not, when used with reference to ownership of land may mean an heir, executor or legatee.
But in the context of a suit, the word is also used in the sense that, one who represents another, when the latter is a disqualified person like a minor or a lunatic.
In this category come guardians.
They are appointed by court to represent a minor or a lunatic, as the case may be, and the suit without such representative cannot legally proceed.
But a statute may confer power upon an authority other than the court to appoint a representative to a disqualified person.
That is the position in the present case.
A statutory representative acts for, and in the place of, a disqualified ward and without such valid representative on record the suit cannot legally proceed, just like in the case of a minor or a lunatic to represent whose interests no guardian is appointed.
If the intention of the legislature was only to provide for the appointment of a separate agent to help the Collector, who had a dual role to perform, it would have used the word " agent " in the section.
That apart, the Collector does not require the statutory power to appoint an agent to help him in the conduct of a suit; for, as a party to the suit, he can always appoint separate Advocates for the two wards.
That the word " representative" does not mean an agent but is intended to convey the idea of one representing a ward and as such brought on record in that capacity, is made clear by the other provisions of the Act wherein the same word appears.
Section 57 of the Act reads: " (1) Where any question arises as between two or more wards of such nature that an adjudication upon it by a civil court is expedient, it shall be lawful for the Court of Wards to appoint a representative on behalf of each ward.
The representative so appointed shall prepare a statement containing the point or points for determination and shall on behalf of the said wards file the statement in a civil court having jurisdiction in the form of a case for the opinion of the said court, 453 (2) The civil Court shall then proceed to hear and dispose of the case in the manner prescribed by the Code of Civil Procedure, 1908, for the hearing and disposal of suits.
(3) The case shall be conducted on behalf of the wards by their representatives appointed under subsection (1) of this section subject to the general control of the Court of Wards.
" It is manifest from this section that the duty of the representative under section 57 is not to act as a clerk or an assistant to the ward but to represent him in the proceedings.
He would be on record representing the ward and it is impossible to contend that the proceedings under section 57 of the Act can either be initiated or disposed of without a representative being appointed in that behalf.
Section 58 of the Act reads: "When it appears to the Court of Wards that any question or dispute arising between two or more wards is a fit subject for reference to arbitration, it may appoint a representative on behalf of each such ward and require the said representatives to submit the question or dispute to the arbitration of such person or persons as it may approve." Under this section also the appointment of a representative on behalf of each ward is a pre requisite for the initiation and conduct of arbitration proceedings.
Here also the representative is not appointed to assist the ward but to represent him in the proceedings.
It is a well known rule of construction that a similar meaning should be given to the word " representative " in the Act unless the context requires otherwise.
The object of the appointment of a representative under sections 56, 57 and 58 of the Act is the same and the same meaning should be given to that word, namely, that the representative appointed is one who represents the ward in the proceedings and is brought on record as such.
Laying emphasis on the word " conduct " or defend " in section 56 of the Act and on the omission of the word " compromise " therein, it is contended that the representative appointed thereunder has no 58 454 power to ' enter into a compromise.
The section does not, in my View, bear out this construction.
The first part of the section enjoins on the Court of Wards to appoint a representative to each of the wards and then the second part proceeds to state that such a representative should thereupon conduct or defend the case.
The later part of the section does not define the meaning of the word " representative " and limit its scope, but only brings out the idea that the suit shall not proceed till such a representative is appointed.
A person appointed to represent a disqualified person shall have all the powers of a party subject to the limitations imposed by relevant statutes and the only limitation imposed by section 56 of the Act is that the said representative is subject to the general control of the Court of Wards.
It follows that the representative can enter into a compromise subject, to the general control of the Court of Wards.
Assistance is sought to be derived by the Additional Solicitor General from decisions distinguishing between the powers of a Solicitor and a Counsel and holding that a Solicitor being only a representative cannot enter into a compromise without the consent of the client, while the latter being in charge of the entire litigation can do so.
In my view these decisions are based upon the peculiar characteristics of the two branches of the profession and cannot legitimately be invoked to construe the provisions of section 56 of the Act.
Nor the fact that the representative appointed under section 56 of the Act is subject to the general control of the, Court of Wards can be relied upon to subvert the operation of the section itself.
The question of control arises only after a representative is appointed and the appointing authority cannot obviously ignore its statutory duty and purport to exercise the duties of representatives in exercise of its power of general control over non existent representatives.
Assuming that the representative has no power to compromise the suit, it does not materially affect the ,question raised in this case.
In that view the authority empowered to do so has to effect the compromise, put the same in court through the representatives and 455 obtain a decree thereon.
But that does not dispense with the appointment of representatives to conduct and defend the suit, for without such representation the suit itself could not be proceeded with and a decree could not be obtained on the compromise.
Lastly, it is said that the provisions of the section are directory and noncompliance thereof would not affect the validity of the compromise decree, if in fact the compromise was effected bona fide by the competent authority.
The word " shall " in its ordinary import is "obligatory ", but there are many decisions wherein the courts under different situations construed the word to mean " may ".
The High Court in this case relied upon the observations of this Court in Jagan Nath vs Jaswant Singh (1) which run as follows: " It is one of the well recognized rules of interpretation that a provision like this should be held to be non mandatory unless non compliance with the provisions was visited with some penalty.
" A perusal of the judgment does not disclose that this Court has laid down any such inflexible rule of construction.
It was construing the word " shall " in section 82 of the Representation of the People Act, 1951, ' which lays down that a, petitioner shall join as respondent to his petition all the candidates who were duly nominated at the election other than himself.
Having regard to the other provisions of the Act, particularly to section 85 thereof, and the construction put upon a similar word in Order XXXIV, rule 1, of the Civil Procedure Code, this Court held that the word " shall " in section 82 was only directory.
This Court did not purport to lay down any broad proposition that whenever the word " shall " is used in a statute it should be construed as directory unless non compliance with the provision is made penal.
Nor the decision in The Queen vs Ingall (2) lays down any such wide rule of construction.
Under section 42 of Valuation (Metropolis) Act, 1869, provision is made for the performance of several acts within the times prescribed therein.
Every matter connected with the valuation must be transacted before the 31st of March, for the (1) ; , 901.
(2) , 207 456 list comes into force on the 6th April.
But there are other sections whereunder provision is made for preparing the valuation lists where there has been omission to make them according to the requirements of the Act.
The observance of times is not enforced by penalties.
The Court held that, notwithstanding the use of the word "shall " in section 42 of the Valuation (Metropolis) Act, 1869, the provision is only directory.
In construing the provisions in such a manner, Lush, J., observed: " We ought to look at the object which the legislature contemplated in passing the Valuation (Metropolis) Act, 1869 But we must, in construing the Act, strike a balance between the inconvenience of holding the list to be null and void and the risk of allowing injury to be done by the delay in making the list; the former seems to me the greater evil, and therefore in my opinion we ought to hold the list to be valid." This judgment is, therefore, an authority for the position that the intention of the legislature should be gathered from the object of the Act and also by striking a balance between the possible inconvenience that would be caused in accepting the one or other of the views.
The decision in Caldow vs Pixwell (1) deals with the provisions of section 29 of the Ecclesiastical Dilapidations Act, 1871, which says that within three calendar months after the avoidance of any benefice, the bishop shall direct the surveyor, who shall inspect the buildings of such benefice, and report to the bishop what sum, if any, is required to make good the dilapidations to which the late incumbent or his estate is liable.
It was held that the provisions as to the time within which the bishop is to direct the surveyor to inspect and report upon the buildings of a benefice after its avoidance is directory only, and not imperative; and that a direction to inspect and report made by a bishop more than three months after the avoidance of a benefice may be valid.
Denman, J., restates the following rules of guidance for construing such provisions: (i) The scope and object of a statute (1) (1876) a C.P.D. 562.
457 are the only guides in determining whether its pro.
visions are directory or imperative; (ii) in the absence of an express provision the intention of the legislature is to be ascertained by weighing the consequences of holding a statute to be directory or imperative; and (iii) the statute imposes a public duty upon the Bishop, and it does not create a power or privilege for the benefit of the new incumbent as a private person.
On those grounds, among others, the learned Judge held that the provision was only directory.
Venkatarama Ayyar, J., in Hari Vishnu Kamath vs Syed Ahmad Ishaque (1) made the following observ.
ations: " They (the rules) are well known, and there is no need to repeat them.
But they are all of them only aids for ascertaining the true intention of the legislature which is the determining factor, and that must ultimately depend on the context.
" In Craies on Statute Law, 5th Edn., the following passage appears, at p. 242: "No universal rule can be laid down as to whether mandatory enactments shall be considered directory only or obligatory with an implied nullification for disobedience.
It is the duty of Courts of Justice to try to get at the real intention of the legislature by carefully attending to the whole scope of the statute to be construed.
" Bearing the aforesaid principles in mind let us look at the provisions of section 56 of the Act.
The object of section 56 of the Act is to prevent the anomaly of the same person occupying a dual role of plaintiff and defendant and to provide for an effective machinery to safeguard the interests of the wards who are placed under the supervision of the Court of Wards.
Should it be held that the appointment of a representative was at the discretion of the Court of Wards, the entire object of the section would be defeated.
A person for whose 'benefit the provision was conceived would be represented by the opposite party, a situation anomalous in the extreme.
On the other hand, no evil consequences can ordinarily be expected to flow if the provision be (1) ; , 1126.
458 construed as mandatory.
A statutory body like the Court of Wards can be relied upon to discharge the duties cast upon it by section 56 of the Act.
Even if it fails, the suit or the appeal, as the case may be, will be heard on merits or a fresh compromise may be effected after following the prescribed procedure.
The balance of convenience is on the side of the provision being construed as mandatory rather than as directory.
In the circumstances, I must hold that the intention of the legislature is to make the provision mandatory and therefore the word "shall" cannot be construed as "may" as contended by the learned Counsel for the respondent.
I cannot accept the contention of the learned Additional Solicitor General that even though section 56 is mandatory, the non compliance of the provisions of the section does not affect the validity of the compromise.
If, as I have held, the appeal could not be proceeded with without the statutory representative on record, the whole proceeding, including the passing of the compromise, without such representative, was null and void.
Before closing the discussion, a reference to the decision of the Judicial Committee in Braja Sunder Deb vs Rajendra Narayan Bhanj Deo (1) is necessary, as strong reliance is placed upon it in support of the contention that non compliance of the mandatory provision of section 56 would not affect the validity of the compromise decree.
There a suit between Raja Rajendra Narayan Bhanj Deo and Raja Braja Sunder Deb, who became the ward of the Court of Wards after the institution of the suit, was compromised.
The compromise petition was put in the Court and a decree was made thereon.
Before the High Court, for the first time, a technical objection was taken.
The Subordinate Judge decreed the suit in terms of the compromise and a formal decree dated December, 22, 1922, was drawn and in the cause title of the decree the manager of the Court of Wards was shown as second defendant while he should have been described as the representative of the first defendant.
But in (1) (1937) L.R. 65 I.A.57.
459 the body of the decree it was clearly mentioned that the manager of the Court of Wards had been substituted as guardian for the ward.
It was contended therein for the appellant that as the manager of the Court of Wards was made an additional defendant and not made a guardian ad litem of the appellant, the compromise decree in the suit was not binding on him.
The Judicial Committee negatived the contention and held that if the proper parties were on the record and were dealt with on the correct footing, the mere want of formality would not make void the bargain of the parties and the decree of the Court.
But in the present case, a mandatory provision had not been complied with and the suit proceeded with the Collector as both the plaintiff and defendant.
The wards were not represented by their separate representatives for the simple reason that no representatives were appointed.
There is no analogy between that decision and the present case.
For the aforesaid reasons I hold that the compromise decree was a nullity and the appeal must be deemed to be pending on the file of the High Court.
In this view, I am relieved of the duty of expressing my opinion on the other questions raised and seriously argued, namely, whether the Court of Wards has power to settle conflicting disputes between two wards and whether such a settlement would be a lawful agreement within the meaning of Order XXIII, rule 3 of the Code of Civil Procedure.
In the result, the order of the High Court is set aside and it is directed to dispose of the appeals in accordance with law.
The appellant will have his costs here and in the High Court.
By the Court: In accordance with the opinion of the majority, the appeals stand dismissed with costs. | The respondent, proprietor of Ramnagar Estate, filed a suit against the appellant, proprietor of Ganeshpur Estate, for the recovery of certain properties.
The appellant filed a cross suit against the respondent.
During the pendency of the suits the appellant was declared to be a person of unsound mind and the Court of Wards assumed superintendence of her properties under the U. P. Court of Wards Act, and placed them in charge of the Deputy Commissioner of Barabanki.
Thereupon the cause titles on the suits were amended and in place of the appellant 's name the 'Deputy Commissioner, Barabanki I/C Court of Wards Ganeshpur Estate ' was substituted.
The Trial Court partly decreed the respondent 's suit and dismissed the appellant 's suit.
Both parties preferred appeals to the High Court.
While the appeals were pending the Court of Wards took over the Estate of the respondent also and placed it also in charge of the Deputy Commissioner, Barabanki.
The cause titles of the appeals were then amended and for the name of the respondent, the name 'Deputy Commissioner, Barabanki I/C Court of Wards Ramnagar Estate ' was substituted.
Thereafter, the Court of Wards passed a resolution settling the appeal on certain terms and under its instructions the lawyers for the parties presented petitions to the High Court for recording compromises in the appeals.
The High Court passed decrees in terms of the compromises.
Shortly afterwards the Court of Wards released the two estates.
Later, the appellant recovered from her affliction, and was declared to be of sound mind.
She presented two applications to the High Court alleging that the compromise decrees were a nullity and praying for a proper disposal of the appeals.
The High Court rejected the applications.
The appellant contended, that the compromise decrees were a nullity (i) as the Court of Wards had not complied with the mandatory provisions of section 56 of the Act, (ii) as there could not in law be a compromise unless there were two parties but in this case there was only one party the Deputy Commissioner, Barabanki and (iii) as the High Court failed to appoint a disinterested person.
as I guardian of the appellant who 432 was of unsound mind under 0.
XXXII of the Code of Civil Procedure.
Held, (per section K. Das and A. K. Sarkar, jj ), that the compromise decrees were not a nullity and were binding on the parties.
Section 56 of the Act which provided that when in a suit or proceeding two or more wards had conflicting interests, " the Court of Wards shall appoint for each such ward a representative " to conduct or defend the case on behalf of the ward whom he represented was clearly direct and the failure of the Court of Wards to observe the provisions thereof did not render the compromise decrees a nullity.
A directory provision did not give discretionary power to do or not to do the thing directed ; it was intended to be obeyed but a failure to obey it did not render a thing duly done in disobedience of it a nullity.
When the appeals were compromised, the compromise between the parties to the appeals, namely, the appellant and the respondent.
It was not a compromise which the Deputy Commissioner, Barabanki, made with himself though he repre sented both the parties.
There was nothing in the Act which indicated that the Court of Wards did not have the power of making a contract between two wards.
The Deputy Commissioner, Barabanki had been appointed the guardian of the appellant under the Act, and he was entitled to act as her guardian for the appeals under 0.
XXXII, r. 4 Of the Code.
The Court of Wards was different from a private guardian and could be trusted to be impartial.
The High Court was right in leaving the interests of the appellant in charge of the Court of Wards though it was also in charge of the interests of the respondent.
Per K. Subba Rao, J.
The compromise decrees were a nullity.
The provisions of section 56 of the Act were mandatory and a non compliance therewith vitiated the proceedings.
The inten tion of the legislature should be gathered from the object of the Act and from a consideration of the inconvenience that may be caused by accepting the one or the other of the views.
The object of section 56 was to prevent the anomaly of the same person representing two conflicting interests and to safeguard the interests of the wards placed under the supervision of the Court of Wards.
No inconvenience would result from holding the provisions to be mandatory.
The word " shall " in section 56 could not be read as " may ".
jagan Nath vs jaswant Singh; , , Queen vs Ingall, , Caldow vs Pixwell, , Hari Vishnu Kamath vs Syed Ahmad Ishaque, ; and Braja Sunder Deb vs Rajendra Narayan Bhanj Deo, (1937) L.R. 65 I.A. 57, referred to. |
Appeal '.
No.75 of 1956.
Appeal by special leave from judgment and order dated March 17, 1955, of the Small Causes Court, Bombay, in Appeal No. 1 of 1955.
M.C. Setalvad, Attorney General for India, section N. Andley, J. B. Dadachanji and Rameshwar Nath, for the appellant.
K. B. Choudhuri, for the respondents.
702 1960.
January 12.
The Judgment of the Court was delivered by GAJENDRAGADKAR J.
When does an employer get a right to prefer an appeal against a direction made under sub section
(3) of section 15 of the (4 of 1936) (hereinafter called the Act)? That is the short question which arises for our decision in the present group of four appeals.
The decision of this question depends on the construction of section 17 (1)(a) of the Act.
In dealing with the question thus posed by the present group of appeals we will refer to the facts in Civil Appeal No. 75 of 1956, and our decision in it would govern the three remaining appeals.
Civil Appeal No.75 of 1956 which has been brought to this Court by special leave arises from a dispute between the General Manager of the Times of India Press.
, Bombay, owned by Benett Coleman & Co, Ltd., (hereinafter called the appellant) and some of the employees in his service (hereinafter called the respondents).
In November 1953, 1,066 applications were made by the Vice President of the Times of India Indian Employees Union on behalf of some of the respondents before Mr. C. P. Fernandes, the authority appointed under the Act in which a claim was made for arrears of increments alleged to have been withheld by the appellant from July 1, 1951, to September 30, 1953, as also for increased dearness allowance from January 1, 1953, to August 31, 1953.
The authority dealt with the whole group of the said applications as a single application under section 16(3) of the Act, and held that the claim made by the respondents for increased dearness allowance was not justified.
In regard to the claim of arrears of increments alleged to have been withheld the authority rejected the claim made by 761 employees and allowed the same in respect of 305 employees.
In the result the order passed by the authority on 31 12 1954 directed the appellant to deposit Rs. 22,698 for payment to the said 305 employees.
The direction thus issued by the authority gave rise to two appeals before the Small Causes Court at Bombay, which is the appellate authority appointed 703 under the Act.
Appeal No. 11 of 1955 was filed by the appellant while Appeal No. 187 of 1954 was filed by the respondents.
Meanwhile the question about the extent of the right conferred on the employer to prefer an appeal by section 17(1)(a) of the Act had been considered by the Bombay High Court in Laxman Pandu & Ors.
vs Chief Mechanical Engineer, Western Railway (B.B. & C.I. Railway), Lower Parel, Bombay (1); and it had been held that under the said section the employer gets a right of appeal only if the order of the authority under the Act awards payment of an amount of Rs. 300 or more in respect of a single individual worker; the right does not exist if the order awards a sum exceeding Rs. 300 collectively to an unpaid group of workers every one of whom gets an amount under Rs. 300.
Following this decision the appellate authority held that the appeal preferred by the appellant was incompetent and so dismissed it.
The appellant then applied for and obtained special leave from this Court to prefer an appeal against the said appellate decision; and so the main point raised by the appeal is about the construction of section 17(1)(a) of the Act.
The Act has been passed in 1936 with a view to regulate the payment of wages to certain classes of persons employed in industry.
Section 15(1) of the Act authorises the State Government by notification in the official Gazette to appoint any Commissioner for Workmen 's Compensation or other officer with experience as a Judge of a Civil Court or as a stipendiary Magistrate to be the authority to hear and decide for any specified area all claims arising out of deductions from the wages, or delay in payment of wages of persons employed or paid in that area.
Section 7 has provided for deductions which may be made from wages.
Any deductions made not in accordance with the said section and contrary to the provisions of the Act as well as wages the payment of which has been delayed can be brought before the authority under sub s (2) of section 15.
Sub section (3) of section 15 empowers the authority to deal with the applications made under sub section
(2) and to direct a refund to (1) , 704 the employed person of the amount deducted or the payment of delayed wages together with the payment of such compensation as the authority may think fit, not exceeding ten times the amount deducted in the former case and not exceeding Rs. 10 in the latter.
Sub section (4) provides that in cases where the authority is satisfied that the application made by the employee was either malicious or vexatious it may direct that a penalty not exceeding Rs. 50 be paid to the employer or other persons responsible for the payment of wages by the applicant.
It would thus be seen that section 15 provides for the making of applications by the employees and for their decision in accordance with the provisions of the Act.
It is necessary to refer to section 16 as well before dealing with the question of the construction of section 17(1)(a).
Section 16 provides for the making of a single application in respect of claims from unpaid group.
Section 16(1) provides that employed persons are said to belong to the same unpaid group if they are borne on the same establishment and if their wages for the same period or periods have remained unpaid after the day fixed by section 5.
Sub section (2) provides for the making of a single application under section 15 on behalf of or in respect of any number of employed persons belonging to the same unpaid group, and prescribes that in such a case the maximum compensation that may be awarded under sub section
(3) of section 15 shall be Rs. 10 per head.
Subsection (3) then provides that the authority may deal with any number of separate pending applications presented under section 15 in respect of persons belonging to the same unpaid group as a single application presented under sub section
(2) of the said section, and the provisions of that sub section shall apply accordingly.
Thus the effect of section 16 is that a single application may be made on behalf of any number of employed persons belonging to the same unpaid group, or if separate applications are made by employed persons belonging to the same unpaid group they may be consolidated and tried as a single application.
Let us now read section 17 which provides for appeals.
Section 17(1) provides that an appeal against a 705 direction made under sub section
(3) or sub section
(4) of s 15 may be preferred within thirty days of the date on which the direction was made, in a Presidency town before the Court of Small Causes and elsewhere before the District Court (a) by the employer or other person responsible for the payment of wages under section 3, if the total sum directed to be paid by way of wages and compensation exceeds Rs. 300, or (b) by an employed person, if the total amount of wages claimed to have been withheld from him or from the unpaid group to which he belonged exceeds Rs. 50, or (c) by any person directed to pay a penalty under sub.s.
(4) of section 15.
Sub section (2) of section 17 makes the directions made under sub section
(3) and sub section
(4) of section 15 final save as provided in sub section (1).
On a plain reading of section 17(1)(a) it seems fairly clear that the only test which has to be satisfied by the appellant before preferring an appeal against a direction issued under section 15(3) is that the total sum directed to be paid by him should exceed Rs. 300.
Where a single application has been made on behalf of a number of employed persons belonging to the same unpaid group under section 16, sub section
(2), and a direction has been issued for the payment of the specified amount, it is the said specified amount that must be considered in deciding whether the test prescribed by section 17(1)(a) is satisfied or not.
The view taken by the Bombay High Court, however, is that section 17(1)(a) is applicable only where the amount directed to be paid to each single applicant exceeds Rs. 300.
In other words, on this view the expression " the total sum directed to be paid " used in section 17(1)(a) is construed to mean the total sum directed to be paid to each individual applicant, and that clearly involves the addition of certain words in the section.
If the application is made by a single employee an appeal can be preferred by the employer against the direction issued in such an application if the total sum directed to be paid to the applicant exceeds Rs. 300; but if a single application is made on behalf of several employees belonging to the same unpaid group the test to be applied is not whether a direction has been issued that the employer 99 706 should pay Rs. 300 or more to each one of the applicants; the test clearly is whether a direction has been issued on the said single application calling upon the employer to pay to the applicants Rs. 300 or more.
Reading section 17(1)(a) by itself we feel no difficulty in reaching this conclusion.
It is, however, urged that in construing section 17(1)(a) it would be relevant and material to compare and contrast its provisions with those of cl.
(b) of section 17, sub section
Providing for the right of an employee to make an appeal this clause requires that the total amount of wages claimed to have been withheld from him or from the unpaid group to which he belonged should exceed Rs. 50.
It is emphasised that this clause refers expressly to the case of an individual employee as well as the cases of employees belonging to an unpaid group; and the argument is that since cl.
(a) does not use the words " unpaid group " it indicates that the direction about the payment of the amount prescribed by the said clause has reference to each individual employee.
We are not impressed by this argument.
Since the Act has provided for the making of a single application on behalf of a number of employed persons belonging to the same unpaid group as well as separate applications made by individual workmen it was unnecessary to refer to the persons employed in the unpaid group while providing for appeals against directions made under section 15(3).
On the other hand, if the Legislature had intended that the right to prefer an appeal should accrue to the employer only if Rs. 300 or more are directed to be paid to each individual employee it would have used appropriate additional words in cl.
Therefore the argument based upon the use of the words " unpaid group " in cl.
(b) is not of any assistance in construing cl.
We are also inclined to think that it could not have been the intention of the Legislature to confer on the employer the right to prefer an appeal only if Rs. 300 or more are ordered to be paid to each one of the applicants.
It is true that the policy of the Act is to provide for speedy remedy to the employees in respect of unauthorised deductions made by the employer or 707 in respect of delayed wages; and with that object the Act provides for the appointment of the authority and prescribes the summary procedure for the decision of the claims;butitseemsveryunlikelythatwhereas an appeal by the employee has been permitted by cl.
(b) whenever the amount in dispute happens to be Rs. 50 or more in respect of an individual applicant or in respect of the unpaid group the Legislature could have intended that the employer should have no right of appeal against a direction made on a; single consolidated application, even though the total liability flowing from the said direction may exceed the specified amount of Rs. 300 by several thousands.
In the present case the amount directed to be paid is more than Rs. 22,000 but it has been held that since each one of the employees is not ordered to be paid Rs. 300 or more there is no right of appeal.
On general considerations, therefore, the conclusion which we have reached on a fair and reasonable construction of cl.
(a) appears to be well founded.
There is another point to which reference must be made.
Section 16(3) empowers the authority to consolidate several applications made by individual employees and bear them as a single application as though it was presented under section 16, sub section
(2); and it is urged that this procedural provision cannot and should not have a decisive effect on the employer 's right to prefer an appeal under section 17(1)(a).
If several applications made by individual employees are not consolidated and heard as a single application under section 16(3) and separate directions are issued, then the employer would have the right to prefer an appeal only where the total amount directed to be paid exceeds Rs. 300.
On the other hand, if the authority consolidates the said applications and makes a direction in respect of the total amount to be paid to the employees belonging to the unpaid group the employer may be entitled to make an appeal even though each one of the employees receives less than Rs. 300.
It would be anomalous, it is said, that the right to appeal should depend upon the exercise of discretion vested in the authority under section 16(3).
We are unable to see the force of this argument.
We apprehend that 708 ordinarily when several applications are made by the employees belonging to the same unpaid group the authority would prefer to treat the said applications as a single application under section 16(3); but apart from this practical aspect of the matter, if section 16(3) permits the consolidation of the several applications and in consequence of consolidation they are assimilated to the position of a single application contemplated by section 16(2), the only question which has to be considered in dealing with the competence of the appeal is to see whether the direction appealed against satisfies the test of section 17(1)(a), and on that point we feel no hesitation in holding that the test prescribed by section 17(1)(a) is that the direction should be for the payment of an amount exceeding Rs. 300.
Besides, we think it would not be right to assume that it is anomalous if different consequences follow from the adoption of different procedures in trying employees ' claims and an appeal does not lie where several applications are tried separately while it lies where similar applications are heard as a single application under section 16(3).
This difference is clearly intended by the Legislature.
A similar different consequence is prescribed in the matter of the award of compensation by section 15, sub section
(3) and section 16,sub section
(2) respectively.
Therefore, the argument based on the alleged anomaly cannot have any validity inconstruing section 17(1)(a).
Incidentally, if one or more employees in the same unpaid group are paid an amount exceeding Rs. 300 and the rest are paid less than Rs. 300, on the alternative construction, the employer would be entitled to make an appeal only in respect of a workman to whom more than Rs. 300 is ordered to be paid and not against the others though the total amount directed to be paid to them may exceed by far the amount of Rs. 300.
In such a case, if the appeal preferred by the employer in respect of the amount ordered to be paid to some of the workmen succeeds that would leave outstanding two conflicting decisions, with the result that a large number of employees in the same unpaid group may get the amount under the direction of the authority while those who were awarded more 709 than Rs. 300 by the authority would get a smaller amount under the decision of the appellate authority.
We are referring to this anomalous aspect of the matter only for the purpose of showing that where the words used in the relevant clause are clear and unambiguous considerations of a possible hypothetical anomaly cannot affect its plain meaning.
That is why we prefer to leave anomalies on both sides out of account and confine ourselves to the construction of the words used in section 17(1)(a).
If the said words had been reasonably capable of two constructions it would have been relevant to consider which of the two constructions would avoid any possible anomalies.
We would, therefore, hold that the appellate authority was in error in dismissing the appeal preferred before it by the appellant on the ground that it was incompetent under section 17(1)(a).
We would like to add that the question about the construction of section 17(1)(a) has been considered by the Madras High Court (Union of India, owning the South Indian Railway by the General Manager vs section P. Nataraja Sastrigal & Ors.
(1) and A. C. Arumugam & Ors.
vs Manager, Jawahar Mills Ltd., Salem Junction (2), the Calcutta High Court (Promod Ranjan Sarkar vs R.N. Munllick (3) and Assam High Court (Cachar Cha Sramik Union vs Manager, Martycherra Tea Estate & Anr.
(4) and they have all differed from the view taken by the Bombay High Court and have construed section 17(1)(a) in the same manner as we have done.
The result is the appeal is allowed, the order of dismissal passed by the appellate authority is set aside and the appeal sent back to it for disposal in accordance with law.
Since the hearing of the appeal has been thus delayed we would direct that the appellate authority should dispose of the appeal as expeditiously as possible.
Under the circumstances of this case we would direct that the parties should bear their own costs.
Appeal allowed.
(1) A.I.R. 1952 Mad. 808.
(3) A.I.R. 1959 Cal.
318 S.C.; (2) A.I.R. 1956 Mad. 79.
(4) A.I.R. 1959 Assam 13. | The expression " the total sum directed to be paid " used in section 17(1) (a) of the , properly construed, does not mean the total sum directed to be paid to each individual applicant.
Consequently, an employer against whom a direction for payment is made under section 15(3) of the Act has a right of appeal under section 17(1) (a) not only when a single applicant is awarded a sum exceeding Rs. 300 but also when an award of a like amount is made on a single application made under section 16(2) of the Act on behalf of several employees belonging to the same unpaid group or on several applications consolidated into one under section 16(3) thereof.
Section 17(1) (a) does not contemplate that before the right to appeal can accrue to the employer in the latter case each individual applicant must be awarded Rs. 300 or more.
Since the language of the statute is clear and unambiguous no consideration of any possible hypothetical anomaly can be allowed to affect its plain meaning.
Laxman Pandu and Others vs Chief Mechanical Engineer, West ern Railway (B. B. and C. I. Railway), Lower Parel, Bombay. , overruled.
Union of India, Owning the South Indian Railway by General Manager vs section P. Nataraja Sastrigal & Ors.
A.I.K. ; A. C. Arumugam & Ors.
vs Manager, Jawahar Mills Ltd., Salem junction, A.I.R. 1956 Mad. 79; Promod Ranjan Sarkar vs R. N. Mullick, A.I.R. 1959 Cal.
318 and Cachar Cha Sramik Union vs Manager, Martycherra Tea Estate & Anr.
A.I.R. 1959 Assam 13, approved. |
Civil Appeal No.257 of 1958.
Appeal by special leave from the Award dated August 20, 1957, of the Industrial Court, Bombay, in Reference (IC) No. 197 of 1956.
C. K. Daphtary Solicitor General of India.
section N. Andley, J. B. Dadachanji and Rameshwar Nath,for the appellant.
B. P. Maheshwari, for the respondent.
I. N. Shroff, for Interveners Nos. 1 and 2.
The Intervener No. 3 did not appear.
1960 January 22, The Judgment of the Court was delivered by SUBBA RAO J.
This appeal raises the question as to what extent the reserves can be deducted from the amount required for rehabilitation of plant and machinery and also as to the manner by which the deductible reserves can be ascertained.
It would be enough if we narrated only the facts relevant to the question raised.
The appellant, Khandesh Spinning and Weaving Mills Company Limited, is a textile mill and its factory is situate at Jalgaon.
The respondent, Rashtriya Girni Kamgar Sangh, represents the employees of the appellant Company.
The respondent on behalf of the employees issued a notice to the appellant under section 42(2) of the Bombay Industrial Relations Act, 1946, demanding payment of reasonable bonus for the period from January 1, 1955 to December 31, 1955.
Negotiations in this regard having failed, the respondent made a reference to the Industrial Court under section 73A of the said Act for arbitration of the dispute arising out of the said notice.
The arbitrator, i.e. the Industrial Court, following the "Fall Bench Formula", ascertained the surplus to be Rs. 2.20 lakhs after deducting the prior charges from the gross profits of the Company, but it did not give any credit to the rehabilitation amount apart from the statutory depreciation.
The Industrial Court disallowed this item for the following reasons: It estimated the amount required for rehabilitation at Rs. 60 lakhs; out of this amount it deducted Rs. 51 lakhs representing tile reserves and the balance of Rs. 9 lakhs spread over a period of 15 years gave the 843 figure of Rs. 60,000 as the amount that should be set apart for the year in question for rehabilitation.
As the statutory depreciation was Rs. 83,639, it came to the conclusion that the Company would not be entitled to any allocation as a prior charge for rehabilitation.
After excluding the said item of rehabilitation, it The fixed the surplus in a sum of Rs. 2.20 lakbs and awarded to the employees four months ' basic wages as bonus.
The learned Solicitor General contended that the Industrial Court accepted the position that the reserves were used as working capital, but deducted the said amount from the amount required for rehabilitation on a wrong and unjustified assumption that, as the amounts so required would be spent for rehabilitation over a course of 15 years by instalments, the temporary user of the said reserves would not affect the question as they would be released in part or in whole in future years.
He argued that this assumption was contrary to the view expressed in decided cases and also the principle governing the ascertainment of the amount for rehabilitation purposes.
On the contrary the learned counsel for the respondent argued that the Industrial Court only assumed that the reserves had been utilised as working capital, as in the view taken by it did not in the least matter whether the reserves were so utilised or not and that, even if that view was wrong, the appellant could not succeed, unless it proved by relevant and acceptable evidence that the reserves were so utilised and that it did not place before the Industrial Court any such evidence to prove that fact.
The first ques tion, therefore, is, what is the scope of the finding of the Industrial Court in this regard ? The Industrial Court in dealing with the contentions of the parties before it observed as follows: "It is true that until some amount is required to be spent for rehabilitation, replacement or modernization, reserves must be used as working capital, but Shri Vimadalal 's argument overlooks that the amount required to be spent for rehabilitation over a course of 15 years is not required to be 844 spent all at once, but by installments over a long period.
" These observations did not record any finding that the reserves were used as working capital.
It was only an assumption made by the Industrial Court, as, the view taken by it, it was immaterial whether the reserves were used as working capital or not.
We do not think that the aforesaid opinion expressed by the Industrial Court is sound.
In ascertaining the surplus for the purpose of fixing the bonus for a particular year, the state of affairs in that year is the guiding factor.
If in a subsequent year any part of the reserves used as working capital is released, that amount will have to be taken into account in ascertaining the surplus for that year and so on for subsequent years: otherwise it will lead to the anomaly of the reserves being excluded from the amount required for rehabilitation, though as a matter of fact the entire reserves were utilised as working capital, and though in future years they were expected to be released but in fact not so released.
This would lead to a result inconsistent with the decisions on the subject which have clearly laid down that the reserves which have been used as working capital shall not be deducted from the amount fixed for rehabilitation.
This result does not advance the case of the appellant unless it is able to prove by admissible evidence that it has used the reserves as working capital during the bonus year in question.
The principles governing the "reserves" in this context are well settled.
This Court in The Associated Cement Companies Ltd. vs It,3 Workmen (1) restated the principle thus at p. 970: "Before actually awarding an appropriate amount in respect of rehabilitation for the bonus year certain .
deductions have to be made.
The first deduction is made on account of the breakdown value of the plant and machinery which is usually calculated at the rate of 50/ of the cost price of the block in question.
Then the depreciation and general liquid reserves available to the employer are deducted.
The reserves which have already (1) 845 been reasonably earmarked for specific purposes of the industry are, however, not taken into account in this connection.
Last of all the rehabilitation amount which may have been allowed to the employer in previous years would also have to be deducted if it appears that the amount was avail able at the time when it was awarded in the past and that it bad not been used for rehabilitation purposes in the meanwhile.
These are the broad features of the steps which have to be taken in deciding the employer 's claim for rehabilitation under the working of the formula.
" This decision, therefore, lays down, so far as it is relevant to the present purpose, that two items shall be deducted from the rehabilitation amount ascertained by adopting the "Full :Bench .Formuula" namely,(i)general reserves available to the employer and (ii) reserves which have not already been reasonably earmarked for specific purposes of the industry.
The question is whether the mere availability of reserves or the simple earmarking for specific purposes would be sufficient to claim the said amounts as deductions.
We do not think that by using the said words this Court meant to depart from the well recognized principle that if the general reserves have not been used as working capital, they cannot be deducted from the rehabilitation amount.
The reserves may be of two Kinds.
Moneys may be set apart by a company to meet future payments which the company is under a contractual or statutory obligation to meet, such as gratuity etc.
These amounts are set apart and tied down for a specific purpose and, therefore, they are not available to the employer for rehabilitation purposes.
But the same thing cannot be said of the general reserves: they would be available to the employer unless he his used them as Working capital.
The use of the words "reasonably earmarked" is also deliberate and significant.
The mere nominal allocation for binding purposes, such as gratuity etc.
, in the company 's books is Dot enough.
It must be ascertained by the Industrial Court on the material placed before it whether the said amount is far in excess of the requirements of the particular purpose for which 846 it is so earmarked and whether it is only a device to reduce the claim of the labour for bonus.
We do not suggest that it is the duty of the Industrial Court to ascertain the correct or exact figure required for a particular purpose; but it is certainly its duty to is cover whether the so called earmarking for a particular purpose is a device to circumvent the formula.
If it is satisfied that there is such a device, it shall deduct that figure in calculating the rehabilitation amount and if possible arrive at a real figure for that purpose.
So too, in the case of general reserves when an employer claims that a specific amount reserved has been used as working capital, it is the duty of the Industrial Court to arrive at a finding whether the said reserves, or any part of them, have been used as working capital and, if so, to what extent during the bonus year.
Shortly stated before a particular reserve can be deducted from the rehabilitation amount it must be established that it has been reasonably earmarked for a binding purpose or the whole or a part of it has been used as working capital and that only such part of the reserves coming under either of the two heads can be deducted from the said amount.
To illustrate, take a particular bonus year, say 1955.
To start with, from the gross profits of that year only items specifically declared by this Court in The Associated Cement Companies Ltd. vs Its Workmen to have a prior charge over the bonus shall be deducted to arrive at the surplus.
No question of deducting any other amount reserved in regard to the profits of that year arises.
But the company has specifically earmarked certain amounts for specific binding purposes in 1954 or earlier to meet future binding obliga tions, such as gratuity etc. ; or has reserved amounts for general purposes but not to meet any contractual or statutory obligations and has not utilised the same as working capital.
In the former case the amount must be deemed to have been utilised and, therefore, it cannot be deducted from the rehabilitation amount; but in the latter case, as the said amounts were not utilised by the employer as working capital, they shall be deducted from the rehabilitation amount.
(1) 847 What taken is the procedure to be followed for ascertaining the said facts ? The burden is obviously on the employer who claims the exclusion of the reserves from the rehabilitation amount on the ground that they are used as working capital or reasonably earmarked for a specific purpose to establish the said facts and to prove the same by relevant and acceptable evidence.
The importance of this question in the context of fixing the amount required for rehabilitation cannot be over estimated.
The item of rehabilitation is generally a major item that enters into the calculations for the purpose of ascertaining the surplus and, therefore, the amount of bonus.
So, there would be a tendency on the part of the employer to inflate this figure and the employees to deflate it.
The accounts of a company are prepared by the management.
The balance sheet and the profit and loss account are also prepared by the company 's officers.
The labour have no concern in it.
When so much depends on this item, the principles of equity and justice demand that an Industrial Court should insist upon a clear proof of the same and also give a real and adequate opportunity to the labour to canvass the correctness of the particulars furnished by the employer.
Cases coming before us disclose that the Industrial Courts and Labour Tribunals are not bestowing so much attention on this aspect of the case as they should.
Some of the tribunals act oil affidavits and sometimes even on balance sheets and extracts of accounts without their being proved in accordance with law.
For the purpose of holding an enquiry or a proceeding under the Bombay Industrial Relations Act, 1946, section 118 of the said Act confers on the Industrial Court the same powers as are vested in Courts in respect of (a) proof of facts by affidavits; (b) summoning and enforcing the attendance of any person and examining him on oath; (c) compelling the production of documents; and (d) issuing commissions for the examinations of witnesses.
In Courts facts have to be established either by oral evidence or by documentary evidence proved in the 108 848 manner prescribed by law.
But Order XTX of the Code of Civil Procedure empowers the Court, to have particular facts proved by affidavits.
Under rule `thereof "any Court may at any time for sufficient reason order that any particular fact or facts may be proved by affidavit, or that the affidavit of any witness may be read at the hearing, on such conditions as the Court thinks reasonable".
But it is subject to the proviso that where it appears to the Court that either part%, bonafide desires the production of a witness for (cross examination, and that such witness can be produced, an order shall not be made authorizing the evidence of ' such witness to be given by affidavit.
Under rule 2, "upon any application evidence may be given by affidavit, but the Court may, at the instance of either party, order the attendance for cross examination of the deponent ".
A combined effect of the relevant provisions is that ordinarily fact has to be proved by oral evidence,, but the Courts, subject to the conditions laid down in Order XIX, may ask a particular fact or facts to proved by affidavits.
Industrial Courts may conveniently follow the procedure.
In view of the importance of the item of rehabilitation in the matter of arriving at the surplus for fixing the bonus principles of equity and justice demand that tribunals should weigh with great care the evidence adduced by the management as well as by the labour to ascertain every sub item that goes into or is subtracted from the rehabilation.
If the parties agree,agrred figure can be accepted.
If they agree to the decision of affidavits that course may be followed.
in the absence of an agreement, the procedure prescribed in Order XIX of the Code of Civil Procedure may usefully be followed by the tribunals so tlitt, both the parties may have full opportunity to (Establish their respective cases.
Recent decisions of this Court emphasize this aspect of the matter.
In lndian Hume Pipe Company Ltd vs Their workmen (1), the balance sheet was upon for proving that the amounts were available for use as working capital and that the (1) ,5 849 balance sheet showed that they were in fact so used.
Bhagwati, J., who delivered the judgment of the Court, presumably to meet the contention that the balance sheet had not been proved, observed at p. 362 thus : " Moreover, no objection was urged in this behalf, nor was any finding to the contrary recorded by the tribunal.
" In that case it was conceded that the reserves were in fact used as working capital.
It is suggested that the learned Judge solely relied upon the relevant items in the balance sheet in support of his conclusion and that the said observation was only an additional ground given by him, but we are inclined to think that the Court would not have accepted the items in the balance sheet as proof of user if it was not satisfied that no objection was taken in that behalf.
In Tata Oil Mills Company Ltd. vs Its Workmen (1), a similar question was raised.
It was contended by the labour in that case that the depreciation reserve was Dot used as working capital and therefore no return should be allowed on the said reserve.
The Chief Accountant of the Company made an affidavit on behalf of the Company that the said depreciation reserve, along with others, had been used as working capital.
This Court accepted the affidavit for the year in question, but made the following observations for future guidance: "It will, however, be open to the workmen in future to show by proper cross examination of the company 's witnesses or by proper evidence that the amount shown as the depreciation reserve was not available in whole or in part to be used as working capital and that whatever may be available was, not in fact so used in the sense explained above.
In the present appeal, however,we must accept the affidavit of the chief accountant.
" These observations also recognized the necessity to give an opportunity to the workmen to cross examine the witnesses put forward by the management to prove the user of any particular reserve as working capital.
This Court once again dealt with the same (1) 850 subject in Anil Starch Products Ltd. vs Ahmedabad Chemical Workers Union (1).
That appeal also raised the question whether return should be allowed on the depreciation reserve used as working capital.
It was contended for the labour in that case that the depreciation reserve was not used as working capital.
Rejecting the said contention, Wanchoo, J., observed: It is enough to say in that connection that an affidavit was filed by the manager of the company to the effect that all its reserves including the depreciation fund had been used as working capital.
The manager appeared as a witness for the company before the Tribunal and swore that the affidavit made by him was correct.
He was cross examined as to the amount required for rehabilitation, which was also given by him in that affidavit; but no question was put to him to challenge his statement that the entire depreciation reserve had been used as working capital In the circumstances, we must accept the affidavit so far as the present year is concerned and hold that the working capital was Rs. 34 lacs.
" Notwithstanding the said finding, the learned Judge took care to reserve the rights of the workmen in future by making the following observations: "It will, however, be open to the workmen in future to show by proper cross examination of the company,s witnesses or by proper evidence that the amount shown as depreciation reserve was not available in whole or in part as explained above to be used as working capital and that whatever was available was not in fact so used.
" This judgment again reinforces the view of this Court that proper opportunity should be given to the labour to test the correctness of the evidence given on affidavit on behalf of the management in regard to the user of the reserves as working capital.
What is the position in the present case ? It is not suggested that there is any reserve which has been reasonably earmarked to discharge a contractual or statutory obligation.
We are only concerned with (1) Civil Appeal No. 684 Of 1957 (not reported) 851 general reserves.
The learned Solicitor General contends that the balance sheet discloses that the entire reserves have been used as working capital and that the respondent did not canvass this position in the statement filed by it before the Industrial Court.
We have already pointed out that the balance sheet, without its being proved by a person competent to do so, cannot prove that any reserves have been utilised as working capital.
In the written statement filed by the appellant before the Industrial Court, no specific allegation is made that the reserves were utilised as working capital, though in its statement of calculations the said reserves were not excluded from the amount claimed towards rehabilitation.
As there is no specific allegation, the respondent also in its statement did not deny the said fact, but in its statement of calculations it did not deduct the reserves from the rehabilitation amount.
Therefore, it must be held that the respondent did not accept the position that the reserve funds were utilised as working capital.
Strong reliance is placed upon the evidence of the General Superintendent of the appellant Company, but a perusal of that evidence discloses that the said witness has not deposed that the Company used the reserves as working capital; nor does the said witness seek to prove either the balancesheet or any extract taken therefrom.
In the circumstances, the respondent had no opportunity to cross examine him in respect of the alleged user of the reserves.
For the aforesaid reasons, we have no option but to hold that Rs. 51 lakhs representing the reserves were not used as working capital and, therefore, the said amount was rightly deducted by the Industrial Court from Rs. 60 lakhs fixed by it towards rehabilitation.
As the balance of Rs. 9 lakhs spread over 15 years came to only Rs. 60,000 during the bonus year and as the statutory depreciation was Rs. 83,639, the Industrial Court rightly excluded the entire rehabilitation amount from its calculations in arriving at the surplus.
No other points were raised before us.
In the result, the appeal fails and is dismissed with costs.
Appeal dismissed. | In ascertaining the surplus available for the payment of bonus according to the Full Bench formula the Industrial Court allowed the statutory depreciation but did not give any credit for the rehabilitation amount claimed.
The Industrial Court estimated the amount required for rehabilitation at Rs. 60 lakhs; out of this amount it deducted Rs. 51 lakhs representing the reserves and the balance of Rs. 9 lakhs spread over a period Of 15 years gave the figure of Rs. 6o,000 as the amount that should be set apart for the year in question for rehabilitation.
This amount being less than the statutory depreciation the Industrial Court held that the appellant was not entitled to any deduction on account of rehabilitation as a prior charge.
The appellant contended that the balance sheet disclosed that the entire reserves had been used as working capital and consequently the said reserves should not be excluded from the amount claimed towards rehabilitation.
Held, that the appellant had failed to prove that the reserves had in fact been used as working capital and as such the amount was rightly deducted by the Industrial Court from the amount fixed for rehabilitation.
The Associated Cement Companies Ltd. vs Its Workmen. , referred to.
In view of the importance of the item of rehabilitation in the calculation of the available surplus it was necessary for tribunals to weigh with great care the evidence of both parties to ascertain every sub item that went into or was subtracted from the item of rehabilitation.
If parties agreed, agreed figures could be accepted.
If they agreed to a decision on affidavits, that course could be adopted.
But in the absence of agreement the procedure prescribed by 0.
XIX, Code of Civil Procedure had to be followed.
The accounts, the balance sheet and profit and loss accounts were prepared by the management and the labour had no hand in it.
When so much depended on this item it was necessary that the Industrial Court insisted upon a clear proof of the item of rehabilitation and also gave a real and adequate opportunity to labour to canvass the correctness of the particulars furnished by the employers.
Indian Hume Pipe Company, Ltd. vs Their Workmen.
[196o] 2 S.C.R. 32, Tata Oil Mills Company Ltd. vs Its Workmen ; and Anil Starch Products Ltd. vs Ahmedabad Chemical Workers ' Union.
C.A. No. 684 Of I957 (not reported), referred to, 842 |
ivil Appeals Nos. 29 and 30 of 1951.
Appeals from the judgment and decree dated 26th October, 1943, of the High Court of Judicature at Allahabad (Verma and Yorke JJ.) in First Appeal No. 48 of 1938 arising out of the judgment and decree dated 6th August, 1937, of the Court of the Additional Civil Judge at Agra in Suit No. 30 of 1936.
M.C. Setalvad and Kirpa Ram (K. B. Asthana, with them) for the appellant in Civil Appeal No. 29 of 1951.
K.N. Agarwal for the appellant in Civil Appeal No. 30 of 1951.
C.K. Daphtary (G. C. Mathur, with him) for the respond ents in both the appeals.
April 24.
The Judgment of the Court was deliv ered by MAHAJAN J.
796 Mst.
Khem Kuer, the young widow of Shah Chiranji Lal, was murdered on the 28th August, 1919, and Mst.
Mohan Kuer, the mother, died on the 5th December, 1932.
Prem Kuer, the respondent in the appeal, claiming herself to be the heir to Shah Chiranji Lal as his sister, brought the suit giving rise to this appeal in the court of the civil judge, Agra, against, amongst others, Mst.
Phool Kuer, the present appellant, for recovery of possession of the properties of Shah Chiranji Lal and mesne profits.
Prem Kuer joined her half sister Mst.
Ram Kuer and their sons as plaintiffs along with herself.
In the array of defendants were impleaded Mst.
Phool Kuer and Mst.
Khem Kuer, widows of Shah Jwala Prasad and Shah Madho Lal and his sons and a host of others as transferees of the properties.
The main defence to the suit was that Shah Jwala Prasad and Shah Madho Lal were recognized to be the owners and heirs to the entire estate of Shah Chiranji Lal by Khem Kuer and Mohan Kuer in a family settlement arrived at between the parties in suit No. 120 of 1915, that by virtue of this family settlement the estate of the deceased was vested in them subject to the life estates of the two women and that the plaintiffs who came to be recognized as reversioners by the Hindu Law of Inheritance (Amendment) Act, 11 of 1929, were not entitled to claim it.
It was further pleaded that on the death of Khem Kuer in 1919, Mohan Kuer surrendered the estate in favour of Jwala Prasad and Madho Lal and they took possession of it as owners and the plaintiffs who subsequently became statutory heirs in 1919 could not be allowed to question the surrender and reopen the succession which could not remain in abeyance.
The learned additional civil judge who tried the suit, dismissed it holding that the compromise of 1915 was a bona fide settlement of a bona fide dispute and was binding as a family settlement being for the benefit of the estate, that Mohan Kuer surrendered the estate validly in favour of Jwala Prasad and Madho 795 MAHAJAN J.
The dispute in this appeal concerns the zemindari and house properties last owned by Shah Chiranji Lal who died at a young age on the 14th May, 1913, leaving him surviving a widow, Mst.
Khem Kuer, and his mother Mst.
Mohan Kuer, besides a number of collaterals, indicated in the pedigree table below : Shah Pirthi Raj : : : : : : : : Mst.
Tulsa Kuer=Shah Lal Chand=Mst.
Mohan Kuer : : : : : : : : : : : : Hira Lal : : : : : : : : Shah Jai : : : Kisen : : : Mst.
Ram Kuer : =Kherpal : : : : : : : : :Shah Jwala Shah Sri :Prasad Kisen : : : :(1)Khem : : : : : Kuer Shah Madho Ram Chand Lachman Kishen Lal :(2)Phool Lal Prasad =Mst.
Umri : Kuer : : : : : : : : : Sudar Mad : Dwarka shan sudan : Prasad Lal Lal : : : : : : : : : : : : Ganga Prasad Jamna Mst.
Prem Kuer Shah Chiranji Lal Prasad =Lekh Raj =Mst.
Khem Kuer : : : : : : Manohar Lal Lachmi Narain 797 Lal and they entered into possession of it after the death of Khem Kuer.
Some of the transferees who had been implead ed as defendants compromised the suit with the plaintiffs and that part of the suit was decided according to the terms thereof between those parties.
Prem Kuer preferred an appeal to the High Court of Judicature at Allahabad against the decree dismissing her suit.
The High Court by its judgment dated the 26th Octo ber, 1943, allowed the appeal, reversed the findings of the learned additional civil judge on the above issues and decreed the plaintiffs ' suit with costs.
Some of the trans feree defendants compromised with the plaintiff appellant in the High Court and the appeal was decided in terms thereof in their favour.
Two main points which are in controversy in this appeal and require consideration, are: 1.
Whether the compromise in suit No. 120 of 1915 amounts to a family settlement and binds the plaintiff respondent, and, 2.
Whether the surrender by Mst.
Mohan Kuer was a valid surrender under Hindu law.
In order to appreciate the respective contentions of the parties, it is necessary to set out shortly in chronological order the history of the events which has resulted in this controversy.
As already stated, Shah Chiranji Lal died on the 14th May, 1913, leaving considerable movable and immovable property.
At the time of his death, his widow Khem Kuer was about eleven years old and his mother Mohan Kuer was about 53 years old.
The two reversioners, Shah Jwala Prasad and Shah Madho Lal, made an application for mutation of names of the estate in their favour claiming it on the basis of a will alleged to have been made by Shah Chiranji Lal on the 13th May, 1913, a day before his death.
On the 10th of September, 1913, an application was made by Mohan Kuer for herself and as guardian of Khem Kuer Challenging the genu ineness of the will and claiming 798 that the estate of the late Shah Chiranji Lal should be mutated in their names.
Notice of this application was given to the two reversioners but they thought it prudent not to appear and to contest the contentions raised by the two ladies.
with the result that the inheritance of the late Chiranji Lal was mutated in the name of the widow as sole heir under the guardianship of Mohan Kuer by an order dated the 28th October, 1913.
The reversioners had also made applications in pending suits for getting themselves im pleaded as legal representatives.
Mohan Kuer applied for the removal of their names and for substitution of the name of the widow and of herself in those cases.
Pending decision of these matters, on the 11th May, 1915, suit No. 120 of 1915 was filed by Jwala Prasad and Madho Lal on the basis of the alleged will of the 13th May, 1913.
On the same day an application was made for the appointment of a receiver and an interim order appointing a receiver was passed by the court.
On the 18th May, 1915, Mohan Kuer for herself and as guardian of the minor widow made an application praying for the discharge of the receiver.
By an order dated the 23rd September, 1915, the receiver was discharged and it was held by the civil judge that the plaintiffs had no prima facie case and that the will propounded by them was a suspicious document.
On the 18th December, 1915, suit No. 120 of 1915 was compromised between the parties.
This compromise is in the following terms : "1.
The plaintiffs relinquish their claim for possession over the estate of Shah Chiranji Lal.
The defendants shall have all those rights to the estate of Shah Chiranji Lal, which she had as a Hindu widow according to law.
After the death of the two Musammats, the plaintiffs in equal shares and, after them, their heirs, who might have the right of survivorship one after the other, shall be the owners of the estate of Shah Chiranji Lal.
The name of Mst.
Mohan Kunwar defendant against one half of the property in lieu of maintenance, shall continue.
799 4.
Mohan Kunwar and Mst.
Khem Kunwar shall have power to do anything they might choose with the entire income from the movable and immovable property, cash, orna ments, amount of decrees and documents, household goods and other movables, which they might have in their possession.
The plaintiffs or anyone else shall have no power to inter fere or to ask for rendition of accounts.
In case Mohan Kunwar defendant dies first, Mst.
Khem Kunwar shall, as a Hindu widow, become the owner in posses sion of the entire property, of which Mst, Mohan Kuer might have been in possession in any way, subject to the provi sions of condition No. 4.
In ,case Mst.
Khem Kuer defendant dies first, Mst, Mohan Kuer shall as a Hindu widow, become the owner in possession of the entire property of which.
Mst, Khem Kuer might have been in possession in any way, subject to the provisions of condition No. 4." In accordance with the terms of this compromise suit No. 120 of 1915 was dismissed.
In the proceedings that were pending for substitution of names the court on the 22nd December, 1915, ordered that Khem Kuer and Mohan Kuer be impleaded as legal representatives of the late Shah Chiranji Lal.
On the 2nd September, 1918, Khem Kuer brought a suit against her mother in law Mohan Kuer for a declaration to the effect that she alone was the lawful heir of Chiranji Lal and was the owner of the property, mentioned in schedule A and that the defendant had no concern with it.
This suit was compromised between the parties on the 22nd April, 1919.
Mohan Kuer agreed that Khem Kuer 's suit be decreed.
Khem Kuer undertook to look after Mohan Kuer in every way and if she desired to live separately from her, she agreed to pay her a sum of Rs. 3000 per annum by way of maintenance.
Khem Kuer did not live long after her having become owner of the entire estate of her husband under the terms of this compromise.
As stated already, she was murdered on the 28th August, 1919.
The estate 104 800 thus became vested in Mohan Kuer both according to Hindu law as well as in accordance with the terms of the compromise of the 18th December, 1915.
It is alleged that either on the fourth or the thirteenth day after the death of Khem Kuer, Mohan Kuer when asked about the mutation of the estate, said that she had no concern with it and had relinquished it and had devoted herself to worship.
On the 15th September, 1919, an application bearing the signature of Mohan Kuer in Hindi was presented by her mukhtar Chaturbhuj in the court of the subordinate judge at Agra, praying that the sale certificate in suit No. 1919 (Shah Jwala Prasad vs Rai Bahadur Shah Durga Prasad), be prepared in the names of Shah Jwala Prasad and Shah Madho Lal, for they were the heirs in possession of the properties of Shah Chiranji Lal.
This application (Exhibit N 31) contains the following recital: "Mst.
Khem Kuer died on the 28th of August, 1919.
I do not want to take any proceedings in my own name.
Shah Jwala Prasad and Shah Madho Lal are the subsequent heirs and it is in their names that all the mutation proceedings etc. are being taken in the revenue court.
They have been made the heirs in possession of the entire property and an applica tion has been filed in their names in this court for prepara tion of the sale certificate.
This petitioner has got no objection to the preparation of the sale certificate in their names, for they are the heirs and are in possession of the property.
" The sale certificate was prepared accordingly.
On the 16th September, 1919, Jwala Prasad and Madho Lal applied for mutation in respect of the lands relating to mauza Somra in the court of the tahsildar of Etmadpur.
In column 5 of this application (Exhibit A 14) it was alleged that they were entitled to mutation by right of inheritance.
Similar appli cations were made in respect of other villages also.
(Vide Exhibit 128 etc.) Mutations were entered in all the villages on the basis that both of them were heirs in equal shares to the property of the deceased, though according to Hindu law, Shah Jwala Prasad alone was the 801 next heir.
During the course of the mutation proceedings one Chintaman, general attorney of Shah Jwala Prasad was exam ined on the 11th October, 1919 and he stated that Mst.
Khem Kuer died on the 28th August, 1919, that Shah Jwala Prasad and Shah Madho Lal were her heirs in equal shares, that Mohan Kuer was the mother in law of the deceased and she did not want her name to be recorded and had made relinquishment in favour of Shah Madho Lal and Shah Jwala Prasad in the civil court on the 15th September, 1919.
Chaturbhuj, gener al attorney of Mohan Kuer was examined in the same proceed ings on the 27th October, 1919, and he stated that Mohan Kuer did not want her name to be recorded in place of the name of the deceased, that she had no objection to the entry of the names of Shah Jwala Prasad and Shah Madho Lal, that she had sent him for making that statement.
He admitted the relinquishment filed by Mohan Kuer in the civil court with respect to the property of Mst.
Khem Kuer but he was not able to state when that relinquishment had taken place.
The tahsildar after recording these statements ordered the mutation of names in favour of the two reversioners (Exhibit M 2).
On the 22nd November, 1919, the two reversioners Shah Jwala Prasad and Shah Madho Lal, having entered into possession of the estate after the death of Khem Kuer made a gift of property of the value of about Rs. 50,000 in favour of the sisters of Shah Chiranji Lal by means of two deeds of gift.
(Vide Exhibit M 16).
These gift deeds contain the following recitals : "Shah Chiranji Lal deceased was the owner of Katariha estate in which besides other villages the villages speci fied below were also included, and as he had no issue after his death Mst.
Khem Kuer became his heir as a Hindu widow of a joint family subject to Mitakshara school of law.
On her death we the executants who were entitled to become the absolute owners of the estate of Shah Chiranji Lal according to Shastras became the absolute owner of the entire property 802 of Shah Chiranji Lal by inheriting the estate from him.
We obtained possession over everything and mutation of names also were effected in our favour from the revenue court in respect of all villages.
Shah Chiranji Lal deceased had two sisters Mst.
Ram Kuer and Mst.
Prem Kuer and he had a desire during his lifetime to give them some property but owing to sudden death he could not himself fulfil his intention during his lifetime.
We the executants accept this fact as desired by him.
Besides this the mother of Shah Chiranji Lal also desires the same thing and it is our duty to fulfil the same, and to give property to the Musammats aforesaid is considered to be a pious and good act from the religious point of view.
It is our duty also to respect their wishes and fulfil the same, so that the people of our caste and family might not think that after the death of Shah Chiranji Lal his wishes remained unfulfilled.
Hence for the reasons set forth above and keeping in view the honour of the family and pious nature of the act we the executants while in a sound state of body and mind . . . make a gift of the following villages in favour of the donees.
" The donees subsequently made a number of transfers of the property gifted to them and in every respect the gift deeds were acted upon.
Jwala Prasad, the presumptive rever sioner, died in the year 1980.
In suit No. 49 of 1928 (same as No. 89 of 1929) one Pandit Rikh Ram had obtained a decree against Shah Madho Lal and his sons and they appealed against it to the High Court and also applied for postponement of the preparation of the final decree.
Stay was ordered on the applicants furnishing security in the sum of Rs. 20,000 for future interest, costs, etc.
On the 26th May, 1930, in compliance with the order of the High Court a security bond was executed by Shah Madho Lal and his sons as first party and by Mst.
Mohan Kuer as second party, containing the following recitals : "After the death of Mst.
Khem Kuer Mst.
Mohan Kuer was to become the owner of the property with 803 limited interests as a Hindu mother, but she relinquished her inheritance and did not agree to accept any property.
By means of a private arrangement, i.e., a family arrange ment, it was decided as between Shah Jwala Prasad and Shah Madho Lal that they should be the owners of the property aforesaid in equal shares.
Documents in that connection were registered.
Thus Shah Madho Lal executant No.1 is the exclusive owner of the property given below which is being pledged and hypothecated under this security bond.
Execu tant No. 4, the second party, has, after hearing and under standing the contents of this security bond, joined in token of the veracity of the facts noted above so that in future she might not be able to take objection to it and so that she might have no objection of any sort to the security bond." (Executant No. 4 was Mst.
Mohan Kuer).
On the 30th June, 1930, an affidavit bearing the thumb impression of Mst.
Mohan Kuer was filed in the same pro ceedings containing the following statements : "I solemnly affirm and say that after the death of Mst.
Khem Kuer I did not agree to accept property nor was I the heir and that I relinquished the entire property in favour of Shah Jwala Prasad who became the owner of the entire property which was in possession of Khem Kuer.
" The Subordinate Judge expressed the view that the bond could not be held to have been executed by Mohan Kuer, she being a pardanashin lady.
He declined to accept the deed as sufficient and valid security.
On the 9th July, 1930, the High Court of Judicature at Allahabad dismissed the applica tion for stay of proceedings.
On the 15th July, 1931, Mohan Kuer instituted suit No. 24 of 1931 in the court of the subordinate judge of Mathura against the widows of Shah Jwala Prasad, Shah Madho Lal and his sons and a number of transferees who had taken the property from these two reversioners.
In para 8 of the plaint it was alleged 804 that the plaintiff was an old pardanashin woman, was simple and of week intellect and illiterate, that on account of the murder of Mst.
Khem Kuer, she was very terror stricken and was full of sorrow and had no knowledge about her rights, that the third defendant and Jwala Prasad who wanted to get the property took undue advantage of the plaintiff 's afore said condition and unlawfully entered into possession of the property left by Chiranji Lal deceased and caused the muta tion of names in their favour.
In para.
12 it was said that the defendants had got the thumb impressions of the plain tiff on certain documents without telling her the contents of those papers, simply by saying that a decree for a con siderable amount had been passed against the property and it was going to be sold in auction and that a security bond must be furnished for saving the property.
She prayed for a decree for possession of the property in dispute in her favour against the defendants.
During the pendency of this suit Mohan Kuer died on the 5th December, and on her death an attempt was made by the present plaintiffs to get them selves impleaded as her legal representatives but on the 9th October 1934 it was held that the claim of Mst.
Mohan Kuer was of a personal character and the suit therefore could not proceed owing to abatement.
It was, however, noted that the legal representatives could file a separate suit, if so advised.
It is in consequence of this order that the suit out of which this appeal arises was filed on the 30th April 1936.
It was contended by the learned Attorney General that the High Court on mere suspicions and unwarranted assump tions had found the main issues in the case against the appellant and had erroneously held that the compromise in suit No. 120 of 1915 was not binding on the 'plaintiffs and that the surrender by Mohan Kuer was not valid surrender under Hindu law.
After hearing the learned counsel at considerable length, we did not think it necessary to hear the respondent in reply, as in our opinion, the decision of the High Court on both the points was right.
805 On the point of surrender, the learned Attorney General contended that the widow effaced herself and put both the reversioners in possession of the property half and half, and agreed to take Rs. 3,000 from them for her maintenance and that the fact of surrender was satisfactorily proved from the conduct of Mohan Kuer in allowing the estate to be mutated in the names of the reversioners and in allowing them to take possession of it, also by the different state ments made by her and from the other documentary and oral evidence led in the case.
Emphasis was laid on the state ments contained in the application (Exhibit M 31), on the statement of her mukhtar Chaturbhuj, and on the recitals of the security bond and the affidavit, Exhibit P 30.
Whether Mohan Kuer effaced herself and surrendered the property, or whether she merely abandoned it, or whether she entered into an arrangement for the division of the estate between herself, the two reversioners and the daughters and their sons it is not possible to predicate with any amount of certainty.
No definite opinion can be offered on the question whether whatever she did, she did voluntarily after fully realizing the consequences of her act and wheth er as a pardanashin lady she had.been properly advised on the matter or whether she merely acted on sentiment.
Considerable doubt is cast on the story of surrender set up by the defendants by the recitals in the two deeds of gift, dated 22nd November, 1919, extracted above.
The donors did not base their title to the property either on the compromise of 1915 or on the surrender of Mohan Kuer of the year 1919 or on the will; on the other hand, they said that they had become owners of the property of Chiranji Lal by inheritance under Hindu law after the death of his widow.
Both of them could not possibly inherit the property half and half under Hindu law.
Moreover, there is no clear or definite evidence of either the time when the arrangement was made or of the terms thereof.
The evidence on these points is vague and 806 unsatisfactory.
It is completely wanting as to the arrange ment under which Mohan Kuer became entitled to receive Rs. 3,000 from them.
The conduct of Mohan Kuer and the various statements by her no doubt do indicate that she cut off her connection with the bulk of the estate of Chiranji Lal after the death of the widow and received a sum of Rs. 3,000 from the rever sioners and it is also clear that at her instance the rever sioners gave property of the value of Rs. 50,000 to her daughters, but in the absence of any satisfactory evidence as to the precise nature of this arrangement it is not possible to conclude that the widow after fully realizing as to what she was doing and after proper advice effaced her self.
In this connection the allegations made by her in the suit of 1931 cannot be altogether ruled out from considera tion.
Assuming however for the sake of argument that Mobart Kuer purported to relinquish her estate in favour of Jwala Prasad and Madho Lal, in our opinion, the relinquishment connot in law operate as an extinction of her title in the estate.
The principle underlying the doctrine of surrender is that it cannot possibly be made in favour of anybody except the next heir of the husband.
Vesting of the estate in the next reversioner takes place under operation of law and it is not possible for the widow to say that she is withdrawing herself from the husband 's estate in order that it may vest in somebody other than the next heir of the husband.
It was held by this court in Mummareddi Nagi Reddi vs Pitti Durairaja Naidu(1) that so far as the next heir is concerned, there cannot be a surrender of the total ity of the interest which the widow had, if she actually directs that a portion of it should be held or enjoyed by somebody else other than the husband 's heirs and that the position is not materially altered if the surrender is made in favour of the next heir with whom a stranger is associat ed and the widow purports to.
relinquish the estate in order that it may vest in (1) [1951] s.c.
R. 655.
807 both of them.
Though in the written statements of the two sets of defendants different versions of the character of the arrangement were pleaded, the learned Attorney General before us stated that the surrender by the widow was made both in favour of Jwala Prasad and Madho Lal in equal moie ties.
Madho Lal admittedly was not the next reversioner entitled to succeed to the estate.
Thus the surrender of the totality of the interest of the widow was not made in favour of the next heir.
That being so, it cannot operate as a valid surrender.
If the surrender could be held a valid one, then obviously succession that had opened out in 1919 and vested in the next heirs could not be divested at the instance of the plaintiffs in the year 1932 on the death of Mohan Kuer, but in view of the invalidity of the surren der it has to be held that succession to Shah Chiranji Lal 's estate opened in 1932 and the plaintiffs as next heirs were entitled to take it.
The next question for consideration is whether the compromise of 1915 entered into between Mohan Kuer as guardian of Khem Kuer, and the two reversioners who had claimed the estate on the basis of a will, was a bona fide family arrangement and thus binding on the ultimate rever sioners, the plaintiffs.
It is well settled that when the estate of a deceased Hindu vests in a female heir, a decree fairly and properly obtained against her in regard to the estate is in the absence of fraud or collusion binding on the reversionary heir, but the decree against the female holder must have involved the decision of a question of title and not merely a question of the widow 's possession during her life (vide Venayeck Anundrow vs Luxumeebaee (1).
This principle of res judicata is not limited to decrees in suits contested and it is competent to a widow to enter into a compromise in the course of a suit bona fide in the inter est of the estate, and not for ' her personal advantage, and a decree passed on such compromise is binding upon the reversioner.
The question whether the transaction (1) 808 is a bona fide settlement of a disputed right between the parties depends on the substance of the transaction and in order that it may bind the estate it should be a prudent and reasonable act in the circumstances of the case.
As observed by their Lordships of the Privy Council in Ram sumran Prasad vs Shyam Kumari (1), the true doctrine is laid down in Mohendra Nath Biswas vs Shamsunnessa Khatun(2), decided in 1914, and it is that a compromise made bona fide for the benefit of the estate and not for the personal advantage of a limited owner will bind the reversioner quite as much as a decree against her after contest.
That being so,we proceed to inquire whether the compromise in the present case is one that can be supported on these principles.
In agreement with the High Court we are of the opinion that it cannot be so supported.
Mohan Kuer in entering into the compromise on behalf of the minor widow never applied her mind to the interests of the ultimate reversioners.
She entered into it for her own personal benefit and for the personal benefit of the minor widow in complete indifference as to what was to happen to the estate after their respective deaths.
Under this compromise these two ladies got all the rights they had under Hindu law without sacrificing an iota of their property and then they agreed that after their death the plaintiffs in equal shares and after them their heirs shall be the owners of the estate of Chiranji Lal.
It did not matter in the least to the two ladies what was to happen to the estate after their deaths and they were quite willing to let this estate go to the plaintiffs in the suit, though one of them was a remote reversioner.
The compromise therefore was made in the interest of the actual parties to the suit in complete disregard of the interests of the ultimate reversioners.
The widows undoubtedly acted with reasonableness and pru dence so far as their personal interest was concerned but further than that they did not see.
The claim, of the two plaintiffs in Suit No. 120 of 1916 was adverse to the inter est of the (1) (1922) 49 I,A. 342.
(2) 809 reversion as they were claiming as legatees under the will.
The widows while entering into the compromise safeguarded their personal rights only and thus in entering into it they only represented themselves and not the estate or the rever sioners and surrendered nothing out of their rights, and it cannot be said that in the true sense of the term it was a bona fide settlement of disputed rights where each party gave up something of its own rights to the other.
The plain tiffs got an admission from the widows in regard to the future succession of the estate that after their deaths they would succeed though they were not heirs in accordance with Hindu law.
By this admission the widows lost nothing what soever.
Those who lost were the ultimate reversioners and their interest was not in the least either considered or safeguarded.
In these circumstances it seems to us that the compromise cannot be held to be a bona fide settlement or family arrangement of disputed rights and was entered into by Mohan Kuer for her personal advantage and of the advan tage of Khem Kuer.
The present case is analogous to the decision of the Privy Council in Imrit Konwur vs Roop Narain Singh (1).
There in a dispute between a person claiming to be an adopted son of the previous owner and the widow and her daughters who would have title after her, the widow gave up her daughters ' rights in consideration of her receiving practically unimpaired what she could.
Their Lordships held that such a compromise could not stand, as indeed it was not a compromise at all.
The learned Attorney General laid considerable emphasis on the decision of their Lordships of the Privy Council in Mata Prasad vs Nageshar Sahai (2).
In that case the widow admitted the right of the reversioner under Act I of 1869 and agreed that succession will be governed by that Act.
The reversioner agreed to let her remain in possession and undertook that he would not alienate the property during that period.
The widow in that case was not constituted a full owner under Hindu law and she did not get her full rights (1) (2) (1925) 52 I.A.393 810 under the compromise but as a matter of concession was allowed to remain in possession by the reversioner and as a matter of fact she sacrificed her rights to a considerable extent and did not act for her personal benefit at all except to the limited extent mentioned above.
In the cir cumstances of that case it was held "that the compromise was a bona fide family settlement of disputed claims and was binding on the reversioners.
In the present case the devolu tion of the property after the death of Chiranji Lal was agreed to be in accordance with Hindu law and that being so, the further devolution of the property after their death was no concern of the widows.
That was a matter of law.
The ultimate reversioners were stabbed in the back by the widow and such a compromise cannot be held to be binding on them.
A large number of cases were cited before us in which com promises under different circumstances had been held to be binding on the reversioners.
We consider that it is wholly unnecessary to examine those cases because the circum stances in which those compromises were made were quite different from the circumstances of the present case.
Considering all the materials which were placed before us, we hold in agreement with the High Court that the compromise in the present case was neither prudent nor reasonable so far as it affected the interests of the estate and that of the ultimate reversioners and that being so, is not binding on the plaintiffs.
For the reasons given above this appeal fails and is dismissed with costs.
Civil Appeal No. 30 of 1951.
This is an appeal by one of the transferees and arises out of the same suit out of which arises appeal No. 29 of 1951.
On the 13th June, 1928, Shah Madho Lal and his son Shah Madhusudan Lal executed a sale deed (Exhibit M 13) in favour of the appellant for the sum of Rs. 21,000.
The transferee while adopting the defence taken by Madho Lal and by the heirs of Jwala Prasad, pleaded that he was protected by the provisions of section 41 of the Transfer of Property Act.
811 The High Court held that in cases where a person who has allowed another to occupy the position of an ostensible owner has a limited estate, the rule of section 41 applies only during the lifetime of the limited owner and is not available to protect transferees against the claim of the reversioners.
A number of authorities were cited in support of this proposition.
The learned counsel for the appellant was unable to displace this proposition.
It is quite clear that the plea of section 41 of the Transfer of Property Act could only be raised against Mohan Kuer or her legal repre sentatives but is not available against the plaintiff, Mohan Kuer having acquired a limited life estate.
This contention is therefore rejected.
The learned counsel then contended that the plaintiff Prem Kuer had relinquished her rights in favour of her sons in 1933 and she had no locus standi to maintain the suit or to appeal against the decision of the trial judge as the title to the estate had vested in her sons.
The plaintiffs had alleged in para.
13 of the plaint that the relinquish ment was inoperative and void.
The defendants did not dis pute that allegation and it is not open to them at this stage to take up the plea which they could have taken in the trial court or in the appellate court.
Even in the grounds of appeal to this court the point was not taken.
If the point was taken at the proper stage the plaintiffs might well have proved that the relinquishment was no longer operative or they might have amended the plaint and put it in proper form.
The learned counsel adopted the arguments of the learned Attorney General in the other appeal and for the reasons given therein these points are decided against him.
This appeal therefore also fails and is dismissed with costs.
Appeals dismissed.
Agent for the appellant in Civil Appeal No. 29 of 1951: section section Shukla.
Agent for the appellant in Civil Appeal No. 80 of 195 I:P. C. Agarwal.
Agent for the respondents in both: Rajinder Narain. | A relinquishment by a Hindu widow of her estate in favour of the next reversioner and a stranger in equal moieties is not a valid surrender under Hindu law.
A valid surrender cannot be made in favour of anybody except the next heir of the husband.
Mummareddi Nagireddi vs Pitti Durairaja Naidu [1951] (S.C.R. 655) followed.
It is competent to a Hindu widow to enter into a compro mise in the course of the suit bona fide in the interest of the estate and not for her personal advantage and a decree passed on such a compromise will be binding on the rever sioner.
The question whether a compromise is a bona fide settlement of a disputed right between the parties depends on the substance of the transaction and in order that it may bind the estate it should be a prudent and reasonable act.
[On the facts their Lordships held, agreeing with the High Court, that, the compromise in the present case was neither prudent nor reasonable so far as it affected the interests of the estate and of the ultimate reversioners and that it was not, therefore, binding on the reversioners.] Ramsumaran Prasad vs Shyam Kumari (49 I.A. 342), Mohendra Nath Biswas vs Shamsunnessa Khatun (21 C.L.J. 157) and Imrit Kunwar vs Roop Narain Singh fol lowed.
Mata Prasad vs Nageshar Sahai (52 I.A. 393) distin guished. |
Criminal Appeal No. 12 of 1952.
Appeal by special leave from the judgment and order dated 4th June, 1951, of the High Court of Judicature of Punjab at Simla (Bhandari and Soni JJ.) in Criminal Appeal No. 109 of 1951 arising out of Judgment and order dated 19th March 1951 of the Court of the Additional Sessions Judge, Ferozepore, in Sessions Trial No. 18 of 1951.
T.R. Bhasin, for the appellant.
Gopal Singh, for the respondent.
April 30.
The Judgment of the Court was delivered by BOSE J.
This is a simple case though it was argued at great length on behalf of the appellant and a number of technical objections to the validity of the trial taken.
The appellant Bhagwan Singh has been convicted of the murder of one Buggar Singh and sentenced to death.
He has also been convicted under section 19(f) of the Indian Arms Act but we are not concerned with that here.
The prosecution story is that the appellant bore a grudge against the deceased because the deceased had fired at the appellant 's brother some six or seven years before the present occurrence and was sent to jail for 814 it.
When he came out of jail the police thought it prudent to take proceedings against both sides under section 107 of the Code of Criminal Procedure.
This resulted in the appel lant 's two brothers and his cousins being bound down, as also the deceased.
This, it is said, constituted the motive for the present crime.
On the date of the occurrence, the 7th of September 1950, the prosecution state that the appellant was sitting at the shop of Jit Singh, P.W. 2, when the deceased came there about 12 15 p.m. and borrowed Rs. 5 from Jit Singh who lent him the money and entered the transaction in his ac count book.
When the deceased left the shop he was followed by the appellant who shot him at point blank range with a pistol only 4 or 5 karams from the shop.
This attracted the attention of a number of bystanders who immediately chased the appellant and apprehended him after a short run of about 30 karams.
He was still carrying the pistol.
It was taken away from him by Jagir Singh Patwari, P.W. 4.
The appellant was immediately taken to the local police post about 100 karams distant and the shopkeeper Jit Singh, P.W. 2, made the first information report at 12 a7 p.m. within 15 minutes of the occurrence.
The motive is proved by Bhag Singh, P.W. 7, who has been believed and that part of the case was ' not challenged before us.
The occurrence was witnessed by a large number of persons of whom the prosecution examined only five.
Two of them turned hostile in the Sessions Court and one gave evidence which has been regarded by the High Court as neu tral.
The remaining two, Balbir Singh (P.W. 5) and Jaswant Singh (P.W. 6) have been believed.
The only questions are (1) whether the conviction can be rested on their testimony and(2) whether certain irregularities in the trial vitiate it.
No attack was made on the testimony of Balbir Singh, P.W. 5, except that the two eye witnesses who 815 resiled in the Sessions Court contradict him.
But it was argued that the evidence of Jaswant Singh P.W. 6, is viti ated because he was not examined by the Committing Magis trate.
It was said that makes his evidence in the Sessions Court inadmissible.
This raises a question which is largely academic in this case because the reason Jaswant Singh, P.W. 6, was not examined by the Committing Magistrate is that the witness had gone away and was not available and it would have been a needless, and indeed unjustifiable, holding up of the pro ceedings to wait till he could be found and summoned.
It is evident that the Sessions Court has power to examine wit nesses who were not examined before the Committing Magis trate because of section 540 of the Criminal Procedure Code, and if the witness is treated as a prosecution witness and examined by the prosecuting counsel instead of by the Court itself that at best would be an irregularity curable by section 537.
The proper time to object to such a procedure would be at the trial itself, and as the appellant was represented in the Sessions Court by two counsel it is too late to object to such a venial irregularity in this Court.
The learned counsel for the appellant took us elaborate ly through the provisions of Chapter XVIII of the Criminal Procedure Code and stressed in particular section 208 (1) but we need not enter into this because section 540 is a complete answer in this particular case.
None of the cases cited goes so far as to say that no witness who was not produced in the committal proceedings can be examined at the trial and we would be unable to agree if they did.
The decision most in favour of the appellant 's contention is Sher Bahadur vs The Crown (1)but that does no more than consider such an omission as a curable defect.
Abdul Qadir J. said at pages 338 and 342 that it was conceded before them that section 540 could be called in aid in such a case, and at page 339 the learned Judge dealt with the question of prejudice (1)(1934)I.L.R. 15 lah.331.
106 816 and concluded at page 344 with the remark that the question is one of fact in each case and that in his opinion there was prejudice in that particular case.
The other learned Judge took the same view at pages 3J,7 and 348 and said: "The Court can, of course, always use its discretion and allow the production of further evidence.
" It is to be observed that the objection in that case was raised at a very early stage and before the sessions trial had commenced; also that the prosecution wished to examine no less than eight material witnesses (out of a total of sixteen) which they had deliberately withheld in the commit tal proceedings.
We make no remarks about the correctness of the observations which travel beyond the question of prejudice because that is unnecessary here.
It is sufficient to say that the learned Judges conceded the power under section 510 and decided the case on the question of preju dice.
The question raised in Queen Empress vs G.W. Hayfield(1) does not arise here because the Sessions Court did not refuse to examine Jaswant Singh, P.W. 6, and so the question whether the prosecution could demand his examina tion as a matter of right never arose.
The fact remains that they were permitted to do so and the defence raised no objection.
The decision of the Allahabad High Court in S.H. Jhabwa la vs Emperor (2)and the Full Bench of the Lahore High Court in Mussammat Niamat vs The Crown(3) are against the learned counsel 's contention.
The decision of the Full Bench of the Lower Burma Chief Court in Emperor vs Channing Arnold (4) is not in point because the Committing Magistrate there refused to examine witnesses which the prosecution wanted, and indeed insisted that he should examine, and what was worse he prevented the accused from completing the cross examination of the only prosecution witness which the Committing Magistrate thought fit to examine.
Whatever else may be thought of (1) All. 212.
(3) (Z936) I.L.R. 17 Lah.
(2) A.I.R. 1933 All. 690.
(4) (1912) 13 Cr. L,.
J. 877.
817 section 208 it is evident that the accused has the right to cross examine.
at any rate, those of the witnesses who are.examined by the Committing Magistrate on behalf of the prosecution and section :547 cannot be used as a cloak for a hasty committal before such cross examination is complete.
In our opinion, the cases cited do not justify the extreme position taken up by the learned counsel for the appellant and as section 540 is a complete answer in this case all we need consider is the question of prejudice.
We do not hold that the Court is bound to examine a witness called under section 540 itself as a court witness and that it can never entrust the examination to the prosecuting counsel because even if that be the proper procedure no prejudice has been occasioned in this particular case.
The irregularity here on this score, if indeed it is one, is so trivial as to be innocuous.
A more important question is, was the appellant taken by surprise and was prejudice occasioned because of that ? We do not think so because Jaswant Singh was mentioned in the first information report, recorded within 15 minutes of the occurrence, as one of the eye witnesses and he was again mentioned as an eye witness in the calendar of the committal proceedings.
The appellant was presumably supplied with the witnesses ' statement to the police, or at any rate he had the right to demand a copy under section 162 and if he did not do so, It was presumably because neither he nor his two learned counsel wanted it.
The first information report is a full one and sets out all the essentials of the prosecution case; therefore, with all that information in the possession of the appellant and his counsel it could be impossible for him to contend that he did not know what this witness was to prove.
Had the witness travelled beyond the statements embodied in the first information report, objection to the use of any thing not contained in it would have been understandable, though to be effective such 818 objection would ordinarily have to be raised at the trial, but as the witness does not do that, there can be no objec tion on the score of prejudice.
It is to be observed that the Explanation to section 537 requires a Court to take into consideration the fact whether any objection on the score of irregularity could have been raised at an earlier stage.
Now the High Court bases its decision on the evidence of these eye witnesses and on the fact that the appellant was apprehended on the spot within a minute or two of the murder with the pistol still in his possession, and had the learned Judges stopped there, there would have been no foundation for the very elaborate network of technicalities upon which the learned counsel for the appellant embarked.
But Bhand ari J. (Soni J. concurring) after saying that "After a careful consideration of all the facts and circumstances of the case I entertain no doubt in my mind that Balbir Singh and Jaswant Singh P. Ws. have told nothing but the truth" went on to say"and that Jit Singh and Jagir Singh who made correct statements before the police and before the Committing Magistrate have given false evidence in the trial Court with the object of saving the appellant from the gallows.
" It was argued that the learned Judges have here used the evidence of these witnesses before the Committing Magis trate as substantive evidence despite the fact that it was legally inadmissible for that purpose because the formali ties prescribed by section 288 were not observed.
Reliance was placed upon Tara Singh vs The State(1).
Even if that be so, it would make no difference because the evidence of Balbir Singh and Jaswant Singh, whom the learned Judges primarily believe, is sufficient to afford a basis for the conviction and the mere fact that extraneous matter not necessary for the conviction was also called in aid would not affect (1) ; 819 the result.
But as a matter of fact the foundation for this attack is based upon incorrect assumptions.
We will deal with Jit Singh, P.W. 2, first.
He supported the prosecution case in his examination inchief but resiled when cross examined.
He was therefore treated as hostile and the learned Public Prosecutor was permitted to cross examine him.
In cross examination the witness 's statement in the Committal Court was read out to him and he was asked whether he had made such a statement and he said: "Yes.
" When that statement is read it is found to tally with his evidence in chief and with the depositions of Balbir Singh and Jaswant Singh and with the first information report.
Now it was not necessary to use the former statement as substantive evi dence at all and the fact that the learned High Court Judges placed this on a par with the statements to the police, including of course the first information report, indicates that they were not using the former statements as substan tive evidence but merely as corroboration of what was said in chief.
The distinction is a subtle one and can perhaps be best explained in the following way.
A witness is called and he says in chief, "I saw the accused shoot X".
In cross examination he resiles and says "I did not see it at all.
" He is then asked "but didn 't you tell A, B & C on the spot that you had seen it ?" He replies "yes, I did.
" We have, of set purpose, chosen as an illus tration a statement which was not reduced to writing and which was not made either to the police or to a magistrate.
Now, the former statement could not be used as substantive evidence.
It would only be used as corroboration of the evidence in chief under section 157 of the Evidence Act or to shake the witness 's credit or test his veracity under section 146, Section 145 is not called into play at all in such a case.
Resort to section 145 would only be necessary if the witness denies that he made the former statement.
In that event, it would be necessary to prove that he did, and if the 820 former statement was reduced to writing, then section 145 requires that his attention must be drawn to those parts which are to be used for contradiction.
But that position does not arise when the witness admits the former statement.
In such a case all that is necessary is to look to the former statement of which no further proof is necessary because of the admission that it was made.
Of course, that statement cannot be used as substantive evidence unless section 988 of the Criminal Procedure Code is called in aid.
But even without section 288 a Court would be entitled to say in such a case, basing on the evidence in chief, which is substantive evidence.
that what the witness said to the police, or to the Committing Magistrate, is the true version, not because those statements form substantive evidence but.
because they tally with the evidence in chief which is substantive.
This is only one of the many ways in which a witness 's testimony can be sifted and examined.
Corroboration is as useful to test the truth of a story as any other method.
In such a case, what the Court really does, though it may happen to put the matter the other way round, is to say that in its opinion the substantive evi dence given in chief is true because it is corroborated by an earlier statement and for that reason, namely because the version in chief is the true one the contradictory version given in cross examination is wrong, not because of the contradiction embodied in the former statement but because of what was said in chief, a version which it is now safe to believe on account of the corroboration afforded by the earlier statement.
It is true the earlier statement could also have been used for contradicting the version given in crossexamination and in that event, if it is in writing, the limitations imposed by section 145 of the Evidence Act would have to be observed, but the prosecution is not bound to do that.
It has a choice.
It can, if it so chooses, build up the version given in chief in any way it pleases and, having done that, use the version in chief to destroy the version in cross examination.
821 But in the case before us there is no need to resort to these subtleties because here the depositions were brought on record and could be used as substantive evidence even if the formalities prescribed by section 145 of the Evidence Act were not observed for the very simple reason that there was no need in this cause to resort to section 145.
As we have said, the prosecution had a choice here because of the two conflicting versions given in chief and in crossexami nation.
It was entitled to use the former statement either to contradict what was said in crossexamination or to corroborate what was said in chief.
In either event, sec tion 288 of the Criminal Procedure Code could be used to make the former statement substantive evidence because what the section says is "subject to the provisions of the Indian Evidence Act," and not subject to any particular section in it.
Section 157 is as much a provision of the Indian Evi dence Act as section 145 and if the former statement can be brought in under section 157 it can be transmuted into substantive evidence by the application of section 288.
Tara Singh vs The State(1) is to be distinguished because there, there were no two versions in the course of the same testimony.
The witness in question was hostile from the start in the Sessions Court and the whole purpose of resort ing to section 288 was to contradict what he said there and no question of corroboration arose.
The prosecution had no choice there, as it was here, of using the former statement either to contradict or to corroborate.
We turn next to Jagir Singh, P.W. 4.
In his case there was no choice.
He was hostile from the start and in his ease our observations in the ruling just referred to apply in full.
But on an examination of his evidence we find that the formalities prescribed by section 145 were complied with.
His cross examination, in contrast to Jit Singh 's where such a procedure was not necessary.
shows that every circumstance intended to be used as contradiction was put to him point by point and passage by passage.
That was (1) ; at 743.
822 conceded, but it was argued that this was done without drawing the witness 's attention to the parts of the writing which were to be used for the purposes of contradiction.
We are by no means satisfied that is the ease because at least one of the passages is reproduced in inverted commas and so must have been read out from the statement.
But that apart.
Immediately after the witness had been questioned about each separate fact point by point, the whole statement was read out to him and he admitted that he had made it in the Committing Court.
Now this procedure may be open to objection when the previous statement is a long one and only one or two small passages in it are used for contradiction that may, in a given case, confuse a witness and not be a fair method of affording him an opportunity to explain but in the present case the previous statement is a short one and the witness was questioned about every materi al passage in it point by point.
Accordingly, the procedure adopted here was in substantial compliance with what sec tion 145 requires.
There can be no hard and fast rule.
All that is required is that the witness must be treated fairly and be afforded a reasonable opportunity of explaining the contradictions after his attention has been drawn to them in a fair and reasonable manner.
We are satisfied that was done here.
The matter is one of substance and not of mere form.
Jit Singh, P.W. 2, said that the statement made by him in the committal proceedings was not read over to him and so did Jagir Singh, P.W. 4.
It was argued that in the absence of an enquiry that must be accepted as true, and if true, the evidence becomes inadmissible.
Now the certificate of the Committing Magistrate en dorsed on the deposition sheet states that the deposition was read out to the witness and that the witness admitted it to be correct.
The Court is bound to accept this as correct under section 80 of the Indian Evidence Act until it is proved to be untrue.
The burden is on 823 the person seeking to displace the statutory presumption and if he chooses to rely on the testimony of a witness which the Court is not prepared to believe the matter ends there.
The duty of displacing the presumption lies on the person who questions it.
The Court is of course bound to consider such evidence as is adduced but it is not bound to believe such evidence nor is there any duty whatever on the Court to conduct an enquiry on its own.
There is nothing in this point.
But we again wish to discountenance the suggestion that the Committing Magistrate should have been examined to prove the truth of his certificate and we endorse the re marks we made in Kashmera Singh vs The State of Madhya Pradesh (1) based on the decision of the Privy Council in Nazir Ahmad vs King Emperor(2) regarding the undesirability of any such practice.
But even if the fact be true that the deposition was not read over, that would only amount to a curable irregularity and, as the Privy Council observed in Abdul Rahman vs King Emperor (3), in the absence of prejudice which must be disclosed in an affidavit which shows exactly where the record departs from what the witness actually said, there is no point in the objection.
The object of the reading over prescribed by section 360 of the Code of Criminal Procedure is not to enable the witness to change his story but to ensure that the record faithfully and accurately embodies the gist of what the witness actually said.
Therefore, before prejudice can be substantiated on this score, it must be disclosed by affidavit exactly where the inaccuracy lies.
The next and last objection is on similar lines.
Jit Singh, P.W. 2., and Jagir Singh, P.W. 4, said that their statements before the Committing Magistrate were made under the threats and duress of the police.
It was argued that that should not have been rejected without further enquiry, and a ruling in which a further enquiry was considered necessary was cited.
Here (1) ; (2) A.I.R. 1936 P.C. 253 at 258.
(3) A.I.R 1927 P.C. 44 at 45 47.
107 824 again, it is no part of a Court 's duty to enter upon a roving enquiry in the middle of a trial on matters which are collateral to the main issue.
The burden is on the person making these allegations to substantiate them and if he chooses to rely on evidence.which does not satisfy the Court he must ' suffer the same fate as every other person who is unable to discharge an onus which the law places upon him.
It was also argued that there was no proper compliance with the provisions.
of section 342 of the Criminal Proce dure Code.
We are satisfied that there was substantial compliance in this case.
The facts were simple and few and the crucial matters were brought to the attention of the appellant.
In any event, the learned counsel was unable to tell us even at the argument stage exactly how his client was prejudiced and tell us what answers his client would have given to the questions which, according to counsel, ought to have been put to the appellant.
We pressed him several times to disclose that but he was unable to do so.
As we said at the outset, the case is a very simple one in which a man was caught red handed with a pistol still in his hand and in which the first information report was recorded practically on the spot within 15 minutes of the occurrence.
The murder was committed in day light and there was no dearth of eye witnesses.
Two have been believed, and in the case of the other two, certain statements made by them in the Sessions Court resiling from statements previ ously recorded in the committal proceedings have been disbe lieved.
The appeal fails and is dismissed.
We see no reason to interfere with the sentence of death.
Appeal dismissed.
Mehta. | The Sessions Court has power to examine witnesses who were not examined before the Committing Magistrate because of sec.
540, Criminal Procedure Code, and if the witness is treated as a prosecution witness and examined by the prose cuting counsel instead of by the court, that at best would be an irrigularity curable by sec.
537 of the Code.
The proper time to object to such a procedure would be at the trial itself.
Sher Bahadur vs The Crown (I.L.R. and Queen Empress vs G.W. Hayfield (I.L.R. 14 All.
212)distin quished S.S. Jhabwala vs Emperor (A.I.R. 1933 All. 690) and Mussamat.
Niamat vs The Crown I.L.R. 17 All. 176) approved.
Emperor vs Channing Arnold referred to.
Resort to sec.
145 of the Evidence Act is necessary only if a witness denies that he made the former statement.
In that event it would be necessary to prove that he did and if the former statement was reduced to writing, then sec.
145 requires that his attention must be drawn to those parts which are to be used for contradiction.
But that position does not arise when the witness admits the former statement.
In such a case all that is necessary is to look to the former statement of which no further proof is necessary because of the admission ' that it was made.
The former statement cannot be used as substantive evidence unless sec.
288, Criminal Procedure Code, is called in aid but even without sec.
288 the court would be entitled to say, basing on the evidence in chief which is the substantive evidence, that what the witness said to the police or the Committing Magistrate, is the true version, not because those state ments form substantive evidence, but because they tally with the evidence in chief which is substantive.
If a former statement can be brought in under sec.
157 of the Evidence Act, it can be transmuted into substantive evidence by the application of sec.
288 of the Criminal Procedure Code.
Tara Singh vs The State ; distinquished.
813 In the certificate of the Committing Magistrate endorsed on the deposition sheet states that the deposition was read out to the witness and the witness admitted it to be correct the court is bound to accept this as correct under sec.
80 of the Evidence Act until it is proved to be untrue.
It is not necessary nor desirable to examine the Commit ting Magistrate to prove the truth of his certificate.
Kashmera Singh vs The State of Madhya Pradsh [1952] (S.C.R.) 526 followed.
Even if it be true that the deposition was not read over, that would only amount to a curable irregularity and in the absence of prejudice which must be disclosed in an affidavit which shows exactly where the record departs from what the witness actually said, the objection cannot be sustained. |
minal Appeal No. 156 of 1961.
Appeal from the judgment and order dated June 15, 1961, of the Calcutta High Court in Criminal Appeal No. 745 of 1959.
D. N. Mukherjee, for the appellant.
P. K. Chakraborty and P. K. Bose, for the respondent.
March 6, 1964.
The Judgment of the Court was delivered by RAGHUBAR DAYAL, J.
Sunil Kumar Paul has preferred this appeal, after obtaining a certificate from the Calcutta High Court under article 134(1)(c) of the Constitution.
The facts leading to the appeal are these.
The appellant was a clerk in the office of the Sub Divi sional Health Officer at Barrackpore in 1955 56.
He used to prepare bills of the establishment, to present them at the ,Sub treasury and later present them at the State Bank at Barrackpore, to receive payment in cash and to make over that amount to the Sub Divisional Health Officer.
Certain bills were drawn under the heading '38 Medical '.
Certain bills were to be drawn under the heading '39 Public Health '.
Some other bills were drawn under other headings.
On October 5, 1956, the appellant presented a bill for Rs. 1,769 out of Which a sum of Rs. 5 10 0 was to be credited in the Postal Life Insurance Ledger and the balance of Rs. 1,763 6 0 was to be received in cash.
This bill was duly passed by the Sub Treasury and was subsequently presented to the Bank on October, 6, 1956 for payment of Rs. 1,763 6 0. 'The Bank paid this amount to the appellant.
The amount was 72 not paid to the Sub Divisional Health Officer.
In fact, the records of the Office of the Sub Divisional Health Officer did not refer to any such bill being prepared and submitted to the Sub Treasury and the Bank for payment.
A bill for practically the same items which were mentioned in the bill cashed on October 6, was however presented on October 1, 1956.
It was for an amount of ' Rs. 1,767 out of which Rs. 5 10 0 were to be credited to the PLI account ledger and the balance of Rs. 1,761 6 0 were to be paid in cash.
The amount of this bill was received on October 1, and was duly handed over to the Sub Divisional Health Officer.
It may be mentioned that this bill.
cashed on October 1, 1956 was at first prepared for Rs. 1,769 and the amount to be received in cash was to be Rs. 1,763 6 0 but prior to this encashment, a correction was made at some stage ', and the bill was reduced by Rs. 2 in the total amount and consequently in the amount to be paid in cash.
The fact of the presentation of a bill for its encashment of Rs. 1,763 6 0 on October 6, 1956 came to the notice of the.
Divisional Health Officer at the instance of the Accountant General and on enquiry it was found that no such bill had been actually presented by his office for encashment and that no such amount was received by him.
This led to a complaint and further enquiries and investigation which ended in the prosecution of the appellant.
The case was made over to the Special Judge by the Government in view of the provisions of the West Bengal Criminal Law Amendment (Special Courts) Act, 1949 (W. B. Act XXI of 1949), hereinafter called the Act, as it involved an offence punishable under section 409 I.P.C.
The Special Judge tried the appellant for that offence and convicted him and sentenced him to rigorous imprisonment for two years and to pay a fine of Rs. 2,000.
The appellant went in appeal to the High Court of Calcutta.
The High Court agreed with the appellant 's contenion that no offence under section 409 I.P.C. had been made out, but held.that he was proved to have committed an offence under section 420 I.P.C.
It accordingly altered his conviction from an offence under section 409 I.P.C. to one under section 420 I.P.C., for cheating the employees of the State Bank, Barrackpore, by representing that the bill for Rs. 1,769 gross and Rs. 1.763 6 0 cash drawn on October 6, 1956, was a genuine bill drawn by the Sub Divisional Health Officer, and thereby dishonestly inducing the Bank 's staff to make over the sum of Rs. 1,763 6 0 to him and sentenced him to rigorous imprisonment for one year and to fine of Rs. 2,000.
It is against this order that this appeal, has been preferred.
73 The facts found by the High Court are sufficient to justify the finding that the appellant committed the offence under section 420 I.P.C. Learned counsel for the appellant has, urged the following points: (1) A case involving an offence under section 420 I.P.C. cannot be allotted for trial to a Special Court by the State Government when such an offence is not committed by a public servant while purporting to act as such public servant.
(2) The Special Court could not take recourse to the provisions of section 237 Cr.
P.C., and if it could, the requiremen ts of section 237 Cr.
P.C. were not satisfied in the present case, and that consequently the High Court could not have altered the conviction of the appellant from an offence under section 409 I.P.C. to one under section 420.
(3) The ingredients of an offence under section 420 I.P.C. were neither alleged nor proved by the prosecution.
(4) The accused has been prejudiced on account of the absence of the necessary allegations and the omission to frame a charge for an offence under s.420 I.P.C. and therefore the provisions of section 537 Cr. P. C. would not cure this defect in trial.
To appreciate the first contention, reference may be made to the relevant provisions of the Act.
They are: "4(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1898, or in any other law, the offences specified in the Schedule shall be triable by Special Courts only: Provided that when trying any case, a Special Court may also try any offence other than an offence specified in the Schedule, with which the accused may under the Code of Criminal Procedure, 1898., be charged at the same trial.
(2) The distribution amongst Special Courts of cases involving offences specified in the Schedule, to be tried by them, shall be made by the State Government.
(2) Save as provided in sub section (1). . the provi sions the Code of Criminal Procedure, 1898, shall, so far as they are not inconsistent with this Act, apply to the pro ceedings of a Special Court; and for the purposes of the said provisions, a Special Court shall be deemed to be a Court of Session trying cases without a Jury, and a person conducting a prosecution before a Special Court shall be deemed to be a Public Prosecutor.
" THE SCHEDULE * * * 2.
An offence punishable under section 409 of the Indian Penal Code.
, if committed by a public servant or by a person dealing with property belonging to Government as an agent of Government in respect of property with which he is entrusted, or over which he has dominion in his capacity of a public servant or in the way of his business as such agent.
An offence punishable under section 417 or section 420 of the Indian Penal Code, if committed by a public servant or by a person dealing with property belonging to Government as an agent of Government, while purporting to act as such public servant or agent.
The Government notification allotting the present case to the Special Court is not on the record and therefore what its actual contents were cannot be stated with any precision.
It may however be assumed that it mentioned the offence involved in the case to be that under section 409 I.P.C., and, possibly, did not state the various facts which went to establish that offence against the appellant.
Section 409 I.P.C. is mentioned in the Schedule referred to in sub section
(2) of section 4 of the Act.
The State Government was therefore competent to allot the case involving that offence to the Special Court.
In fact it had to allot the case to the Special Court in view of the provision of sub section
(1) of section 4 to the effect that the offences specified in the Schedule shall be triable by Special Courts only.
The question therefore really is whether the Special Court could try the appellant 75 for the offence under section 420 I.P.C. An offence under section 420 I.P.C. when committed in certain circumstances is also men tioned in the Schedule.
It has to be tried by Special Courts only when it is committed by a public servant while purporting to act as such.
There is no doubt that the appellant is a public servant.
This has not been disputed.
Learned counsel for the appellant, Mr. Mukherjee, has urged that the expression 'while purporting to act as such public servant ' be construed to mean 'while purporting to act in the discharge of official duties ' and that presentation of a false bill could not be in the discharge of official duty.
Such presentation may not be in the discharge of official duty, but the question is different and is as to whether the presentation of a false bill was made by the public servant purporting to do so in the discharge of his duties.
The appellant did present the false bill purporting to present it in the discharge of his duties as a clerk of the Office of the Sub Divisional Health Officer who was duly authorised to present bills and cash them.
Reliance is placed on the case reported as Bhajahar Mondal vs The State or West Bengal(1) in support of the contention that the appellant should not have been tried by the Special Court of the offence under section 420 I.P.C. when the case was allotted as one involving an offence under section 409 I.P.C. The facts of that case were very different.
The order allotting the case mentioned the offence of which the accused was to be tried to be an offence under section 161 read with section 116 I.P.C. The order was made on November 27, 1952.
Prior to this date, on July 28, 1952, abetment of an offence under section 161 I.P.C. was made a distinct offence under section 165 A I.P.C. by the Criminal Law Amendment Act XLVI of 1952 An offence under section 165A was not mentioned in the Schedule to the Act as it stood on November 27, 1952.
This Court held that the notification of the Government making over the case to the Special Court was bad as the case made over related to no existing offence.
Such cannot be said of the Government notification allotting the case in the present appeal to the Special Court, as on the date of such notification there existed an offence under section 409 I.P.C. and it was included in the Schedule to the Act.
On the facts proved, it is not to be doubted that the appellant presented the bill for Rs. 1,763 6 0 at the State Bank oil October 6, purporting to act as the clerk of the Sub Divisional Health Officer.
The bill presented was on be half of that officer.
The Bank made the payment to him a (1) ; 76 the messenger of that officer duly authorised to receive payment in cash.
It follows that the offence under section 420 committed by the appellant would be committed by him as a public servant purporting to act as such, and that a case involving this offence also could have been allotted to the Special Court by the State Government for trial.
The Special Court was therefore competent to try the accused for this offence if the facts proved established it.
Apart from the consideration that the offence of cheating of which the appellant accused has been convicted fell within the offences mentioned in the Schedule, the appellant could be tried by the Special Court for this offence in view of the proviso to section 4.
The proviso authorizes the Special Court, when trying a case involving an offence specified in 'he Schedule to try any offence other than that offence with which the accused may be charged at the same trial in accordance with the provisions of the Code of Criminal Procedure.
The accused could be charged with an offence under section 420 I.P.C. if he could be tried for this offence at the trial for an offence under section 409 I.P.C. He could be so tried in view of is.
236 and 237 Cr. P. C.
It is urged for the appellant that the provisions of section 236 Cr. P. C. would.apply only to those cases where there be no doubt about the facts which can be proved and a doubt rises as to which of the several offences had been committed on the proved facts.
Sections 236 and 237 read: "236.
If a single act or series of acts is of such a nature that it is doubtful which of several offences 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) A is accused of an act which may amount to theft, or receiving stolen property, or criminal breach of trust or 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.
77 237.
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.
Illustration A is charged with theft.
It appears that he committed the offence of criminal breach of trust, or that of receiving stolen goods.
He may be convicted of criminal breach of trust or of receiving stolen goods (as the case may be) though he was not charged with such offence.
" The framing of a charge under section 236 is, in the nature of things, earlier than the stage when it can be said what facts have been proved, a stage which is reached when the court delivers its judgment.
The power of the Court to frame various charges contemplated by section 236 Cr. P. C. therefore arises when it cannot be said with any definiteness, either by the prosecutor or by the Court, that such and such facts would be proved.
The Court has at the time of framing the charges, therefore to consider what different offences could be made out on the basis of the allegations made by the prosecution in the complaint or in the charge submitted by the investigating agency or by the allegations made by the various prosecution witnesses examined prior to the framing of the charge.
All such possible offences could be charged in view of the provisions of section 236 Cr. P. C. as it can be reasonably said that it was doubtful as to which of the offences the facts which could be ultimately proved would constitute.
The facts which must have been alleged prior to the stage of the framing of the charge in the present case must have been what had been stated in the charge sheet submitted by the Investigating Officer, 24 Parganas, which is printed at p. 3 of the appear record.
This charge sheet narrates in the column meant for the name of offences and circumstances connected with it: "that on the 6th October 1956 Sunil Kumar Paul, a Public servant in the employment of the office of the Sub Divisional Health Officer, Barrackpore i.e., (clerk) dishonestly drew Rs. 1,763 6 0 excluding Postal Life Insurance deduction of Rs. 5 10 0 from the State Bank of India, Barrackpore Branch by submitting a false duplicate Estt.
Pay Bill 78 for the office of the said S.D.H.O., Barrackpore.
The money drawn was not credited to the office of the Sub Divisional Health Officer, Barrackpore.
" It is practically on these facts that the conviction of the appellant for an offence under section 420 I.P.C. has been found ed.
It follows that the Special Court could therefore have framed a charge under section 420 I.P.C. at the relevant time if it had been of the opinion that it was doubtful whether these facts constitute an offence under section 409 I.P.C. as stated in the charge sheet or an offence under section 420 I.P.C. When a charge under section 420 I.P.C. could have been framed by the trial Court by virtue of section 236 Cr.
P.C. that ,Court or the appellate Court can, in law, convict the appellant of this offence instead of an offence under section 409 I.P.C. if it be of the view that the offence of cheating bad been established.
This would be in accordance with the provisions of section 237 Cr.
P. C In Begu vs The King Emperor(1) sections 236 and 237 were construed by Viscount Haldane thus: "The illustration makes the meaning of these words quite plain.
A man may be convicted of an offence, although there has been no charge in respect of it, if the evidence is such as to establish a charge that might have been made.
That is what happened here.
The three men who were sentenced to rigorous imprisonment were convicted of making away with the evidence of the crime by assisting in taking away the body.
They were not charged with that formally, but they were tried on evidence which brings the case under section 237.
" This was approved by this Court in Ramaswamy Nadar vs The State of Madras(2).
In this case, the accused, acquitted of an offence under section 420 I.P.C. was convicted by the High Court of an offence under section 403 I.P.C.
This Court held that the High Court could do so.
On facts, however, this Court did not find the offence under section 403, proved.
In the State of Andhra Pradesh vs Kandimalla Subbaiah(3) it was held that while a Special Judge appointed under section 6 of the Criminal Law Amendment Act (XLVI of 1952) had juris diction to try cases under section 5 of the Prevention of Corruption Act, he could, under section 7(3) of the Criminal Law Amendment (1) 52 I.A. 191.
(2) (3) , 203.
79 Act try other offences under the Code of Criminal Procedure if the accused could be charged with them at the same trial and that therefore the accused could be tried at the trial for an offence under section 5 of the Prevention of Corruption Act for an offence under section 120B read with sections 466, 467, 420 I.P.C. and that the other accused who had abetted the commission of these offences could also be tried.
Sub section
(3) of section 7 of the Criminal Law Amendment Act provided that when trying any case a Special Judge might also try any offence other than an offence specified in section 6 with which the accused might, under the Code of Criminal Procedure, 1898, be charged at the same trial.
In support of his contentions, learned counsel for the appellant referred to the case reported as Nanak Chand vs The State of Punjab.(1) wherein it was stated at p. 1212: "The provisions of section 236 can apply only in cases where there is no doubt about the facts which can be proved but a doubt arises as to which of several offences have been committed on the proved facts in which case any number of charges can ' be framed and tried or alternative charges can be framed. . .
In the present case there is no doubt about the facts and if the allegation against the appellant that he had caused the injuries to the deceased with takwa was established by evidence, then there could be no doubt that the offence of murder had been committed.
" This does not help the appellant 's contention as the alle gations in that case if proved could establish, according to the Court, the offence of murder only and therefore there was no room for any doubt about the nature of offence com mitted and for the application of section 236 Cr. P. C.
In that case, the appellant was tried along with others for an offence under section 302 read with section 149 I.P.C.
The Sessions Judge convicted the appellant and a few others under section 302 read with section 34 I.P.C.
The High Court acquitted the others and altered the conviction of the appellant to the offence under section 302 I.P.C.
It was, in this setting, that this Court held that on the basis of the specific allegation that the appellant had struck the deceased with a takwa, there could be no doubt of that fact constituting an offence under section 302 and not an offence under section 302 read with section 149 I.P.C. We therefore hold that at the trial of the appellant for an offence under section 409 I.P.C., in this case, the appellant could have also been charged for an offence under section 420 I. P. C. in view of section 236 of the Code of Criminal Procedure.
(1) ; 80 It is then urged for the appellant that under the proviso to section 4 of the Act, the Special Court can try any other offence only when the accused is specifically charged with that offence.
The language of the proviso does not lead to such a conclusion.
It provides for the trial of the accused for any other offence provided the accused could be charged with that offence at the same trial under the provisions of the Code of Criminal Procedure.
The proviso does not say that the charge must be framed, though of course, if the trial Court itself tries the accused for a certain offence, it will ordinarily frame a charge.
The proviso empowers a Court to try the accused for that offence and has nothing to do with the power of the trial, court or of the appellate Court to record a conviction for any other offence when an accused is being tried with respect to an offence mentioned in the Schedule.
The Court 's power to take recourse to the provisions which empower it to record a conviction for an offence not actually charged, depends on other provisions of the Code and the Act.
Section 5(2) of the Act provides that the provisions of the Code of Criminal Procedure so far as they are not incon sistent with the Act, would apply to the proceedings of the Special Court and for the purposes of these provisions, the Special Court could be deemed to be a Court of Sessions.
There is nothing in the provisions of section 237 of the Code of Criminal Procedure which is inconsistent with the provisions of the Act.
Section 237 simply empowers the Court to convict an accused of the offence with which he could have been charged under section 236, even when he had not been charged with it.
Section 237 really deals with the final orders which the Court can pass on a trial of an accused for a certain offence.
In view of the proviso to sub section
(1) of section 4, the Special Court could have tried the appellant for the offence under section 420 I.P.C.
It did not actually try him for that offence.
It was however open to it and to the appellate Court to convict him of the offence under section 420 I.P.C. when trying for an offence under section 409 I.P.C. in view of section 237 of the Code.
It has also been urged for the appellant that the proviso to section 4 does not give any power to the Special Court to try an offence which be independent of the offence mentioned in the allotment order.
That is to say, the Special Court, in this case, could have tried the appellant only for such offences which will be in some way related to the offence under section 409 I.P.C.
It is further urged that the ingredients of the offence under section 420 I.P.C. are absolutely different from the ingredients of the offence under section 409 I.P.C. 81 The ingredients of two must be different from one another and it is therefore not necessary to consider whether the ingredients of the two offences are in any way related.
The Court has to see, for the purpose of the proviso, ' whether the accused could be charged with any offence, other than the one referred to in the allotment order, in view of the provisions of the Code.
There is nothing in the proviso which could lead to the construction that any limitations other than those laid down by the provisions of the Code of Criminal Procedure were to affect the nature of the offence which could be tried by the Special Court.
We are therefore of opinion that the Special Court could try the appellant for the offence under section 420 I.P.C. and that therefore the High Court was right in altering his conviction from that under section 409 to section 420 I.P.C.
We have already referred to the statement in the chargesheet that the appellant presented a false bill to the State Bank and cashed it.
This allegation is sufficient for the pur pose of the offence under section 420 I.P.C.
It was not necessary to allege or to prove that the appellant himself had prepared the false bill.
Such an allegation could not be made in the present case in particular, as the bill which was cashed on October 6, could not be traced.
The presentation of the bill for encashment carries with it the representation that it is a genuine bill and therefore the allegations in the case attributed misrepresentation to the appellant at the time he presented the bill.
It may be mentioned here that if the bill had been a genuine bill, the offence made out in the present case would have been an offence under section 409 I.P.C.
In the circumstances, therefore, the appellant cannot be said to be prejudiced in his conviction under section 420 I.P.C. on account of the non framing of the charge, and consequent non trial, under section 420 I.P.C.
In fact, in the circumstances of the case, no question of irregularity in the trial arises.
The framing of the charge under section 420 I.P.C. was not essential and section 237 Cr.
P. C. itself justifies his conviction of the offence under section 420 if that be proved on the findings on the record.
The last contention for the appellant was that the sentence is severe.
We do not consider a sentence of 1 year 's rigorous imprisonment and a fine of Rs. 2,000 severe.
The appeal therefore fails and is dismissed.
Appeal dismissed. | The appellant was tried and convicted by the Special Judge for an offence under section 409 I.P.C. and sentenced to rigorous imprisonment for two years and to pay a fine of ' Rs. 2,000.
On appeal, the High Court altered his conviction from an offence under section 409 to one under section 420 I.P.C. for cheating the employees of the State Bank, by representing a, bill as a genuine bill drawn by the Sub Divisional Health Officer, and thereby dishonestly inducing the Bank 's Staff to make over the sum of Rs. 1,763 6 0 to him and sentenced him to rigorous imprisonment for one year and to a fine of Rs. 2,000.
On appeal by certificate the appellant mainly contended (i) that a case under section 420 I.P.C. could not be allotted for trial to a Special Court by the Government when such an offence was not committed by a public servant while purport ing to act as such public servant: (ii) that the Special Court could not take recourse to the provision of section 237 Code of Criminal Procedure and if it could, the requirements of section 237 Code of Criminal Procedure were not satisfied and consequently the High Court could not have altered the conviction from section 409 I.P.C. to one under section 420 and (iii) that the accused had been prejudiced ' on account of the absence of a charge under section 420 I.P.C. Held (i) that on the facts proved it must be held that the offence under section 420 committed by the appellant would be committed by him as a public servant purporting to act as such, and that a case involving this offence also could have been allotted to the Special Court by the Government for trial.
The Special Court was, therefore, competent to try the accused for this offence if the facts proved established it, Besides, the appellant could be tried by the Special Court for this offence in view of the proviso to section 4 of the West Bengal Criminal Law Amendment Act.
Bhajahari Mondal vs State of West Bengal, [1959] S.C.R. 1276, distinguished.
(ii) that at the trial of the appellant for an offence under section 409 I.P.C., in this case, the appellant could have also been charged for an offence under section 420 I.P.C., in view of section 236 of ' the Code of Criminal Procedure.
71 In view of the proviso to sub section (1) of section 4 of the Act, the Special Court could have tried the appellant for the offence under section 420 I.P.C.
It did not actually try him for that offence.
It was however, open to it and to the appellate court to convict him of the offence under section 420 I.P.C., when trying for an offence under section 409 I.P.C., in view of section 237 of the Code of Criminal Procedure.
(iii) that in the present case the appellant could not be said to be prejudiced in his conviction under section 420 I.P.C. on account of the non framing of the charge, and consequent non trial, under section 420 I.P.C.
In fact, no question of irregularity in the trial arises.
The framing of the charge under section 420 I.P.C. was not essential and section 237 Code of Criminal Procedure itself justifies his conviction of the offence under section 420 if that be proved on the findings on the record.
Case Law discussed. |
minal Appeal No. 217 of 1959.
Appeal by special leave from the judgment and order dated September 10, 1959 of the Punjab High Court in Criminal Misc.
No. 559 of 1959.
Appellant in person.
section M. Sikri, Advocate General for the State of Punjab, Mohinder Singh Punnan, T. M. Sen and D. Gupta, for the respondent.
March 25.
The Judgment of the Court was delivered by GAJENDRAGADKAR, J.
On December 10, 1958, Mr. M. L. Sethi lodged a First Information Report against the appellant Mr. R. P. Kapur and alleged that he and his mother in law Mrs. Kaushalya Devi had committed offences under sections 420 109, 114 and 120B of the Indian Penal Code.
When the appellant found that for several months no further action was taken on the said First Information Report which was hanging like a sword over his head he filed a criminal complaint on April 1, 1959, against Mr. Sethi under sections 204, 211 and 385 of the Indian Penal Code and thus took upon himself the onus to prove that &he First Information Report lodged by Mr. Sethi was false.
On the said complaint Mr. Sethi moved that the proceedings in question should be stayed as the police had not made any report on the First Information Report lodged by him and that the case started by him was still pending with the police.
After hearing arguments the learned Magistrate ordered that the appellant 's complaint should stand adjourned.
Thereupon the appellant moved the Punjab High Court under section 561 A of the Code of Criminal Procedure for quashing the proceedings initiated by the First Information Report in question.
Pending the hearing of the said petition in the said High Court the police report was submitted under section 173 of the Code on July 25, 1959.
Subsequently, on September 10, 1959, Mr. Justice Capoor heard the appellant 's petition and held that no case had been made out for quashing the proceedings under s.561 A.
In the result the petition was dismissed.
It is against this order that the appellant has come to this Court by special leave, 50 390 The material facts leading to the proceedings against the appellant lie within a very narrow compass.
It appears that in January 1957 the mother in law of the appellant and his wife entered into an agreement with the owners of certain lands in village Mohammadpur Munirka to purchase lands at Rs. 5 per sq.
Earnest money was accordingly paid to the vendors and it was agreed that the sale had to be completed by April 13, 1957; by consent this period was extended to June 13, 1957.
Meanwhile, on March 8, 1957, notifications were issued by the Chief Commissioner under sections 4 and 6 of the Land Acquisition Act, 1894, for acquiring considerable area of land which included the lands belonging to the vendors; this acquisition was intended for the housing scheme of the Ministry of Works, Housing and Supply in the Government of India.
The proposed acquisition was treated as one of urgency and so under section 17 of the Acquisition Act possession of the land was taken by the Collector on June 8, 1957.
Some of the persons concerned in the said lands filed objections against the validity of the action taken under section 17.
It was under these circumstances that the sale deeds were executed by the vendors in favour of Mrs. Kaushalya Devi and certain other vendees on June 12, 1957.
It appears that the vendees presented their claim before the Land Acquisition Collector and an award has been made in Septem ber 1958 by which Mrs. Kaushalya Devi has been allowed compensation at Rs. 3 8 0 per sq.
That is how the title of the lands in question passed to Mrs. Kaushalya Devi.
The First Information Report filed by Mr. Sethi alleges that he and the appellant were friends and that on January 4,1958, the appellant dishonestly and fraudulently advised him to purchase 2,000 sq.
of land in Khasra Nos. 22, 23, 24 and 25 in the aforesaid village Mohammadpur Munirka on the representation that as owner of the land in the area Mr. Sethi would get a plot of desired dimensions in the same area developed by the Ministry under its housing scheme.
The appellant also represented to Mr. Sethi, according to the First Information Report, that since under the scheme no person would, be allotted more than one 391 plot he would have to surrender a part of his land; that is why as a friend he was prepared to give to Mr. Sethi one plot at the price at which it had been purchased.
According to Mr. Sethi the appellant dictated an application which he was advised to send to the Secretary of the Ministry of Works and he accordingly sent it as advised.
The First Information Report further alleges that the appellant had assured Mr. Sethi that the land had been purchased by his mother in law at Rs. 10 per sq.
Acting on this representation Mr. Sethi paid Rs. 10,000 by cheque drawn in favour of Mrs. Kaushalya Devi on January 6, 1958.
This cheque has been cashed.
Subsequently a draft of the sale deed was sent by the appellant to Mr. Sethi in the beginning of March 1958 and on March 6, 1958, a further sum of Rs. 10,000 was paid by cheque.
The draft was duly returned to the appellant with a covering letter in which Mr. Sethi stated that he would have liked to add one clause to the deed to the effect that in the event of the authorities not accepting the sale for the purpose of allotment, the amount of Rs. 20,000 would be refunded to him; and he expressed, the hope that even if the said clause was not included in the document the appellant would accept it.
The sale deed in favour of Mr. Sethi was registered on March 21, 1958.
It is this transaction which has given rise to the First Information Report in question.
Broadly stated the First Information Report is based on four material allegations about fraudulent misrepresentation.
It is alleged that the appellant fraudulently misrepresented to Mr. Sethi that the land had been purchased at Rs. 10 per sq.
; that the appellant fraudulently concealed from Mr. Sethi the pendency of the proceedings before the Land Acquisition Collector, Delhi, and of the acquisition of the said property under section 17 of the said Act; he also made similar fraudulent misrepresentations as regards the scheme of housing to which he referred.
As a result of these misrepresentations Mr. Sethi entered into the transaction and parted with Rs. 20,000.
That in brief is the nature of the complaint made by Mr. Sethi in his First Information Report.
The appellant urged before the Punjab High Court that the case started against 392 him by the First Information Report should be quashed under section 561 A of the Code.
The Punjab High Court has rejected the appellant 's contention.
The question which arises for our decision in the present appeal is: Was the Punjab High Court in error in refusing to exercise its inherent jurisdiction under s.561 A of the Code in favour of the appellant ? Before dealing with the merits of the appeal it is necessary to consider the nature and scope of the inherent power of the High Court under section 561 A of the Code.
The said section saves the inherent power of the High Court to make such orders as may be necessary to give effect to any order under this Code or to prevent abuse of the process of any court or otherwise to secure the ends of justice.
There is no doubt that this inherent power cannot be exercised in regard to matters specifically covered by the other provisions of the Code.
In the present case the magistrate before whom the police report has been filed under section 173 of the Code has yet not applied his mind to the merits of the said report and it may be assumed in favour of the appellant that his request for the quashing of the .proceedings is not at the present stage covered by any specific provision of the Code.
It is well established that the inherent jurisdiction of the High Court can be exercised to quash proceedings in a proper case either to prevent the abuse of the process of any court or otherwise to secure the ends of justice.
Ordinarily criminal proceedings instituted against an accused person must be tried under the provisions of the Code, and the High Court would be reluctant to interfere with the said proceedings at an interlocutory stage.
It is not possible, desirable or expedient to lay down any inflexible rule which would govern the exercise of this inherent jurisdiction.
However, we may indicate some categories of cases where the inherent jurisdiction can and should be exercised for quashing the proceedings.
There may be cases where it may be possible for the High Court to take the view that the institution or continuance of criminal proceedings against an accused person may amount to the abuse of the process of the court or that the quashing of the impugned proceedings would secure the ends of 393 justice.
If the criminal proceeding in question is in respect of an offence alleged to have been committed by an accused person and it manifestly appears that there is a legal bar against the institution or continuance of the said proceeding the High Court would be justified in quashing the proceeding on that ground.
Absence of the requisite sanction may, for instance, furnish cases under this category.
Cases may also arise where the a11egations in the First Information Report or the complaint, even if they are taken at their face value and accepted in their entirety, do not constitute the offence alleged; in such cases no ques tion of appreciating evidence arises; it is a matter merely of looking at the complaint or the First Information Report to decide whether the offence alleged is disclosed or not.
In such cases it would be legitimate for the High Court to hold that it would be manifestly unjust to allow the process of the criminal court to be issued against the accused person.
A third category of cases in which the inherent jurisdiction of the High Court can be successfully invoked may also arise.
In cases falling under this category the allegations made against the accused person do constitute an offence alleged but there is either no legal evidence adduced in support of the case or evidence adduced clearly or manifestly fails to prove the charge.
In dealing with this class of cases it is important to bear in mind the distinction between a case where there is no legal evidence or where there is evidence which is manifestly and clearly inconsistent with the accusation made and cases where there is legal evidence which on its appreciation may or may not support the accusation in question.
In exercising its jurisdiction under section 561 A the High Court would not embark upon an enquiry as to whether the evidence in question is reliable or not.
That is the function of the trial magis trate, and ordinarily it would not be open to any party to invoke the High Court 's inherent jurisdiction and ' contend that on a reasonable appreciation of the evidence the accusation made against the accused would not be sustained.
Broadly stated that is the nature and scope of the inherent jurisdiction of the High Court under section 561 A in the matter of quashing 394 criminal proceedings, and that is the effect of the judicial decisions on the point (Vide: In Re: Shripad G. Chandavarkar (1), Jagat Ohandra Mozumdar vs Queen Empress (2 ), Dr. Shanker Singh vs The State of Punjab (3 ), Nripendra Bhusan Ray vs Govind Bandhu Majumdar(4 ) and Ramanathan Chettiyar vs K. Sivarama Subrahmanya Ayyar (5).) Mr. Kapur, who argued his own case with ability before us, strongly relied on the decision of the Punjab High Court in section P. Jaiswal vs The State & Anr.
(6) and contended that in the interest of justice and in order to avoid unnecessary harassment to him we should ourselves examine the evidence on record and decide whether the said evidence can possibly lead to his conviction.
In that case Jaiswal was charged with having committed offences under 'section 147 and section 452 of the Code and it does appear from the judgment of the High Court that the learned judge elaborately considered all the evidence on which the prosecution relied and came to the conclusion that the proceedings taken against Jaiswal and his co accused should be quashed.
It is, however, clear from the judgment that the learned judge was very much impressed by the fact that the police had reported that there was no case or at the most only a technical offence against Jaiswal but the district magistrate had interfered with the statutory duty of the police and had directed the police officer concerned to prosecute him.
On these facts the learned judge was inclined to take the view that there was a violation of the fundamental right guaranteed to Jaiswal under article 21 of the Constitution.
Besides, in the opinion of the learned judge the evidence on which the prosecution relied showed that the essential ingredients of the offence charged were missing " and the very essentials were non existent".
It is on these findings that the criminal proceedings against Jaiswal were quashed.
It is unnecessary for us to consider .whether the fundamental right guaranteed under article 21 had really been contravened or not.
We have merely referred to the relevant findings recorded by (1) A.I.R. 1928 Bom.
(2) (1954) 56 Punjab L.R. 54.
(3) Mad.
(4) Cal.
(5) A.I.R. 1924 Cal. 1018.
(6) (1953) 55 Punjab L.R 77.
395 the learned judge in order to emphasise the fact that this decision cannot be read as an authority for the proposition that an accused person can approach the High Court under section 561 A of the Code and ask it to appreciate the evidence adduced against him and quash the proceedings in case it thought that the said evidence did not justify the charge.
In fact, in dealing with the case the learned judge has himself approved of the several decisions which have construed the nature and scope of the inherent jurisdiction under section 561 A and so the decision must be confined to the basic findings recorded by the learned judge in that case.
This being the true legal position the question which falls for our decision is: Does the appellant show that his case falls under any of the three categories already mentioned by us.
There is no legal bar to the institution of the present proceedings or their continuance, and it is obvious that the allegations made in the First Information Report do constitute offences alleged against the appellant.
His argument, however, is that the evidence on record clearly and unambiguously shows that the allegations made in the First Information Report are untrue; he also contends that " certain powerful influences have been operating against him with a view to harm him and debar him officially and otherwise and have instigated and later seized upon the false First Information Report filed by Mr. Sethi against him".
In this connection he has naturally placed emphasis on the fact that the investigating agency has acted with extraordinary dilatoriness in the matter and that for several months the police did not make the report under section 173 of the Code.
It is true that though the complaint against the appellant is essentially very simple in its nature the police authorities did not make their report for nearly seven months after the First Information Report was lodged.
We have already indicated how the appellant was driven to file.
a complaint on his own charging Mr. Sethi with having filed a false First Information Report against him, and how the Report in question was filed after the appellant moved the High 396 Court by his present petition under section 561 A.
It is very much to be deplored that the police officers concerned did not act diligently in this matter, and it is not surprising that this unusual delay has given rise to the apprehension in the mind of the appellant that the object of the delay was to keep the sword hanging over his head as long as possible.
It is perhaps likely that the appellant being the senior most Commissioner in the punjab the investigating authorities may have been cautious and circumspect in taking further steps on the First Information Report; but we are satisfied that this explanation cannot account for the inordinate delay made in submitting the report under section 173.
It is of utmost importance that investigation into criminal offences must always be free from any objectionable features or infirmities which may legitimately lead to the grievance of the accused that the work of investigation is carried on unfairly or with any ulterior motive.
Even so it is difficult to see how this conduct on the part of the police officers can materially assist the appellant in his prayer that the proceedings which have now reached the criminal court should be quashed.
We must, therefore, now proceed to consider the appellant 's case that the evidence on record is demonstrably against the allegation of Mr. Sethi that he was induced by the appellant to part with Rs. 20,000 as a result of the several misrepresentations alleged in the First Information Report.
He contends that the principal allegation against him is two fold, that he fraudulently and dishonestly concealed from Mr. Sethi any information about the pendency of the proceedings before the Collector, and fraudulently re presented to him that the land had been purchased at Rs. 10 per sq.
According to the appellant, if the correspondence on the record is considered, and the statements made by Mr. Sethi and his wife and their conduct at the material time are taken into account, it would irresistibly show that the whole story about the fraudulent misrepresentations is untrue.
The appellant has taken us Through the relevant correspondence and as referred us to the statements and the conduct of the parties.
We are anxious not to express 397 any opinion on this part of the appellant 's argument.
All we wish to say is that we would inevitably have to consider the evidence ourselves and to appreciate it before we pronounce any opinion on the validity or otherwise of the argument.
It is not a case where the appellant can justly contend that on the face of the re.
cord the charge levelled against him is unsustainable.
The appellant no doubt very strongly feels that on the relevant evidence it would not be reasonably possible to sustain the charge but that is a matter on which the appellant will have to satisfy the magistrate who takes cognisance of the case.
We would, however, like to emphasise that in rejecting the appellant 's prayer for quashing the proceedings at this stage we are expressing no opinion one way or the other on the merits of the case.
There is another consideration which has weighed in our minds in dealing with this appeal.
The appellant has come to this Court under article 136 of the Constitution against the decision of the Punjab High Court; and the High Court has refused to exercise its inherent jurisdiction in favour of the appellant.
Whether or not we would have come to the same conclusion if we were dealing with the matter ourselves under section 561 A is not really very material because in the present case what we have to decide is whether the judgment under appeal is erroneous in law so as to call for our interference under article 136.
Under the circumstances of this case we are unable to answer this question in favour of the appellant.
Appeal dismissed. | One S lodged a first information report against K.
When K found that no action was taken on the report for several months he filed a criminal complaint against S contending that the report lodged by S was false.
At the instance of S the magistrate ordered K 's complaint to stand adjourned till the police made its final report on the first information report.
Thereupon K moved the High Court under section 561 A of the Code of Criminal Procedure for quashing the proceedings initiated by the first information report.
Pending the hearing the police submitted its report under section 173 of the Code.
Subsequently the High Court dismissed the petition.
K obtained special leave and appealed: Held that no case for quashing the proceedings was made out.
The inherent 'Jurisdiction of the High Court could be exercised to quash proceedings in a proper case either to prevent the abuse of the process of any Court or otherwise to secure the ends of justice.
The following are some categories of cases where the inherent jurisdiction could and should be exercised to quash proceedings: (i) where there was a legal bar against the institution or continuance of the proceedings; (ii) where the allegations in the first information report or complaint did not make out the offence alleged; and (iii)where either there was no legal evidence adduced in support of the charge or the evidence adduced clearly or manifestly failed to prove the charge.
In exercising its jurisdiction under section 561 A of the Code the High Court cannot embark upon an enquiry as to whether the evidence in the case is reliable or not .
In the present case there was no legal bar to the institution of the proceedings or to their continuance; the allegations made in the first information report did constitute the offences alleged and it could not be contended that on the face of the record the charge was unsustainable.
In re: Shripad G. Chandavarkar, A.I.R. 1928 Bom.
184, jagat Chandra Mozumdar vs Queen Empress, Cal.
786, Dr. Shankar Singh vs The State of Punjab, (1954) 56 Punj.
L.W. 54, Nripendra Bhusan Ray vs Govind Bhandhu Majumdar, A.I.R. 1924 Cal.
1018 and Ramanathan Chettiar vs K. Sivarama Subrahmanya Ayyar, Mad. 722, referred to.
S.P. Jaiswal vs The State, , distin guished, 389 |
: Civil Appeals Nos. 249 & 250 of 1958.
Appeals by special leave from the judgment and order dated March 7, 1956, of the Bombay High Court in I.T.R. Nos. 52 and 53 of 1955.
K. N. Rajagopal Sastri and D. Gupta, for the appellant (in both the appeals).
N. A. Palkhivala, section N. Andley and J. B. Dadachanji, for the respondent (in both the appeals).
April 14.
The Judgment of the Court was delivered by section K. DAS, J.
These two appeals with special leave have been heard together.
They arise out of similar facts and the question of law arising therefrom is the same.
The short facts are these.
One Balkrishna Purushottam Purani died on November 11, 1947.
He left behind him three widows and two daughters.
The three widows were named Indira, Ramluxmi and Prabhuluxmi.
These widows as legal heirs inherited the estate of the deceased, which consisted of immovable properties situate in Ahmedabad, shares in Joint Stock Companies, money lying in deposit, and share in a registered firm.
For the two assessment years 1950 51 and 1951 52 (the corresponding account years being the Sambat years 2005 and 2006) the Incometax Officer issued notices to the legal heirs of Balkrishna Purushottam Purani.
Pursuant to those notices, returns were filed under the heading, " Legal heirs of Balkrishhna Purushottam Purani ", in one case 515 and in the name of the 'estate of Balkrishna in the other; the status was shown as " individual " in one case and " association of persons " in the other.
They were signed by Indira, one of the three widows.
For the assessment year 1950 51 the total income was shown as under Rs. Property. 11,011 Share from registered firm.
4,071 Dividends.
51,796 Interest. 22,343 Ground rent. 125 Total. . 69,346 For the assessment year 1951 52, the total income was shown as Rs. Property .
10,879 Share from registered firm.
460 Dividends.
80,426 Interest on deposits. . 536 Ground rent. 125 Total. . 92,426 For both years the Income tax Officer took the status of the assessee as an " association of persons " and on that footing made two assessment orders.
There was an appear to the Appellate Assistant Commissioner, and two of the points taken before him were(a) that the three widows ought to have been assessed separately and not as an " association of persons ", and (b) that in any event, the income from property ought to have been assessed separately in the hands of the three widows by reason of the provisions in section 9(3) of the Income tax Act, 1922.
The Appellate Assistant Commissioner rejected point (a) but accepted point (b).
Then, there was a further appeal to the 516 Income tax Appellate Tribunal, Bombay.
The Tribunal held that the entire estate of deceased Balkrishna Purushottam Purani was inherited and possessed by the three widows as joint tenants and its income was liable to be assessed in their hands in the status of an association of persons.
The Tribunal further held that the Appellate Assistant Commissioner was wrong in holding that the shares of the three widows were definite and determinable and section 9(3) was applicable.
The assessee then moved the Tribunal to refer certain questions of law which arose out of its orders to the High Court of Bombay.
The Tribunal referred four such questions, but we are now concerned with only one of them, viz., question No. 3 which was in the following terms: " (3) Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the assessment made on the three widows of Balkrishna Purushottam Purani in the status of an association of persons is legal and valid in law ? " Two references were made to the High Court in respect of the orders passed for two assessment years and they gave rise to Income tax References Nos. 52 and 53 of 1955.
The leading judgment was given in T. T. It.
52 of 1955.
The High Court held that the Tribunal was in error in coming to the conclusion that the three widows could be assessed in the status of an association of persons with regard to the income which they earned as heirs of their deceased husband.
Therefore, it answered question No. 3 in the negative.
The department represented by the Commissioner of Income tax, Bombay, then applied to this Court and obtained special leave to appeal from the judgment and orders of the High Court of Bombay in the two References.
These two appeals have been filed in pursuance of the special leave granted by this Court.
The appellant is the Commissioner of Income tax, Bombay, and the assessee is the respondent.
The argument on behalf of the appellant is that the High Court was in error when it said that " what is required before an association of persons can be liable to tax is not that they should receive income but that 517 they should earn or help to earn income by reason of their association, and if the case of the Department stops short at mere receipt of income, then the Department must fail in bringing home the liability to tax of individuals as an association of persons.
" It is submitted that the High Court did not, in the statement quoted above, lay down the correct test for determining what is an " association of persons " for the purposes of the Income tax Act.
Before we go on to discuss the argument presented on behalf of the appellant, it is necessary to clear the ground by stating what is the position of co widows in Mitakshara succession and what are the findings arrived at by the Tribunal.
The position of co widows is well settled.
They succeed as co heirs to the estate of their deceased husband and take as joint tenants with rights of survivorship and equal beneficial enjoyment ; they are entitled as between themselves to an equal share of the income.
Though they take as joint tenants, no one of them has a right to enforce an absolute partition of the estate against the others so as to destroy their right of survivorship.
But they are entitled to obtain a partition of separate portions of the property so that each may enjoy her equal share of the income accruing therefrom.
The Tribunal found that the widows in this case did not exercise their right to separate possession and enjoyment and " they chose to manage the property jointly, each acting for herself and the others and receiving the income of the property which they were entitled to enjoy in equal shares.
" Learned counsel for the appellant has emphasised before us the aforesaid finding of the Tribunal and has contended that on the finding of joint management, the widows fulfilled even the test laid down by the High Court and constituted an an "association of persons" for taxing purposes.
The High Court, however, rightly pointed out that the only property which the widows could have managed jointly was the immovable property which fetched an income of about Rs. 11,000, and as to that property, the Appellate Assistant Commissioner had held that section 9 (3) applied.
There was no appeal by the Department against that finding and it was not 68 518 open to the Tribunal to go behind it.
Even on merits the Tribunal was wrong in thinking that the respective shares of the widows were not definite and ascertainable.
They had an equal share in the income, viz., one third each, and the provisions of section 9 (3) clearly applied in respect of the immovable property.
With regard to the shares, dividends and interest on deposits there was no finding of any act of joint management.
Indeed, the main item consists of the dividends and it is difficult to understand what act of management the widows performed in respect thereof which produced or helped to produce income.
On the contrary, the statement of the case shows that the assessee filed lists of shares, copies whereof are marked annexure C and form part of the case, which showed that the shares stood separately in the name of each one of the three widows and this was not denied by the Department.
We now come to the main question in this appeal.
What constitutes an " association of persons " within the meaning of the Income tax Act ? It has been repeatedly pointed out that the Act does not define what constitutes an association of persons, which under section 3 of the Act is an entity or unit of assessment.
Previous to the year 1924, the words of section 3 were " individual, company, firm and Hindu undivided family." By the Indian Income tax Amendment Act of 1924 (Act XI of 1924) the words " individual, Hindu undivided family, company, firm and other association of individuals " were substituted for the former words.
By the Income tax Amendment Act of 1939 (Act VII of 1939) the section was again amended and it then said: " Where any Act of the Central Legislature enacts that income tax shall be charged for any year at any rate or rates, tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act in respect of the total income of the previous year of every individual, Hindu undivided family, company and local authority, and of every firm and other association of persons or the partners of the firm or members of the association individually.
" 519 By the same Amending Act (Act VII of 1939) sub section
(3) of section 9 was also added.
Now, section 3 imposes a tax " in respect of the total income. . . . of every individual, Hindu un divided family, company and local authority, and of every firm and other association of persons or the partners of the firm or members of the association individually.
" In the absence of any definition as to what constitutes an association of persons, we must construe the words in their plain ordinary meaning and we must also bear in mind that the words occur in a section which imposes a tax on the total income of each one of the units of assessment mentioned therein including an association of persons.
The meaning to be assigned to the words must take colour from the context in which they occur.
A number of decisions have been cited at the bar bearing on the question, and our attention has been drawn to the controversy as to whether the words " association of individuals " which occurred previously in the section should be read ejusdem generis with the word immediately preceding, viz., firm or with all the other groups of persons mentioned in the section.
Into that controversy it is unnecessary to enter in the present case.
Nor do we pause to consider the widely differing characteristics of the three other associations mentioned in the section, viz., Hindu undivided family, a company and a firm, and whether in view of the amendments made in 1939 the words in question can be read ejusdem generis with Hindu undivided family or company.
It is enough for our purpose to refer to three decisions: In re: B. N. Elias and Others (1); Commissioner of Income tax, Bombay vs Laxmidas Devidas and Another("); and In re: Dwarakanath Harishchandra Pitale and Another(3); In In re: B. N. Elias and Others (1) Derbyshire, C. J., rightly pointed out that the word " associate " means, according to the Oxford dictionary, " to join in common purpose, or to join in an action." Therefore, an association of persons must be OD e in which two or more persons join in a common purpose or common action, and as the words occur in (1) (2) (3) 520 a section which imposes a tax on income, the association must be one the object of which is to produce income, profits or gains.
This was the view expressed by Beaumont, C. J., in Commissioner of Income tax, Bombay vs Laxmidas Devidas and Another (1) at page 589 and also in Re: Dwarakanath Harishchandra Pitale and Another (2).
In re: B. N. Elias (3 ) Costello, J., put the test in more force full language.
He said "It may well be that the intention of the legislature was to hit combinations of individuals who were engaged together in some joint enterprise but did not in law constitute partnership When we find that there is a combination of persons formed for the promotion of a joint enterprise then I think no difficulty arises in the way of saying that these persons did constitute an association We think that the aforesaid decisions correctly lay down the crucial test for determining what is an association of persons within the meaning of section 3 of the Income tax Act, and they have been accepted and followed in a number of later decisions of different High Courts to all of which it is unnecessary to call attention.
It is, however, necessary to add some words of caution here.
There is no formula of universal application as to what facts, how many of them and of what nature, are necessary to come to a conclusion that there is an association of persons within the meaning of section 3; it must depend on the particular facts and circumstances of each case as to whether the conclusion can be drawn or not.
Learned counsel for the appellant has suggested that having regard to sections 3 and 4 of the Indian Income tax Act, the real test is the existence of a common source of income in which two or more persons are interested as owner or otherwise and it is immaterial whether their shares are specific and definite or whether there is any scheme of management or not.
He has submitted that if the persons so interested come to an arrangement, express or tacit, by which they divide the income at a point of time before it emanates from the source, then the association ceases; otherwise it continues to be an association.
(1) (2) (3) 521 We have indicated above what is the crucial test in determining an association of persons within the meaning of section 3, and we are of the view that the test suggested by learned counsel for the appellant are neither conclusive nor determinative of the question before us.
Coming back to the facts found by the Tribunal, there is no finding that the three widows have combined in a joint enterprise to produce income.
The only finding is that they have not exercised their right to separate enjoyment, and except for receiving the dividends and interest jointly, it has been found that they have done no act which has helped to produce income in respect of the shares and deposits.
On these findings it cannot be held that the three widows had the status of an association of persons within the meaning of section 3 of the Indian Income Tax Act.
The High Court correctly answered question No. 3 in the negative.
Accordingly, the appeals fail and are dismissed with costs.
There will be one set of hearing fee in the two appeals.
Appeals dismissed. | A Hindu governed by the Mitakshara School of Hindu Law died leaving three widows as his legal heirs.
The widows took the estate as joint tenants and did not exercise their right to separate possession and enjoyment.
The main income was from dividends and from immovable property.
The latter was held under section 9(3) of the Income tax Act not to be assessable as income 514 of an association of persons.
The question was whether the three widows could be assessed as an association of persons in respect of the rest of the income: Held, that the three widows did not have the status of an association of persons within the meaning of section 3 of the Income tax Act.
An association of persons is one in which two or more persons join in a common purpose or common action and, for purposes of the income tax law, one of its objects must be to produce income, profits or gains.
It must be a combination of persons formed for the promotion of a joint enterprise for producing income.
In the present case except for receiving the dividends and interest jointly the widows had done no act which helped to produce the income.
In Ye : B. N. Elias, , Commissioner of Income tax, Bombay vs Laxmidas Devidas, and Re. Dwayakanath Harishchandra, , approved. |
Appeal No. 507 of 1957.
Appeal by special leave from the order and judgment dated September 28, 1955, and February 20, 1956, of the Bombay High Court in Income tax Reference No. 28 of 1955.
R.J. Kolah and I. N. Shroff, for the appellant.
C. K. Daphtary, Solicitor General of India,B. Ganapathy lyer and D. Gupta, for the respondent.
March 30.
The Judgment of the Court was delivered by HIDAYATULLAH, J.
This is an appeal with the special leave of this Court, and is directed against an order dated September 28, 1955, and a judgment dated February 20, 1956, of the High Court of Bombay.
By the order, the High Court reframed a question referred to it by the Appellate Tribunal at Bombay, which it answered by its judgment.
Mrs. Kusumben D. Mahadevia (hereinafter referred to as the assessee) who has filed this appeal, was, at all material times, residing in Bombay.
She was a shareholder, holding 760 shares of Mafatlal Gagalbhai & Co., Ltd., Bombay.
For the assessment year 1950 51 (the previous year being the calendar year 1949), she was assessed to income tax on a total income of Rs. 1,50,765 which included a grossed up dividend income of Rs. 1,47,026.
In the latter income was included a sum of Rs. 47,120 being the dividends declared by Mafatlal Gagalbhai & Co., Ltd., Bombay.
Mafatlal Gagalbhai & Co., Ltd., is a private limited Company with its registered office at Bombay.
It was, at all material times, 'resident and ordinarily resident ' in British India.
It was also doing business in the former Baroda State, and used to keep its profits derived in that State with Mafatlal Gagalbhai Investment Corporation, Navsari.
In the year 1949 Mafatlal Gagalbhai & Co., Ltd., declared dividends out of these accumulated profits by three resolutions, which are reproduced: 25 3 1949.
" That a further dividend of Rs. 17 per ordinary share free of income tax for the year 1947 be and is hereby declared absorbing Rs. 4,29,250 419 and the same be payable in Navsari out of the profits of the year 1947 lying at Navsari." 24 9 1949.
" That a further dividend of Rs. 24 per ordinary share free of income tax for the year 1948 be and is hereby declared absorbing Rs. 6,06,000 and the same be payable in Navsari out of the profits of the year 1948 lying at Navsari with Messrs. M.G. Investment Corporation Ltd. on or after 30th April, 1949.
" 24 9 1949.
" Resolved that an Ad interim dividend of Rs. 21 per ordinary share free of income tax absorbing Rs. 5,30,250 be and is hereby declared for the year 1949 out of the income of the Company for the year 1949 remaining unbrought with Messrs. M. G. Investment Corporation Ltd., Navsari, and that the same be payable in Navsari on or after 30th April, 1949.
" The assessee did not bring these dividends into British India.
She claimed the benefit of para.
4 of the Merged States (Taxation Concessions) Order, 1949 (hereinafter referred to briefly as the Concessions Order); but the Tribunal held that the income did not accrue to her in the Baroda State.
The Tribunal pointed out that the dividends were declared by Mafatlal Gagalbhai & Co., Ltd., out of its profits which had accrued partly in, what was then called, British India and partly in the Indian State.
The dividend was thus declared out of ' composite profits '.
It further pointed out that the assessee had paid for and acquired the shares of a Company in British India and was thus holding an asset in British India, and that the income was from that asset.
The Tribunal, however, at the instance of the assessee drew up a statement of the case under section 66(1) of the Indian Income tax Act, and referred the following question to the High Court: " Whether the net dividend income of Rs. 47,120 accrued to the assessee in the former Baroda State, or whether it is income accrued or deemed to have accrued to the assessee in British India ?" When the reference was heard, the High Court was of the opinion that the Tribunal ought to have decided and referred also the question whether the Concessions 420 Order applied to the assessee.
The High Court recognised the grievance of the assessee that no such point was raised before the Tribunal.
The High Court, however, by its order dated September 28, 1955, decided that there was no need to send the case back for a supplemental statement, since all the facts necessary to decide the two questions were before the High Court.
The High Court then reframed the question, as it said, to comprehend the two points of law in the following words: " Whether the assessee is entitled to any concession under the Merged States (Taxation Concessions) Order, 1949, with regard to the net dividend income of Rs. 47,120?" The reference then came up for final disposal on February 20, 1956, and the High Court answered the question in the negative, holding that para.
4 of the Concessions Order did not apply to the assessee.
The High Court did not decide where the income had accrued to the assessee.
Leave to appeal to this Court was refused by the High Court, but the assessee applied to this Court for special leave against both the order and the judgment and obtained it, and the present appeal has been filed.
At the very outset, the assessee has questioned the jurisdiction of the High Court to frame and deal with a question of law not arising out of the order of the Tribunal.
The assessee points out that the Tribunal had decided that the income had accrued in British India.
The assessee had challenged this part of the decision, and if the Commissioner felt it necessary, he should have obtained the decision of the Tribunal and asked for a reference on the other point also.
Since the Tribunal had not gone into the question of the applicability to the assessee of the Concessions Order and had not expressed any opinion thereon, the assessee contends that the High Court could not raise the question on its own, and decide it.
The assessee strongly relies upon a decision of this Court in New Jehangir Vakil Mills Ltd. vs Commissioner of Incometax (1).
In that case, the Bombay High Court had (1) 421 directed the Tribunal to submit a supplementary statement of the case on points not arising from the order of the Tribunal, and this Court held that the High Court had no jurisdiction to do so.
The learned counsel for the Commissioner, on the other hand, contends that the question was the assessability of the assessee, who claimed the benefit of the Concessions Order.
The main question was thus the applicability of the Concessions Order, and the question of the accrual of the income, whether in British India or in Baroda, was merely ancillary.
The latter question was, according to the respondent, included in the first question, and the High Court was right when it framed a comprehensive question and answered it in the sequence it did.
The respondent points out that the High Court having held that the Concessions Order did not apply, was not required to decide the other limb of the question, as it became unnecessary to do so.
In our opinion, the objection of the assessee is well founded.
The Tribunal did not address itself to the question whether the Concessions Order applied to the assessee.
It decided the question of assessability on the short ground that the income had not arisen in Baroda but in British India.
That aspect of the matter has not been touched by the Bombay High Court.
The latter has, on the other hand, considered whether the Concessions Order applies to the assessee, a matter not touched by the Tribunal.
Thus, though the result is the same so far as the assessment is concerned, the grounds of decision are entirely different.
The High Court felt that the question framed by it comprehended both the aspects and, perhaps it did.
But the two matters were neither co extensive, nor was the one included in the other.
The question of accrual of income has to be decided under the Incometax Act, and has but little to do with the Concessions Order.
That question can be adequately decided on the facts of this case without advertence to the Concessions Order.
It cannot, therefore, be said to be either coextensive with or included in the decision of the question actually considered by the High Court to wit, whether the Concessions Order applied or not.
If this 54 422 be so, it is manifest that the Tribunal decided something which stands completely outside the decision of the Bombay High Court.
The High Court also decided a matter which was not considered by the Tribunal even as a step in the decision of the point actually decided.
The two decisions are thus strangers to each other, though they lead to the same result.
Section 66 of the Income tax Act which confers jurisdiction upon the High Court only permits a reference of a question of law arising out of the order of the Tribunal.
It does not confer jurisdiction on the High Court to decide a different question of law Dot arising out of such order.
It is possible that the same question of law may involve different approaches for its solution, and the High Court may amplify the question to take in all the approaches.
But the question must still be one which was before the Tribunal and was decided by it.
It must not be an entirely different question which the Tribunal never considered.
The respondent attempted to justify the action taken by contending that the decision of the question of the accrual of the income with reference to the place of accrual implied the applicability of the Concessions Order.
We do not agree.
If this were so, there would be no necessity to frame the question again.
Indeed, the High Court itself felt that there were two limbs of the question of assessability, and reframed the question to cover both the limbs.
Where the High Court went wrong was in not deciding both the limbs but one of them and that too, the one not decided by the Tribunal.
The resulting position can be summed up by saying that the High Court decided something which the Tribunal did not, and the Tribunal decided something which the High Court did not.
This is clearly against the provisions of section 66.
The respondent referred to Scindia Steam Navigation Co. Ltd. vs Commissioner of Income tax (1), Commissioner of Income tax vs Breach Candy Swimming Bath Trust (2 ) and Ismailia Grain Merchants Association vs Commissioner of Income tax (3).
They (1) (2) (3) 423 were all decisions of the same Court, and arose in different circumstances.
In two of them, the question was wide enough to take in a line of reasoning not adopted by the Tribunal, and in the third, the question was widened by deleting a reference to a section, when another section was also material.
They were not cases where the issues of law as decided by the Tribunal and the High Court were entirely different, which is the case here.
The Punjab High Court has taken a contrary view in Mash Trading Co. vs Com missioner of Income tax (1).
For the reasons given above, we are of opinion that the High Court exceeded its jurisdiction in going outside the point of law decided by the Tribunal and deciding a different point of law.
The order of the High Court will, therefore, be set aside, and the case will be remitted to the High Court to decide the question framed by the Tribunal.
In view of the fact that both the assessee and the Commissioner pointed out the anomaly to the : High Court and the question was reframed in spite of this, the costs of this appeal shall be costs in the reference to.
be heard by the High Court, and will abide the result.
Appeal allowed.
Case remitted. | The appellant was a shareholder of a company known as Mafatlal Gagalbhai and Co., Ltd. The Company with its registered office at Bombay was at all material times resident in British India.
It was also doing business in the former Baroda State and used to keep its profits derived in that State with Mafatlal Gagalbhai Investment Corporation, Navsari.
In the year 1949 Mafatlal Gagalbhai and Co. Ltd. declared dividends out of profits which had accrued partly in British India and partly in the Indian State.
The appellant was assessed to income tax on the dividends earned by her.
She did not bring those dividends into British India and claimed the benefit of para.
4 of the Merged States (Taxation Concessions) Order.
The Tribunal held that the income did not accrue to the appellant in the Baroda State but it did not decide the question whether she was entitled to the benefits of the Taxation Concessions Order.
The High Court on a reference to it held that para.
4 of the Taxation Concessions Order.
did not apply to the assessee but it did not decide the other question as to where the income had accrued to the assessee.
On appeal by special leave the appellant contended, inter alia, that since the Tribunal had not gone into the question of the applicability to the assessee of the Concessions Order and had not expressed any opinion thereon, the High Court could not raise the question on its own and decide it: Held, that the High Court exceeded its jurisdiction in going outside the point of law decided by the Tribunal and deciding a different point of law.
Section 66 of the Income tax Act which confers jurisdiction upon the High Court only permits a reference of a question of law arising out of the order of the Tribunal.
It does not confer jurisdiction on the High Court to decide a different question of law not arising out of such order.
New Jehangir Vakil Mills Ltd. vs Commissioner of Income tax, , Scindia Steam Navigation Co. Ltd. vs Commissioner of Income tax, , Commissioner of Incometax vs Breach Candy Swimming Bath Trust, and Ismailia Grain Merchants Association vs Commissioner of Incometax, [1957] 31 I.T.R. 433, distinguished.
Mash Trading Co. vs Commissioner of Income tax, , considered. |
Criminal Appeal No. 74 & 75 of 1986.
From the Judgment and Order dated 13.11.1984 of the Punjab and Haryana High Court in Crl.
Appeal No. 128 SP of 1984.
R.L. Kohli, R.C. Kohli and D.D. Sharma for the Appellant in Crl.
A. No. 74 of 1984.
D.S. Tewatia and Mahabir Singh for the appellant in Crl.
A. No. 75 of 1984.
U.R. Lalit, R.S. Yadav and H.M. Singh for the Respondents.
The Judgment of the Court was delivered by PG NO 573 JAGANNATH SHETTY, J.
These two appeals, by special leave, are directed against a judgment of the High Court of Punjab & Haryana in Criminal Appeal No. 128 SP of 1984.
The common respondents in the appeals.
were prosecuted for various offenses in the court of Additional Sessions judge, Faridkot.
By judgment dated February 28,1984 learned Judge convicted and sentenced the accused as follows: "Keeping in view the circumstances of the case and the part played by each of them I, hereby sentence Sukhbir, Sukhpal and Surat Singh accused to undergo R.I. for four years u/s 307/149 IPC.
Each of Om Pal, Dhan Pal, Mannu and Siri Chand are ordered to undergo R.I. for three year.
u/s 307/149 IPC.
Each of the seven accused are further ordered to undergo R.I. for one year 148 IPC, two years R.I. u/s 325 149 IPC and one year R. I. s/u 323/149 IPC.
Keeping in view the circumstances of the case.
all the sentences shall run concurrently. ' ' The accused appealed t the High Court challenging the conviction and sentence.
The High Court by the judgment under appeals acquitted Sukhpal Singh and Surat singh of all charges by giving them the benefit of doubt.
The other accused who are respondents herein are also acquitted of the offence under section 307/149 and section 148 IPC.
There conviction and sentence under section 325/149, 323/149 and section 148 IPC are however.
maintained.
They are released on probation of good conduct.
Each one of them, is ordered to pay compensation of Rs. 2,500 to Joginder who was seriously injured in the incident.
In default to pay the compensation they are directed to serve their sentence.
The operative portion of the judgment runs like this: "There is no previous history of enmity between to parties.
The occurrence is the outcome of a sudden flare up.
I think, these five appellants namely Sukhbir Singh Dhanpal, Mannu, Siri Chand and Om Pal are entitled their benefit under section 360 Cr.
Consequently, I suspend their sentence under section 325/149, 323/149 and section 148 IPC and order that the appellants namely Sukhbir Singh, Dhan Pal Mannu.
Siri Chand and Om Pal be released on probation on their entering into bonds of Rs.3,000 each with one surety in the like amount for a period of one year, to the satisfaction of the trial PG NO 574 court, undertaking to appear in the court to receive the sentence during the said period whenever called upon to do so and in the meantime to keep peace and be of good behavior.
However, each one of the appellant would pay Rs.2,500 as compensation payable to Joginder injured.
Compensation if not paid within two months, the appellants namely Sukhbir Singh, Dhanpal.
Mannu, Siri Chand and Om Pal would be called upon to serve their sentence.
But for this modification, appeal fails and is hereby dismissed.
In view of section 12 of the , no disqualification would attach to the appellants due to this conviction.
Sd/ K.P.S.Sandhu Judge" Dt.
November 13, l984 In these appeals, there is no serious dispute with regard to acquittal of Sukhpal Singh and Surat Singh.
The prosecution case that they were armed with Barchha has not been proved.
There was no incised injury on the victim or any of the prosecution witnesses.
Their participation in the commission of crime therefore appears to be doubtful.
The High Court was justified in acquitting them.
Counsel for the appellants are, however, vary critical of the order of High Court with regard to the remaining accused.
It is urged that the High Court was too much charitable to, them.
The intention of accused was obviously to commit murder of joginder.
Their acquittal under section 307 IPC is characterised as perverse.
At any rate, it is said that they ought not have been put on probation.
It is an abuse of the process of Court.
They should have been properly sentenced by term of imprisonment and fine.
It is also urged that Joginder has sustained permanent disability due to head injury and no amount of compensation would be adequate for him except severe punishment to the accused as a general deterrence.
Counsel for the accused on the other hand, seeks to support the order of the High Court in every respect.
In the light of the submissions, three questions arise consideration (i) whether the respondents are not guilty of the offence under section 307/149 IPC; (ii) whether the High Court was justified in extending the benefit of section 360 Cr.
P.C. and releasing the accused on probation of good conduct; and (iii) whether the compensation awarded to PG NO 575 Joginder could be legally sustained, and if so, what should be the proper compensation ? For a proper consideration of these questions, we may summarise briefly the factual background: The rival parties in this case are collaterals.
On September 28, 1982 at about 8/9 a.m. they had an altercation near the tubewell belonging to Hari Kishan.
Joginder is the son of Hari Kishan.
Virender another injured in this case is nephew of Hari Kishan.
Hari Kishan was sitting near his tubewell.
Virender and Joginder were sowing Berseem crop.
The accused carne from the side of the tubewell.
They were armed with Ballams and Dangas.
One of them raised a Lalkara at which the accused attacked Virender and Joginder.
In the brawl that followed some of the accused were also injured.
The injured were removed to Civil Hospital, Ballabgarh.
The Medical Officer there referred them to Safdarjung Hospital, New Delhi.
Finally., they landed themselves at the AIIMS, New Delhi.
They were examined by the Doctors.
Virender was found to have two injuries caused by blunt weapons.
Joginder was found to have head injury.
Amongst the accused Siri Chand, Dhan Pal, Om Pal and Sukhbir Singh were injured.
They were medically examined in AIIMS or Safdarjung Hospital, New Delhi.
Siri Chand had four injuries including a fracture caused by blunt weapon.
that has been proved by Dr. Rita Sood (DW1).
Dhan Pal and Om Pal each had four injuries but simple.
They were also, caused by blunt weapons.
Dr. V.K. Dhingra (DW 2) has spoken to that.
Sukhbir singh had one incised wound on his person.
Anurag Saxena (DW 3) has testified.
On the first question as to acquittal of the accused under s.3O7/149 IPC, some significant aspects may be borne in mind.
Under s.307 IPC what the Court has to see is, whether the act irrespective of its result, was done with the intention or knowledge and under circumstances mentioned in that section.
The intention or knowledge or the accused must be such as is necessary constitute ' murder.
Without this ingredient being established, there can be no offence of "attempt to murder".
Under section 307 the intention precedes the act attributed to accused.
Therefore, the intention is to be gathered from all circumstances, and not merely from the consequences that ensue.
The nature of the weapon used, manner in which it is used.
motive for the crime,severity of the blow, the part of the body where the injury is inflicted are some of the factors that may be taken into consideration it,determine the intention.
In this case, two parties in the course of a fight inflicted on each other injuries both serious and minor.
The accused though armed with ballam never used the sharp edge of it.
PG NO 576 They used only the blunt side of it despite they being attacked by the other side.
They suffered injuries but not provoked or tempted to use the cutting edge of the weapon.
It is very very significant.
It seems to us that they had no intention to commit murder.
They had no motive either.
The fight as the High Court has observed, might have been a sudden flare up.
Where the fight is accidental owing to a sudden quarrel, the conviction under section 307 is generally not called for.
We, therefore, see no reason to disturb the acquittal of accused under section 307 IPC.
The question next to be considered is whether the accused are entitled to the benefit of probation of good conduct ? We gave our anxious consideration to the contentions urged by counsel.
We are of opinion that the High Court has not committed any error in this regard also.
Many offenders are not dangerous criminals but are weak characters or who have surrendered to temptation or provocation.
In placing such type of offenders, on probation, the Court encourages their own sense of responsibility for their future and protect them from the stigma and possible contamination of prison.
In this case.
the High Court has observed that there was no previous history of enmity between the parties and the occurrence was an outcome of a sudden flare up.
These are not shown to be incorrect.
We have already said that the accused had no intention to commit murder of any person.
Therefore,the extension of benefit of the beneficial legislation applicable to first offenders cannot be said to be inappropriate.
This takes us to, the third questions which we have formulated earlier in this judgments.
The High Court has directed each of the respondents to pay Rs. 2,500 as compensation to Joginder.
The High Court has not referred to any provision of law in support of the order of compensation.
But that can be traced to section 357 Cr.
P.C. Section 357, leaving aside the unnecessary, provides : "357.
Order to pay compensation : (1) When a court imposes a sentence of fine or a sentence (including a sentence of death) of which fine forms a part,the Court may.
when passing judgment.
order the whole or any part of the fine recovered to be applied (a) in defraying the expenses properly incurred in the prosecution; PG NO 577 (b) in the payment to any person of compensation for any loss or injury caused by the offence.
when compensation is in the opinion of the Court, recoverable by such person in a civil Court; XXXXX XXXXX XXXX XXXXX XXXXX XXXXX (3) When a Court imposes a sentence, of which fine does not not form a part, the Court may, when passing judgment.
order the accused person to pay, by way of compensation.
such amount as may be specified in the order to the person who has suffered any loss or injury by reason of the act for which the accused person has been so sentenced.
(4) An order under this section may also be made by an Appellate Court or by the High Court or Court of Session when exercising its power of revision.
(5) At the time of awarding compensation in any subsequent civil suit relating to the same matter.
the Court shall take into account any sum paid or recovered as compensation under this section.
" Sub section (1) of Section 357 provides power to award compensation to victims of the offence out of the sentence of fine imposed on accused.
In this case.
we are not concerned with sub section (1).
We are concerned only with sub section (3).
It is an important provision but Courts have seldom invoked it.
Perhaps due to ignorance of the object of it.
It empowers the Court to award compensation to victims while passing judgment of conviction.
In addition to conviction, the Court may order the accused to pay some amount by way of compensation to victim who has suffered by the action of accused.
It may be noted that this power of Courts to award compensation is not ancillary to other sentences but it is in addition thereto.
This power was intended to do something to re assure the victim that he or she is not forgotten in the criminal justice system.
It is a measure of responding appropriately to crime as well of reconciling the victim with the offender.
It is, to some extent.
a constructive approach to, crimes.
It is indeed a step forward in our criminal justice system.
We, therefore,recommend to all Courts to exercise this power liberally so as to meet the ends of justice in a better way.
PG NO 578 The payment by way of compensation must, however, be reasonable What is reasonable, may depend upon the facts and circumstances of each case.
The quantum of compensation may be determined by taking into account the nature of crime, the justness of claim by the victim and the ability of accused to pay.
If there are more than one accused they may be asked to pay in equal terms unless their capacity to pay varies considerably.
The payment may also vary depending upon the acts of each accused.
Reasonable period for payment of compensation, if necessary by installments, may also be given.
The Court may enforce the order by imposing sentence in default.
Joginder in this case is an unfortunate victim.
His power of speech has been permanently impaired.
Doctor has certified that he is unable to speak and that is why he has not stepped into the witness box for the prosecution.
The life long disability of the victim ought not to be bye passed by the Court.
He must be made to feel that the Court and accused have taken care of him.
Any such measure which would give him succor is far better than a sentence by deterrence.
The compensation awarded by the High Court, in our opinion, appears to be inadequate having regard to the nature of injury suffered by Joginder.
We have ascertained the means of accused and their ability to pay further sum to the victim.
We are told that they are not unwilling to bear the additional burden.
Mr. Lalit learned counsel said that his clients are willing to pay any amount determined by this Court.
It is indeed a good gesture on the part of counsel and his clients.
With due regard to all the facts and circumstances of the case, we consider that Rs.50,000 compensation to Joginder would meet the ends of justice.
We direct the respondents to pay the balance within two months in equal proportions.
The order of the High Court is modified only to the extent of Compensation as indicated above and in all other respects it is kept undisturbed.
The appeals are accordingly disposed of.
R.S.S. Appeals disposed of. | Seven persons were convicted under sections 307/149, 325/l49, 3231/149 and 148 IPC and sentenced to undergo R.Z. from one year to three years.
The High Court acquitted two of all charges, and five of the offence under section 307/149 while maintaining their conviction and sentence under section 325/149, section 323/149 and section 148.
They were however released on probation of good conduct.
Each one of them was ordered to pay compensation of Rs. 2,500 to Joginder who was seriously injured and whose power of speech was permanently impaired.
Before this Court the appellant contended that the intention of the five accused was obviously to commit murder of Joginder and their acquittal under section 3O7 IPC was perverse.
Disposing of the appeal, it was, HELD: (1) Under section 307 IPC what the Court has to see is whether the act irrespective of its result, was done with the intention or knowledge and under circumstances mentioned in that section.
The intention or knowledge must be such as is necessary to constitute murder.
Without this ingredient being established there can be no offence of"attempt to murder".
Under section 307 the intention precedes the act attributed to accused.
Therefore, the intention is to be gathered from all circumstances, and not merely from the consequences that ensue.
In this case, the respondents had no intention to commit murder.
They had no motive either.
[575F G] PG NO 571 PG NO 572 (2) Many offenders are not dangerous criminals but are weak characters or who have surrendered to temptation or provocation.
In placing such type of offenders on probation the Court encourages their own sense of responsibility for their future and protects them from the stigma and possible contamination of prison.
[576C D] (3) In this case, the High Court has observed that there was no previous history of enmity between the parties and the occurrence was an outcome of a sudden flare up.
The accused had no intention to commit murder of any person.
Therefore, the extension of benefit of the beneficial legislation applicable to first offenders cannot be said to be inappropriate.
l576D E] (4) Section 357 empowers the Court to award compensation to victims while passing judgment of conviction.
This power of Courts to award compensation to victims is not ancillary to other sentences but it is in addition thereto.
This power is intended to do something to reassure the victim that he or she is not forgotten in the criminal justice system.
It is recommended to all Courts to exercise this power liberally so as to meet the ends of justice in a better way.
[577F H] (5) The payment by way of compensation must be reasonable.
What is reasonable may depend upon the facts and circumstances of each case, e.g. the nature of crime, the justness of claim by the victim and the ability of the accused to pay etc.
On these considerations the Court enhanced the compensation to Rs. 50,000.
[578A B] |
Appeal No. 236 of 1955.
Appeal from the judgment and order dated August 3, 1953, of the Punjab High Court in Civil Reference No. 7/1952.
M. C. Setalvad, Attorney General for India, K. N. Rajagopal Sastri and D. Gupta, for the appellant.
N. C. Chatterjee and section K. Sekhri, for the respondent.
July 27.
The Judgment of the Court was delivered by 76 section K. DAS J.
This is an appeal on a certificate of fitness granted under the provisions of sub section 2 of section 66A of the Indian Income tax Act, 1922, by the High Court of Judicature for the State of Punjab then sitting at Simla.
The certificate is dated December 28, 1953, and was granted on an application made by the Commissioner of Income tax, Punjab, appellant herein The relevant facts are shortly stated below.
For the assesment year 1946 47, one Pandit Thakurdas Bhargava, an advocate of Hissar and respondent before us, was assessed to income tax on a total assessable income of Rs. 58,475/ in the account year 1945 46.
This sum included the amount of Rs. 32,500/stated to have been received by the respondent in July, 1945 for defending the accused persons in a case known as the Farrukbnagar case.
The assessee claimed that the said amount of Rs. 32,500/ was not a part of his professional income, because the amount was given to him in trust for charity.
This claim of the assessee was not accepted by the Income tax Officer, nor by the Appellate Assistant Commissioner who heard the appeal from the order of the Income tax Officer.
Both these officers held that the assessee had received the amount of Rs. 32,500/ as his professional income and the trust which the assessee later created by a deed of Trust dated August 6, 1945, did not change the nature or character of the receipt as professional income of the assessee; they further held that the persons who paid the money to the assessee did not create any trust nor impose any obligation in the nature of a trust binding on the assessee, and in fact and law the trust was created by the assessee himself out of his professional income ; therefore, the amount attracted tax as soon as it was received by the assessee as his professional income, and its future destination or application was irrelevant for taxing purposes.
From the order of the Appellate Assistant Commissioner a further appeal was carried to the Income tax Appellate Tribunal, Delhi Branch.
We shall presently state the facts which the Tribunal found, but its conclusion drawn from the facts found was expressed in the following words:"The income in this case did not at 77 any stage arise to the assessee.
Keeping in mind the express stipulation made by the assessee when he accepted the brief there was a voluntary trust created, which had to be and was subsequently reduced into writing after the money was subscribed.
The payments received from the accused and other persons were received on behalf of the trust and not by the assessee in his capacity as an individual.
In this view, we delete the sum of Rs. 32,500/ from the assessment.
" The appellant then moved the Tribunal for stating a case to the High Court on the question of law which arose out of the order of the Tribunal.
The Tribunal was of the opinion that a question of law did arise out of its order, and this question it formulated in the following terms: " Whether the sum of Rs. 32,500/ received by the assessee in the circumstances set out in the trust deed later executed by him on August 6, 1945, was his professional income taxable in his hands, or was it money received by him on behalf of a trust and not in his capacity as an individual.
" It appears that in stating a case the Tribunal framed an additional question as to whether the trust was created at or before the payment of Rs. 32,500/ , but expressed the view that this additional question was implicit in the principal question formulated by it.
A case was accordingly stated to the High Court under section 66 of the Indian Income tax Act, and the High Court by its judgment dated August 3, 1953, answered the question in favour of the assessee, hold ing that " the sum of Rs. 32,500/ received by the assessee was not received by him as his professional income but was received on behalf of the trust and not in his capacity as an individual ".
The appellant then moved the High Court and obtained the certificate of fitness referred to earlier in this judment.
We shall presently state the facts found by the Tribunal in connection with the receipt of the sum of Rs. 32,500/ by the assessee, from which the Tribunal drew its inference.
But the question as framed by the Tribunal and answered by the High Court, was 78 whether in the circumstances set out in the trust deed dated August 6, 1945, the amount of Rs. 32,500/received by the assessee was professional income in his hand.
It is, therefore, appropriate to refer first to the recitals in the trust deed.
The respondent stated in the trust deed that he had "decreased" his legal practice for the last few years and had reserved his professional income accruing after June 1944 for payment of taxes and charity.
He then said: " accordingly, I have been acting on that.
In the Farrukh Dagar, district Gurgaon case, Crown vs Chuttan Lal etc., the relatives and the accused expressed a strong desire to get the case conducted by me during its trial.
At last on their persistence and promise that they would provide me with Rs. 40,000/ for charitable purposes and I would create a public charitable trust thereof I agreed to conduct the case.
The case is now over.
The accused and their relatives have given me Rs. 32,500/ for charity and creating a trust.
The said amount has been deposited in the Bank.
If they pay any other amount that will also be included in that.
Accor dingly, I create this trust with the following conditions and with the said amount and any other amount which may be realized afterwards or included in the trust;".
(then followed the name and objects of the trust, etc.).
The Tribunal accepted as correct the statements of the respondent that he was at first unwilling to accept the brief in the Farrukhnagar case; he was then persuaded to accept it at the request of some members of the Bar and some influential local people on the understanding, as the respondent put it, that the accused persons of that case would provide Rs. 40,000/ for a charitable trust which the respondent would create.
Eventually, the sum of Rs. 32,500/ was paid by or on behalf of the accused persons, and as the Tribunal has put it, a charitable trust was created by the respondent by the trust deed dated August 6, 1945, the recitals whereof we have q noted above.
The question before us is what is the proper legal inference from the aforesaid facts found by the Tribunal.
Both the Tribunal and the High Court have drawn the inference that a charitable trust was created 79 by the persons who paid the money to the assessee, and all that the assessee did under the deed of trust dated August 6, 1945, was to reduce the terms of the trust to writing.
The High Court, therefore, applied the principle laid down by the Privy Council in Raja Bejoy Singh Dudhuria vs Commissioner of Income tax, Bengal (1) and observed that by the overriding obligation imposed on the assessee by the persons who paid the money, the sum of Rs. 32,500/ never became the income of the assessee; and the amount became trust property as soon as it was paid, there being no ques tion of the application of part of his income by the assessee.
On behalf of the appellant it has been contended that the inference which the Tribunal and the High Court drew is not the proper legal inference which flows from the facts found, and according to the learned Attorney General who appeared for the appellant the proper legal inference is that the amount was received by the assessee as his professional income in respect of which he later created a trust by the deed of trust dated August 6, 1945.
He has submitted that there was no trust nor any legal obligation imposed on the assessee by the persons who paid the money, at the time when the money was received, which prevented the amount from becoming the professional income of the assessee.
He has also contended that even the existence of a trust will make no difference, unless it can be held that the money was diverted to that trust before it could become professional income in the hands of the assessee.
We think that the question raised in this case can be decided by a very short answer, and that answer is that from the facts found by the Tribunal the proper legal inference is that the sum of Rs. 32,500/ paid to the assessee was his professional income at the time when it was paid and no trust or obligation in the nature of a trust was created at that time, and when the assessee created a trust by the trust deed of August 6, 1945, he applied part of his professional income as trust property.
If that is the true conclusion as we hold it to be, then the principle laid down (1) 80 by the Privy Council in Bejoy Singh Dudhuria 's case (1) has no application.
It is indeed true, as has been observed by the High Court, that a trust may be created by any language sufficient to show the intention and no technical words are necessary.
A trust may even be created by the use of words which are primarily words of condition, but such words will constitute a trust only " where the requisites of a trust are present, namely, where there are purposes independent of the donee to which the subject matter of the gift is required to be applied and an obligation on the donee to satisfy those purposes.
" The findings of the Tribunal show clearly enough that the persons who paid the sum of Rs. 32,500/ did not use any words of an imperative nature creating a trust or an obligation.
They were anxious to have the services of the assessee in the Farrukhnagar case; the assessee was at first unwilling to give his services and later he agreed proposing that he would himself create a charitable trust out of the money paid to him for defending the accused persons in the Farrukhnagar case.
The position is clarified beyond any doubt by the statements made in the trust deed of August 6, 1945.
The assessee said therein that he was reserving his professional income as an advocate accruing after June, 1944 for payments of taxes and charity and, accordingly, when he received his professional income in the Farrukhnagar case he created a charitable trust out of the money so received.
The clear statement in the trust deed, a statement accepted as correct by the Tribunal, is that the assessee created a trust on certain conditions etc.
It is not stated anywhere that the persons who paid the money created a trust or imposed a legally enforceable obligation on the assessee.
Even in his affidavit the assessee had stated that " it was agreed that the accused would provide Rs. 40,000/ for a charitable trust which I would create in case I defend them, on an absolutely clear and express understanding that the money would not be used for any private and personal purposes.
" Even in this affidavit there is no suggestion that the persons who paid the money created the (1) 81 trust or imposed any obligation on the assessee.
It was the assessee 's own voluntary desire that he would create a trust out of the fees paid to him for defending the accused persons in the Farrukhnagar case.
Such a voluntary desire on the part of the assessee created no trust, nor did it give rise to any legally enforceable obligation.
In the circumstances the Appellate Assistant Commissioner rightly pointed out that " if the accused persons had themselves resolved to create a charitable trust in memory of the professional aid rendered to them by the appellant and had made the assessee trustee for the money so paid to him for that purpose, it could, perhaps, be argued that the money paid was earmarked for charity ab initio but of this there was no indication anywhere".
In our opinion the view taken by the Appellate Assistant Commissioner was the correct view.
The money when it was received by the assessee was his professional income, though the assessee had expressed a desire earlier to create a charitable trust out of the money when received by him.
Once it is held that the amount was received as his professional income, the assessee is clearly liable to pay tax thereon.
In our opinion the correct answer to the question referred to the High Court is that the amount of Rs. 32,500/ received by the assessee was professional income taxable in his hands.
Learned Counsel for the respondent has referred us to a number of decisions where the principle laid down in Bejoy Singh Dudhuria 's Case (1) was applied, and has contended that where there is an allocation of a sum out of revenue as a result of an overriding title or obligation before it becomes income in the hands of the assessee, the allocation may be the result of a decree of a court, an arbitration award or even the provisions of a will or deed.
In view of the conclusion at which we have arrived, the decisions relied upon can hardly help and it is unnecessary to consider them.
Our conclusion is that there was no overriding obligation imposed on the assessee at the time when the sum of Rs. 32,500/ was received by him.
(1) 82 Accordingly, we allow this appeal and set aside the judgment and order of the High Court.
The answer to the question is in favour of the appellant, namely, that the sum of Rs. 32,500/ received by the assessee was his professional income taxable in his hands.
The appellant will be entitled to his costs throughout.
Appeal allowed. | The assessee, an advocate, accepted a case on condition that the clients would provide him with Rs. 40,000 for charitable purposes and that he would create a public charitable trust with the money.
The clients gave the assessee Rs. 32,500 and he created a trust therewith.
The assessee claimed that the said amount of Rs. 32,500 was not his professional income as the amount had been given to him in trust for charity.
Held, that the said amount was the professional income of the assessee and was liable to income tax.
At the time when this money was paid to the assessee no trust or obligation in the nature of trust was created.
The clients who paid the money did not create any trust nor imposed any legally enforceable obligation on the assessee.
The money when it was received by the assessee was his professional income though he had expressed a desire earlier to create a charitable trust out of the money when received.
The assessee 's own voluntary desire to create a trust out of the fees paid to him did not create a trust or a legally enforceable obligation.
Raja Bejoy Singh Dudhuria vs Commissioner of Income Tax, Bengal, , referred to. |
Appeal No. 216 of 1954.
Appeal from the judgment and decree dated September 26,1946, of the former Chief Court of Avadh at Lucknow, in First Appeal No. 7 of 1940.
Naunit Lal, for the appellant.
section N. Andley, Rameshwar Nath, J. B. Dadachanji and P. L. Vohra, for respondent No. 1. 1960.
August 5.
The Judgment of the Court was delivered by DAS GUPTA J.
This appeal raises the question of interpretation of section 15 of the United Provinces Encumbered Estates Act, 1934.
On March 1, 1924, Sardar Nihal Singh, the predecessor of the appellant before us, borrowed a sum of rupees one lakh from Raja Durga Narain Singh, predecessor of the respondents, on mortgage of a house in Butlergunj, Lucknow and also the entire Zamindari interest in a village Parsera.
Interest was 8 per cent.
per annum compound with six monthly rests.
In 1932 Raja Durga Narain Singh brought a suit for recovery of Rs. 1,83,791 5 9 on account of principal and interest due on the mortgage, by sale of the mortgaged property.
In this suit the Subordinate Judge, Lucknow, made a preliminary decree declaring the amount due to the plaintiff on the mortgage calculated up to March 29, 1935, to be Rs. 1,83,791 5 9 up to the date of the suit, Rs. 49,280 2 6 as the amount due on account of interest thereupon from March 19, 1932, the date of the suit to March 29, 1935, the date fixed for payment.
A sum of Rs. 4,314 2 9 was awarded as the cost of the suit.
The defendant was ordered to pay this total sum of Rs. 2,37,385 11 0 before the 29th day of March, 1935, with future interest at 6 per cent.
per annum simple on the principal sum of rupees one lakh.
The amount not having been paid on that date, the Court on an application made by the mortgagee decree.
holder made a final decree on May 9, 1935, directing sale of the property for recovery of the sum of Rs. 2,37,503 5 6 with future interest as in the preliminary decree,(this sum being the total of Rs. 2,37,305 11 0 120 of the preliminary decree, Rs. 116 10 1 the interest from March 30, 1935, and rupee one the cost of the final decree).
An application for revision under section 115 of the Code of Civil Procedure in connection with this decree was rejected by the Chief Court of Oudh on April 20,1937.
Before this, on October 26, 1936, an application had been made by Sardar Nihal Singh under section 4 of the U. P. Encumbered Estates Act, requesting the provisions of the Act to be applied to him.
After this application came before the Special Judge in accordance with the provisions of section 6, the mortgagee decreeholder Raja Durga Narain Singh filed a written state ment of his claim on September 30,1937, and stated that the amount due to him on the basis of his decree was Rs. 2,51,904 8 6 including Rs. 14,300 as interest subsequent to the final decree till September 30, 1937, and a sum of Rs. 51 3 0 the decree for costs in his favour by the Oudh Chief Court when rejecting the mortgagor 's application for revision.
He prayed that a decree for Rs. 2,51,904 8 6 be passed in his favour against the applicant Sardar Nihal Singh and his property.
The applicant contested this claim pleading that the principal amount borrowed from the claimant being rupees one lakh the claimant was not entitled to recover any sum as interest thereupon in excess of the principal amount under section 14 of the Encumbered Estates Act.
This plea was rejected by the Special Judge who held that the claimant was entitled to Rs. 2,37,503 5 6 for which the final decree was passed, and also Rs. 51 3 0 as costs in the matter of revision application and further to 6 per cent.
per annum interest on rupees one lakh from May 29, 1935, the date of the final decree till the date of the application under the Encumbered Estates Act, i.e., October 26, 1936.
Accordingly he gave the claimant a simple money decree for Rs. 2,46,338 8 6 with proportionate costs and future interest at the rate of 4 per cent.
per annum simple from the date of application till realisation.
On appeal, the Cheief Court of Oudh rejected the appellant 's contention that the Special Judge was bound by section 14 of the Act to limit the decree to a sum 121 of rupees two lakhs only and held that in so far as the preliminary decree found Rs. 1,83,791 5 9 as the amount due on the mortgage on March 29, 1932, it was not inconsistent with section 14 of the Encumbered Estates Act, and so the Special Judge was bound to accept this finding under section 15.
It held however that in so far as this decree allowed interest pendente lite on the above amount from March 19, 1932, to March 29, 1935, at 8% per annum, it was inconsistent with sub section 7 of section 14.
The Chief Court accordingly held that this interest pendente lite must be reduced to 4 1/4% simple.
After saying that a sum of Rs. 4,314 2 9 would be added on account of costs, rupee one should be added on account of the costs of the final decree and Rs. 51 3 0 as costs of a revision application, the Court held that the principal amount of Rs. 1,00,000 shall carry interest from March 29, 1935, till the date of application under section 4 of the Encumbered Estates Act, viz., October 26, 1936, and that the aggregate of these figures shall carry interest from October 27, 1936, till realisation at 4 per cent.
per annum.
It directed a decree for the sum thus found to be substi tuted for that passed by the Subordinate Judge.
An application for leave to appeal to the Privy Council against this decree was made on January 13, 1947.
This application was disposed of on April 14, 1953.
Holding that the valuation of the suit was well over Rs. 20,000 and the value of the appeal to the Supreme Court was Rs. 41,971 2 9 the Chief Court gave, in view of the modification made by it in the lower court 's decree, a certificate that the case fulfils the requirements of section 110 of the Code of Civil Procedure and that the applicant had a right to appeal to the Supreme Court.
On the strength of that certificate the present appeal was filed When the appeal came up for hearing before a Bench of four judges of this Court Mr. Andley, on behalf of the respondents stated that in this case he was raising a constitutional point.
Thereupon the Court directed that the matter be posted before the Constitution Bench.
That is how the appeal has come up for hearing and final disposal before us.
16 122 Mr. Andley stated before us that the Constitutional point which he had wanted to raise was whether the judgment of the Chief Court was one of affirmance under article 133(1) of the Constitution but that be did not wish to pursue this point.
As Mr. Andley does not press his constitutional point, no further discussion of this is necessary.
The real controversy in the case between the parties is, as already indicated, as regards the interpretation of section 15 of the Encumbered Estates Act.
The relevant portion of section 15 is in these words: "In determining the amount due on the basis of a loan which has been the subject of a decree the Special Judge shall accept the findings of the Court which passed the decree except in so far as they are inconsistent with the provisions of section 14.
" A later amendment by which after the words and figures " section 14 ", the words " or section 4 of the U. P. Zamindars Debts Reduction Act, 1952 " were added is not relevant for our purpose.
Section 14 runs as follows: " 14.
(1) The Special Judge shall, by an order in writing, fix a date for enquiring into the claims made in pursuance of the notice published in accordance with section 9 and give notice of such date to all the claimants and the person who made the application under section 4.
(2) The Special Judge shall examine each claim and after hearing such parties as desired to be heard and considering the evidence, if any, produced by them shall determine the amount, if any, due from the landlord to the claimant on the date of the application under section 4.
(3) All evidence recorded in any suit or proceeding which is stayed under sub section (1) of section 7 may be taken by the Special Judge as evidence recorded before himself.
(4) In examining each claim the Special Judge shall have and exercise all the powers of the Court in which a suit for the recovery of the money due would lie and shall decide the questions in issue on the principles as those on which such court would decide them, subject to the following provisions, namely: 123 (a) the amount of interest held to be due on the date of the application shall not exceed that portion of the principal which may still be found to be due on the date of the application: (b) the provisions of the United Provinces Agriculturists Relief Act, 1934, shall not be applicable to proceedings tinder this Act.
(5) For the purpose of ascertaining the principal under clause (a) of subsection (4) the Special Judge shall treat as principal any accumulated interest which has been converted into principal at any statement or settlement of account or by any contract made in the course of the transaction on or before December 31, 1916.
Explanation: Interest which on or before December 31, 1916, became part of the principal under the express terms of original contract shall, for the purposes of this section, be deemed to be principal.
(6) For the purposes of ascertaining the principal under clause (a) of sub section (4) the Special Judge shall not treat as principal any accumulated interest which has been converted into principal at any statement or settlement of accounts or by any contract made in the course of the transactions after December 31, 1916.
(7) If the Special Judge finds that any amount is due to the claimant he shall pass a simple money decree for such amount, together with any costs which he may allow in respect of proceedings in his court and of proceedings in any civil court stayed under the provisions of this Act, together with pendente lite and future interest at a rate not greater than the rate specified in section 27, and if he finds that no amount is due he may pass a decree for costs in favour of the landlord.
Such decree shall be deemed to be a decree of a civil court of competent jurisdiction but no decree against the landlord shall be executable within Uttar Pradesh except under the provisions of the Act: Provided that no pendente lite interest shall be allowed in the case of any debt where the creditor was in possession of any portion of the debtor 's property in lieu of interest payable on such debt.
" 124 Obviously there can be no question of any inconsistency in a finding of a court which has passed a decree on the basis of a loan, with the provisions mentioned in sub sections 1, 2 & 3 of section 14; nor is there any question of any inconsistency with the provisions of sub section 7 of section 14, as those provisions apply only after the Special Judge has found the amount due to the claimant and the question of inconsistency of any finding in the decree with the provisions of section 14 arise under section 15 at the stage when the amount due is being determined.
Sub sections 4, 5 and 6 of section 14 however require careful consideration of the Special Judge, when examining a decree of a Civil Court, to ' find whether any of the findings of the court is inconsistent with those provisions.
If they are inconsistent with any of those provisions he has to reject the findings to the extent of such inconsistency.
Thus, if for example, the provisions of the , would be beneficial to the applicant landlord and have not been taken into consideration by the court which passed the decree the Special Judge will have to give effect to section 14(4)(b) of the Act to modify the finding of the Court as regards the amount due, after applying the provisions of the Usurious Loans Act.
On the other hand, if the provisions of the U. P. Agriculturists Relief Act, 1934, have been applied by the Civil Court, the finding as regards the amount due in so far as the same was based on those provisions cannot, in view of its inconsistency with sub section 4(c) of section 14 be accepted by the Civil Court and he will have to modify the same, leaving out the provisions of the U. P. Agriculturists Relief Act.
Similarly if in arriving at the amount due, the Court which passed the decree has acted inconsistently with sub sections 5 and 6 of section 14, the finding will have to be modified by the Special Judge by applying the provisions of sub sections 5 and 6.
So, also if the finding of the Court which passed the decree is " inconsistent with " the provisions of sub section 4(a) of section 14 of the Encumbered Estates Act the finding will have to be rejected in so far as it is inconsistent.
The question that has arisen in this case and may as well arise in other cases, is whether when in ascertaining 125 the amount due on the basis of a loan, at the date of the suit, the Court which passed the decree did not allow interest exceeding the portion of the principal which was still due at the date of the suit, the finding as regards the amount due is inconsistent with section 14(4) (a) because the consequence of that finding as regards the amount due, together with interest allowed thereupon, is that on the date of the application the amount of interest due exceeds the portion of the principal remaining unpaid on the date of the application.
On behalf of the decree holder claimant it is contended that all that is necessary to save inconsistency with sub section 14(4)(a) is that the principle that the amount of interest shall not exceed the amount of the unpaid principal has been followed, in passing the decree and the fact that the result of the finding would be that on the date of the application section 4 of the Act the interest due would exceed the portion of the principal unpaid on such date is of no consequence.
This contention cannot in our opinion be accepted.
The requirement of sub section 4(a) of section 14 is that " the amount of interest held to be due on the date of the application shall not exceed that portion of the principal which may still be found to be due on the date of the application.
" The words " on the date of the application " cannot be ignored.
There can be no doubt that these words " on the date of the application " were deliberately used in the sub section for the purpose of benefiting the landlord applicant to this extent that whatever interest due on the contract may amount to, it will be limited to the amount of the principal found still remaining due, on the date of the application.
When the Legislature goes further and provides that if prior to the application a decree has been made on the basis of the loan the findings of the Court which passed the decree shall be accepted but forbids such acceptance if such finding is inconsistent with the provisions of section 14, the intention clearly is that the fact that there has been a decree will not make any difference as regards the duty of the Special Judge to give the applicant the benefit of the provisions of section 14.
When the Court passed the decree, there was 126 no application under the Encumbered Estates Act, and so, there could be no question of the Court then complying with the provisions of section 14(4)(a).
Even so, when the Special Judge has to reject such of the findings as are " inconsistent " with section 14, he must find out the effect of the several findings of the court to ascertain whether there is such inconsistency.
Where the consequence of the finding of the court which passed the decree is that the provisions of section 14(4)(a) about the amount of interest due on the date of the application not exceeding the unpaid principal on that date are contravened, the finding should be held to be inconsistent with these provisions.
In saying that if in the decree the court did not allow interest as on the date of the suit to exceed the principal then remaining due there is no inconsistency with section 14(4)(a), the respondent 's counsel is in effect asking us to read for the words " in so far as they are inconsistent with the provisions of section 14 " the words " in so far as they would have been inconsistent with the provisions of section 14, if the date of the institution of the suit be deemed to be the date of the application under section 4.
" For this we cannot find any justification.
Not only would this defeat the beneficial purpose of the legislation under section 14(4)(a); but this will also not be the natural meaning of the words " in so far as they are inconsistent with the provisions of section 14." The Chief Court 's view that the Special Judge has merely to see whether the Civil Court that passed the decree could have passed the decree which it did pass if that court had had to apply the provisions of section 14, treating the date of the institution of the suit as the date of the application cannot therefore be accepted as correct.
The same view had been taken by the Chief Court of Oudh in an earlier decision, of Pandit Ramsagar Prasad vs Mst.
Shayama (1).
A Full Bench of the Allahabad High Court had in Rukun uddin vs Lachhmi Narain (2) to consider the question whether a finding in a decree made by a civil court that the creditor is entitled to interest only at the rates specified in U. P. Agriculturists Relief Act was inconsistent with the (1) A.I.R. 1939 Oudh 75.
(2) I.L.R. [1945] All. 307.
127 provisions of section 14 of the U. P. Encumbered Estates Act and was therefore not binding on the Special Judge hearing an application under the U. P. Encumbered.
Estates Act.
They held that such a finding must be held to be inconsistent with the provisions of section 14 and could therefore not be binding on the Special Judge.
There can be no doubt about the correctness of this view, for, as has been pointed out above section 14(4)(c) provides that the provisions of the U. P. Agriculturists Relief Act shall not be applicable to proceedings under the Encumbered Estates Act.
One of the learned judges Mr. Justice Verma referred with approval in the course of his judgment to the view taken in Ramsagar Prasad 's Case (1).
For the reasons mentioned earlier how ever we are of opinion that the view in Ramsagar Prasad 's Case (1) which has been followed by the Chief Court in the present case is wrong.
Our conclusion therefore is that the Special Judge is even where there has been a decree by a civil court in respect of a loan bound to follow the provisions of section 14(4)(a) of the Act so that the amount of interest which he can hold to be due on the date of the application must not exceed the portion of the principal found to be due on the date of the application.
Accordingly in the present case the Special Judge should have held the amount of interest due oil the date of the application, i.e., October 26, 1936, to amount to rupees one lakh only, that being the principal which was still due on that date.
Under the provisions of sub section 7 of section 14 the Special Judge has to "pass a simple money decree for such amount, together with any costs which he may allow in respect of proceedings in his court and of proceedings in any civil court stayed under the provisions of this Act, together with pendente lite and future interest at a rate not greater than the rate specified in section 27.
" It was in view of this provision that the special Judge and the High Court allowed interest at the rate of 4% per annum.
The proper decree the Special Judge should have passed therefore was one for rupees two lakhs for the loan with permissible interest, plus Rs. 4,314 2 9, Rs. 51 3 0 and rupee (1) A.I.R. 1939 Oudh 75.
128 one on account of costs, that is, for a total sum of Rs. 2,04,366 5 9 with proportionate costs with interest pendente lite and future interest at the rate of 4 per cent per annum simple from the date of the application, i.e., October 26, 1936, till realisation.
Accordingly, we allow the appeal, set aside the decree passed by the courts below and order that in place of the decree made by the Trial Court be substituted a money decree in the terms as mentioned above.
The appellant will get his costs in the appeal.
Appeal allowed. | N borrowed rupees one lakh from D on mortgage of a house and Zamindari interest on March 1, 1924.
Interest was 8% per annum compoundable with six monthly rests.
In 1932 the mortgagee filed a suit on the mortgage and a decree was passed for the recovery of Rs. 1,83,781/5/9 principal and interest upto the date of the suit and Rs. 49,280/ 2/6 interest from date of the suit upto the date fixed for payment, with future interest at 6% per annum simple on the principal sum.
On the failure of the mortgagor to pay by the date fixed a final decree was passed on May 9, 1935 for sale of the property for recovery of a sum of Rs. 2,37,503/5/6 which had become due.
On October 26, 1936, N made an application under section 4 of the U. P. Encumbered Estates Act, 1934, requesting that the provisions of the Act be applied to him.
Section 14(4)(a) of the Act provided that " the amount of interest held to be due on the date of application shall not exceed that portion of the principal which may still be found to be due on the date of the application ".
N contended that in view of section 14(4)(a), D was not entitled to recover any sum as interest in excess of the principal sum of rupees one lakh.
D contended that it was not necessary to reopen the decree as the principle of section 14(4)(a) had not been violated in passing the decree.
Held, that the proper decree that should have been passed on the application was for rupees two lakhs for the principal and interest plus costs and interest pendente lite and future interest at 4% per annum.
The words " on the date of the application " in section 14(4)(a) of the Act had been deliberately used to benefit the applicant by reducing the interest to the amount of the principal found still due on the date of the application, whatever amount of interest may be due under the contract.
The fact that there had been a decree did not make any difference in giving the benefit of the section to the applicant.
Pandit Ramsagar Prasad vs Mst.
Shayama, A.I.R. 1939 Oudh 75, disapproved.
Rukun uddin vs Lachhmi Narain, I.L.R. 1945 All.
307, referred to. 119 |
minal Appeal No. 158 of 1956.
Appeal by special leave from the judgment and order dated February 9, 1955, of the Calcutta High Court in Criminal Revision No. 282 of 1954, arising out of the judgment and order dated December 15, 1953, of the Second Municipal Magistrate, Calcutta, in Case No. 2629C of 1952.
Feb. 8, 9, 10.
section M. Bose, Advocate General for the State of West Bengal, A. C. Mitra, B. Sen, P. K. Bose and D. Gupta, for the appellant.
Three questions arise for determination in this appeal: (1) whether State is a " person " within the meaning of section 386 of the Calcutta Municipal Act, 1923, (2) does the Constitution make any change in the principal of prerogative as part of the common law and (3) does article 372 of the Constitution keep the existing law intact, i. e., the law as declared in L. R. 73 1.
A. 271 to the effect that the Crown is not bound by any statute unless it is expressly named or unless it can be held to be included by necessary implication.
The word " person " has been held not to include the State.
[A.I.R. 1954 Punj. 49 ; A.I.R. 57 Punj. 150; A.I.R. 53 Nag. 35 ; A.I.R. 1955 Nag. 177 ; I.L.R. 1953 1 Cal.
355; 62 C.W.N. 561.
33 Pat.
603 takes the contrary view.] If the word " person " included the State, article 300 of the Constitution would not be 161 necessary.
How far the Crown is bound by a Statute not specifically naming it is laid down by the Privy Council in L.R. 73 I.A. 271.
The decision of the Madras High Court taking a contrary view in I.L.R. was not cited before the Privy Council and is based upon the wrong assumption that common law changed with the change of legislation.
The coming into force of the Constitution does not alter the law as laid down in L.R. 73 I.A. 271, I.L.R. and I.L.R. Article 372 of the Constitution includes the common law of the land and continues the same after the coming into force of the Constitution.
[I.L.R. , I.L.R. This common law doctrine of the immunity of the Crown from Statutes not specifically naming it or referring to it by necessary implication is applicable in United States also. ; [52 L. Ed. 82; ; M. C. Setalvad, Attorney General for India, R. Ganapathy Iyer, R. H. Dhebar and T. M. Sen, for intervener No. 1 The question is whether the ancient rule of English common law declared to be applicable to India by the Privy Council is applicable to the construction of section 386 and it has to be examined as to what was the position before and after the Constitution.
The High Court has decided that even before the Constitution the principle did not apply in spite of the Privy Council decision.
The statute of 1923 must be con strued in accordance with the rule of interpretation prevailing in 1923.
The makers of statute in 1923 did not intend to include State in the word " person ".
The decision of the Privy Council was the binding law of the land unless there was legislation abrogating it or taking away its effect.
Article 372 of the Constitution actually continues the law as laid down in L.R. 73 I.A. 271.
This Article uses the expression " of the law in force in India " and not the words " existing law ".
The same expression is used in section 292 of the Government of India Act and was interpreted in There is nothing in the Constitution which takes away the applicability of the rule.
There is nothing in 21 162 that rule or in its nature repugnant to any provision of our Constitution.
The rule is illustrated in ; and I C.L.R. 406.
The rule is applicable to all forms of Governments and is based on the ground of public policy and not merely on the ground of prerogative.
; ; V. K. T. Chari, Advocate General for Madras and T. M. Sen, for intervener No. 4. Supported the Advocate General of Bengal.
H. M. Seervai, Advocate General for Maharashtra and R. H. Dhebar, for intervener No. 5.
The word " person " should be given its normal meaning.
It does not include the Crown or the State.
It would not include the State unless the statute would be meaningless without such inclusion.
[L.R. 73 I.A. 271 ; I C.L.R. 406].
By " necessary implication " is meant that without the inclusion of the crown or the State the beneficent purpose of the statute would be wholly frustrated.
The consensus of judicial opinion in Bombay has been the same as expressed in L.R. 73 I.A. 271.
The rule has nothing to do with forms of Government.[93 L. Ed. 1406].
Indian decisions have uniformly taken this view.
[5 Bom.
H.C.R. 23 ; I.L.R. I Bom.
213; 36 Bom.
L.R. 820; ; I.L.R. 2 All. 196].
I.L.R. accepts the rule but says that it does not apply to taxation.
This was a wrongful curtailment of the prerogative.
[Halsbury, Vol. 7, p. 469, para 98].
The judgments of the Privy Council delivered before January 26, 1950, are binding on all courts in India except the Supreme Court and they are binding till the Supreme Court takes a different view.
[A.I.R. 1953 Cal. 524; A.I.R. 1955 Nag. 293; Government of India Act, section 212 provided that the judgments of the Federal Court and of the Privy Council shall be binding and shall be followed.
section M. Sikri, Advocate General of Punjab and D. Gupta, for intervener No. 2.
In pre Constitution statutes the word " person " could include " the Crown " but normally or ordinarily it would not so include.
In I.L.R. 1958 Punj.
201 it was held that person " included the State of Punjab and the Union 163 of India.
The rule laid down by the Privy Council is equally applicable to a Republic. ; ; 65 L. Ed. 315; ; and ; In A.I.R. 1956 Pat. 91 the State has been held to be a person.
G. C. Mathur and C. P. Lal, for intervener No. 3.
Adopted the arguments of the Advocate General of West Bengal and of the Attorney General of India.
T. M. Sen, for intervener No. 6.
Adopted the arguments of the Advocate General, Bengal and the Attorney General of India.
N. C. Chatterjee, Sunil K. Basu and Sukumar Ghose, for respondents.
Section 386 is directed towards maintenance of healthy condition etc.
and is a wholesome provision for safeguarding the health of the people by providing for the control of storing houses and for the equality of the stores.
The financial aspect, i. e., the recovery of license fees or fine is inconsequential.
The prerogative of immunity from the statutes is only available when the State acts as State and not when it descends to trade and business.
State is a person.
Salmond, 11th Edition, p. 35, defines person as an entity capable of rights and duties.
It has the power to hold and acquire property ; it can sue and be sued [Article 300 of the Constitution ; 60.Punj.
L. R. 546.].
The correct rule of interpretation is that to exempt the State from the operation of a statute there must be express exclusion in favour of the State.
[Friedman in The mere fact that the State cannot be sent to jail, does not indicate that it is not a person.
A Corporation is a person.
It is the stigma of the conviction that matters and it is not a question of hurting the State financially. ; [1950] S.C.R. 720.
A Corporation can be prosecuted even where mens rea or state of mind is concerned.
[Paton on Jurisprudence, 2nd Edition, p. 279].
Sanctions of criminal law should be available against the State for enforcing the law.
[72 C. L. R. 409; Willis ' Constitution Law, p. 37].
State is a person.
; ; I. L. R. [1951] 1 All. 269].
When State engages in trade or commerce, it must be treated in the same 164 way as ordinary citizens.
[A. 1.
R. ; A. 1.
R. 1956 Pat.
91.] State is not a person only for the purposes of article 14.
The doctrine of immunity of States from the operation of its laws cannot be invoked in the present constitutional set up.
The rule is based on royal prerogative.
; ; Willis p. 54].
The rule springs from the prerogative that the King can do no wrong.
There is no one equivalent to the King now in India and therefore the prerogative does not survive.
Law is a scheme of social control and the command of a superior.
If the State claims immunity, it must be exempted by express legislation.
Immunity cannot be implied.
There has been progressive restriction on the immunity of the State. ; ; ; I.L. R. lays down the correct law.
After the coming into force of the Constitution, the High Courts are not bound by the judgment of the Privy Council.
All powers are derived from the Constitution and no immunities can be implied.
Even if any immunity can be implied, then it cannot be invoked in respect of any trading or commercial activity.
[5 Bom.
H. C. R. Appendix 1 at p. 13; ; ; 90 L. Ed. 326].
The activity carried on by the State in storing food grains etc., and distributing them was trading activity and not exercise of Governmental function.
The State is bound by necessary implication by the provisions of the Calcutta Municipal Act, 1.923.
There are provisions in the Act which expressly exempt the State from their operation.
See section 126.
section M. Bose in reply.
Common law can be amended by legislation.
See section 4, Hindu Succession Act (30 of 1956) and Hindu Adoptions and Maintenance Act (78 of 1956).
There is difference between Civil and Criminal liability.
[72 C. L. R. 406, at 409, 424, 425].
The State is not carrying on any trading activity but is acting in the exercise of essential Governmental functions.
; Common law of England was introduced in the Presidency towns by statutes.
See Ormond 's Rules of Court; 1.
L. R. 61 Cal.
165 H. M. Seervai, (with the permission of the Court).
It is a settled rule that if a word is not a term of art, you must take the ordinary meaning and not go to technical books.
; ; 90 L. Ed. 396; Halsbury Vol. 7, p. 221].
section M. Sikri, (with the permission of the Court) referred to Holdsworth History of the English Law, ' Vol. 10, p. 354.
August 16.
The Judgment of Sinha, C.J., Imam and Shah, JJ., was delivered by Sinha, C. J. Sarkar and Wanchoo, JJ., delivered separate judgments.
SINHA C. J.
This appeal by special leave is directed against the judgment and order of the High Court at Calcutta dated February 9, 1955, whereby that Court, in its revisional jurisdiction, set aside an order of acquittal dated December 15, 1953, passed by the Municipal Magistrate, Calcutta, in respect of the prosecution launched by the Corporation of Calcutta, respondent in this Court, against the appellant.
The relevant facts are these.
On July 1, 1952, the Corporation of Calcutta made an application for summons under section 488 of Bengal Act III of 1923, which was substituted by West Bengal Act XXXIII of 1951, against " the Director of Rationing and Distribution representing the Food Department of the Government of West Bengal ".
The offence complained of was " for using or permitting to be used premises No. 259, Chitpur Road, Upper, for the purpose of storing rice etc., under the provisions of the Bengal Rationing Order, 1943, without a licence under section 386 for the year, 1951 52, corresponding section 437 of the C.M.C. Act, 1951 ".
Section 386(1)(a) of the Calcutta Municipal Act is in these terms: ,, No person shall use or permit to be used any premises for any of the following purposes without or otherwise than in conformity with the terms of a licence granted by the Corporation in this behalf, namely, any of the purposes specified in Schedule XIX 166 Item 8 of the said Schedule is " storing, packing, pressing, cleansing, preparing or manufacturing, by any process whatever, any of the following articles and the articles mentioned include rice, flour, etc.
The facts alleged by the prosecution were not denied in behalf of the Department, which was in the position of the accused, but it was contended by way of a preliminary objection that the prosecution was not maintainable in law.
After hearing arguments for the parties the learned trial Magistrate passed an order acquitting the accused relying upon a decision of the Calcutta High Court in the case of The Corporation of Calcutta vs Sub Postmaster, Dharamtala Post Office(1), holding that the provisions of section 386 of the Act, neither in terms nor by necessary implication, bound the Government.
The respondent moved the Calcutta High Court in its revisional jurisdiction in Criminal Revision No. 282 of 1954, which was heard by a Division Bench consisting of J. P. Mitter and section N. Guha Ray, JJ.
Cxuha Ray, J., who delivered the judgment of the Court, Mitter, J., concurring, held that the previous decision of the same High Court in The Corporation of Calcutta vs Sub Postmaster, Dharamtala Post Office (1) was clearly distinguishable.
The distinction pointed out was that the previous decision of the Court had relied upon the decision of the Judicial Committee of the Privy Council in Province of Bombay vs Municipal Corporation of the Citu of Bombay (2), in a case arising before the coming into force of the Constitution.
As the present case arose after the advent of the Constitu tion, the High Court did not feel bound by the aforesaid decision of the Privy Council and therefore examined the legal position afresh.
On such an examination, the High Court came to the conclusion that the Indian Legislature in enacting laws acted on the assumption that the Government would be bound unless excluded either expressly or by necessary implication oftener than on the assumption that it would not be bound, unless the Legislature so provided expressly or by necessary implication.
The High Court took the view that the decision of the Division (1) (2) (1946) L.R. 73 I.A. 271.
167 Bench of the Madras High Court in Bell vs The Municipal Commissioners for the City of Madras (1) was more in consonance with the law in India than the opposite view expressed in the Privy Council judgment aforesaid.
They definitely decided that the law of India, even before the coming into effect of the Constitution, 7 and even at the time of the passing of the Government of India Act, 1935, was that the Government was bound by a Statute unless it was exempted either expressly or by necessary implication.
In that view of the matter, the High Court further observed that the question whether the decision aforesaid of the Privy Council was still good law under article 372 of the Constitution did not arise and that, if it did, it was inclined to the view that the law declared by the Privy Council was not continued by any provision of law.
In effect, the High Court took the view that the State was bound by the Statute unless it was excluded from its operation either expressly or by necessary implication.
In that view of the matter, it held that section 386 of the Act bound the appellant, set aside the order of acquittal and sent the case back to the learned Magistrate for disposal according to law.
The appellant made an application for special leave to appeal from the aforesaid judgment and order of the High Court, and obtained special leave in September 1955.
It is thus clear that this case had remained pending in this Court for about five years.
If this Court agreed with the view expressed by the High Court, the case would have to be tried on merits and the trial would begin more than eight years after the institution of the petition of complaint, but, as will presently appear, this prosecution was misconceived and therefore, in effect, no one has been the worse for the long pendency of the prosecution, which now must come to an end.
The short question for determination in this appeal is whether any offence had been committed by the appellant, as alleged against him.
If he was bound by the provisions of the Act to take out a licence on payment of the necessary fees, he must be held to have contravened the provisions of that Statute.
It has (1) Mad. 457.
168 been contended by the learned Advocate General of Bengal, representing the appellant, that the decision of the Privy Council referred to above is still good law and that the contrary decision of the Division Bench of the Madras High Court (1) did not take the correct view of the legal position.
The argument further is that the Privy Council decision was certainly binding on the Courts in India at the time it was rendered.
That was the law of the land as declared by the highest judicial authority.
Has that judicial determination been altered by the Constitution ? It has been argued that the law in India, even after the coming into effect of the Constitution, continues to be the same as the law in England in respect of the prerogatives of the Crown.
The Act in question does not make any express provision binding the Government and there was nothing in the Act to show to the contrary by necessary implication.
The Act could operate with reasonable efficacy without being held to be binding on the Government.
It was further pointed out that the High Court had failed to take into con sideration the fact that that High Court itself had construed the Calcutta Municipal Act of 1923, which was replaced by the present Act of 1951, on the basis of the Privy Council decision not to have bound the Government.
The Act of 1951 did not make any provision expressly abrogating that view.
Hence, it is argued the High Court should have felt bound by the previous decision of that very Court given on the basis of the Privy Council decision; and had erred in taking the opposite view.
The argument further was that the State is not a person within the meaning of the penal section with reference to which the prosecution had been launched.
The common law could not have been overridden impliedly by a course of legislation.
The common law applies to India even after the Constitution, not because there is the King or the Queen, but because it is the law in force.
In other words, what was the prerogrative of the sovereign has now become the law of the land in respect of the sovereignty of the State.
Thus the law of England, which (1) Mad, 457. 169 in its source was the prerogative of the Crown, was the common law of the land and was adopted by the Constitution by article 372, subject to the reservations contained therein.
The Attorney General for India as also the Advocates General of Madras and Bombay supported the contention raised on behalf of the appellant.
Mr. N. C. Chatterjee, who appeared on behalf of the respondent, contended that the State is a legal person as recognised in article 300 of the Constitution and was, therefore, capable of rights and obligations; that unless there is an express exclusion of the State by the Legislature, the Act would apply to all, including the State.
He further contended that under the Constitution there is no King and, therefore, there cannot be any question of prerogative.
Any exemption from the operation of the statute must be found in express immunity under the law and cannot be implied.
He went to the length of contending that a State 's prerogative is inconsistent with the whole Constitution.
Whatever may have been the legal position before the coming into effect of the Constitution, it has not countenanced the continuance of any such prerogative as is contended for on behalf of the appellant.
Another line taken by Mr. Chatterjee is that when the State embarks upon a business, it does so not in its sovereign capacity, but as a legal person, subject to the same rights and liabilities as any other person.
In effect, therefore, he contended that the State is a person within the meaning of section 386 of the Act; that the doctrine of immunity of States from the operation of its laws cannot be invoked after the advent of the Constitution, and, alternatively, that even if the immunity is available to the State as a sovereign power, it is not available to the State when it embarked upon a commercial undertaking and that.
in any case, the State was bound by the law by applying the rule of necessary implication from the provisions of the Act.
In this case it is manifest that it is the Government of West Bengal which is sought to be prosecuted 22 170 through one of its officers.
The prosecution is not against a named person, but against the Director of a named Department of the Government.
The person who was the Director of the Department at the relevant date, that is to say, in the year 1951 52 may not be the same person who answered that description on the date the prosecution was launched.
In essence, therefore, it is the Government of West Bengal which has to answer the charge levelled by the respondent, the Corporation of Calcutta.
Whether a prosecution against such an indeterminate person would or would not lie is a matter which has not been raised and, therefore, need not be discussed.
The question most canvassed before us in whether the penal section invoked in this case applies to Government.
It has been contended, and in our opinion rightly, that the provisions of the penal section neither by express terms nor by necessary implication are meant to be applied to Government.
The decision of the Judicial Committee 'of the Privy Council(1), if it is good law even now, completely covers this case, but the decision of the High Court, now under examination, has taken the view that the earlier decision of the Division Bench of the Madras High Court (2 ) has laid down the correct law, and not the Privy Council decision.
We have, therefore, to decide which of the two decisions has taken the correct view of the legal position as it obtained on the day the prosecution was launched.
It is well established that the common law of England is that the King 's prerogative is illustrated by the rule that the Sovereign is not necessarily bound by a statutory law which binds the subject.
This is further enforced by the rule that the King is not bound by a statute unless he is expressly named or unless he is bound by necessary implication or unless the statute, being for the public good, it would be absurd to exclude the King from it.
Blackstone (Commentaries, Vol.
I, 261 262) accurately summed up the legal position as follows: "The king is not bound by any act of Parliament, unless he be named therein by special and (1) (1946) L.R. 73 I.A. 271.
(2) Mad.
457. 171 particular words.
The most general words that can be devised. affect not him in the least, if they may tend to restrain or diminish any of his rights or interests.
For it would be of most mischievous consequence to the public, if the strength of the executive power were liable to be curtailed without its own express consent by constructions and implications of the subject.
Yet, when an act of Parliament is expressly made for the preservation of public rights and the suppression of public wrongs, and does not interfere with the established rights of the crown, it is said to be binding as well upon the king as upon the subject; and, likewise, the king may take the benefit of any particular act, though he be not specialty named." (Quoted at p. 355 of Holdsworth, A History of English Law, Vol.
The King 's prerogative is thus created and limited by common law and the sovereign can claim no prerogative, except such as the law allows.
(See Halsbury 's Laws of England, Vol. 7, Third Edition, para.
464, at p. 22 1).
The prerogative of the Crown in respect of property is thus stated in the same volume of Halsbury 's Laws of England, para.
980, at p. 465: "The Crown not being bound by any statute whereby any prerogative right, title, or interest belonging to it may be divested or abridged, unless expressly named or bound by clear implication, property owned, and occupied by the Crown is exempt from taxation unless rendered liable either by express words or necessary implication.
Moreover, an express exemption of particular classes of Crown property in a statute is not in itself sufficient to raise the implication that such property only is exempt, and that other property not falling within the exception is bound, such clauses being inserted merely ex majore cautela.
" That was the law applicable to India also, as authoritatively laid down by the Privy Council in the case referred to above.
That decision was rightly followed by the Calcutta High Court as stated above.
That would be the legal position until the advent of the Constitution.
172 The question naturally arises: whether the Constitution has made any change in that position ? There are no words in the Constitution which can be cited in support of the proposition that the position has changed after the republican form of Government has been adumbrated by our Constitution.
It was argued on behalf of the respondent that the existence of such a prerogative is negatived by the very form of our new set up, that is to say, it was contended that the republican form of Government is wholly inconsistent with the existence of such a prerogative.
In our opinion, there is no warrant for such a contention.
The immunity of Government from the operation of certain statutes, and particularly statutes creating offences, is based upon the fundamental concept that the Government or its officers cannot be a party to committing a crime analogous to the I prerogative of perfection ' that the King can do no wrong.
Whatever may have been the historical reason of the rule, it has been adopted in our country on grounds of public policy as a rule of interpretation of statutes.
That this rule is not peculiar or confined to a monarchical form of Government is illustrated by the decision of the Supreme Court of U. section A. in the case of United States of America vs United Mine Workers of America (1), where it is laid down that restrictions on the issue of injunctions in labour disputes contained in certain statutes do not apply to the United States Government as an employer or to relations between the Government and its employees and that statutes in general terms imposing certain restrictions or divesting certain privileges will not be applied to the sovereign without express words to that effect.
Similarly, in the case of United States of America vs Reginald P. Wittek (2), the question arose whether the District of Columbia Emergency Rent Act applied to government owned defence housing or to government owned low rent housing in the District, and it was ruled by the Supreme Court, reversing the decision of the Municipal Court of Appeals, that the statute in question did not apply to the United States Government (1) ; (2) ; 173 which was not a " landlord " within the meaning of the Act.
The decision was based on the rule that a general statute imposing restrictions does not impose them upon the Government itself without a clear expression or implication to that effect.
Another illustration of the rule is to be found in the case of Jess Larson vs Domestic and Foreign Commerce Corporation (1).
In that case a suit by a citizen, in effect, against the Government (War Assets Administration) for an injunction was dismissed by the District Court on the ground that the Court did not have jurisdiction, because the suit was one against the United States.
The Supreme Court, by majority, held that the suit as against the United States must fail on the ground that according to the laws of the country the sovereign enjoyed an immunity which was not enjoyed by the citizens.
The case of Roberts vs Ahern (2) is another illustration of the same rule.
It was held by the High Court of Australia in that case that the Executive Government of the Commonwealth or of a State is not bound by a statute unless the intention that it shall be so bound is apparent.
On the other hand, article 372 of the Constitution has specifically provided that subject to the other provisions of the Constitution all the laws in force in this country immediately before the commencement of the Constitution shall continue in force until altered or repealed or amended by a competent Legislature or by other competent authority.
The expression " law in force " has been used in a very comprehensive sense as would appear from the provisions of sub cls.
(a) and (b) of cl.
(3)of article 13 of the Constitution.
If we compare the provisions of article 366(10) which defines " existing law " which has reference to law made by a legislative agency in contradistinction to " laws in force " which includes not only statutory law, but also custom or usage having the force of law, it must be interpreted as including the common law of England which was adopted as the law of this country before the Constitution came into force.
It is thus clear that far from (1) ; : ; (2) (1904) I. C.L.R. 406. 174 the Constitution making any change in the legal position, it has clearly indicated that the laws in force continue to have validity, even in the new set up, except in so far as they come in conflict with the express provisions of the Constitution.
No such provision has been brought to our notice.
That being so, we are definitely of the opinion that the rule of interpretation of statutes that the State is not bound by a statute, unless it is so provided in express terms or by necessary implication, is still good law.
But Mr. Chatterjee further contended, alternatively, that even if it were held that the Government as a sovereign power may have the benefit of the immunity claimed, it is not entitled to that immunity when it embarks upon a business and, in that capacity, becomes subject to the penal provisions of the statute equally with other citizens.
This question was not raised below and has not been gone into by the High Court, nor is it clear on the record, as it stands, that the Food Department of the Government of West Bengal, which undertook rationing and distribution of food on a rational basis had embarked upon any trade or business.
In the absence of any indication to the contrary, apparently this Department of the Government was discharging the elementary duty of a sovereign to ensure proper and equitable distribution of available food stuffs with a view to maintaining peace and good Government.
Therefore, the alternative argument suggested by Mr. Chatterjee has no foundation in fact.
It only remains to consider the other alternative argument that even if the State has not been bound by the penal section in the statute in question in express terms, it must be deemed to be bound by it by necessary implication.
But no specific provisions of the statute in question have been brought to our notice which could lend any support to this alternative argument.
It has not been shown to us that if the section which was sought to be applied against the Government were held not expressly to apply to Government, the law will lose any of its efficacy, or that its working will be hampered in any way.
It must, therefore, be 175 held that there is no substance in this contention either.
The appeal is accordingly allowed, the judgment under appeal set aside and the acquittal of the appellant confirmed.
SARKAR J.
The appellant is an officer of the Government of West Bengal.
He was prosecuted before a Municipal Magistrate of Calcutta for storing rice in certain premises without obtaining a licence for that purpose from the respondent, the Corporation of Calcutta, as required by section 386 of the Calcutta Municipal Act, 1923.
That was an Act passed by the legislature of the former Province of Bengal and may, for the present purpose, be taken to have been passed by the legislature of the State of West Bengal.
In storing the rice the appellant had acted in his official capacity and for carrying out the West Bengal Government 's rationing scheme.
The Magistrate acquitted the appellant holding that the Act did not bind the Government as it was neither expressly nor by necessary implication made bound, and so, the appellant who had been prosecuted as representing the Government would not be liable for non compliance with its provisions.
On revision the High Court at Calcutta held that the English rule that a statute did not bind the Crown unless expressly or by necessary implication made bound, did not apply to Indian statutes and so the Government would be liable for breach of the provisions of the Calcutta Municipal Act.
In this view of the matter, the High Court set aside the order of acquittal and sent the case back to the Magistrate for disposal on the merits.
This appeal has been taken from the order of the High Court with special leave granted by this Court.
The main question is whether the English rule that The Crown is not bound by the provisions of any statute unless it is directly or by necessary implication referred to " applies to India.
It is said that the rule is based on the English law of Crown prerogatives and has no application to India since the promulgation of our Constitution as we have now a republican 176 form of government where no question of royal prerogatives can arise.
It is pointed out that the prosecution was in this case started since the Constitution came into force and whatever may have been the position earlier, the Government can no longer take shelter under the English rule.
I think the rule applies to India even after the Constitution.
It seems to me that the rule as applied in modern times, is really a rule of construction of statutes and is not dependent on royal prerogatives.
This is the view that appears to have been taken in all recent authorities, to some of which I wish now to refer.
In Craies on Statutes (5th Ed.) it is stated at p. 392 that " The rule is analogous, if not equivalent, to the rule already stated that the common law is not presumed to be altered by statute ".
The rule, therefore, is based on the presumed intention of the legislature and is, hence, a rule of construction of statutes.
Then I find it stated in Attorney General vs Donaldson (1) that " It is a well established rule, generally speaking, in the construction of Acts of Parliament, that the King is not included unless there are words to that effect; for it is inferred prima facie that the law made by the Crown with the assent of the Lords and Commons, is made for subjects and not for the Crown".
Again in Comber V. Justices of Berks (2) it was said in reference to this rule, " In Rex vs Cook, 3 T.R. 519, the general principle as to the construction of statutes imposing charges as containing an exemption of the Crown was laid down ".
In the Australian case of Roberts vs Ahern (3), it was said, "This rule has commonly been based on the Royal prerogative.
Perhaps, however, having regard to modern developments of constitutional law, a more satisfactory basis is to be found in the words of Alderson, B." The words referred to are what I have already set out from Attorney General vs Donaldson (1).
In America too this rule has been applied as a rule (1) ; , 123; ; (2) ; , 65.
(3) (1904) 1.C.L.R. 406, 417.
177 of construction though there is no King there but the government is of the republican form.
So in United States vs United Mine Workers of America (1) it was observed, " There is an old and well known rule that statutes which in general terms divest pre existing rights or privileges will not be applied to the sovereign without express words to that effect.
It has been stated, in cases in which there were extraneous and affirmative reasons for believing that the sovereign should also be deemed subject to a restrictive statute, that this rule was a rule of construction only ".
Again in reference to the same rule it was said in United States V. State of California (2).
" The presumption is an aid to consistent construction of statutes of the enacting sovereign when their purpose is in doubt ".
In our country also in Bell vs The Municipal Commissioners for the City of Madras(3), a case on which much reliance has been placed by the respondent, it was said after referring to various English cases dealing with the rule, " This emphatic statement of the rule being founded upon general principles of construction is undoubtedly applicable as much to Indian enactments as to Colonial or Imperial Statutes ".
It was also said at the same page, " The rule of construc tion above adverted to cannot itself be regarded as a prerogative of the Crown ".
Then I find that in England the rule protects from the operation of a statute not only what may strictly be called Crown prerogatives, or whatever is nowadays left of them, but all the Crown 's rights, title and interest: see Halsbury 's Laws of England (3rd Ed.) Vol.
VII, p. 465.
In volume XXXI of the Second Edition of the same treatise it is stated with reference to the rule that, " The Crown for this purpose means not only the King personally, but also the officers of State and servants of the Crown when acting within the scope of their authority on behalf of the Crown in the discharge of executive duties ".
In Mersey Docka (1) ; , 272 ; ; , 902.
(2) ; , 186; ; , 574.
(3) Mad.
457, 485.
23 178 vs Cameron(1), Lord Cranworth after referring to the various instances where the rule had been applied to exempt buildings occupied for purposes of the government from rates and other impositions, said, " These decisions however have all gone on the ground more or less sound, that these might all be treated as buildings occupied by the servants of the Crown, and for the Crown, extending in some instances the shield of the Crown to what might more fitly be described as the public government of the country ".
Again in Coomber vs Justices of Berks (2), Lord Blackburn after referring to certain observations of Lord Westbury in the Mersey Docks case(1) said, "He there says that the public purposes to make an exemption " must be such as are required and created by the government of the country, and are, therefore, to be deemed part of the use and service of the Crown;" and in Greig vs University of Edinburgh (3) be more clearly shews what was his view by using this language, "property occupied by the servants of the Crown, and (according to the theory of the Constitution) property occupied for the purposes of the administration of the government of the country, become exempt from liability to the poor rate ".
" In this case it was held that lands with buildings constructed thereon and used by county justices, and for police purposes were not liable to income tax.
In Cooper vs Hawkins (4) it was held that an engine driver employed by the Crown who drove a steam locomotive on Crown service at a speed exceeding the limit specified by regulations made under a statute, was not liable as in the absence of express words, the statute did not bind the Crown.
Lastly, I refer to Roberts vs Ahern (5) where a person acting under the orders of the Government of the Commonwealth of Australia had been prosecuted for having carted away nightsoil from a Post Office without a licence from, and without having given any security to, the local authority as was required by an enactment of the State of Victoria.
It was held that he was not liable to prosecution because, (1) ; , 508; ; (2) ; , 65.
(3) (1868) L.R.I H.L, (SC.)348.
(4) (5) ; , 417. 179 " The modern sense of the rule, at any rate, is that the Executive Government of the State is not bound by Statutes unless that intention is apparent: " p. 418.
It was also said that " The doctrine is well settled in this sense in the United States of America: " (p. 418).
It is unnecessary to multiply instances where acts of the executive government have received the protection of the rule.
All this would seem to put it beyond doubt, that whatever its origin, the rule has long been regarded only as a rule of construction.
It has been widely used to exempt executive governments from the operation of statutes quite apart from protecting prerogative rights of the British Crown strictly so called.
It has been held reasonable to presume that the legislature intended that executive governments are not to be bound by statutes unless made bound expressly or by necessary implication.
It would be equally reason.
able to do so in our country even under the present set up for the presumption has all along been raised in the past and especially as the applicability of the rule can no longer be made to depend on the prevailing form of government.
In countries with a republican form of government, the Sovereign would be the State, and its acts, which can only be the acts of its executive limb would be, under the rule exempt from the operation of its statutes.
Whether the royal prerogative as understood in England, exists in the present day India is not a question that can arise in applying what is a pure rule of construction of statutes.
Further it is quite clear that the rule has been applied by courts in India in the construction of Indian statutes all along at any rate upto the promulgation of our Constitution, except in the solitary instance of Bell 's case (1) earlier referred to.
It would therefore be right to hold that the legislatures in our country have proceeded on the basis that the rule would govern the enactments passed by them.
That being so and remembering that the rule is one of construction, there would be no reason to deny its application to Indian statutes after the Constitution.
The Dew republican (1) Mad.
180 form of government adopted by us would not warrant a departure from the long established rule of construction.
It was then said that the course of legislation in India would indicate that it was not intended even before the Constitution that the rule would apply to Indian statutes.
This contention was based on Bell 's case(1).
That case seems to me to have proceeded on a basis not very sound.
On an examination of certain Indian statutes it was said, " It is noteworthy that as a general rule government is specially excluded whenever the Legislature considered that certain provisions of an enactment should not bind the Government ".
From this the conclusion was drawn that "According to the uniform course of Indian legislation, statutes imposing duties or taxes bind Government as much as its subjects, unless the very nature of the duty or tax is such as to be inapplicable to the Government ".
It seems to me that this decision overlooks the uniform course of decisions of Indian Courts applying the rule in the construction of Indian statutes.
The legislature must be deemed to have known of these decisions and if they wanted to depart from their effect they would have passed a statute bringing about the desired result.
No such statute was ever passed.
It is wellknown that in these circumstances the legislatures must be taken to have proceeded on the basis that the decisions were correct and the rule was to be applied to the statutes passed by them.
That being so, an examination of the course of Indian legislation would be irrelevant.
The cases where the Government was expressly excluded must be taken to be instances of exemptions ex majori cautila: see Hornsey Urban Council vs Hennel(2).
Furthermore, it seems to me that a comparison of the number of statutes where the Government had been specially excluded from their operation with the number where the statutes are silent on the subject, is, at best, a very unsafe guide for deciding whether the rule should be applied to Indian enactments.
I therefore dissent from the view expressed in Bell 's case(1), that the rule does not apply in India.
(1) Mad.
(2) 181 Now it seems to me that in storing the rice in the present case, the Government of West Bengal was performing one of its governmental functions.
It was storing rice for purposes of rationing, that is, making food stuff available to citizens in time of scarcity.
That such activity is a part of the government 's duty is unquestionable.
The act for which the appellant was prosecuted was, therefore, an act of the West Bengal Government done in discharge of its ordinary duties as the government and the rule would prevent the Act from applying to make the Government liable for a breach of it.
Then it is said that the Act binds the Government by necessary implication.
In support of this argument we were referred to certain provisions of the Act which expressly exempted the Government from their operation.
I am unable to agree that this raises the necessary implication.
It has been said in Halsbury 's Laws of England (2nd Ed.) Vol.
XXXI at p. 523 that " A general prerogative of the Crown is not deemed to have been abandoned by implication by reason of the specific exemption in a statute of any class of the servants of the Crown from acting in compliance with the prerogative, nor by reason of the :fact that the Crown has foregone or curtailed its rights in some other direction in another part of the statute " ; see also Hornsey Urban Council case (1) earlier referred to.
These observations would show the unsoundness of the contention raised by the respondent.
Lastly, it is said that the purpose of the Act was to prevent adulteration of food stuffs and this object would be wholly defeated unless the Government was bound by it.
It is not in dispute that if this were so, that might be a ground for holding that the Act bound the Government.
On this aspect of the case reference may be made to Province of Bombay vs Municipal Corporation of Bombay (2).
I am however unable to hold that the purpose of the Act would be wholly or at all defeated if the Government were not bound by it.
It seems to me that section 386 of the Act, the breach of which is complained in this case, is concerned with (1) (2) (1946) L.R. 73 I.A. 271.
182 the use of premises and not with the prevention of adulteration of food stuffs as was contended for the respondent.
The provisions with regard to adulteration of food stuffs are contained in a, different part of the statute.
There is nothing to show that the purpose of the Act would wholly be defeated if some premises were used contrary to the terms of the Act.
I would for these reasons hold that the Act did not bind the Government and the prosecution of the appellant for an act done in the discharge of his duties as an officer of the Government cannot be maintained.
This appeal should therefore be allowed and the order of the High Court set aside and that of the Magistrate restored.
WANCHOO J. I have had the advantage of reading the judgments prepared by my Lord the Chief Justice and my brother Sarkar J.
I agree with their conclusion but my reasons are different.
I therefore proceed to state my reasons for coming to the same conclusion.
The facts have already been stated in the judgment of my Lord the Chief Justice and I will not therefore repeat them.
Suffice it to say that the Corporation of Calcutta initiated this prosecution, in substance, of the State of West Bengal through its Director of Rationing and Distribution under section 488 of the Calcutta Municipal Act, No. 111 of 1923, (now equivalent to section 537 of the Calcutta Municipal Act, No. XXXIII of 1951), for using or permitting to be used certain premises for the purpose of storing rice, etc.
under the provisions of the Bengal Rationing Order, 1943, without a licence under section 386 of Act III of 1923, (now equivalent to section 437 of Act XXXIII of 1951).
The State did not deny the facts; but it was contended on its behalf that the prosecution was not maintainable in law.
The Magistrate held that the provisions of section 386 of the 1923 Act did not apply to the State either expressly or by necessary implication and therefore passed an order of acquittal.
The Corporation took the matter in revision to the High Court, which distinguished an earlier decision of the High Court relied upon by the Magistrate and held that after India became a 183 democratic republic from January 26, 1950, the High Court was not bound by the decision of the Privy Council in a similar matter reported in Province of Bombay vs Municipal Corporation of the City of Bombay (1) and that the rule of construction based on the royal prerogative that the Crown was not bound by a statute unless it was expressly named therein or at any rate could be held to be bound by necessary implication, did not apply in India after January 26, 1950, and that the true rule of construction on which the Indian legislatures acted was that the State would be bound unless excluded either expressly or by necessary implication.
The High Court therefore held that section 488 of the Act of 1923 read with section 386 bound the State and set aside the order of acquittal and sent the case back to the Magistrate for disposal according to law.
The most important question thus is, whether the rule of construction derived from the royal prerogative in England can still be said to apply in India after January 26, 1950.
If this rule of construction based on the royal prerogative does not apply, it would necessarily follow that the ordinary rule of construction, namely, that the State would also be bound by the law like anybody else unless it is expressly excluded or excluded by necessary implication, would apply.
Now the rule of construction based on the royal prerogative is a survival from the medieval theory of divine right of Kings and the conception that the sovereign was absolutely perfect, with the result that the common law of England evolved the maxim that " the King can do no wrong ".
In course of time however the royal prerogative in England was held to have been created and limited by the common law and the sovereign could claim no prerogatives, except such as the law allowed nor such as were contrary to Magna Carta or any other statute or to the liberties of the subject.
The courts also had jurisdiction to inquire into the existence or extent of any alleged prerogative.
If any prerogative was disputed, they had to decide the question whether or not it existed in the same way as they decided any other question of law.
If a, (1) (1946) L.R. 73 I.A. 271.
184 prerogative was clearly established, they could take the same judicial notice of it as they took of any other rule of law: (see Halsbury 's Laws of England, 3rd Edition, Vol. 7, p. 221, para. 464).
The question of royal prerogative was also considered in Attorney General vs De Keyser 's Royal Hotel Limited(1).
It was held there in that even where there was prerogative it could be curtailed by a statute, if the statute dealt with something which before it could be affected by the prerogative, inasmuch as the Crown was a party to every Act of Parliament.
Thus in modern times, the royal prerogative is the residue of discretionary or arbitrary authority which at any time is legally left in the hands of the Crown and is recognised under the common law of England.
Two things are clear from this modern conception of royal prerogative, namely, (1) that there must be a Crown or King to whom the royal prerogative attaches, and (2) that the prerogative must be part of the common law of England.
Both these conditions existed when the Privy Council decision in Province of Bombay vs Municipal Corporation of the City of Bombay (2) was given in October 1946; the King was still there and the Privy Council held that the English common law rule of construction applied to Indian legislation as much as to English statutes.
I may mention however that in England also the rule has come in for criticism by writers of books on law.
Glanville L. Williams in his treatise on " Crown Proceedings " says at p. 53: " The rule originated in the Middle Ages, when it perhaps had some justification.
Its survival, however, is due to little but the Vis inertiae." Again at 54, the author says " With the great extension in the activities of the State and the number of servants employed by it, and with the modern idea, expressed in the Crown Proceedings Act," (compare in this connection article 300 of our Constitution), " that the State should be accountable in wide measure to the law, the presumption should be that a statute binds the Crown rather than it does not." (1) ; (2) (1946) L.R. 73 I.A. 271. 185 After January 26, 1950, when our country became a democratic republic and the King ceased to exist, it is rather otiose to talk of the royal prerogative.
It is also well to remember that the English common law as such never applied to India, except in the territories covered by the original side of the three Chartered High Courts, namely, Calcutta, Bombay and Madras, (see Kahirodebihari Datta vs Mangobinda Panda(1) ) though sometimes rules of English common law were applied by Indian courts on grounds of justice, equity and good conscience.
It seems to me therefore that to apply to Indian statutes a construction based on the royal prerogative as known to the common law of England now when there is no Crown in this country and when the common law of England was generally not even applicable, (except in a very small part), would be doing violence to the ordinary principle of construction of statutes, namely, that only those are not bound by a statute who are either expressly exempted or must be held to be exempt by necessary implication.
In our country the Rule of Law prevails and our Constitution has guaranteed it by the provisions contained in Pt.
III thereof as well as by other provisions in other Parts: (see Virendra Singh and others vs The State of Uttar Pradesh (2) ).
It is to my mind inherent in the conception of the Rule of Law that the State, no less than its citizens and others, is bound by the laws of the land.
When the King as the embodiment of all power executive, legislative and judicial has disappeared and in our republican Constitution, sovereign power has been distributed among various organs created thereby, it seems to me that there is neither justification nor necessity for continuing the rule of construction based on the royal prerogative.
It is said that though the King has gone, sovereignty still exists and therefore what was the prerogative of the King has become the prerogative of the sovereign.
There is to my mind a misconception here.
It is true that sovereignty must exist under our Constitution (1) Cal.
841, 857.
(2) (1955) 1.S.C.R. 415.
186 but there is no sovereign as such now.
In England, however, the King is synonymous with the sovereign and so arose the royal prerogative.
But in our country it would be impossible now to point to one person or institution and to say that he or it is the sovereign under the Constitution.
A further question may arise, if one is in search of a sovereign now, whether the State Government with which one is concerned here is sovereign in the same sense as the English King (though it may have plenary powers under the limits .set under our Constitution).
This to my mind is another reason why there being no King or sovereign as such now in our country, the rule of construction based on the royal prerogative can no longer be invoked.
Reliance was placed in this connection on certain cases from Australia and Canada and also from the United States of America.
So far as Australia and Canada are concerned, the cases are not of much help for the Crown exists there still.
Besides in Canada and in most of the provinces of Canada and in New Zealand provisions have been specifically introduced in the Interpretation Acts laying down that no provision or enactment in any Act shall affect, in any manner whatsoever, the rights of His Majesty, his heirs or successors, unless it is expressly stated 'therein that His Majesty shall be bound thereby: (see Street on Governmental Liability ", at p. 152).
In the United States also, it is doubtful if the royal prerogative as such is relied on as the basis of certain principles which are in force there.
In United States of America vs United Mine Workers of America, Etc.
(1), the Supreme Court did say that there was an old and well known rule that statutes which in general terms divested pre existing rights and privileges would not be applied to the sovereign without express words to that effect.
But there was no discussion of the royal prerogative as such in the judgment and the rule was called a well established rule of construction only.
Besides the Court went on to consider the words of the statutes under consideration and held that on a proper construction of them the United States was not bound.
(1) ; 187 In United States of America vs Reginald P. Wittek (1), the Supreme Court did say that a general statute imposing restrictions does not impose them upon the government itself without a clear expression or implication to that effect; but this decision was based mainly on the terms of the State statute there under consideration and the surrounding circumstances and legislative history of the statute concerned.
Another case in the same volume is Jess Larson vs Domestic and Foreign Commerce Corporation (2) at p. 1628, where a suit was brought against an officer of the United States and it was held that it was in substance a suit against the sovereign government over which the court in the absence of consent had no jurisdiction.
There is no discussion in this case of the royal prerogative having continued in the United States and the decision seems to have turned on some law of that country which provides that a suit against the Government could not be tried in a court in the absence of consent.
As against these decisions I may refer to H. Snowden Marshall vs People of the State of New York (3) to show that royal prerogative as such is losing ground in the United States, if nothing more.
When dealing with the priority of a State over the unsecured creditors in payment of debts out of the assets of the debtor, the Supreme Court held that whether the priority was a prerogative right or merely a right of administration was a matter of local law and the decision of the highest court of the State as to the existence of the right and its incidents would be accepted by the Federal Supreme Court as conclusive.
Again in Guaranty Trust Company of New York vs United States of America (4), the Supreme Court held that the immunity of the sovereign from the operation of statutes of limitation, although originally a matter of royal prerogative, was now based upon the public policy of protecting the citizens of the State from the loss of their public rights and revenues through the (1) L. Ed. 1406.
(2) L. Ed. 1628.
(3) ; L. Ed. 315.
(4) ; 188 negligence of the officers of the State, showing that some of those immunities which in England were claimed as royal prerogatives, though preserved in the United States, were so preserved for other reasons.
Besides it must not be forgotten that though the Crown no longer remained in the United, States after the attainment of independence the American colonies out of which the United States arose were colonised by English settlers who carried the common law of England with them to America with the result that the first Constitution of some of the States (like New York) after independence provided that the common law of England which together with the statutes constituted the law of the colony before independence should be and continue to be the law of the State subject to such alterations as its legislature might thereafter make: (see H. Snowden Marshall vs People, of the State of New York( '), at p. 317).
That may account for the United States recognising some of those prerogative rights which were in force in England; though even so, the basis for such recognition is now more the law or public policy than any royal prerogative as such.
The position in our country was somewhat different.
We had the King but the common law of England did not, as already indicated, apply as a rule in this country.
Now that the King has also gone, there seems to be no reason for continuing the royal prerogatives after January 26, 1950.
Further it appears to me that the royal prerogative where it deals with substantive rights of the Crown as against its subjects, as, for example, the priority of Crown debts over debts of the same nature owing to the subject, stands on a different footing from the royal prerogative put forward in the present case, which is really no more than a rule of construction of statutes passed by Parliament.
Where, for example, a royal prerogative dealing with a substantive right has been accepted by the, Courts in India as applicable here also, it becomes a law in force which will continue in force under article 372(1) of the Constitution.
But (1) ; ; 189 where the royal prerogative is merely a rule of construction of statutes based on the existence of the Crown in England and for historical reasons, I fail to see why in a democratic republic, the courts should not follow the ordinary principle of construction that no one is exempt from the operation of a statute unless the statute expressly grants the exemption or the exemption arises by necessary implication.
On the whole therefore I am of opinion that the proper rule of construction which should now be applied, at any rate after January 26, 1950, is that the State in India whether in the Centre or in the States is bound by the law unless there is an express exemption in favour of the State or an exemption can be inferred by necessary implication.
The view taken by the Calcutta High Court in this connection should be accepted and the view expressed by the Privy Council in Province of Bombay vs Municipal Corporation of the City of Bombay (1) should no longer be accepted as the rule for construction of statutes passed by Indian legislatures.
Let me then come to the question whether on the view I have taken of the rule of construction, the prosecution in this case can be allowed to continue.
There is nothing in the Act of 1923 or in the Act of 1951 exempting the State specifically from any of the provisions of the Calcutta Municipal Act.
In this case the State is being prosecuted under section 488 (or section 537 now) and that section provides for fine for breach of section 386 (or section 437 now).
The provision is a penal provision ' and immediately a question arises whether the State as such, apart from its individual officers as natural persons, is liable to prosecution under the criminal law or has to be exempted from the operation of the provisions of criminal statutes by necessary implication.
A criminal proceeding generally ends with punishment which may be imprisonment, or fine, or both.
Now it does not require any elaborate reason to realise that the State as such cannot be sentenced to imprisonment because there is no way of (1) (1946) L.R. 73 I.A. 271. 190 keeping it in prison; therefore, by necessary implication, the State is exempt from all penal statutes and provisions providing for sentences of imprisonment or death.
Then come those penal provisions which impose fines, like the present case, and the question is whether in such a case also the State must be deemed by necessary implication to be exempt from the penal provision.
Generally speaking fines when inflicted by courts are realised by the State and go to the coffers of the State.
In effect, therefore if the State as such is to be prosecuted under a penal statute imposing fine the result is that the Court will sentence the State to fine which will go to the State itself.
It is obvious that if such is the result of a prosecution, namely that the accused gets the fine, the intention could never be that such a prosecution should be launched.
Therefore where the penalty is fine and the fine goes to the State, it must be held that by necessary implication the law does not intend the State to be prosecuted for such an offence.
In the present case I find that under section 81 of the Act of 1923 (or the corres ponding section 115 of the Act of 1951) the fines imposed by the Magistrate will not go to the Corporation but in the usual way to the State.
Under the circumstances whatever other methods may be possible for enforcing the provisions of section 386 (or section 437 now) against the State it cannot be intended to be enforced by prosecution resulting in fine which would go to the State itself.
In these circumstances it must be held that by necessary implication the State is exempt from the penal provisions contained in section 488 (now section 537).
I would therefore allow the appeal, set aside the judgment of the High Court and restore the order of acquittal by the Magistrate.
Appeal allowed. | The appellant was using certain premises in Calcutta for storing rice flour, etc.
without taking out any license under section 386(1)(a) of the Calcutta Municipal Act, 1923.
The respondent filed a complaint against the appellant for a contravention of section 386(1)(a).
The trial Magistrate acquitted the appellant holding that the provisions of section 386(1)(a), neither in terms nor by necessary implication bound the Government whom the appellant represented.
In revision, the High Court held that the Government was bound by a statute unless the legislature excluded it expressly or by necessary implication.
The High Court declined to follow the decision of the Privy Council in L. R. 73 1.
A. 271 that the general principle applicable in England applied to Indian legislation also.
Held, that the State was not bound by the provisions of section 386(1)(a) of the Calcutta Municipal Act, 1923, and that the appellant was not liable to be prosecuted for a contravention of this section.
Per Sinha, C. J., Imam and Shah, jj.
The law applicable to India before the Constitution was as authoritatively laid down by the Privy Council in L. R. 73 I. A. 271.
The Constitution has not made any change in the legal position.
On the other hand it has clearly indicated that the laws in force before January 26, 1950, shall continue to have validity even in the new set up except in so far as they were in conflict with the express provisions of the Constitution.
The rule of interpretation of statutes that the State is not bound by a statute unless it is so provided in express terms or by necessary implication, is still good law.
Province of Bombay vs Municipal Corporation of the City of Bombay, (1946) L.R. 73 I. A. 271, applied.
Bell vs The Municipal Commissioners for the City of Madras, Mad. 457, disapproved.
The Corporation of Calcutta vs Sub Postmaster, Dharmatala Post Office, , United States of America vs 159 United Mine Workers of America; , , United States of America vs Reginald P. Wittek, (1949) 93 L. Ed.
1406, Less Larson vs Domestic and Foreign Commerce Corporation, ; and Roberts vs Abern, (1904) I C. L. R. 406, referred to.
There is nothing in the Act to indicate that the State was bound by it by necessary implication, nor is there anything in it to show that if section 386 were not held to apply to the State the law would lose it efficacy or that its working would be hampered in any way.
Per Sarkar, J.
The rule that the crown is not bound by the provisions of any statute unless it is directly or by necessary implication referred to is really a rule of construction of statutes and is not dependent on royal prerogatives.
It has been applied by courts in India all along before the Constitution and there is no reason why it should not be applied to the interpretation of statutes after the Constitution.
Attorney General vs Donaldson, ; , Coomber V ' justices of Berks; , , Roberts vs Ahern, (1904) I C.L.R. 406, United States vs United Mine Workers of America; , , United States vs The State of California, ; Bell vs The Municipal Commissioners for the City of Madras, Mad. 457, Mersey Docks vs Cameron, ; and Coomber vs Justice of Berks, , Greig vs University of Edinburgh, (1868) L. R.
I H. L. (SC.) 348 and Cooper vs Hawkin section , referred to.
Section 386(1)(a) does not bind the Government by necessary implication; the fact that certain provisions of the Act expressly exempt the Government does not raise the necessary implication.
Nor would the purposes of the Act be defeated if the Government were not bound by it.
Hornsey Urban Council vs Hennel, and Province of Bombay vs Municipal Corporation, Bombay, (1946) L.R. 73 1.
A. 271, relied on.
Per Wanchoo, J.
The rule of construction which is based on the royal prerogative as known to the common law of England cannot be applied to India now when there is no crown in India and when the Common law of England is not applicable.
The, proper rule of construction which should be applied now is that the state is bound by a statute unless it is exempted expressly or by necessasy implication.
Province of Bombay vs Municipal Corporation of the City of Bombay, (1946) L. R. 73 1.
A. 271, not applied.
United States of America vs United Mine Workers of America, Etc., , United States of America vs Reginald P. Wittek; , , Jess Larson vs Domestic and Foreign 160 Commerce Corporation; , , H. Snowden Marshall vs People of the State of New York, (192O) 65 L. Ed. 315 and Guaranty Trust Company of New York vs United States of America, ; , referred to.
The Calcutta Municipal Act, 1923, does not specifically exempt the State from its provisions, As the State cannot be sentenced to imprisonment it is exempt by necessary implication from all penal provisions providing for sentences of imprisonment or death.
Further, where a statute provides for a fine and the fine goes to the State, the State is exempted from the provisions by necessary implication as it could never be the intention that such a prosecution should be launched.
The prosecution in the present case is under section 488 which provides for a fine for a breach of section 386, and the fine when imposed and realised goes to the State.
Consequently, the State is exempt from the penal provisions of section 488 of the Act by necessary implication. |
Appeal No. 755 of 1957.
Appeal by special leave from the judgment and order dated March 23, 1955, of the former Nagpur High Court in Misc.
Civil Case No. 240 of 1953.
10 K. N. Rajagopal Sastri, R. H. Dhebar and D. Gupta, for the appellant.
Veda Vyasa, section N. Andley, J. B. Dadachanji,_ Rameshwar Nath and P. L. Vohra, for the respondent.
October, 17.
HIDAYATULLAH J.
This appeal, with special leave, has been filed against the judgment of the Nagpur High Court in a reference under section 66(1) of the Indian Income tax Act, 1922, by which the High Court answered the following question in the negative: " Whether the proportionate profits on the goods of the value of Rs. 4,10,785 were received or were deemed to be received in British India, in the year of, account, by or on behalf of the assessee Company within the meaning of Section 4(1)(a) of the Indian Income tax Act, 1922 ".
The Commissioner of Income tax, Madhya Pradesh and Bhopal is the appellant, and the Bhopal Textiles Ltd., Bhopal, is the respondent.
For the assessment year 1944 45, the Company which was non resident was treated as ' resident and ordinarily resident ' under section 4(1)(c) of the Income tax Act.
In the year of account, it had supplied its manufactured articles either to the Government of India or its nominees at Agra, Allahabad and Delhi.
Under the orders of the Government, the goods were sent direct to the persons nominated, who made the payment against the goods.
The goods were all sent for Bhopal, and the railway freight and other charges were to be borne by the buyers to whom the railway receipts made out in the name of the consignees were sent by the Company through the Imperial Bank at Bhopal.
The Bhopal Branch sent the railway receipts to branches of the Bank at Agra, Allahabad and Delhi, which collected the amounts due from the buyers, and transmitted them to the Imperial Bank, Bhopal, to the credit of the Company.
On these facts, a total sum of Rs. 4,40,373 was held by the Department to have been received in British India.
of that sum, an amount of Rs. 29,588 which represented the receipts 11 for supplies direct to Government is no longer in dispute.
The balance represents the sum, which was the subject matter of the reference.
The usual appeals followed, and the contention of the Company that the money was not received in, British India was not accepted by the Tribunal.
The Tribunal did not decide about the place of accrual.
A reference was then made by the Tribunal of the question quoted above.
The High Court in deciding the reference went into the question of passing of property under the Indian , and came to the conclusion that since the property in the goods had passed to the buyers, the Imperial Bank of India, Bhopal, must be " deemed to have received the railway receipts as agents of the buyers ".
Continuing the reason, the learned Judges observed: " So also the branches of the Bank at Agra, Allahabad and Delhi acted as the agents of the buyers when they collected the money from them and transmitted it to the Bhopal branch.
In this view, the profits cannot be said to be received by the assessee Company in British India. ' It received the money only when it reached the Bhopal branch as a credit to its own account and that was not in British India at the material time ".
The case was not decided by the Tribunal on the basis of accrual of the income, profits or gains to the Company.
It was decided on the fact of actual receipt, whether it was in British India or in Bhopal, which was then outside the taxable territories.
We need not, therefore, concern ourselves with the problem whether property in the goods could be said to have passed absolutely to the buyers without any right of disposal being reserved by the Company.
It is a matter of some doubt whether the goods were absolutely at the disposal of the buyers after the rail.
way receipts were handed over to the Bank.
It is in evidence and has been adverted to by the Incometax Officer that the Company, when it handed over the railway receipt to the Imperial Bank at Bhopal, did so along with a covering letter in which it asked the Bank to deliver the railway receipt and the bill to 12 the buyers against payment of the bill amount plus collection charges.
In this view of the matter, though we do not express any final opinion, we doubt whether the right of disposal was parted with by the, Company.
A railway receipt is a document of title to goods, and, for all purposes, represents the goods.
When the railway receipt is handed over to the consignee on payment, the property in the goods is transferred.
In this case, it is a matter of considerable doubt whether the property in the goods can be said to have passed to the buyers by the mere fact of the railway receipts being in the name of the consignees, as has been held by the High Court.
Since we are not deciding the question of accrual, we do not elaborate the point.
Coming now to the question as to where the amount was received, we have no doubt that the view of the Tribunal was correct.
This income was received at Agra, Allahabad or Delhi from the buyers by the Imperial Bank acting as the agent of the Company.
The Company had handed over the railway receipts to the Bank, and asked the Bank not to hand over the railway receipts to the buyers, unless payment was received.
This was sufficient to make the Bank an agent of the Company.
The buyers could not have countermanded the instructions given by the Company to the Bank, which they would, indubitably, have been able to do, if the Bank was their agent.
This was laid down by this Court in The Commissioner of Income tax vs P. M. Rathod and Company (1).
Mr. Veda Vyasa contends that the case is distinguishable on the ground that the railway receipts there were " to self ' whereas here the railway receipts, were made out in the name of the consignee.
Nothing turns upon this distinction.
The document of title to goods was still the property of the Company till payment for it was received and it was handed over.
In this view of the matter, we are of opinion that the ruling in question app lies.
Mr. Veda Vyasa finally contended that the agreement between the parties was that the goods were to (1) ; 13 be sent for Bhopal, and that the price was also to be paid there.
He contended that the handing over of the railway receipts to the Bank at Bhopal was in furtherance of the agreement, that the money was ultimately obtained by the Bank and handed over at Bhopal also, and that, thus, the money must be deemed to have been received there.
This, in our opinion, does not truly represent the character of the transaction.
No doubt, under the agreement, payment was to be made at Bhopal; but the circumstances show that that was departed from, and the ordinary mercantile practice of handing over the railway receipts to one 's own bankers with a request to hand over the receipts against payment to the buyers was followed.
The Bank, as we have shown above, was thus the agent of the sellers, as was laid down in the ruling of this Court, and the fact of payment to the agent determines the place where the money can be said to be received by the Company.
That place was at Agra, Allahabad or Delhi.
In this view, the income, profits or gains must be deemed to have been received in the taxable territories, and the answer to the question ought to have been in the affirmative.
We accordingly allow the appeal, and answer the question in the affirmative.
The appellant will be entitled to his costs here and in the High Court.
Appeal allowed. | Respondent, a non resident company, in the accounting year supplied goods which were sent F. O. R. Bhopal to the buyers in British India.
The railway receipts were handed over to a Bank in Bhopal with instructions to hand over the railway receipts to the buyers, who were named as consignees, only on receipt of payment of the bill and collection charges.
The branches of the Bank within the taxable territory collected the amounts due from the buyers and transmitted them to Bhopal to the credit of the respondent.
The question was whether the profits in the goods were received or deemed to be received in British India.
Held, that the decision of this Court in Commissioner of Income tax vs P. M. Rathod & Co. applied to this case; and the income, profits or gain must be deemed to have been received within the taxable territory.
The fact of payment to the agent determines the place where the money can be said to be received by the seller.
Since in the instant case the railway receipts were not to be handed over to the buyers by the Bank, as per instructions of the seller, unless payment for the value of the goods were received by the Bank which instructions the buyers could not countermand, this was sufficient to make the Bank an agent of the seller.
Held, also, that a railway receipt is a document of title to goods, and, for all purposes, represents the goods.
When the railway receipt is handed over to the consignee on payment, the property in the goods is transferred.
The Commissioner of Income tax vs P. M. Rathod and Co., ; , relied on. |
Appeal No. 210 of 1959.
Appeal by special leave from the judgment and order dated January 16, 1958, of the Patna High Court in Mis.
Judicial case No. 156 of 1957.
B. C. Ghose and P. K. Chatterjee, for the Appellant.
section P. Varma, for Respondents Nos. 1 to 5.
R. C. Dutta, for Respondents Nos.
6 to 20. 1960.
November 7.
The Judgment of Hidayatullah, Das Gupta and Ayyangar, JJ., was delivered by Ayyangar, J., and that of section K. Das and Shah, JJ., was delivered by Shah, J. AYYANGAR.
The sole question which arises in this appeal, which comes by way of special leave is as to whether sales under which goods were delivered outside the State of Bihar for the purpose of consumption but not within the State of first delivery or first destination, are exempt from the levy of sales tax by the Bihar State by virtue of article 286(1)(a) of the Constitution as it stood before the recent amendment.
The India Copper Corporation Ltd. (referred to hereafter as the assessee company) carries on business in copper and various other materials and mineral pro.
ducts and the office of its General Manager is in the district of Singhbhum in Bihar.
The period covered by the assessment now in dispute is January 26, 1950 to March 31, 1950.
The normal practice of the assessee company was to deposit sums of money from time to time provisionally towards payment of sales tax in advance and have the amount finally adjusted after the completion of the assessment of each year.
The assessee company followed this practice in respect of the amount of sales tax due by it for the year 1949 50.
For the financial year April 1, 1949 to March 31, 1950, the Superintendent of Sales tax, Singhbhum, 278 computed the tax liability of the company in the sum of Rs. 3,60,703 4 0 by an order of assessment dated November 13,1950, and the company made payment of the amount due by it beyond the sums already paid.
It would be noticed that this financial year comprised two periods (1) before the Constitution, viz., April 1, 1949 to January 25, 1950, and (2) the post Constitution period from January 26, 1950 to March 31, 1950.
There is now no controversy as regards the sales tax payable in respect of sales effected during the pre Constitution period.
The assessee company however raised a dispute that in respect of the post Constitution period, it was not liable to pay any sales tax in respect of sales to buyers, under which though the property in the goods passed within the State, delivery of the goods was effected outside the State of Bihar for consumption outside that State on the ground that such sales were exempted from tax by article 286(1)(a) of the Constitution as it originally stood.
It addressed a formal letter to the Commissioner of Commercial Taxes, Bihar, on December 30, 1952, making this demand enclosing a statement showing full particulars of the goods sold, the bill numbers, the date and the amount etc., to enable the refund claimed to be calculated.
The assessee company followed it up by a formal petition for review of the assessment order by filing a revised return under section 12(2) of the Bihar Sales tax Act together with an application for refund.
The departmental authorities rejected these applications by order dated July 20, 1953.
Further proceedings before the department by way of revision etc.
failed to secure to the assessee company the relief which it claimed and thereafter it filed an application under articles 226 and 227 of the Constitution before the High Court of Patna praying for the issue of a writ to quash the order of assessment dated November 30, 1950, and the orders rejecting the prayers for review, reassessment and refund and for a direction to the departmental authorities to refund the sum realised by them in so far as the tax related to sales as a result of which goods were delivered outside the State of Bihar.
279 The learned Judges of the High Court held that the order of the Superintendent of Sales tax, Singhbhum, dated November 13, 1950, should be set aside and that the matter should go back to the Superintendent to make a reassessment according to law for the post Constitution period.
A further direction was added requiring the respondent to refund to the assessee so much of the tax as had been paid in excess of the amount of reassessment to be made by the Superinten dent in accordance with the law as laid down by the Court.
In formulating the law applicable, the learned Judges drew a distinction between sales as a direct result of which goods were delivered in a State outside the State of Bihar and consumed in that State and those cases in which the goods thus delivered, were not consumed in the State of first destination but were re exported from the State of first destination to other States.
They held that the first category of sales were covered by the Explanation to article 286 (1)(a) of the Constitution and were " inside " the State of first delivery and consequently " outside " the State of Bihar within the meaning of the Article and therefore exempt from tax by the Bihar State.
In regard, however, to the second category of sales, it was held that they were not within the Explanation and were therefore outside the constitutional exemption under article 286(1)(a).
The assessee company not being satisfied, filed an application to the High Court for a Certificate of fitness under articles 132 and 133 of the Constitution, but this having been rejected, they applied to and obtained special leave from this Court under article 136 of the Constitution and that is how the appeal is now before us.
Three points were urged before us by Mr. B. C. Ghose, learned Counsel for the appellants: (1) that on a proper construction of article 286(1)(a) and the Explanation thereto (as it stood before the Article was amended by the Constitution Sixth Amendment Act, 1956) every sale as a direct result of which goods were delivered for consumption outside the State, was not within the taxing power of the State in which the 280 goods were at the time of the sale, and ,in which property passed as a result thereof, and that it was immaterial whether the delivery was for the purpose of consumption in the State of first destination or whether the delivery in such State was not for the purpose of consumption therein but, for re export to other States, (2) that even if article 286(1)(a) exempted only sales in which as a direct result of the sale the goods were delivered for the purpose of consumption in the State of first destination, on the pleadings and the evidence before the Court the assessee company must be taken to have established that all the sales effected by it and in regard to which exemption from payment of tax was claimed, conformed to this requirement, (3) a narrower submission, that even it be that to fall within the Explanation the delivery has to be for the Purpose of consumption in the State of first destination, the learned Judges of the High Court erred in requiring the assessee company to prove not merely that the goods were delivered for the purpose of consumption but further that the goods so delivered were actually consumed within that State.
We shall now deal with these points in that order.
Article 286(1)(a) together with the Explanation on whose construction the first point depends ran in these terms: " Article 286(1).
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 (a) outside the State; or (b). . . . . . . . . . . Explanation.
For the purposes of sub clause (a) a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State, notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State.
" The scope and the purpose of this Explanation was 281 discussed and explained by this Court in The State of Bombay vs Unitea Motors (India) Ltd. (1) and it is the passage in this judgment extracted below on which reliance was placed by the learned Counsel in support of his submission: ". . .
The authors of the Constitution had to devise a formula of restrictions to be imposed on the State power of taxing sales or purchases involving inter State elements which would avoid the doubts and difficulties arising out of the imposition of sales tax on the same transaction by several Provincial Legislatures in the country before the commencement of the Constitution.
This they did by enacting clause (1) (a) with the Explanation and clause (2) of Article 286.
Clause (1)(a) prohibits the taxation of all sales or purchases which take place outside the State but a localised sale is a troublesome concept, for, a sale is a composite transaction involving as it does several elements such as agreement to sell, transfer of ownership, payment of the price, delivery of the goods and so forth, which may take place at different places.
To solve the difficulty an easily applicable test for determining what is an outside sale had to be formulated, and that is what, in our opinion, the Explanation was intended to do.
It provides by means of a legal fiction that the State in which the goods sold or purchased are actually delivered for consumption therein is the State in which the sale or purchase is to be considered to have taken place, notwithstanding the property in such goods passed in another State .
An " outside " sale or purchase is explained by defining what is an inside sale, and why actual delivery and consumption in the State are made the determining factors in locating a sale or purchase will presently appear.
The test of sufficient territorial nexus was thus replaced by a simpler and more easily workable test: Are the goods actually delivered in the taxing State, as a direct result of a sale or purchase, for the purpose of consumption therein ? Then, such sale or purchase shall be deemed to have taken place (1) ; , 1081 36 282 in that State and outside all other States.
The latter States are prohibited from taxing the sale or purchase; the former alone is left free to do go.
Multiple taxation of the same transaction by different States is also thus avoided.
" It might be mentioned that this portion of the judgment is unaffected by the dissent expressed in the later decision in The Bengal Immunity Company Ltd. vs The State of Bihar (1).
The argument based upon this passage was broadly on these lines: Article 286 (1)(a) imposes a ban on the legislative power to levy a tax on sales which are outside " the taxing State.
What sales are " outside is not easy to decide because that depends upon " the situs " of a sale, which cannot, in most cases, be located in any one place with certainty being dependent on a variety of factors which might or might not converge.
The Constitution makers did not directly define what was meant by a ,sale that was " outside the State " but achieved the same purpose by explaining an " inside " sale with the result that what was not an " inside " sale should be held to bean ,outside" sale.
It must however be pointed out that it was not disputed that the terms of the " Explanation " would not be satisfied unless the delivery was for the purpose of consumption therein, i.e. in the State of first destination, If the terms of the Explanation were satisfied, the State of " delivery.
cum consumption ", (to coin a convenient expression to designate the State in which goods are delivered as a direct result of the sale for the purpose of consumption therein), used in the Explanation, would have power to tax the sale as being one fictionally " inside " it.
In such an event all the other States in India, barring that State would be prevented from taxing that sale because the sale would be " outside " those States.
This however, it was urged, would not exhaust the operation of the Explanation, but further that the Explanation was exhaustive of what the Constitution makers conceived to be a sale which alone may be the subject of tax by a State.
The deduction learned Counsel made from these premises was twofold (1) that (1) 283 in cases where goods were as a direct result of the sale delivered outside the State of Bihar for the purpose of consumption in the State of first destination, the conditions of the Explanation were satisfied and the sales being " outside " the State of Bihar could not be taxed by that State.
So far there is no dispute and indeed the learned Judges of the High Court have, subject to a matter of detail to which reference will be made later, accepted the contention of the assessee.
(2) a further consequence, that in cases where goods were delivered as a result of the sale outside the State of Bihar, but not for the purpose of consumption in such State of first destination, the terms of the Explanation were no doubt not satisfied and consequently the, sale was not inside such State of delivery and indeed not " inside " any State in India within the Explanation, but that such sales also must be held to be " outside " every State in India within article 286 (1)(a).
The learned Judges of the High Court repelled this contention and, in our opinion, correctly.
The passage in the judgment of the United Motors case extracted earlier dealt with Explanation sales and with none else.
When the terms of the Explanation were satisfied such sales were by a fiction deemed to be " inside " the State of delivery cum consumption and therefore " outside " all other States.
In such cases therefore, only the State " inside " which the sale is deemed to take place by virtue of the Explanation, is exempt from the ban imposed by article 286(1)(a).
All other States would be subject to that ban in respect of such sales.
The learned Chief Justice however did not, in the passage extracted, deal with the case of sales which did not satisfy the terms of the Explanation.
The situs of what might be termed 1 non Explanation ' sales has therefore to be determined independently of the terms of the Explanation.
Such sales would be exempt from tax only if the sale took place " outside the State but not otherwise.
The next question is, does a sale take place " outside " the State, where as a result of the contract of 284 sale, the property in the goods passes to the purchaser within the State; in other words, is a sale completed by the passing of property within the State not " inside" a State, for the more reason that as a direct result of the sale the goods are delivered outside the State.
The answer depends on the meaning to be attributed to the words " a sale or purchase which has taken place " outside the State occurring in the body of article 286 (1).
The expression " outside the State " is capable of being understood in more senses than one.
It could be understood as comprehending cases where no element or ingredient which constitutes a sale takes place within the State; in other words as applying solely to those cases where there exists no territorial nexus between the State imposing the tax and the sale.
Obviously, this could not have been intended to be incorporated in article 286(1) because the tax in such cases would be beyond the legislative power of the State under Entry 54 of the State List read with article 246 of the Constitution.
The expression " outside " has therefore to be understood not as a sale so " outside " as not to have any territorial connection between the State in question and the sale, but in a somewhat narrower sense.
The real difficulty arises in ascertaining the precise content of the narrower sense in which the word is used as meaning a sale in substance " outside " the State, though there might be some elements of the sale which if the exemption under article 286(1)(a) were not enacted, would enable a State to levy a tax on the sale on the ground that it was within the legislative power of the State under article 246 read with Entry 54.
As already pointed out, the situs of a sale is not easy to determine and several factors which constitute a completed transaction of sale including the delivery of the goods, lay claim to be considered as in themselves constituting sufficient next to justify their being treated as determining the locus of a sale.
Thus, merely by way of illustration, the place where the goods are at the time of the contract of sale, the place where the contract of sale is concluded, the place where the property in the goods passes and that 285 in which the delivery takes place compete for recognition as constituting the locus of a sale.
Before the Constitution, these and other similar factors were treated as affording sufficient territorial connection to endow the State in which any of the events occurred with legislative competence to tax the sale.
This led to a multiplicity of the taxation of the same transaction of sale by a plurality of States, with the result that the consumer was hard hit and trade itself, and national economy suffered in the process.
It has been pointed out that article 286(1)(a) was designed to counteract that state of affairs.
If a single State was designed to have the power to tax any particular transaction of sale, the question that next falls to be considered is the determination of that State in regard to which it could be predicated that the sale in question was not " outside " that State or in other words, the determination of the particular State in regard to which it could be said that the sale was " inside " that State.
The key to the problem is afforded by two indications in the Article itself: (1) the opening words of Article 286(1) which speak of a sale or purchase taking place and (2) the non obstante clause in the Explanation which refers to the general law relating to " sale of goods under which property in the goods has, by reason of such sale or purchase, passed in another State.
" These two together indicate that it is the passing of property within the State that is intended to be fastened on, for the purpose of determining, whether the sale in question is " inside " or " outside " the State, and therefore, subject to the operation of the " Explanation " that State in which property passes would be the only State which would have the power to levy a tax on the sale.
As was explained in the recent decision of this Court in Burmah Shell Oil Storage & Distributing Co., of India, Ltd. vs The Commercial Tax Officer (1) : " By sale here (article 286(1)(a) ) is meant a completed transaction by which property in the goods passes.
Before the property in the goods passes, the contract (1) C.A. 751 of 1957 & C.A. 10 of 1958 (Unreported).
286 of sale is only executory, and the buyer has only a chose in action. . . .
The Constitution thinks in terms of a completed sale by the passing of property and not in terms of an executory contract for the sale of goods.
" Notwithstanding that is not an " outside " sale, the power of the State to tax might be negatived by the operation of the Explanation which by its non obstante clause shifts the situs of the sale and renders the sale transaction one within the delivery cum consumption State, i.e. as the State in which the sale transaction must be deemed to take place.
Where the terms of the Explanation are satisfied, the sale transaction will, by a legal fiction created by it, be deemed to take place "inside" the State of delivery and therefore " outside " the State in which the property passes.
The conclusion reached therefore is that where the property in the goods passes within a State as a direct result of the sale, the sale transaction is not outside the State for the purpose of article 286(1)(a), unless the Explanation operates.
We need also add that the power of the State to impose the tax might still not be available unless the transaction in question is unaffected by the other bans imposed under sub cl.
(1)(b), (2) and (3) of article 286.
The submission therefore of learned Counsel for the appellants, that in respect of non Explanation sales the State of Bihar has no power to levy a tax by reason of such sales being 'outside " the State within article 286(1)(a) must be rejected.
The second contention urged by the learned Counsel for the appellant was that even assuming he was wrong on the first point, all the sales by the assessee company fell within the terms of the Explanation to article 286(1)(a) being sales as a direct result of which the goods were delivered for consumption in the State of first destination, and that the learned Judges of the High Court were in error in considering, that some of the sales did not conform to this requirement.
In support of this submission learned counsel drew our attention to two matters.
He first referred us to the application dated December 30, 1952 made on behalf 287 of the assessee company to the Commissioner of Commercial Taxes, Bihar, Patna in which the claim for refund of the tax paid was rested on the following ground : After getting out that the tax on sales effected between the period January 26, 1950 to March 31, 1950 was not assessable by virtue of article 286 of the Constitution, the application stated: " Total sales of raw materials of copper and brass sheet and circles sold by us and despatched under railway receipts for buyers ' consumption are as follows".
Then followed the sales effected and the tax paid in respect of the sales.
The claim in this form was annexed to and made part of the petition to the High Court under article 226 and 227 of the Constitution and in paragraph 9 of the petition, this letter was referred to and a copy thereof was incorporated and marked as 1A.
In this paragraph which was the other matter relied on the claim for refund was said to be " on sales made to buyers outside Bihar State for consumption ".
Learned Counsel strongly pressed upon us that paragraph 9 and the annexure had clearly asserted that the sales which were the, subject of the claim for refund involved a delivery of the goods outside the State of Bihar for consumption in the State of first destination and the State of Bihar not having filed any counter affidavit challenging the correctness of these allegations, the High Court should have held that the terms of the Explanation were satisfied and should have ordered the refund claimed.
We however consider that this submission is without force.
Neither in the claim put forward in Exh. 'A ' nor in para graph 9 of the petition was any distinction drawn between sales under which deliveries were effected outside the State of Bihar for the purpose of consumption in the State of first destination and those in which the deliveries outside the State were effected for the purpose of consumption not in the State of first destination but in other States.
In fact, this was made clear in the later paragraphs of the petition to the High Court from which it is apparent that the assessee company made a claim for tax exemption in 288 respect of sales in which the delivery took place outside the State of Bihar, whether the delivery was for the purpose of consumption in the State of first destination or otherwise.
In paragraph 17(1) of the petition to the High Court the assessee stated: " (the petitioner was not liable to pay tax on goods delivered outside the State of Bihar which was also for consumption outside the State of Bihar ", and again in clause (iii) of the same paragraph this was repeated: " the goods being outside the State of Bihar, delivered outside the State of Bihar and consumed outside the State of Bihar were not liable to sales tax by the State of Bihar " and similarly in cl.
(v) of the same paragraph a reference was made to " goods delivered outside the State of Bihar for consumption outside the State of Bihar ".
The same idea is emphasized in paragraph 19 also which contained the prayer of the petition.
On these averments it is clear that the claim made by the assessee was that to invoke the exemption contained in article 286(1)(a) it was sufficient that the goods were delivered outside the State of Bihar and that it was immaterial whether the delivery was for the purpose of consumption in the State of first destination or otherwise.
This involved the same argument which was raised by the learned Counsel that we have dealt with earlier.
The learned Judges of the High Court were therefore right in drawing a distinction between the two types of sales which we have already indicated.
The last point that was urged by the learned Counsel was that the learned Judges of the High Court erred in requiring the assessee to prove that the goods delivered outside the State of Bihar were actually consumed in the State of first destination before the exemption from tax could be availed of In their judgment now under appeal the learned Judges have stated: "The petitioner would not be entitled to exemption if the goods were not consumed in the State of first destination but were re exported from the State of first destination to other States) '.
Learned Counsel for the appellant complained that 289 under the Explanation to article 286(1)(a) there need be no proof of actual consumption of the goods delivered in the State of first destination but that the Explanation was satisfied if the purpose of the delivery tinder the sale was for consumption in that State.
If after a sale that satisfied that requirement, viz., for the purpose of consumption in the State of first destination, the buyer under such a sale for his own purposes reexported the goods that was not a matter with which the seller was concerned and would not affect the character of the sale as one falling within the Explanation to article 286(1)(a).
Learned Counsel therefore urged that the learned Judges of the High Court went wrong in requiring proof on the part of the assessee that the goods were actually consumed within the State of first delivery outside Bihar and that this was an unwarranted addition to the requirements of the Explanation.
We consider this submission well founded and indeed the learned Counsel for the respondent did not dispute that the actual order of the High Court went beyond the terms of the Explanation to article 286(1)(a).
The order of the High Court will, therefore, be modified by making it clear that if the goods were as a direct result of the sale delivered outside the State of Bihar for the purpose of consumption in the State of first delivery the assessee would be entitled to exemption of the sales tax imposed and that it would not be necessary for the assessee to prove further that the goods so delivered were actually consumed in the State of first destination.
Subject to this modification, the appeal fails, but in the circumstances of the case there will be no order as to costs.
SHAH J.
We agree with the conclusion of Mr. Justice Rajagopala Ayyangar, J., but because our approach to the question is somewhat different, we propose to record our reasons separately.
The Bihar Sales Tax Act, 1947, was enacted in exercise of legislative authority conferred upon the Provincial Legislatures by entry 42 in List II read 37 290 with section 100(3) of the Government of India Act, 1935.
By section 2(g) of the Act, " sale " was defined (in so far as it is material) as meaning any " transfer of property in goods for cash or deferred payment or other valuable consideration. . provided. . provided further that notwithstanding anything to the contrary in the Indian Sales of Goods Act, 1930, the sale of any goods (i) which are actually in Bihar at the time when, in respect thereof, the contract of sale as defined in section 4 of that Act is made, or (ii) which are produced or manufactured in Bihar by the producer or manufacturer thereof, shall, wherever the delivery or contract of sale is made, be deemed for the purposes of this Act to have taken place in Bihar." Under entry 42 of List II of the Government of India Act, 1935, the Provincial Legislatures could tax sales by selecting some fact or circumstance which provided a territorial nexus with the taxing power of the State even if the property in the goods sold passed outside the Province or the delivery under the contract of sale took place outside the Province.
Legislation taxing sales depending solely upon the existence of a nexus, such as production or manufacture of the goods, or presence of the goods in the Province at the date of the contract of sale, between the sale and the Legislating Province could competently be enacted under the Government of India Act, 1935 see the Tata Iron and Steel Co., Ltd. vs The State of Bihar and Poppatlal Shah vs The State of Madras (2).
By article 286 of the Constitution, certain fetters were placed upon the legislative powers of the States as follows: article 286: " (1) 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 (a) outside the State ; or (b) in the course of the import of the goods into, or export of the goods out of, the territory of India.
(1) (2) ; 291 Explanation:For the purposes of sub cl.
(a) a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State.
(2) Except in so far as Parliament may by law otherwise provide, no law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of any goods where such sale or purchase takes place in the course of inter State trade or commerce : Provided that the President may by order direct that any tax on the sale or purchase of goods which was being lawfully levied by the Government of any State immediately before the commencement of this Constitution shall, notwithstanding that the imposition of such tax is contrary to the provisions of this clause, continue to be levied until the thirty first day of March, 1951.
(3) No law made by the Legislature of a State imposing, or authorising the imposition of, a tax on the sale or purchase of any such goods as have been declared by Parliament by law to be essential for the life of the community shall have effect unless it has been reserved for the consideration of the President and has received his assent.
" With a view to impose restrictions on the taxing power of the States under the pre Constitution statutes, amendments were made in these statutes by the Adaptation of Laws Order.
By the Adaptation of Laws Order, 1951, in the Bihar Sales Tax Act was incorporated with retrospective operation from January 26, 1950, section 33, which provided: " ' (1) Notwithstanding anything contained in this Act, (a) a tax on the sale or purchase of goods shall not be imposed under this Act (i) where such sale or purchase takes place outside the State of Bihar ; or 292 (ii) where such sale or purchase takes place in the course of import of the goods into, or export of the goods out of, the territory of India ; (b) a tax on the sale or purchase of any goods shall not, after the 31st day of March, 1951, be imposed where such sale or purchase takes place in the course of inter State trade or commerce except in so far as Parliament may by law otherwise provide; (2) The Explanation to cl.
(1) of article 286 of the Constitution shall apply for the interpretation of sub cl.
(1) of cl.
(a) of sub section
" By this amendment, on the taxing power of the Bihar State the same restrictions were engrafted on the pre Constitution statute as were imposed by article 286 of the Constitution upon post Constitution statutes.
This court has held in the Bengal Immunity Co., Ltd. vs The State of Bihar (1) that the operative provisions of the several parts of article 286 namely cl.
(1) (a), (1)(b) and (2) and cl.
(3) were intended to deal with different topics and one could not be projected or read into another.
Therefore, by the incorporation of section 33 in the Bihar Sales Tax Act read with article 286, notwithstanding the amplitude of the power otherwise granted by the charging section read with the definition of " sale ", a cumulative fetter of triple dimension was imposed upon the taxing power of the State.
The Legislature of the Bihar State could not since January 26, 1950, levy a tax on sale of goods taking place outside the State or in the course of import of the goods into, or export of the goods out of the territory of India, or on sale of any goods where such sale took place in the course of inter State trade or commerce.
By the Explanation to article 286(1)(a) which is incorporated by sub section
(2) section 33 of the Bihar Sales Tax Act, a sale is deemed to take place in the State in which the goods are actually delivered as a direct result of such sale for the purpose of consumption in that State even though under the law relating to sale of goods the property in the goods has by reason of such sale passed in another State.
In the State of Bombay vs The United Motors (India) Ltd. (2), it was held that (1) (2) ; 293 since the enactment of article 286(1)(a), a sale described in the Explanation which may for convenience be called an " Explanation sale " is taxable by that State alone in which the goods sold are actually delivered as a direct result of sale for the purpose of consumption in that State.
The right to tax arises because the sale is deemed to take place in that State and outside all other States and the latter States are prohibited from taxing the sale ; the former alone is left free to do so.
The Bihar Sales Tax Act enacted in exercise of the power conferred by entry 42 of List II of the Government of India Act, 1935, upon the Provincial Legislatures is saved by article 372 of the Constitution as existing law, but by the combined operation of sub sections
(1) and (2) of section 33, the Bihar State is incompetent to tax sales of goods in the course of imports into and exports out of the territory of India, and after March 31, 1951, sales of goods in the course of inter State trade or commerce.
In view of the exposition of the content of the Explanation to article 286(1)(a) by this court in the United Motors case (1), the Bihar State is also incompetent to tax " Explanation sales " where the goods are delivered in another State as a direct result of the sale for consumption in that State.
By this last ban, to the extent provided by subs.
(1)(a)(i) and sub section
(2) of section 33, the State of Bihar is deprived of its power to tax sales; but the ban does not wholly extinguish the power of the State to tax sales relying upon a real territorial nexus between the sale and the State.
In other words, by enacting that a tax shall not be imposed under the Act when the sale takes place outside the State of Bihar in section 33(1)(a)(i), only the power to tax " Explanation sales " which do not take place within the State of Bihar in taken away, but not the power to tax " non Explanation sales " in which though under the general law of sale of goods the property passes outside the State, there exists between the taxing power of the State and the sale a nexus as contemplated by the definition of sale in section 2(g).
If the sale is one in which the goods have been delivered outside the State of (1) ; 294 Bihar, but not as a direct result of the sale or not for the purpose of consumption in the State of first delivery, the sale will not be covered by the Explanation, and the right to tax the sale, if arising otherwise under the Act relying upon the territorial nexus, will not be impaired by the prohibition imposed by cl.
(1)(a)(i) of section 33.
The right of the State of Bihar to tax a sale relying upon a real territorial nexus not being impaired by section 33 of the Act, all sales as defined by section 2(g) of the Bihar Sales Tax Act are liable to be taxed, except those falling within section 33(1)(a)(ii), section 33(2) and " Explanation sales " outside the State of Bihar.
The appellant company carries on the business of manufacturing copper and other mineral products in the State of Bihar.
It has its registered office and its place of business in the District of Singhbhum in the State of Bihar and is registered as a " dealer " under the Bihar Sales Tax Act, 1947.
The appellant company sent out its products to various places in India in the year of assessment ending on March 31, 1950 and has paid the tax assessed by the Sales Tax Officer.
The appellant is now seeking to obtain a refund of the tax paid for the period between January 26 and March 31, 1950, on the plea that the tax was paid under a misapprehension of the law.
The High Court in an application under article 226 of ' the Constitution directed the Sales Tax authorities to refund so much of the tax as was not proved to have been paid in respect of sales of goods delivered and consumed in the State of first destination.
On the goods delivered and consumed in the State of first destination outside Bihar, the appellant could not be called upon to pay sales tax.
That is undisputed.
The appellant also claimed that on the goods delivered for consumption in the State of first delivery outside Bihar, it was not liable to pay sales tax, even if there was no evidence to prove that the goods were in fact consumed in such State.
In our judgment, the High Court was in error in directing that the exemption provided by article 286(1)(a) read with the Explanation which was at the material time incorporated by section 33 in the Bihar Sales Tax Act by the Adaptation of 295 Laws Order, 1951, only applied to all sales of goods delivered and consumed in the State of first destination.
If the goods were delivered for consumption, it is immaterial whether they were in fact consumed in the State where they were delivered.
The power of the State to levy sales tax relying upon the territorial nexus between the taxing power of the State and the sale, is impaired for reasons already set out to the extent to which it is restricted by the incorporation of article 286(1)(a)(i) and the Explanation thereto, in that Act.
Therefore, sales effected on or after January 26, 1950, where goods are as a direct result of the sale delivered in another State for consumption in that other State, are not liable to be taxed.
The directions issued by the High Court will therefore be modified as follows: The order of the Superintendent of Taxes is set aside.
He is directed to grant refund of tax paid in the light of this judgment.
The appellant will be entitled to exemption from payment of tax if the goods are, as a direct result of the sale, delivered in another State for the purpose of consumption in that State.
Appeal dismissed subject to modification. | The appellant effected sales during the period 26 1 1950 to 31 3 1950, whereunder the property in the goods passed in the State of Bihar but delivery was effected outside Bihar for consumption outside Bihar.
In some of these sales the goods were delivered in the State of first destination for consumption therein whilst in other cases the goods were not for consumption in the State of first delivery of destination.
The appellant contended that both these categories of sale were exempt from tax under article 286(1)(a) as they were outside sales.
Held (per Hidayatullah, Das Gupta and Rajagopala Ayyangar, JJ.) that the sales where delivery in the State of first destination was for consumption therein, were outside the State of Bihar within the Explanation to article 286(1)(a) and Bihar could not tax them, but the sales where delivery in the State of first destination was not for consumption therein were not " Explanation Sales " and were not " outside " sales and Bihar could tax them.
Where the property in the goods passed within the State as a direct result of the sale the sale was not an " outside " sale for the purpose of article 286(1)(a) unless it fell within the Explanation.
In the first category of sales the appellant was entitled to the.
exemption and it was not necessary for it to prove that the goods delivered for consumption in the State of first destination were actually consumed therein.
The State of Bombay vs United Motors (India) Ltd., and Bengal Immunity Company Ltd. vs The State of Bihar, , referred to.
Burmah Shell Oil Storage & Distributing Co. of India Ltd. vs The Commercial Tax Officer, C. A. No. 751 of 57 and C. A. No. 10 of 1958 (Unreported), relied on.
Per section K. Das and Shah, Jj.
Section 33 introduced in the Bihar Sales Tax Act by the Adaptation of Laws Order, 1951, engrafted the same restrictions on the taxing power of the State on the pre Constitution statutes as were imposed by article 286 upon post Constitution statutes.
Section 33(1)(a)(1) of the Act took away only the power to tax " Explanation Sales " but not the power to tax " non Explanation Sales ".
A sale in which goods had been delivered outside Bihar, but not as a direct result of 277 the sale or not for the purpose of consumption in the State of first delivery was not covered by the Explanation, and the right to tax the sale, if it arose otherwise under the Act, was not impaired by section 33(1)(a)(i). |
Appeal No. 761 of 1957.
Appeal by special leave from the judgment and order dated February 24, 1955, of the former Bombay High Court in I.T.R. 48/X of 1954.
Hardayal Hardy and D. Gupta, for the appellant.
N. A. Palkhivala and I. N. Shroff, for the respondent.
November 17.
The Judgment of the Court was delivered by SHAH, J.
The Income Tax Appellate Tribunal, Bombay Bench "A", referred under section 66(1) of the Indian Income Tax Act, 1922 hereinafter referred to as the Act the following question: "Whether the sum of Rs. 15,608 should have been included in the assessee Company 's "profit" for the purpose of determining whether the payment of a larger dividend than that declared by it would be unreasonable ?" The High Court answered the question in the negative.
Against the order of the High Court, with special leave under article 136 of the Constitution, this appeal is preferred.
M/s. Bipinchandra Maganlal & Co., Ltd. hereinafter referred to as the Company is registered under the Indian Companies Act, The Company is one in 495 which the public are not substantially interested within the meaning of section 23A Explanation of the Act.
Its paid up capital at the material time was Rs. 20,800 made up as follows: 20 shares of Rs. 50 each fully paid up and 1980 shares of Rs. 50 each, Rs. 10 being paid up per share.
In December 1945, the Company purchased certain machinery for Rs. 89,000 and sold it sometime in March, 1947, for the price for which it was originally purchased.
In the books of account of the Company, the written down value of the machinery in the year of account 1946 47 (April 1, 1946 to March 31, 1947) was Rs. 73,392.
The trading profits of the Company as disclosed by its books of account for the year 194647 were Rs. 33,245.
At the General Meeting held on October 21, 1947.
the Company declared a dividend of Rs. 12,000 for the year of account.
In assessing tax for the year of assessment 1947 48, the Income Tax Officer computed the assessable income of the Company for the year of account 1946 47 at Rs. 48,761 after adding back to the profit of Rs. 33,245 returned by the Company, Rs. 15,608 realised in excess of the written down value of the machinery sold in March, 1947.
The Income Tax Officer passed an order under section 23A of the Act that Rs. 15,429 (being the undistributed portion of the assessable income of the Company as reduced by taxes payable) shall be deemed to have been distributed as dividend amongst the shareholders as at the date of the General Meeting, and the proportionate share of each shareholder shall be included in his total income.
Appeals preferred against his order to the Appellate Assistant Commissioner and the Income Tax Appellate Tribunal proved unsuccessful, but the Appellate Tribunal at the instance of the Company referred the question set out hereinbefore to the High Court at Bombay under a. 66(1) of the Act.
Section 23A(1) of the Act as it stood at the relevant time (in so far as it is material) was as follows: "Where the Income Tax Officer is satisfied that in respect of any previous year the profits and gains distributed as dividends by any company upto the end 496 of the sixth month after its accounts for that previous year are laid before the company in general meeting are less than 60% of the assessable income of the company of that previous year, as reduced by the amount of income tax and super tax payable by the company in respect thereof, he shall, unless he is satisfied that having regard to losses incurred by the company in earlier years or to the smallness of the profit made, the payment of a dividend or a larger dividend than that declared would be unreasonable, make with the previous approval of the Inspecting Assistant Commissioner an order in writing that the undistributed portion of the assessable income of the company of that previous year as computed for income tax purposes and reduced by the amount of income tax and super tax payable by the company in respect thereof shall be deemed to have been distributed as dividends amongst the share holders as at the date of the general meeting aforesaid. . .
Clearly, by section 23A, the Income Tax Officer is required to pass an order directing that the undistributed portion of the assessable income of any company (in which the public are not substantially interested) shall be deemed to have been distributed as dividends amongst the shareholders if he is satisfied that (i) the company has not distributed 60% of its assessable income of the previous year reduced by the Income tax and super tax payable, (ii) unless payment of a dividend, or a larger dividend than that declared, having regard to (a) losses incurred by the company in the earlier years or (b) the smallness of the profits made in the previous year, be unreasonable.
The total assessable income of the Company for the year of account was Rs. 48,761 and the tax payable thereon was Rs. 21,332: 60% of Rs. 27,249 (assessable income reduced by the income tax and super tax due) exceeded the dividend declared by Rs. 4,458.
The first condition to the exercise of jurisdiction by the Income Tax Officer under section 23A was therefore indisputably fulfilled.
But the Income Tax Officer had 497 still to be satisfied whether having regard to the smallness of the profit (there is no evidence in this case that loss was incurred by the Company in earlier years), it would be unreasonable to distribute dividend larger than the dividend actually declared.
The Income Tax Officer did not expressly consider this question: he rested his decision on the rejection of the contention raised by the Company that the difference between the price of the machinery realised by sale and the written down value in the year of account could not be taken into account in passing an order under section 23A.
He, it seems, assumed that if that difference be taken into account, distribution of larger dividend was not unreasonable, and the Tribunal proceeded upon the footing that the assumption was correctly made.
Counsel for the Revenue submits in support of the appeal that the expression " smallness of profit " means no more than smallness of the assessable income, and that in any event, in the computation of profits, the amount realised by sale of the machinery in the year of account in excess of its written down value was liable to be included in considering whether the condition relating to "smallness of profit" was fulfilled.
At the material time, section 2(6C) of the Act defined "income" as inclusive amongst others of any sum deemed to be profits under the second proviso to cl.
(vii) of sub section
(2) of section 10.
By section 10, in the computation of profits or gains of an assessee under the head "Profits and gains of business, profession or vocation" carried on by him, the amount by which the written down value of any building, machinery or plant which has been sold, discarded or demolished.
or destroyed exceeds the amount for which the building, machinery or plant is actually sold or its scrap value is to be allowed as a deduction.
This allowance is however subject to an exception prescribed by the second proviso to el.
(vii) sub section
(2) of section 10 that where the amount for which any building, machinery or plant is sold exceeds the written down value, so much of the 63 498 excess as does not exceed the difference between the original cost and the written down value shall be deemed to be profit of the previous year in which the sale took place.
In computing the profits and gains of the Company under section 10 of the Act, for the purpose of assessing the taxable income, the difference between the written down value of the machinery in the year of account and the price at which it was sold (the price not being in excess of the original cost) was to be deemed to be profit in the year of account, and being such profit, it was liable to be included in the assessable income in the year of assessment.
But this is the result of a fiction introduced by the Act.
What in truth is a capital return is by a fiction regarded for the purposes of the Act as income.
Because this difference between the price realized and the written.
down value is made chargeable to income tax, its character is not altered, and it is not converted into the assessee 's business profits.
It does not reach the assessee as his profits: it reaches him as part of the capital invested by him, the fiction created by section 10(2)(vii) second proviso notwithstanding.
The reason for introducing this fiction appears to be this.
Where in the previous years, by the depreciation allowance, the taxable income is reduced for those years and ultimately the asset fetches on sale an amount exceeding the written down value, i.e., the original cost less depreciation allowance, the Revenue is justified in taking back what it had allowed in recoupment against wear and tear, because in fact the depreciation did not result.
But the reason of the rule does not alter the real character of the receipt.
Again, it is the accumulated depreciation over a number of years which is regarded as income of the year in which the asset is sold.
The difference between the written down value of an asset and the price realized by sale thereof though not profit earned in the conduct of the business of the assessee is nationally regarded as profit in the year in which the asset is sold, for the purpose of taking back what had been allowed in the earlier years.
A company normally distributes dividends out of its business profits and not out of its assessable income.
499 There is no definable relation between the assessable income and the profits of a business concern in a commercial sense.
Computation of income for purposes of assessment of income tax is based on a variety of artificial rules and takes into account several fictional receipts, deductions and allowances.
In considering whether a larger distribution of dividend would be unreasonable, the source from which the dividend is to be distributed and not the assessable income has to be taken into account.
The Legislature has not provided in section 23A that in considering whether an order directing that the undistributed profits shall be deemed to be distributed, the smallness of the assessable income shall be taken into account.
The test whether it would be unreasonable to distribute a larger dividend has to be adjudged in the light of the profit of the year in question.
Even though the assessable income of a company may be large, the commercial profits may be so small that compelling distribution of the difference between the balance of the assessable income reduced by the taxes payable and the amount distributed as dividend would require the company to fall back either upon its reserves or upon its capital which in law it cannot do.
For instance, in the case of companies receiving income from property, even though tax is levied under section 9 of the Act on the bona fide annual value of the property, the actual receipts may be considerably less than the annual value and if the test of reasonableness is the extent of the assessable income and not the commercial profit, there may frequently arise cases in which companies may have to sell off their income producing assets.
The Legislature has deliberately used the expression "smallness of profit" and not "smallness of assessable income" and there is nothing in the context in which the expression "smallness of profit" occurs which justifies equation of the expression "profit" with "assessable income".
Smallness of the profit in section 23A has to be adjudged in the light of commercial principles and not in the light of total receipts, actual or fictional.
This view appears to have been taken by the High Courts in India without any dissentient 500 opinion, see Sir Kasturchand Ltd. vs Commissioner of Income Tax, Bombay City (1), Ezra Proprietary Estates Ltd. vs Commissioner of Income Tax, West Bengal (2) and Commissioner of income Tax, Bombay City vs F. L. Smith & Co., (Bombay) Ltd. (3).
By the fiction in section 10(2)(vii) second proviso, read with section 2(6C), what is really not income is, for the purpose of computation of assessable income, made taxable income: but on that account, it does not become commercial profit, and if it is not commercial profit, it is not liable to be taken into account in assessing whether in view of the smallness of profits a larger dividend would be unreasonable.
In our judgment, the High Court was right in holding that the amount of Rs. 15,608 was not liable to be taken into account in considering whether having regard to the smallness of the profit made by the Company, it would be unreasonable to declare a larger dividend.
The appeal therefore fails and is dismissed with costs.
Appeal dismissed.
(1) (1940) XVII I.T.R. 493.
(2) (1950) XVIII I.T.R. 762.
(3) (1959) XXXV I.T.R. 183. | The respondent company purchased certain machinery for Rs. 89,000 and sold it for the same value, but in the books of account the written down value of the machinery was shown in the year of account as Rs. 73,392.
The Income Tax Officer in computing the assessable income of the company added the difference, i.e. Rs. 15,608, between the actual value and the written down value to the profit of the company.
The Income Tax Officer also passed an order under section 23A of the Income Tax Act, and directed that the undistributed portion of the assessable income, shall be deemed to have been distributed amongst the shareholders as dividend.
Appeals against the order of the Income tax Officer proved unsuccessful and the Appellate Tribunal referred the following question to the High Court under section 66(1): "Whether the sum of Rs. 15,608 should have been included in the assessee company 's "profit" for the purpose of deter mining whether the payment of a larger dividend than that declared by it would be unreasonable.
" The High Court answered the question in the negative.
On appeal by special leave, Held, that the view taken by the High Court was correct.
494 By the fiction in section 10(2)(Vii) second proviso, read with s.2(6C), what is really not income is, for the purpose of computation of assessable income, made taxable income: but on that account, it does not become commercial profit, and if it is not commercial profit, it is not liable to be taken into account in assessing whether in view of the smallness of profits a larger dividend would be unreasonable.
"Smallness of profit" should not be equated with "smallness of assessable income" but should be determined in accordance with commercial principles.
Sir Kasturchand Ltd. vs Commissioner of Income tax, Bombay City, (1949) XVII I.T.R. 493, Ezra Proprietary Estates Ltd. vs Commissioner of Income tax, West Bengal, (1950) XVIII I.T.R. 762 and Commissioner of Income tax Bombay City vs F. L. Smith & Co. (Bombay) Ltd., (1959) XXXV I.T.R. 183, referred to. |
Appeal No. 761 of 1957.
Appeal by special leave from the judgment and order dated February 24, 1955, of the former Bombay High Court in I.T.R. 48/X of 1954.
Hardayal Hardy and D. Gupta, for the appellant.
N. A. Palkhivala and I. N. Shroff, for the respondent.
November 17.
The Judgment of the Court was delivered by SHAH, J.
The Income Tax Appellate Tribunal, Bombay Bench "A", referred under section 66(1) of the Indian Income Tax Act, 1922 hereinafter referred to as the Act the following question: "Whether the sum of Rs. 15,608 should have been included in the assessee Company 's "profit" for the purpose of determining whether the payment of a larger dividend than that declared by it would be unreasonable ?" The High Court answered the question in the negative.
Against the order of the High Court, with special leave under article 136 of the Constitution, this appeal is preferred.
M/s. Bipinchandra Maganlal & Co., Ltd. hereinafter referred to as the Company is registered under the Indian Companies Act, The Company is one in 495 which the public are not substantially interested within the meaning of section 23A Explanation of the Act.
Its paid up capital at the material time was Rs. 20,800 made up as follows: 20 shares of Rs. 50 each fully paid up and 1980 shares of Rs. 50 each, Rs. 10 being paid up per share.
In December 1945, the Company purchased certain machinery for Rs. 89,000 and sold it sometime in March, 1947, for the price for which it was originally purchased.
In the books of account of the Company, the written down value of the machinery in the year of account 1946 47 (April 1, 1946 to March 31, 1947) was Rs. 73,392.
The trading profits of the Company as disclosed by its books of account for the year 194647 were Rs. 33,245.
At the General Meeting held on October 21, 1947.
the Company declared a dividend of Rs. 12,000 for the year of account.
In assessing tax for the year of assessment 1947 48, the Income Tax Officer computed the assessable income of the Company for the year of account 1946 47 at Rs. 48,761 after adding back to the profit of Rs. 33,245 returned by the Company, Rs. 15,608 realised in excess of the written down value of the machinery sold in March, 1947.
The Income Tax Officer passed an order under section 23A of the Act that Rs. 15,429 (being the undistributed portion of the assessable income of the Company as reduced by taxes payable) shall be deemed to have been distributed as dividend amongst the shareholders as at the date of the General Meeting, and the proportionate share of each shareholder shall be included in his total income.
Appeals preferred against his order to the Appellate Assistant Commissioner and the Income Tax Appellate Tribunal proved unsuccessful, but the Appellate Tribunal at the instance of the Company referred the question set out hereinbefore to the High Court at Bombay under a. 66(1) of the Act.
Section 23A(1) of the Act as it stood at the relevant time (in so far as it is material) was as follows: "Where the Income Tax Officer is satisfied that in respect of any previous year the profits and gains distributed as dividends by any company upto the end 496 of the sixth month after its accounts for that previous year are laid before the company in general meeting are less than 60% of the assessable income of the company of that previous year, as reduced by the amount of income tax and super tax payable by the company in respect thereof, he shall, unless he is satisfied that having regard to losses incurred by the company in earlier years or to the smallness of the profit made, the payment of a dividend or a larger dividend than that declared would be unreasonable, make with the previous approval of the Inspecting Assistant Commissioner an order in writing that the undistributed portion of the assessable income of the company of that previous year as computed for income tax purposes and reduced by the amount of income tax and super tax payable by the company in respect thereof shall be deemed to have been distributed as dividends amongst the share holders as at the date of the general meeting aforesaid. . .
Clearly, by section 23A, the Income Tax Officer is required to pass an order directing that the undistributed portion of the assessable income of any company (in which the public are not substantially interested) shall be deemed to have been distributed as dividends amongst the shareholders if he is satisfied that (i) the company has not distributed 60% of its assessable income of the previous year reduced by the Income tax and super tax payable, (ii) unless payment of a dividend, or a larger dividend than that declared, having regard to (a) losses incurred by the company in the earlier years or (b) the smallness of the profits made in the previous year, be unreasonable.
The total assessable income of the Company for the year of account was Rs. 48,761 and the tax payable thereon was Rs. 21,332: 60% of Rs. 27,249 (assessable income reduced by the income tax and super tax due) exceeded the dividend declared by Rs. 4,458.
The first condition to the exercise of jurisdiction by the Income Tax Officer under section 23A was therefore indisputably fulfilled.
But the Income Tax Officer had 497 still to be satisfied whether having regard to the smallness of the profit (there is no evidence in this case that loss was incurred by the Company in earlier years), it would be unreasonable to distribute dividend larger than the dividend actually declared.
The Income Tax Officer did not expressly consider this question: he rested his decision on the rejection of the contention raised by the Company that the difference between the price of the machinery realised by sale and the written down value in the year of account could not be taken into account in passing an order under section 23A.
He, it seems, assumed that if that difference be taken into account, distribution of larger dividend was not unreasonable, and the Tribunal proceeded upon the footing that the assumption was correctly made.
Counsel for the Revenue submits in support of the appeal that the expression " smallness of profit " means no more than smallness of the assessable income, and that in any event, in the computation of profits, the amount realised by sale of the machinery in the year of account in excess of its written down value was liable to be included in considering whether the condition relating to "smallness of profit" was fulfilled.
At the material time, section 2(6C) of the Act defined "income" as inclusive amongst others of any sum deemed to be profits under the second proviso to cl.
(vii) of sub section
(2) of section 10.
By section 10, in the computation of profits or gains of an assessee under the head "Profits and gains of business, profession or vocation" carried on by him, the amount by which the written down value of any building, machinery or plant which has been sold, discarded or demolished.
or destroyed exceeds the amount for which the building, machinery or plant is actually sold or its scrap value is to be allowed as a deduction.
This allowance is however subject to an exception prescribed by the second proviso to el.
(vii) sub section
(2) of section 10 that where the amount for which any building, machinery or plant is sold exceeds the written down value, so much of the 63 498 excess as does not exceed the difference between the original cost and the written down value shall be deemed to be profit of the previous year in which the sale took place.
In computing the profits and gains of the Company under section 10 of the Act, for the purpose of assessing the taxable income, the difference between the written down value of the machinery in the year of account and the price at which it was sold (the price not being in excess of the original cost) was to be deemed to be profit in the year of account, and being such profit, it was liable to be included in the assessable income in the year of assessment.
But this is the result of a fiction introduced by the Act.
What in truth is a capital return is by a fiction regarded for the purposes of the Act as income.
Because this difference between the price realized and the written.
down value is made chargeable to income tax, its character is not altered, and it is not converted into the assessee 's business profits.
It does not reach the assessee as his profits: it reaches him as part of the capital invested by him, the fiction created by section 10(2)(vii) second proviso notwithstanding.
The reason for introducing this fiction appears to be this.
Where in the previous years, by the depreciation allowance, the taxable income is reduced for those years and ultimately the asset fetches on sale an amount exceeding the written down value, i.e., the original cost less depreciation allowance, the Revenue is justified in taking back what it had allowed in recoupment against wear and tear, because in fact the depreciation did not result.
But the reason of the rule does not alter the real character of the receipt.
Again, it is the accumulated depreciation over a number of years which is regarded as income of the year in which the asset is sold.
The difference between the written down value of an asset and the price realized by sale thereof though not profit earned in the conduct of the business of the assessee is nationally regarded as profit in the year in which the asset is sold, for the purpose of taking back what had been allowed in the earlier years.
A company normally distributes dividends out of its business profits and not out of its assessable income.
499 There is no definable relation between the assessable income and the profits of a business concern in a commercial sense.
Computation of income for purposes of assessment of income tax is based on a variety of artificial rules and takes into account several fictional receipts, deductions and allowances.
In considering whether a larger distribution of dividend would be unreasonable, the source from which the dividend is to be distributed and not the assessable income has to be taken into account.
The Legislature has not provided in section 23A that in considering whether an order directing that the undistributed profits shall be deemed to be distributed, the smallness of the assessable income shall be taken into account.
The test whether it would be unreasonable to distribute a larger dividend has to be adjudged in the light of the profit of the year in question.
Even though the assessable income of a company may be large, the commercial profits may be so small that compelling distribution of the difference between the balance of the assessable income reduced by the taxes payable and the amount distributed as dividend would require the company to fall back either upon its reserves or upon its capital which in law it cannot do.
For instance, in the case of companies receiving income from property, even though tax is levied under section 9 of the Act on the bona fide annual value of the property, the actual receipts may be considerably less than the annual value and if the test of reasonableness is the extent of the assessable income and not the commercial profit, there may frequently arise cases in which companies may have to sell off their income producing assets.
The Legislature has deliberately used the expression "smallness of profit" and not "smallness of assessable income" and there is nothing in the context in which the expression "smallness of profit" occurs which justifies equation of the expression "profit" with "assessable income".
Smallness of the profit in section 23A has to be adjudged in the light of commercial principles and not in the light of total receipts, actual or fictional.
This view appears to have been taken by the High Courts in India without any dissentient 500 opinion, see Sir Kasturchand Ltd. vs Commissioner of Income Tax, Bombay City (1), Ezra Proprietary Estates Ltd. vs Commissioner of Income Tax, West Bengal (2) and Commissioner of income Tax, Bombay City vs F. L. Smith & Co., (Bombay) Ltd. (3).
By the fiction in section 10(2)(vii) second proviso, read with section 2(6C), what is really not income is, for the purpose of computation of assessable income, made taxable income: but on that account, it does not become commercial profit, and if it is not commercial profit, it is not liable to be taken into account in assessing whether in view of the smallness of profits a larger dividend would be unreasonable.
In our judgment, the High Court was right in holding that the amount of Rs. 15,608 was not liable to be taken into account in considering whether having regard to the smallness of the profit made by the Company, it would be unreasonable to declare a larger dividend.
The appeal therefore fails and is dismissed with costs.
Appeal dismissed.
(1) (1940) XVII I.T.R. 493.
(2) (1950) XVIII I.T.R. 762.
(3) (1959) XXXV I.T.R. 183. | The respondent company purchased certain machinery for Rs. 89,000 and sold it for the same value, but in the books of account the written down value of the machinery was shown in the year of account as Rs. 73,392.
The Income Tax Officer in computing the assessable income of the company added the difference, i.e. Rs. 15,608, between the actual value and the written down value to the profit of the company.
The Income Tax Officer also passed an order under section 23A of the Income Tax Act, and directed that the undistributed portion of the assessable income, shall be deemed to have been distributed amongst the shareholders as dividend.
Appeals against the order of the Income tax Officer proved unsuccessful and the Appellate Tribunal referred the following question to the High Court under section 66(1): "Whether the sum of Rs. 15,608 should have been included in the assessee company 's "profit" for the purpose of deter mining whether the payment of a larger dividend than that declared by it would be unreasonable.
" The High Court answered the question in the negative.
On appeal by special leave, Held, that the view taken by the High Court was correct.
494 By the fiction in section 10(2)(Vii) second proviso, read with s.2(6C), what is really not income is, for the purpose of computation of assessable income, made taxable income: but on that account, it does not become commercial profit, and if it is not commercial profit, it is not liable to be taken into account in assessing whether in view of the smallness of profits a larger dividend would be unreasonable.
"Smallness of profit" should not be equated with "smallness of assessable income" but should be determined in accordance with commercial principles.
Sir Kasturchand Ltd. vs Commissioner of Income tax, Bombay City, (1949) XVII I.T.R. 493, Ezra Proprietary Estates Ltd. vs Commissioner of Income tax, West Bengal, (1950) XVIII I.T.R. 762 and Commissioner of Income tax Bombay City vs F. L. Smith & Co. (Bombay) Ltd., (1959) XXXV I.T.R. 183, referred to. |
s 1, 7, 8, 10, 53 and 76 of 1963.
Petitions under Art 32 of the Constitution of India for the enforcement of Fundamental Rights.
R.V. section Mani and K. R. Shama, for the petitioner (in W.P. Nos. 1 and 76 of 1963).
R. V. section Mani and T. R. Y. Sastri, for the petitioner (in W.P. Nos. 7, 8, 10 and 53).
A.V. Ranganadham Chetty and A. Y. Rangam, for the respondent (in the petitions).
I.N. Shroff, for the interveners Nos. 1 and 5 (in all the petitions).
M. C. Setalvad, N. section Bindra and R. H. Dhebar, for inter vener No. 2 (in W.P. No. 1 of 1.963).
C. P. Lal, for intervener No. 3 (in W.P. No. 1 of 1963).
R. H. Dhebar, for intervener No. 4 (in W.P. No. 1 of 1963).
section V. Gupte, Additional Solicitor General, N. section Bindra and R. H. Dhebar, for intervener No. 6 (in W.P. No. 1 of 1963).
83 March 9, 1964.
The Judgment of the Court was delivered by WANCHOO, J.
These six petitions under article 32 of Constitution raise a common question about the constitution ality of the Madras Land Reforms (Fixation of Ceiling on Land Act, No. 58 of 1961 (hereinafter referred to as the Act), which was assented to by the President on April 13, 1962 and came into force on publication in the Fort St. George Gazette on May 2, 1962.
The constitutionality of the Act is attacked on the ground that it violates articles 14, 19 and 31(2) of the Constitution.
It is not necessary to set out in full the attack made on the constitutionality of the Act in these petitions.
It will be enough if we indicate the two main attacks on the constitutionality of the Act under article 14.
The first of these is with respect to section 5 of the Act which lays down the ceiling area.
The second is on section 50 of the Act read with Sch.
III thereof, which provides for compensation.
It is urged that the Act is not protected under article 31 A of the Constitution and is therefore open to attack in case it violates article 14, 19 or 31.
The petitioners in this connection rely on the judgment of this Court in Karimbil Kunhikoman vs State of Kerala(1).
Before we consider the two main attacks on the constitu tionality of the Act we may briefly indicate the scheme of the Act.
Chapter 1 is preliminary, Section 3 thereof provides for various definitions, some of which we shall refer to later.
Chapter 11 deals with fixation of ceiling on land holdings.
Section 5 thereof fixes the ceiling area.
The other sections provide for determining surplus land, and s.18 provides for the acquisition of surplus land which vests in the Government free from all encumbrances.
Chapter III provides for ceiling on future acquisition and restriction on certain transfers.
Chapter IV provides for the constitution and functions of the land board.
Chapter V provides for the constitution and functions of the sugar factory board.
Chapter VI provides for compensation.
Section 50 thereof read with Sch.
III lays down the mode for determining compensation for the land acquired by the Government and other ancillary matters.
Chapter VII provides for survey and settlement of lands in the transferred territory which came to the State of Madras by virtue of the States Reorganisation Act of 1956.
Chapter VIII provides for cultivating tenants ' ceiling area.
Chapter IX provides for exemption of certain lands from the application of the Act.
Chapter X provides for land tribunals and Chapter XI for appeals and revision.
Chapter XII provides for certain penalties and procedure while Chapter XIII provides for disposal of land acquired by the Government under the Act.
Chapter XIV deals with miscellaneous provisions, including s.110, which provides for the framing of rules (1) [1962] Suppl.
1 S.C.R. 829.
84 The main purpose of the Act is to provide for a ceiling on land holdings, for determining surplus land which would be acquired by Government and for payment of compensation therefor.
The Act is applicable to agricultural land as defined in section 3(22) and is mainly concerned with persons holding lands in ryotwari settlement or in any other way subject to payment of revenue direct to the Government.
It is not in dispute that the Act is not protected under article 31 A of the Constitution and it is in this background that we shall consider the attack based on article 14 on the two main provisions of the Act relating to ceiling area under section 5 and compensation under section 50 read with Sch.
III of the Act.
It is first necessary to read certain definitions in s 3.
Section 3(14) defines family as follows "family" in relation to a person means the person, the wife or husband, as the case may be, of such person and his or her (i) minor sons and unmarried daughters; and (ii) Minor grandsons and unmarried grand daughters in the male line, whose father and mother are dead.
" It is unnecessary to refer to the explanation of section 3(14), for present purposes.
Section 3 (34) is in these terms: person ' includes any trust, company, family, firm, society or association of individuals, whether incorporated or not.
" Section 3 (45) is as follows: " 'surplus land ' means the land held by a person in excess of the ceiling area and declared to be surplus land under sections 12, 13 or 14.
" Section 5 is in these terms: "5.
(1) (a) Subject to the provisions of Chapter VIII, the ceiling area in the case of every person and, subject to the provisions of sub sections (4) and (5) and of Chapter VIII, the ceiling area in the case of every family consisting of not more than five members, shall be 30 standard acres (b) The ceiling area in the case of every family consisting of more than five members shall, subject to the provisions of sub sections (4) and (5) and of Chapter VIII, be 30 standard acres together with an additional 5 standard acres for every member of the family in excess of five.
(2) For the purposes of this section, all the lands held individually by the members of a family or jointly by some or all of the members of such family shall be deemed to be held by the family.
85 (3) (a) In calculating the extent of land held by a member of a family or by an individual person, the share of the member of the family or of the individual person in the land held by an undivided Hindu family, a Marumakkattayam tarwad, an Aliyasanthana family or a Nambudiri Illom shall be taken into account.
(b) In calculating the extent of land held by a family or by an individual person, the share of the family or of the individual person in the land held by a firm, society or association of individuals (whether incorporated or not) or by a company (other than a non agricultural company) shall be taken into account.
Explanation For the purposes of this section (a) the share of a member of a family or of an individual person in the land held by an undivided Hindu family, a Marumakkattayam tarwad, an Aliyasanathana family or a Nambudiri Illom, and (b) the share of a family or of an individual person in the land held by a firm, society or association of individuals (whether incorporated or not), or by a company (other than a non agricultural company), shall be deemed to be the extent of land (i) which, in case such share is held on the date of the commencement of this Act, would have been allotted to such member, person or family had such land been partitioned or divided, as the case may be, on such date; or (ii) which, in case such share is acquired in any manner whatsoever after the date of the commencement of this Act, would be allotted to such member, person or family if a partition or division were to take place on the date of the preparation of the draft statement under sub section (1) of section 10. "(4). . . " It is unnecessary to consider the rest of section 5 for present purposes.
The attack on section 5 (1) is that it is hit by article 14 inasmuch as it denies equality before the law or equal protection of law to persons similarly situate, and reliance is placed in this connection on the decision of this Court in Karimbil Kunhikoman(1).
In that case this Court was considering the Kerala Agrarian Relations Act, 1961 (hereinafter referred to as the 86 [1962] Suppl.
1 S.C.R. 829.
Kerala Act).
The argument is that as in the Kerala Act, so in the present Act, the word "family" has been given an artificial definition which does not conform to any kind of natural families prevalent in the State, namely, Hindu undivided family, Marumakkattayam family, Aliyasanathana family or Nambudiri Illom, and that a double standard has been fixed in section 5(1) in the matter of providing ceiling.
It is therefore urged that the ratio of that decision fully applies to the present Act.
Therefore, section 5(1) should be struck down as violative of article 14 in the same manner as section 58 of the Kerala Act was struck down.
We are of opinion that this contention is correct and the ratio of that case applies with full force to the present case.
It was observed in that case that "where the ceiling is fixed . . by a double standard and over and above that the family has been given an artificial definition which does not correspond with a natural family as known to personal law, there is bound to be discrimination resulting from such a provision".
In the present case also "family" has been given an artificial definition as will immediately be clear on reading.
3(14), which we have set out above.
It is true that this definition of "family" in section 3(14) is not exactly the same as in the Kerala Act.
Even so there can be no doubt that the definition of the word "family" in the present case is equally artificial.
Further in the Kerala Act section 58 fixed a double standard for the purpose of ceiling; in the present case section 5(1)(a) fixes a double standard though there is this distinction that in section 5(1) the same ceiling is fixed in the case of a person as in the case of a family consisting of not more than five members, namely, 30 standard acres while in the Kerala Act, the ceiling fixed for a family of not more than five was double that for an adult unmarried person.
But that in our opinion makes no difference in substance.
The provision of section 5(1) results in discrimination between persons equally circumstanced and is thus violate of article 14 of the Constitution.
This will be clear from a simple example of an undivided Hindu family, which we may give.
Take the case of a joint Hindu family consisting of a father, two major sons and two minor sons, and assume that the mother is dead.
Assume further that this natural family has 300 standard acres of land.
Clearly according to the personal law, if there is a division in the family, the father and each of the four sons will get 60 standard acres per head.
Now apply section 5(1) to this family.
The two major sons being not members of the family because of the artificial definition given to "family" in section 3(14) of the Act will be entitled to 30 standard acres each as individuals and the rest of their holdings i.e. 30 standard acres in the case of each will be Surplus land.
But the father and the two minor sons being an artificial family as defined in section 3(14) will be entitled to 30 87 standard acres between them and will thus lose 150 standard acres, which will become surplus land.
This shows, clearly how this double standard in the matter of ceiling read with the artificial definition of "family" will result in complete discrimination between these five members of a natural family.
Under the Hindu law each member would be entitled to onefifth share in the 300 standard acres belonging to the family.
Under the Act however the two major sons will keep 30 standard acres each while the father and the two minor sons together will keep 30 standard acres which work out to 10 standard acres each.
The two major sons will thus lose 30 standard acres each while the father and the two minor sons will lose fifty standard acres each.
No justification has been shown on behalf of the State for such discriminatory treatment resulting in the case of members of a joint Hindu family; nor ;.ire we able to understand why this discrimination which clearly results from the application of section 5 (1) of the Act is not violative of article 14 of the Constitution.
Examples can be multiplied with reference to joint Hindu families which would show that discrimination will result on the application of this provision.
Similarly we are of opinion that discrimination will result in the case of Marumakkattayam family, Aliyasanthana family and a Nambudiri Illom, particularly in the case of the former two where the husband and wife do not belong to the same family.
We are clearly of opinion that as in the case of section 58 of the Kerala Act so in the case of section 5 (1) of the Act discrimination is writ large on the consequences that follow from section 5(1).
We therefore hold that section 5(1) is violative of the fundamental right enshrined in article 14 of the Constitution.
As the section is the basis of Chapter 11 of the Act, the whole Chapter must fall along with it.
Next we come to the provisions as to compensation contained in section 50 read with Sch.
III of the Act.
Here again we are of opinion that the decision of this Court in Karimbil Kunhikoman 's(1) case fully applies to the scheme of compensation provided in the Act which is as discriminatory as was the scheme in the Kerala Act.
Learned counsel for the respondent however contends that Sch., III does not provide for any cut in the purchase price as was the case in the Kerala Act, and therefore the provisions in the Act are not discriminatory.
If we look at the substance of the matter, however, we find that there is really no difference between the provisions for compensation in the Kerala Act and the provisions in respect thereof in the Act, though the provisions in the Act are differently worded.
What was done in the Kerala Act was to arrive at the figure of compensation on certain principles, and a cut was then imposed on the figure thus arrived at and this cut pro gressively increased by slabs of Rs. 15,000.
In the present [1962] Suppl.
1 S.C.R. 829.
88 case , a converse method has been adopted and the provision is that first the net annual income is arrived at and thereafter compensation is provided for slabs of Rs. 5,000 each of net income.
For the first slab of Rs. 5,000, the compensation is 12 times the net annual income, for the second slab of Rs. 5,000 it is II times, for the third slab of Rs. 5,000 it is ten times and thereafter it is nine times.
Let us now work out this slab system.
Take four cases where the net annual income is respectively Rs. 5,000, Rs.10,000, Rs. 15,000 and Rs. 20,000.
The firstperson whose net annual income is Rs. 5,000 will get Rs.60,000 as compensation, the second person whose net annualincome is Rs. 10,000 will et Rs. 1,15,000, the third personwith a net annual income of Rs. 15,000 will get Rs. 165,000 and the person with a net annual income of Rs. 20,000 will et Rs. 2,10,000.
If the same multiplier had been applied as in the case of the first slab of Rs. 5,000 to the other three slabs also, these persons would have got compensation of Rs. 1,20,000, Rs. 1,80,000 and Rs. 2,40,000.
This will show that in effect there is a cut of about 4 per cent on the total compensation which corresponds to the purchase price in the Kerala Act in the case of a person with a net annual income of Rs. 10,000, of about 8 per cent in the case of a person with a net annual income of Rs. 15,000 and about 12 per cent in the case of a person with a net annual income of Rs. 20,000.
Though the manner of arriving at the total com pensation is ostensibly different from that provided in the Kerala Act, its effect is the same, namely, as the total net income goes up after the first slab of Rs. 5,000 there is a progressive cut in the total compensation just as was the case in the Kerala Act.
The argument that the cut is justified on the same basis as higher rates of income tax on higher slabs of income has already been rejected by this Court in Karimbil Kunhikoman 's case(1).
Therefore, for the reasons given in that case, we are of opinion that the provisions contained in section 50 read with Sch.
III of the Act with respect to compensation are discriminatory and violate article 14 of the Constitution.
Sections 5 and 50 are the pivotal provisions of the Act, and if they fall, then we are of opinion that the whole Act must be struck down as unconstitutional.
The working of the entire Act depends on section 5 which provides for ceiling and section 50 which provides for compensation.
If these sections are unconstitutional, as we hold they are, the whole Act must fall.
We therefore allow the petitions and strike down the Act as unconstitutional.
The petitioners will get their costs from the State of Madras one set of hearing fee.
Petitions allowed.
(1) [1962] Suppl.
1 S.C.R. 829. | The constitutionality of the Madras Land Reforms (Fixation of Ceiling on Land) Act, 1961 was attacked on the ground that it violated articles 14, 19, 31(2) of the Constitution.
Held (i) The provisions of section 5(1) of the Act result in discrimination between persons equally circumstanced and are thus violative of article 14 of the Constitution.
As this section is the basis of Chapter II of the Act, the whole chapter must fall along with it.
The ratio of Karimbil Kunhikoman vs State of Kerala [1962] Supp. 1 S.C.R. 829 applies with full force to the present case.
(ii)The provisions in section 50 read with Sch.
III of the Act with respect to compensation are discriminatory and violate article 14 of the Constitution.
Karimbil Kunhikoman vs State of Kerala [1962] Supp.
S.C.R. 829, followed.
(iii)Ss.
5 and 50 are the pivotal pro visions of the Act, and as they fall, the whole Act must be struck down as unconstitutional. |
Appeal No. 543 of 1962.
Appeal from the judgement and order dated November 26, 1959 of the Punjab High Court in Civil Writ No. 678 1957.
Bishan Narain and N. N. Keswani, for the appellant.
B. K. Khanna and B. R. G. K. Achar, for respondent Nos. 1 to 3.
D. N. Mukherjee, for respondent No. 4.
R. V. section Mani and T. R. V. Sastri, for respondent No. 5.
March 12, 1964.
The Judgment of the Court was delivered by AYYANGAR, J.
This is an appeal on a certificate of fitness granted under article 133 by the High Court of Punjab against the order of that Court dismissing the appellant 's petition to it under article 226 of the Constitution.
The point in controversy lies within a narrow compass and hence of the voluminous facts we propose to set out only those which are relevant for appreciating the contentions urged before us.
The father of the appellant owned con siderable agricultural property in Pakistan and he with the members of his family moved over to India on partition.
The appellant 's father was allotted a considerable extent of land in village Kharar, District Ambala, but we are not concerned with that.
He had still some unsatisfied claim for allotment and on December 29, 1955 he was allotted by the Managing Officer on quasi permanent tenure Khasra Nos. 880, 881 and 882 which were within the municipal area of Kharar with the regularity of which allotment alone this appeal is concerned.
It may be mentioned that the appellant 's father had died in 1952 and the allotment made was actually to the appellant in lieu of the claim of his father.
On the allotment being made, a sanad was issued to the appellant on December 31, 1955 by the Managing Officer.
When the appellant tried to take possession of these lands, disputes were raised by respondent& L/P (D) ISCI 7 . . 194 Nos. 4 and 5.
They were not displaced persons but they claimed that they had been in possession of this property from a long anterior date from which they could not be disturbed and also that the property could not be the subject of a valid allotment.
These respondents moved the Assistant Settlement Commissioner for cancellation of the allotment and this appeal was allowed by the officer who found that the land comprised in these three khasra numbers were within an " urban area" within the meaning of r. 2(h) of the Displaced Persons Compensation and Rehabilitation Rules, 1955 and consequently that the allotment to the appellant was contrary to law.
He, therefore, cancelled the allotment.
The appellant thereafter applied to the Chief Settlement Commissioner in revision and not being successful there moved the High Court by a, petition under articles 226 and 227 of the Constitution.
As stated earlier, this petition was dismissed and it is the correctness of this dismissal that is challenged in the appeal before us.
Mr. Bishan Narain, learned Counsel for the appellant urged in the main two contentions in support of the appeal.
The first was (1) that after the Managing Officer granted a sanad on December 31, 1955 in the name of the President of India, the appellant obtained an indefeasible title to the property and that this title could not be displaced except on grounds contained in the sanad itself even in the event of the order of allotment being set aside on appeal or revision.
We have considered this point in Shri Mithoo Shahani and Ors.
vs The Union of India and Ors.(1) which was pronounced on March 10, 1964 and for the reasons there stated this submission has to be rejected.
The second point that he urged was, and this was in fact the main contention raised before the High Court, that rule 2(h) of the Displaced Persons Compensation and Rehabilitation Rules, 1955 was unconstitutional as contravening article 14 of the Constitution and so the original allotment to the appellant must be held to be lawful.
We consider that there is no substance in this argument.
In fact, we are unable to appreciate the ground on which the contention is being urged.
Section 40 of the enables the Central Government by Notification in the Official Gazette to make rules to carry out the purposes of the Act, and in particular on an elaborately enumerated list of matters.
It was not suggested that the rules of 1955 were not competently made under section 40.
These rules were published on May 21, 1955 when they came into force.
Rule 2(h) the validity of which is impugned in these proceedings is a rule containing the definitions.
Rule 2(h) reads, to extract what is material: (1) ; 195 "2.
In these rules, unless the context otherwise requires (a) to (g). . . . . . (h) 'Urban area ' means any area within the limits of a corporation, a municipal committee, a notified area committee, a town area committee, a small town committee, a cantonment or any other area notified as such by the Central Government from time to time; Provided that in the case of the quasi perma nent allotment of rural agricultural lands already made in the States of Punjab and Patiala and East Punjab States Union, the limits of an urban area shall be as they existed on the 15th August, 1947.
" The words 'of rural agricultural lands ' occurring in the proviso to this rule were replaced by an amending Notifica tion of 1957 by the words 'in rural area ', but this amendment is obviously of no significance.
"Rural area" is defined by rule 2(f) to mean 'any area which is not an urban area '.
Pausing here, it would be useful to state two matters which are not in dispute: (1) that the allotment to the appellant was made on December 29, 1955, the sanad being issued two days later.
It was therefore an allotment which was made after May 21, 1955 when the rules came into force; (2) the other matter is that Khasra Nos. 880, 881 and 882 were included in urban limits on February 10, 1951 by the municipal area of Kharar being extended to cover these plots.
It would, therefore, be obvious that on the date when the allotment was made, the allotted land was in an "urban area" and therefore it could not have been validly allotted.
We must confess our inability to comprehend what precisely was the discrimination which the rule enacted which rendered it unconstitutional as violative of article 14.
So far as we could understand the submission, the unreasonable discri mination was said to exist because of the operation of the proviso.
Under the proviso in regard to quasipermanent allotments 'already made, i.e. made before May 21, 1955 in the States of Punjab and PEPSU, the test of what was to be considered an "urban area" was to be determined on the basis of the state of circumstances which obtained on 15th August, 1947.
The allotment in favour of the appellant was after the rules came into force and was not one "already made".
Therefore if on the date of the allotment the land was in an urban area, the allotment would be governed by the main para of the definition and so could not have been validly made and that was the reason why it was set L, P(D) 1 SCI , (a). 196 aside.
The discrimination is said to consist in the rule having drawn a dividing line at the date when it came into force, or determining whether the allotment was valid or not.
It is the discrimination that is said to be involved in this prospective operation of the rule that we find it difficult to appreciate.
It is possible that before the rules were framed the land now in dispute could have been allotted, but because of this it is not possible to suggest that the rule altering the law in this respect which ex concessis is within the rule making power under the Act, is invalid.
Such a contention is patently self contradictory.
Every law must have a beginning or time from which it operates, and no rule which seeks to change the law can be held invalid for the mere reason that it effects an alteration An the law.
It is sometimes possible to plead injustice it ', a rule which is made to operate with retrospective effect, but to say that a rule which operates prospectively is invalid because thereby a difference is made between the past and the future, is one which we are unable to follow.
There are no merits in this appeal which fails and is dis missed with costs.
Appeal dismissed. | The father of the appellant owned considerable agricultural property in Pakistan and he with the members of his family moved over to India on partition.
The appellant 's father had some unsatisfied claim for allotment and on December 29.
1955 he was allotted some plots in Urban area within a certain municipality.
The appellant 's father died in 1952 and the allotment made was actually to the appellant in lieu of the claim of his father.
On the allotment being made, a sanad was issued to the appellant by the Managing Officer.
When the appellant tried to take possession of these lands, disputes were raised by respondents Nos. 4 and 5.
These respondents moved the Assistant Settlement Commissioner for cancellation of the allotment on the ground that these disputed plots were within an "urban area" within the meaning of r. 2(h) of the Displaced Persons, Compensation and Rehabilitation Rules, 1955 and, therefore, the allotment to the appellant was contrary to law.
The Assistant Settlement Commissioner accepted the contention of the res pondents and allowed the appeal and cancelled the allotment.
The appellant then applied to the Chief Settlement Com missioner in revision.
He rejected the petition.
Then the appellant moved a petition under articles 226 and 227 of the Constitution before the High Court.
This petition was also dismissed.
the High Court granted certificate of fitness under article 133 of the Constitution and hence the appeal.
Held:(i) Where an order making an allotment was set aside by the Assistant Commissioner or Settlement Commissioner the title which was obtained on the basis of the continuance of that sanad or order also fell with it.
Shri Mithoo Shahani vs Union of India, ; , relied on.
(ii)The contention of the appellant that r. 2(h) of the Displaced Persons Compensation and Rehabilitation Rules, 1955, was unconstitutional as contravening article 14 of the Constitution must fail.
This contention is based on the basis of the proviso to Rule 2(h).
Rule 2(h) was framed under section 40 of the Act.
This rule along with other rules came into force on May 21, 1955.
The allotment was made to the appellant on December 29, 1955 and the Sanad was issued two days later.
In other words the allotment in favour of the appellant was after the rule came into force and was not one "already made" as stated in the proviso to r. 2(h).
Therefore, if on the date of the allotment the land was in an urban area, the allotment would be governed by the main para of the definition and the proviso, had no application.
193 The discrimination is said to consist in the rule having drawn a dividing line at the date when it came into force, for determining whether the allotment was valid or not.
Such a contention is patently self contradictory.
Every law must have a beginning or time from which it operates, and no rule which seeks to change the law can be held invalid for the mere reason that it effects an alternation in the law.
It is sometimes possible to plead injustice in a rule which is made to operate with retrospective effect, but to say that a rule which operates prospectively is invalid because thereby a difference is made between the past and the future, is one which cannot be accepted. |
Appeal No. 780 of 1962.
Appeal by special leave from the judgment and decree dated November 28, 1960, of the Patna High Court, in Miscellaneous Judicial Case No. 724 of 1958.
K. N. Rajagopal Sastri and R. N. Sachthey, for the appel lant.
section K. Kapur and B. N. Kirpal, for the respondent.
March 13, 1964.
The judgment of HIDAYATULLAH and SHAH, JJ. was delivered by HIDAYATULLAH J. SARKAR J. delivered a dissenting opinion.
SARKAR, J.
This matter has come before us on a case stated by the Income tax Appellate Tribunal.
The question is how to determine the cost of acquisition of bonus shares for ascertaining the profits made on a sale of them.
The assessment year concerned is 1949 50 for which the accounting year is the calendar year 1948.
The assessee held shares by way of investment and also as stock in trade of his business as a share dealer.
We are concerned in this case only with its holdings of ordinary shares in Rohtas Industries Ltd. In 1944 the assessee acquired 31,909 of these shares at a cost of Rs. 5,84,283 / and was holding them in January 1945.
In that month the Rohtas Industries Ltd. distributed bonus shares at the rate of one ordinary bonus share for each original share and so the assessee got 31,909 bonus shares.
Between that time and December 31, 1947, the assessee sold 14,650 of the original shares with the result that on January 1, 1948 it held the following shares: (a) 17,259 original shares acquired in 1944, (b) 31,909 bonus shares issued in January 1945, (c) 59,079 newly issued shares acquired in the year 1945 after the issue of the bonus shares and (d) 2,500 further shares acquired in 1947.
The total holding of the assessee on January 1, 1948 thus came to 1,10,747 shares which in its books had been valued at Rs. 15,57,902/ .
In arriving at this figure the assessee had valued the bonus shares at the face value of Rs. 10/ each and the other shares at actual cost.
On January 29, 1948, the assessee sold all these shares for the total sum of Rs. 15,50,458 / , that is, at Rs. 14/ per share and in its return for the year 1949 50 claimed a loss of Rs. 7,444 on the sale.
It is this return which has led to this appeal.
213 The Income tax officer held that the assessee was not en titled to charge as the cost of acquisition of the bonus shares a sum equivalent to their face value for nothing had in fact been paid and he computed their cost at Rs. 6 8 0 per share.
He arrived at this price by the following method, which has been called as the method averaging: 584283 x Face value of bonus shares: 319090 x 1/31909.
In adopting this procedure the Income tax Officer purported to follow the decision of the Bombay High Court in Commissioner of Income tax vs Maneklal Chunilal and Sons Ltd.(1).
The Bombay High Court later followed this case in Emerald and Co. Ltd. vs Commissioner of Income tax, Bombay City, Bombay (2).
On that basis he held that the assessee had made a profit of Rs. 2,39,317 by way of capital gains and levied tax on it accordingly.
On appeal the Appellate Assistant Commissioner held that these shares were not investment shares but formed the assessee 's stock in trade on which it was liable to pay income tax and not capital gains tax.
He also held that the assessee having adopted the method of valuing the stocks at cost and no price having actually been paid for the bonus shares, it must be held that there was an inflation in the opening stock by Rs. 3,19,090.
This figure, it may be observed, represented the cost of the bonus shares at their face value.
It% his opinion the bonus shares had to be valued at nit.
The appellate Commissioner 's conclusion was that the assessee was liable to be taxed on a trading profit of Rs. 3,11.646/ in respect of the sale of shares.
Thise view was confirmed on a further appeal to the Appellate Tribunal.
It is however not clear whether the Tribunal held that there had been a trading profit or capital gains.
This matter does not seem to have been raised at any stage after the Appellate Commissioner 's order and is not material to the real question that has to be decided.
After the Tribunal 's judgment the assessee got an order from the High Court directing the Tribunal to refer the following question to it: "Whether on the facts and circumstances of the case the profit computed at Rs. 3,11,646/ on the sale of shares in Rohtas Industries Ltd. was in accordance with law?" The answer to this question admittedly depends on the cost of acquisition, if any, to be properly attributed to the bonus shares.
If the Appellate Commissioner 's method of valuing (1) (I.T. Ref.
No. 16 of 1948, unreported).
(2) 214 them at nil was wrong, the question had to be answered in the negative.
The High Court, following the judgment of Lord Sumner in Swan Brewery Company Limited vs The King(1), held that the real cost of the bonus shares to the assessee was the face value of the shares and answered the question in the negative.
The observations of Lord Sumner which he later expressed more fully in Commissioner of Inland Revenue vs Blott(2) , no doubt, lend support to the High Court 's view.
I shall consider the view expressed by Lord Sumner later.
Now, I wish to notice another case on which the High Court also relied and that was Osborne (H.M. Inspector of Taxes) vs Steel Barrel Co. Ltd(3).
I do not think that the observations of Lord Greene M. R. in this case to which the High Court referred, are of any assistance.
All that was there said was that when fully paid shares were properly issued for a consideration other than cash, the consideration must be at the least equal in value to the par value of the shares and must be based on an honest estimate by the directors of the value of the assets acquired.
In that case fully paid shares had been issued in lieu of stocks and the question was as to how the stocks were to be valued.
That case had nothing to do with the issue of bonus shares or the ascertainment of the cost of their acquisition.
As I have said earlier, Lord Sumner 's observation in Blott 's case (2) certainly supports the view taken by the High Court but in that case Lord Sumner was in a minority.
The other learned Judges, excepting Lord Dunedin, who took a somewhat different view to which reference is not necessary because it has not been relied upon, held that when the articles of a company authorise the issue of bonus shares and the transfer of a sufficient amount out of the accumulated profits in its hands representing their face value to the share capital account, what happens when the articles are acted upon is a capitalisation of the profits and the bonus shares issued are not in the hands of the share holder income liable to tax.
In Blott 's case (2) the articles gave the power which had been acted upon.
Lord Sumner on the other hand held that since a company could not issue shares for nothing nor pay for them out of its profits, it must be held that what happened in such a case was as if the company had issued cash dividend to the shareholder and had set it off against the liability of the shareholder to pay for the bonus share issued to him.
I think the preferable view is that taken by the majority of the Judges.
When the articles permit the issue of bonus shares and the transfer of undivided profits direct to the share capital account, it cannot be said that a cash dividend must be (1) (3) 215 deemed to have been declared which could be set off against the liability to pay for the shares.
This is not what was done in fact.
What in fact was done, and legally done, was to transfer the profits to the share capital account by a resolution passed by the majority of the shareholders so that the shareholders never acquired any right to any part of it.
The view taken by the majority has since been followed unanimously, and even if it was open to doubt, for myself, at this distance of time, I would not be prepared to depart from it: Commissioners of Inland Revenue vs Fisher 's Executors(1) and Commissioner of Income tax, Bengal vs Mercantile Bank of India Limited(2).
It is of some significance to observe that the latter is a case from India.
In the present case the record does not contain any refer ence to the resolutions resulting in the issue of the bonus shares nor to the provisions of the articles but the case has proceeded before us on the basis that the bonus shares had been legally issued under powers contained in the articles and the profits had been equally legally transferred to the share capital account without the shareholders having acquired any right in them.
Following the majority opinion in Blott 's case(3) I think I must hold that the High Court was in error in the view it took in the present case.
There is no foundation for proceeding on the basis as if the bonus shares had been acquired by the assessee at their face value.
Its profits cannot be computed on that basis.
Two other methods of ascertaining the cost of acquisition of the bonus shares for computing the profits made on their sale have been suggested.
One of them is the method of averaging which is the method adopted by the Bombay High Court in the cases earlier mentioned.
The other is the method of finding out the fall in the price of the original shares on the issue of the bonus shares and attributing to the latter shares that fall and to value them thereby.
The object of these methods seems to me to find out what the bonus shares actually cost the assessee.
But this would be an impossible task for they actually cost the assessee nothing; it never paid anything for them.
There would be more reason for saying that it paid the face value of the bonus shares because the profits of the Company of a, similar amount which might otherwise have come to it had been directly appropriated to the share capital account on the issue of the bonus shares.
But this method I have rejected already and, for the reason that no amount was actually paid for the bonus shares by the assessee.
For the same reasons the two suggested methods for ascertaining the actual (1) ; 2) (1936) A.C. 478.
(3 ) 216 cost of these shares have also to be rejected.
If however it were to be said that these methods were for finding out the market value of the bonus shares the importance of which value for the present purpose will soon be seen I would say that the only way to find out the market value is from the market itself.
How then is the cost of the bonus shares to be determined? We start with this that nothing in fact was paid for them.
But if the cost of acquisition is nil, the whole of the sale proceeds of the shares would be taxable profits.
In Commis sioner of Income tax vs Bai Shirinbai K. Kooka(1) this Court has approved of the Bombay High Court 's view that "obvious ly, the whole of the sale proceeds or receipts could not be treated as profits and made liable to tax, for that would make no sense" (P. 397).
So the profits cannot be ascertained on the basis that the bonus shares had been acquired for nothing.
The view taken by the Appellate Commissioner and the Tribunal cannot be supported.
It seems to me that the cost price of the bonus shares has to be decided according to the principle laid down in Bai Shirinbai Kooka 's case(1).
The assessee in that case had purchased shares many years ago by way of investment at a comparatively lower price.
She started trading with them from April 1, 1945.
The question was how the profits on the sale of these shares were to be ascertained.
The sale price was known but what was the cost price? The High Court said that in order to arrive at real profits one must consider the accounts of the business on commercial principles and construe profits in their normal and natural sense, a sense which no commercial man would misunderstand.
The High Court 's conclusion was this: When the assessee purchased the shares at a lesser price, that is what they cost her and not the business; but so far as the business was concerned, the shares cost the business nothing more or less than their market value on April 1, 1945.
This date, it will be remembered, was the date when the business was started.
These observations were fully approved by this Court.
Bai Shirinbai Kooka 's case(1) therefore is authority for the proposition that where it cannot be shown what was paid for the acquisition of a trading asset by a trader, it has for tax purposes to be deemed to have been acquired at the market value of the date when it was acquired.
I think on the authority of this case, the bonus shares must in the present case be deemed to have been acquired at the market value of the date ,of their issue.
I would, therefore, answer the question framed in the negative.
(1) [1962] Supp. 3 S.C.R. 391. 217 HIDAYATULLAH, J.
This appeal by the Commissioner of Income tax, Bombay raises the important question how bonus shares must be valued by an assessee who carries on business in shares.
The assessee here is Dalmia Investment Co. Ltd. (now Shri Rishab Investment Co. Ltd.) which is a public limited company and the bonus shares were issued in the calendar year 1945 by Rohtas Industries Ltd. in the propor tion of one bonus share for one ordinary share already held by the shareholders.
In this way, the assessee company received 31,909 bonus shares of the face value of Rs. 10/ per share which shows that its previous holding was 31,909 ordinary shares.
The existing ordinary shares were purchased by the assessee company for Rs. 5,85,283/ .
We now come to the assessment year 1949 50 which corresponded to the accounting period of the assessee company the calendar year 1948.
The assessee company was holding shares as investment and was also dealing in shares.
The shares in the trading account, being the stock in trade, were valued at the beginning of the year and also at the end of the year and the book value was based on cost.
Between December 31, 1945 and January 1, 1948, the assessee company sold some shares of Rohtas Industries Ltd. and bought others.
Its holding on the first day of January 1948 was 1,10,747 shares which were valued in its books at Rs. 15,57,902/ .
The assessee company sold these shares on January 29, 1948 to Dalmia Cement and Paper Marketing Company Limited for Rs. 15,50,458/ .
This date, it may be pointed cut, fell within the period in which capital gains were taxable.
The assessee company returned a loss of Rs. 7,444/on this sale.
In its books it had valued these shares as follows: Existing shares Book value (1) 17,259 (out of 31,909 original 13,10,951 Proportionate shares).
cost from Rs. 5,84,283.
(2) 31,909 Bonus shares 3,19,090. 00 at face value of Rs. 10 per share (3) 59,079 Now Issue shares 8,88,561 00at cost.
(4) 2,500 New purchase shares 39,300 00at cost.
Total 1,10,747 shares 15,57,902. 00 The amount of Rs. 3,19,090/ which represented the cost of the bonus shares in the above account was debited to the investment account and an identical amount was credited to a capital reserve account.
, The loss which was returned was the difference between Rs. 15,57,902/ claimed to be the cost price of 1, 10,747 shares and their sale price of Rs. 15,50,458/.
The return was not accepted by the Income tax Officer, Special Investigation Circle, Patna.
In his assessment order, the Income tax Officer held that the market value of the existing 218 shares when bonus shares were issued, was Rs. 18/ per share and the value of the shares was Rs. 5.74,362/ (31,909 x Rs. 18).
He held that the sale of the shares took place at Rs. 14/ per share.
To this data he purported to apply a deci sion of the High Court of Bombay in Commissioner of Income tax vs Maneklal Chunnilal and Sons(1) and held that there was profit of Rs. 7/8/0 per bonus share and the, total profit was Rs. 2,39,317/ which he held was capital gain.
He brought Rs. 2,39,317/ to tax as capital gains.
Before the Appellate Assistant Commissioner, Patna.
reliance was placed upon the decision of the Bombay High Court in Emerald and Co. Ltd. vs Commissioner of Incometax, Bombay City(2) and it was argued that by applying the principle laid down in that case, the average cost was Rs. 9/10/0 per share and total profit Rs. 1,49,355/ .
The Appellate Assistant Commissioner did not accept the above calculation.
According to the Appellate Assistant Commissioner, the bonus shares had cost nothing to the assessee company.
He omitted Rs. 3,19,090/ from the book valuation and held that the actual cost of 1,10,747 shares was Rs. 12,38,812/and that the assessee company instead of suffering a loss of Rs. 7,444/ on the sale of the shares had actually made profit of Rs. 3,11,646/ .
He issued a notice to the assessee company and enhanced the assessment.
On further appeal to the Tribunal, the assessee company submitted again on the strength of the ruling of the Bombay High Court in Emerald and Co. Ltd. vs Commissioner of Income tax, Bombay City(2) that the actual profit was Rs. 1,57,326/ .
This was done by spreading the cost of the 31,909 ordinary shares over those shares and bonus shares taken together and adding to half the cost attributable to the old ordinary shares the cost of new purchases in the same year and finding out the average cost of shares other than bonus shares.
The Tribunal did not accept this calculation.
According to the Tribunal it was not possible to put a valuation upon shares for which nothing was paid.
The Tribunal held that the old shares and bonus shares could not be "clubbed together" and the decision of the Appellate Assistant Commissioner was right.
The Tribunal, however, stated a case under section 66(1) of the Income tax Act at the instance of the assessee company suggesting the question for the opinion of the High Court: "Whether on the facts and circumstances of the case, the profit computed at Rs. 3,11,646/ on the sale of shares in Rohtas Industries Ltd. was in accordance with law?" (1) Income tax Reference No. 16 of 1948 dt.
23 3 1949.
(2) 219 The reference was heard by V. Ramaswamy, C.J. and Kanhaiya Singh, J. They held that the Income tax authorities were wrong in holding that profit should be computed at Rs. 3,11,646/ or at any other amount.
According to them, there was no profit on the sale of 31,909 shares and they answered the question in favour of the assessee.
Before the High Court it was contended by the assessee company that the bonus shares must be valued at their face value of Rs. 10/ per share and the Department contended that they should be valued at nil.
It appears that the other methods of calculation of the cost price of bonus shares were abandoned at that stage.
Ramaswami, C.J. and Kanhaiya Singh, J. held that the issue of bonus shares was nothing but a capitalisation of the company 's reserve account or the profits and the bonus shares could not be considered to be issued free.
According to them, the payment for the shares must be found in the bonus which was declared from the undistributed profits and the face value of the bonus shares represented the detriment to the assessee company in respect of the undistributed reserves.
The present appeal was brought against the decision of the High Court by special leave granted by this Court.
It will be seen from the above that there are four possible methods for determining the cost of bonus shares.
The first method is to take the cost as the equivalent of the face value of the bonus shares.
This method was followed by the assessee company in making entries in its books.
The second method adopted by the Department is that as the shareholder pays nothing in cash for the shares, cost should be taken at nil.
The third method is to take the cast of the original shares and to spread it over the original shares and bonus shares taken collectively.
The fourth method is to find out the fall in the price of the original shares on the stock exchange and to attribute this to the bonus shares.
Before us the assessee company presented for our acceptance the first method and the Department the third method.
We shall now consider which is the proper way to value the bonus shares.
It is convenient to begin with the contention that the cost of bonus shares must be taken to be their face value.
The argument requires close attention, because support for it is sought in certain pronouncements of Lord Sumner to which reference will be made presently.
Mr. Kapur contends that a company cannot ordinarily issue shares at a discount, and argues that a fortiori it cannot issue shares for nothing.
He submits therefore that the issue of bonus shares involves a twofold operation the creation of new shares and the declaration of a dividend or bonus which dividend or bonus must be deemed to be paid to the shareholder and to be returned by him to acquire the new shares.
Since the amount credited in 220 the books of the company as contribution of capital by the shareholder is the face value of the bonus shares, he contends that the cost to the shareholder is equal to the face value of the bonus shares.
He relies upon the decision of the Privy Council in Swan Brewery Company Ltd. vs Rex(1).
In that case, Lord Sumner observed: "True, that in a sense it was all one transaction, but that is an ambiguous expression.
In business, as in contemplation of law, there were two transactions, the creation and issue of new shares on the company 's part, and on the allottees ' part the satisfaction of the liability to pay for them by acquiescing in such a transfer from reserve to share capital as put an end to any participation in the sum of pound 101,450 in right of the old shares, and created instead a right of general participation in the company 's profits and assets in right on the new shares, without any further liability to make a cash contribution in respect of them." Lord Sumner adhered to his view later in the House of Lords in Commissioner of Inland Revenue vs John Blott(2) but Lord Dunedin and he were in a minority, and this view was not accepted by the majority.
In view of this conflict, it is necessary to state what really happens when a company issues bonus shares.
A limited liability company must state in its memorandum of association the amount of capital with which the company desires to do business and the number of shares into which that capital is to be divided.
The company need not issue all its capital at the same time.
It may issue only a part of its capital initially and issue more of the unissued capital on a later date.
After the company does business and profits result, it may distribute the profits or keep them in reserve.
When it does the latter, it does not keep the money in its coffers , the money is used in the business and really represents an increase in the capital employed.
When the reserves increase to a considerable extent, the issued capital of the company ceases to bear a true relation to the capital employed.
The company may then decide to increase its issued capital and declare a bonus and issue to the shareholders in lieu of bonus, certificates entitling them to an additional share in the increased capital.
As a matter of accounting the original shares in a winding up before the increase of issued capital would have yielded to the shareholder the same return as the old shares and the new shares taken together.
What was previously owned by the shareholder by virtue of the original certificates is after the issue of bonus (1) (2) 8 Tax Cases 101.
221 shares, held by them on the basis of more certificates.
In point of fact, however, what the shareholder gets is not cash but property from which income in the shape of money may be derived in future.
In this sense, there is no payment to him but an increase of issued capital and the right of the shareholder to it is evidenced not by the original number of certificates held by him but by more certificates.
There is thus no payment of dividend.
A dividend in the strict sense means a share in the profits and a share in the profits can only be said to be paid to the shareholder when a part of the profits is released to him in cash and the company pays that amount and the shareholder takes it away.
The conversion of the reserves into capital does not involve the release of the profits to the shareholder , the money remains where it was, that is to say, employed in the business.
Thereafter the company employs that money not as reserves of profits, but as its proper capital issued to and contributed by the shareholders.
If the shareholder were to sell his bonus shares, as shareholders often do, the shareholder parts with the right to participation in the capital of the company, and the cash he receives is not dividend but the price of that right.
The bonus share when sold may fetch more or may fetch less than the face value and this shows that the certificate is not a voucher to receive the amount mentioned on its face.
To regard the certificate as cash or as representing cash paid by the shareholder is to overlook the internal process by which that certificate comes into being.
We may now see what was decided in the Swan Brewery 's(1) case.
In that case the company had not distributed all its profits in the past.
As a result, it had a vast reserve fund.
The company increased its capital and from the reserve fund, issued shares pro rata.
These shares, it was held by Lord Sumner, were dividend.
It was claimed in that case that there was no dividend and no distribution of dividend, because nothing had been distributed and nothing given.
Where formerly there was one share, after the declaration of bonus there were two but the right of participation was the same.
This argument was not accepted and the face value of the shares was taken to be dividend.
Section 2 of the Act of Western Australia, however, defined dividend to include "every profit, advantage or gain intended to be paid or credited to or distributed among the members of any company.
" It is obvious that it was im possible to hold that the bonus shares were outside the extended definition.
Swan Brewery 's(1) case has been accepted as rightly decided on the special terms of the section, as indeed it was.
In Blott 's(2) case, Rowlatt, J. observed that the bonus shares were included in the expression "advantage" occurring in the (1) (2) 8 Tax Cases 101.
222 highly artificial definition of the word "dividend".
In the Court of Appeal, Lord Sterndale, M. R. and Warrington and ' Scrutton, L. JJ. distinguished the case on the same ground.
It was, however, pointed out by the Master of Rolls that in Bouch vs Sproule(1) Lord Herschell had observed that in such a case, the company does not pay or intend to pay any sum as dividend but intends to and does appropriate the undivided profits and deals with them as an increase of the capital stock in the concern.
Blott 'S(2) case then reached the House of Lords.
It may be pointed out at this stage that it involved a question whether super tax was payable on the amount represented by the face value of the bonus share.
For purposes of assessment of supertax which was (as it is in our country) a tax charged in respect of income of an individual the total of all income from all sources had to be taken into account and the tax was exigible if the total increased a certain sum.
Such additional duty is really nothing but additional income tax and is conveniently described as super tax.
Viscounts Haldane, Finlay and Cave held that an amount equal to the face value of the shares could not be regarded as received by the tax payer and that there was no more than the capitalisation of the profits of the company in respect of which certificates were issued to the shareholders entitling them to participate in the amount of the reserve but only as part of the capital.
Lords Dunedin and Sumner, however, held that the word "capitalisation" was somewhat "hazy" and the issue of the shares involved a dual operation by which an amount was released to the shareholder but was retained by the company and applied in payment of those shares.
In our opinion, and we say it respectfully, the better view is that of the majority and our conclusions set out earlier accord substantially with it.
It follows that though profits are profits in the hands of the company but when they are disposed of by converting them into capital instead of paying them over to the share holders, no income can be said to accrue to the shareholder because the new shares confer a title to a larger proportion of the surplus assets at a general distribution.
The floating capital used in the company which formerly consisted of subscribed capital and the reserves now becomes the subscribed capital.
The amount said to be payable to the shareholders as income goes merely to increase the capital of the company and in the hands of the shareholders the certificates are property from which income will be derived.
Lord Dunedin did not rely upon Swan Brewery 's(3) case.
He held that as the company could not pay for another, the shareholder must be taken to have paid for the bonus shares himself and the payment was (2 ) 8 Tax Cases 101.
(3) 223 the amount which came from the accumulated profits as pro fits.
Lord Sumner, however, stated that in Swan Brewery 's(1) case, he did not rely upon the extended definition of dividend in the Australian Statute, but upon the principle involved.
He observed that as a matter of machinery, what was done was to keep back the money released to the shareholder for application towards payment for the increased capital.
Lord Sumner had already adhered to his view in an earlier case of the Privy Council, but Swan Brewery 's(1) case and Blott 's(2) case were considered by the Privy Council in Com missioner of Income tax, Bengal vs Mercantile Bank of India Ltd. and others(3).
Lord Thankerton distinguished Swan Bre wery 's(1) case and followed Blott 's(2) case, though in Nicholas vs Commissioner of Taxes of the State of Victoria(4), Blott 's (2) ,case was distinguished on the ground that the definition in the Unemployment Relief Tax (Assessment) Act, 1933 also included within a person 's assessable income "any dividend, interest, profit or bonus credited, paid or distributed to him by the company from any profit derived in or from Victoria or elsewhere by it", and that bonus shares must be regarded as dividend under that definition.
The Indian Income tax Act defines "dividend" and also extends it in some directions but not so as to make the issue of bonus shares a release of reserves as profits so that they could be included in the term.
The face value of the shares cannot therefore be taken to be dividend by reason of anything in the definition.
The share certificate which is issued as bonus entitles the holder to a share in the assets of the company and to participate in future profits.
As pointed out above, if sold, it may fetch either more or less.
The market price is affected by many imponderables, one such being the yield or the expected yield.
The detriment to the shareholder, if any, must therefore be calculated on some principle, but the method of computing the cost of bonus shares at their face value does not accord either with fact or business accountancy.
Can we then say that the bonus shares are a gift and are acquired for nothing? At first sight, it looks as if they are so but the impact of the issue of bonus shares has to be seen to realise that there is an immediate detriment to the shareholder 'in respect of his original holding.
The Income tax Officer, in this case, has shown that in 1945 when the price of shares became stable it was Rs. 9 per share, while the value of the shares before the issue of bonus shares was Rs. 18/ per share.
In other words, by the issue of bonus shares pro rata, which Tanked pari passu with the existing shares, the market price was exactly halved, and divided between the old and the bonus shares.
This will ordinarily be the case but not when the shares (1)(1914) A.C. 231.
(3)(1936) A.C. 478.
(2) 8 Tax Cases 101.
(4) 224 do not rank pari passu and we shall deal with that case separately.
When the shares rank pari passu the result may be stated by saying that what the shareholder held as a whole rupee coin is held by him, after the issue of bonus shares, in two 50 nP coins.
The total value remains the same, but the evidence of that value is not in one certificate but in two.
This was expressed forcefully by the Supreme Court of United States of America, quoting from an earlier case, in Eisner vs Macomber(1) thus: "A stock dividend really takes nothing from the property of the corporation, and adds nothing to the interests of the shareholders.
Its property is not diminished, and their interests are not increased.
The proportional interest of each shareholder remains the same.
The only change is in the evidence which represents that interest, the new shares and the original shares together representing the same proportional interest that the original shares represented before the issue of the new ones In short, the corporation is no poorer and the stock holder is no richer than they were before If the plaintiff gained any small advantage by the change, it certainly was not an advantage of $417,450 the sum upon which he was taxed What has happened is that the plaintiff 's old certificates have been split up in effect and have diminished in value to the extent of the value of the new.
necessarily disposes of a part of his capital interest, just as if he should sell a part of his old stock, either before or after the dividend.
What he retains no longer entitles him to the same proportion of future dividends as before the sale.
His part in the control of the company likewise is diminished.
" Swan Brewery 's (2) case, it may be pointed out, was distinguished here also on the basis of the extended definition.
it follows that the bonus shares cannot be said to have cost nothing to the shareholder because on the issue of the bonus shares, there is an instant loss to him in the value of his original holding.
The earning capacity of the capital employed remains the same, even after the reserve is converted into bonus shares.
By the issue of the bonus shares there is a corresponding fall in the dividends actual or expected and the market price moves accordingly.
The method of calculation which places the value of bonus shares at nil cannot be correct.
(1) L.Ed. 521.
(2)(1914) A.C. 231.
225 This leaves for consideration the other two methods.
Here we may point out that the new shares may rank pari passu with old shares or may be different.
The method of cost .accounting may have to be different in each case but in essence and principle there is no difference.
One possible method is to ascertain the exact fall in the market price of the shares already held and attribute that fall to the price of the bonus shares.
This market price must be the middle price and not as represented by any unusual fluctuation.
The other method is to take the amount spent by the shareholder in acquiring his original shares and to spread it over the old and new shares treating the new as accretions to the old and to treat the cost price of the original shares as the cost price of the old shares and bonus shares taken together.
This method is suggested by the Department in this case.
Since the bonus shares in this case rank pari passu with the old shares there is no difficulty in spreading the original cost over the old and the new shares and the contention of the Department in this case is right.
But this is not the end of the present discussion.
This simple method may present difficulties when the shares do not rank pari passu or are of a different kind.
In such cases, it may be necessary to compare the resultant price of the two kinds of shares in the market to arrive at a proper cost valuation.
In other words, if the shares do not rank pari passu, assistance may have to be taken of other evidence to fix the cost price of the bonus shares.
It may then be necessary to examine the result as reflected in the market to determine the equitable cost.
In England paragraph 10 of Schedule Tax to the Finance Act, 1962 provides for such matters and for valuing Rights issue but we are not concerned with these matters and need not express an opinion.
It remains to refer to three cases to which we have already referred in passing and on which some reliance was placed.
In The Commissioner of Income tax (Central), Bombay vs M/s Maneklal Chunnilal and Sons Ltd., Bombay(1), the assessee held certain ordinary shares of the face value of Rs. 100/ in Ambica Mills Ltd. and Arvind Mills Ltd. These two com panies then declared a bonus and issued preference shares in the proportion of two to one of the face value of Rs. 100/ each.
These preference shares were sold by the assessee and if the face value was taken as the cost, there was a small profit.
The Department contended that the entire sale proceeds were liable to be taxed, because the assessee had paid nothing for the bonus shares and everything received by it was profit.
The assessee 's view was that the cost was equal to the face value of the shares.
The High Court rejected both these contentions and held that the cost of the shares previously held must be divided between those shares and the bonus shares in the same (1)I.T. Ref.
No. 16 of 1948 d. 23rd March 1949.
226 proportion as their face value, and the profit or loss should then be found out by comparing the cost price calculated on this basis with the sale price.
In our opinion, there is difficulty in the High Court 's decision.
The preference shares and the ordinary shares could hardly be valued in the proportion of their face value.
The ordinary shares and the preference shares do not rank pari passu.
The next case is Emerald Co. Ltd. vs C.I.T., Bombay City(1).
In that case, the assessee had, at the beginning of the year, 350 shares of which 50 shares were bonus shares and all were of the face value of Rs. 250/ each.
The assessee sold 300 shares and claimed a loss of Rs. 35,801 / by valuing the bonus shares at face value.
The Department arrived at a loss of Rs. 27,766/ by the method of averaging the cost, following the earlier case of the Bombay High Court just referred to.
The Tribunal suggested a third method.
It ignored the 50 shares and the loss was calculated by considering the cost of 300 shares and their sale price.
The loss worked out at Rs. 27,748/ , but the Tribunal did not disturb the order of the Appellate Assistant Commissioner in view of the small difference.
The High Court held that the method adopted by the Department was proper but this Court, on appeal, held that in that case the method adopted by the Tribunal was correct.
This Court did not decide which of the four methods was the proper one to apply, leaving that question open.
The reason was that the assessee originally held 50 shares in 1950; in 1951, it received 50 bonus shares.
It sold its original holding three days later and then purchased another 100 shares after two months.
In the financial year 1950 51 (assessment year 1951 52), the Income tax Officer averaged the price of 150 shares and found a profit of Rs. 1,060/ on the sale of 50 shares instead of a loss of Rs. 1,365/ which was claimed.
The assessee did not appeal.
In the financial year 1951 52 (assessment year 1952 53), the assessee started with 150 shares (100 purchased and 50 bonus).
It then purchased 200 shares in two lots and sold 300 shares, leaving 50 shares.
The assessee company claimed a loss of Rs. 35,801 / .
The Income tax Officer computed the loss at Rs. 27,766/ and the Tribunal computed the loss at Rs. 27,748 The Tribunal, however, did not disturb the loss as computed by the Income tax Officer in view of the slender difference of Rs. 18/ .
The High Court 's decision was reversed by this Court, because the High Court ignored all intermediate transactions and averaged the 300 shares with the 50 bonus shares.
The shares in respect of which the bonus shares were issued were already averaged with the bonus shares.
This was not a case of bonus shares issued in the year of account.
It involved purchase and sale of some of the shares.
The average cost price of the original and bonus shares was (1)(1956) 227 already fixed in an earlier year by the Department and this fact should have been taken into account.
No doubt, Chagla, C.J. observed that it was not known which of the several :shares were sold in the year of account, but in the Statement of the Case it was clearly stated that bonus shares were untouched.
The decision of this Court in Emerald Company 's(1) case.
however, lends support to the view which we have expressed here.
The bonus shares can be valued by spreading the cost of the old shares over the old shares and the new issue taken together, if the shares rank pari passu.
When they do not, the price may have to be adjusted either in the proportion of the face value they bear (if there is no other circumstance differentiating them) or on equitable considerations based on the ,market price before and after the issue.
Applying the principles to the present case, the cost of 31,909 shares, namely, Rs. 5,84,283/ must be spread over those shares and the 31,909 bonus shares taken together.
The ,cost price of the bonus shares therefore was Rs. 2,92,141 /because the bonus shares were to rank equal to the original ,shares.
The account would thus stand as follows: Share in Rohtas Industries Ltd. Rs. 1 .
Old issue of 17,259 shares brought forward from 1945, at (proportionate) cost 1,58, 035 2.
Bonus shares 31,909 received in 1945, at (proportionate, spread out) cost 2,92,141 3.
New issue 59,079 shares brought forward from 1945 8,88,561 4.
New purchases 2,500 shares brought forward from 1947 39,300 Total 1,10,747 shares 13,78,037 Sales of all theabove shares in 1948 15,50,458 Profit 7,444 Profit to be added to the income returned 1,79,865 The answer to the question given by the High Court was therefore erroneous and the right answer would be that the profit computed at Rs. 3,11,646/ was not in accordance with law.
The appeal is therefore allowed with costs here and in the High Court.
Appeal allowed. | The assessee company dealt in shares and also held invest ments of shares on January 1, 1948.
The assessee held 1,10,747, shares of Rohtas Industries at a book value of Rs. 15,57,902/ .
Of these shares 31,909 were bonus shares issued by Rohtas Industries in 1945 at the face value of Rs. lo/, each and the assessee had debited the investment account in respect of the bonus shares by Rs. 3,19,090 with a corresponding entry in the capital reserve account on its credit side for the same amount.
The assessee acquired these bonus shares at a cost of Rs. 5,84,283 in 1944.
On January 29, 1948, the assessee sold the entire lot of 1,10,747 shares for Rs. 15,50,458.
The assessee deducted the sale price from the book value of Rs. 15,57,902 and claimed a loss of Rs. 7,444 on the sale of shares.
The appellate Tribunal valued the bonus shares at nil and held that the assessee had made a profit of Rs. 3,11,646/ .
On a reference the High Court held that the Tribunal was wrong in holding that the assessee had made a profit of Rs. 3,11,646/ .
Held (per Hidayatullah and Shah, JJ.): (i) The Income tax Act defines "dividend" and also extends it in some directions but not so as to make the issue of bonus shares a release of reserves as profits so that they could be included in the term.
The face value of the shares cannot therefore be taken to be dividend by reason of anything in the definition.
The shares certificate which is issued as bonus entitles the holder to a share in the assets of the company and to participate in future profits.
The bonus share when sold may fetch more or may fetch less than the face value, and this shows that the certificate is not a voucher to receive the amount mentioned on its face.
The market price is affected by many imponderables, one such being the yield or the expected yield.
The detriment to the share holder, if any, must therefore be calculated on some principle, but the method of computing the cost of bonus shares at their face value does not accord either with fact or business accountancy.
Swan Brewery Co. Ltd. vs Rex , disapproved.
Commissioner of Inland Revenue vs John Blott, 8 Tax Cases 101, approved.
Bouch V. Sproule, , referred to.
Commissioner of Income tax, Bengal vs Mercantile Bank of India Ltd., and Nicholas vs Commissioner of Taxes of the State of Victoria, , referred to.
(ii) The bonus shares cannot be said to have cost nothing to the share holder because on the issue of its bonus shares, there is an instant loss to him in the value of his original holding.
The earning capacity of the capital employed remains the same, even after the reserve is converted into bonus shares.
By the issue of the bonus shares there is a corresponding fall in the dividends 211 actual or expected and the market price moves accordingly.
The method of calculation which places the value of bonus shares, at nil cannot be correct.
(iii) The bonus shares can be valued by spreading the cost of the old shares over the old shares, and the new issue taken together, if the shares rank pari passu.
When they do not, the price may have to be adjusted either in the proportion of the face value they bear (if there is no other circumstances differentiating them) or on equitable considerations based on the market price before and after the issue taking the middle price not that represented by any unusual fluctuations.
On the facts of this case it was held that since the bonus shares in this case rank pari passu with the old shares there is no difficulty in spreading the original cost over the old and the new shares.
Commissioner of Income tax vs Maneklal Chunilal and Sons, Income tax Reference No. 16/1948, dt. 23 3 1949, disapproved.
Emerald and Co. Ltd. vs Commissioner of Income tax, Bombay City, , distinguished.
Eisner vs Macomber, L.Ed. 521, referred to.
Per Sarkar, J. (dissenting): (i) The view taken by the majo rity of Judges in Blott 's case is a correct one.
In that case the learned Judges held that when the articles of a company authorise the issue of bonus shares and the transfer of a sufficient amount out of the accumulated profits in its hands representing their face value to the share capital account, what happens when the articles are acted upon is a capitalisation of the profits and the bonus shares issued are not in the hands of the share holder income liable to tax.
Following the majority opinion in Blott 's case it was held that the High Court was in error in the view it took in the present case.
There is no foundation for proceeding on the basis as if the bonus shares had been acquired by the assessee at their face value.
Its profits cannot be computed on that basis.
Commissioner of Inland Revenue vs Blott (1921)2 A.C. 171, relied on.
Swan Brewery Co. Ltd. vs King , disapproved.
Osborne (H.M. Inspector of Taxes) vs Steel Barrel Co. Ltd., , inapplicable.
Commissioner of Inland Revenue vs Fisher 's Executors, ; and Commissioner of Income tax, Bengal vs Mer cantile Bank of India Ltd., , referred to.
Commissioner of Income tax vs Maneklal Chunilal and Sons Ltd., I.T. Ref.
No. 16 of 1948 and Emerald and Co. Ltd. vs Commissioner of 1ncome tax, Bombay City, , referred to.
(ii) Bai Shirinbai Kooka 's case is the authority for the proposition that where it cannot be shown what was paid for the acquisition of a trading asset by a trader, it has for tax purposes to be deemed to have been acquired at the market value of the date when it was acquired.
On the basis of this authority the Bonus shares must in the present case be deemed to have been acquired at the market value of the date of their issue.
(iii) On the basis of the same authority, it would not be correct to say that the bonus shares had been acquired for nothing.
212 The view taken by the Appellate Commissioner and the Tribunal cannot be supported.
Commissioner of Income tax vs Bai Shirinbai K. Kooka, [1962] Supp.
3 S.C.R. 391, relied on. |
ON: Civil Appeal Nos.
1938 39 of 1987.
From the Order dated 1.10.1985 of the Customs Excise and Gold (Control) Appellate Tribunal, New Delhi in Appeal Nos.
ED (SR) T. 1415/82 Al and 1533/84 A. 357 M.K. Banerjee, Solicitor General, A.K. Ganguli and P. Parmeshwaran for the Appellant.
A.T.M. Sampath for the Respondents.
The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J.
These are appeals under section 35L(b) of the (hereinafter called 'the Act ').
The respondents T.I. Millers Ltd. and T.I. Diamond Chain manufacture cycle lamps and automative chains.
Both these goods are assessable under Item 68 of the Central Excise Tariff.
The said respondents filed price lists for the sale of the goods through their distributors, namely, M/s. T.I. and M Sales Ltd., M/s. Charmvel Agencies and M/s. Ambadi Enterprises Pvt.
Ltd. quoting their price to the distributor as assessable value.
However, subsequently following the decision of the Madras High Court in a valuation case, the respondents required that the price charged by them from buyers at the factory gate should be accepted as the assessable value and not the price to the distributors.
The question is whether the price charged by the respondents from buyers at the factory gate should be accepted as the assessable value for the levy of duty under section 3 of the Act.
The Assistant Collector found from the sales pattern of the respondents that the distributors were 'related persons ' as per section 4 of the Act and the price at which the distributors sold the goods should, therefore, be the assessable value.
The respondents went up in appeal before the Appellate Collector.
The Appellate Collector held that in order to establish mutuality of business interests, direct and indirect between manufacturer and buyer, it should be shown that they have been promoting the business of each other in their own interest and that in the absence of such a finding in the Assistant Collector 's order, these could not be held to be related persons.
Section 4 of the Act provides that where the duty of excise is chargeable on any excisable goods with reference to value, such value should be determined on the basis of the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale.
We are not concerned for the purpose of these appeals with the provisos nor with sub section (2) or sub section (3) of section 4 of the Act.
Sub section 4(c) of section 4 defines 'related person ' to mean a person who is so 358 associated with the assessee that they have interest, direct or indirect, in the business of each other and includes a holding company, a subsidiary company, a relative and a distributor of the assessee, and any sub distributor of such distributor.
The explanation provides that 'holding company ', 'subsidiary company ' and 'relative ' have the same meanings as in the .
The words "related person" have been considered by this Court in Union of India and others vs Atic Industries Limited, ; Bhagwati, J., as the learned Chief Justice then was, speaking for the Court held that the first part of the definition of "related person" in clause (c) of sub section (4) of section 4 defines "related person" to mean "a person who is so associated with the assessee that they have interest directly or indirectly in the business of each other".
It is not enough, the Court observed, that the assessee has an interest, direct or indirect in the business of the person alleged to be a related person has an innough, that the person alleged to be a related person has an interest, direct or indirect in the business of the assessee.
To attract the applicability of the first part of the definition, it was observed, the assessee and the person alleged to be a related person must have interest, direct or indirect in the business of each other.
Each of them must have a direct or indirect interest in the business of the other.
The quality and degree of interest which each has in the business of the other may be different, the interest of one in the business of the other may be direct while the interest of the latter in the business of the former may be indirect.
That would not make any difference so long as each has got some interest, direct or indirect in the business of the other.
In the notice issued by the Central Government seeking to review the Appellate Collector 's order, the Central Government indicated that there was an agreement existing between the respondents and their distributors according to which they were the company 's distributors for the sale of their goods.
Major portion of the sales were effected through M/s. T.I. and M Sales Ltd. who were the main distributors of M/s. Tube Investments of India Ltd. and its subsidiary companies and rest of the sales through the other two distributors.
M/s. Tube Investment of India was the holding company of M/s. T.I. Millers Ltd. The agreement between the assessee and the T.I. and M Sales Ltd. was registered under the MRTP Act.
The Government of India also found that there was a territorial earmarking for the operation of the distributors, who also undertook advertisements and helped the sub dealers for maintaining show rooms in dealer 's pre 359 mises.
The distributors did not deal with competitor 's goods.
The Government of India also noted that the assessee granted mark up to the distributors to cover their establishment expenses, travelling expenses, advertisement and sundry expenses.
On these grounds, the Government of India tentatively considered that it was a fit case for reversing the order of the Appellate Collector who had held that the distributors were not related persons under section 4 of the Act.
The question is, whether the distributors in this case were related persons of the respondents and secondly, whether the expenses incurred for maintaining the show room, advertisements etc.
should also be added to the assessable value.
How the value should be computed has been examined by this Court in Union of India and others etc.
vs Bombay Tyre International Ltd. etc.
; , There, Pathak, J. as the learned Chief Justice then was, held that the definition of the words "related person" did not suffer from any constitutional infirmity.
This Court reiterated that on a true construction of its provisions in the context of the statutory scheme the old section 4(a) should be considered as applicable to the circumstances of the particular assessee himself and not of manufacturers generally.
The Court further reiterated that pursuant to the old section 4(a) the value of an excisable article for the purpose of the excise levy should be taken to be the price at which the excisable article is sold by the assessee to a buyer at arm 's length in the course of whole sale trade at the time and place of removal.
Where, however, the excisable article is not sold by the assessee in wholesale trade, but for example, is consumed by the assessee in his own industry the case is one where under the old section 4(a) the value must be determined as the price at which the excisable article or an article of the like kind and quality is capable of being sold in wholesale trade at the time and place of removal.
This Court analysed the position under the Central Excise and Salt Act, 1944 as amended by Act XXII of 1973 that if the price at which the excisable goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal as defined in sub section (4)(b) of section 4 is the basis for determination of excisable value provided, of course, the buyer is not a related person within the meaning of sub section (4)(c) of section 4 and the price is the sole consideration for the sale, that would be the value.
The proposition is subject to the terms of the three provisos to subsection (1)(a) of section 4.
Where the wholesale price of any excisable goods for delivery at the place of removal is not known and the value thereof is determined with reference to the wholesale price for delivery at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery should be 360 excluded from such price.
It was further held that these principles could not apply where the tariff value had been fixed in respect of any excisable goods under sub section (2) of section 3.
The Court also dealt with the interpretation of definition of 'related person '.
The Court further held that the expenses incurred on account of the several factors which have contributed to its value upto the date of sale, which apparently would be the date of delivery, are liable to be included.
Consequently, where the sale is effected at the factory gate, expenses incurred by the assessee upto the date of delivery on account of storage charges, outward handling charges, interest on inventories (stocks carried by the manufacturer after clearance), charges for other services after delivery to the buyer, namely, after sales service and marketing and selling organisation expenses including advertisement expenses marketing and selling organisation expenses and after sales service promote the marketability of the article and enter into its value in the trade.
Where the sale in the course of wholesale trade is effected by the assessee through its sales organisation at a place or places outside the factory gate, the expenses incurred by the assessee upto the date of delivery under the aforesaid heads cannot, on the same grounds, be deducted.
The assessee will be entitled to a deduction on account of the cost of transportation of the excisable article from the factory gate to the place or places where it is sold.
The cost of transportation will include the cost of insurance on the freight for transportation of the goods from the factory gate to the place or places of delivery.
The new section 4(4)(d)(i) has made express provision for including the cost of packing in the determination of "value" for the purpose of excise duty.
The review application, by the change of law, was forwarded to the Tribunal.
It was contended before the Tribunal on behalf of the appellant that the distributors were related persons in terms of the judgment of this Court in Bombay Tyre International case (supra).
Our attention was drawn to a letter dated 10th September, 1981 from the respondents to the Assistant Collector that the mark up allowed to the distributors was to cover their establishment expenses, advertisement, travelling expenses and he pointed out that this mark up included certain elements which have to be included in the assessable value.
The Tribunal held that according to the judgment of this Court in Bombay Tyre International case (supra) where the sale is effected at the factory gate, expenses incurred on account of charges for services after delivery to the buyer, namely after sale service and marketing and selling organisation expenses, including advertisement expenses could not be deducted from the assessable value.
It was further urged 361 on behalf of the appellant that other features like division of territory amongst the distributors and the marginal quantity of direct sales otherwise, as well as the fact that the distributors did not deal in competitor 's goods, clearly indicated that these are related persons.
Learned Counsel drew our attention to the meaning of the term 'ordinarily ' given in K.G. Iyer 's Judicial Dictionary at page 704 and explained that it meant 'habitually ', or 'usually ', or 'normally '.
In this case, ordinarily sales are only through distributors and the sales are made by them on behalf of the manufacturer.
Learned Counsel pointed out that this was a case where it was an extension of the manufacturer 's self to the point of sale by the distributor.
Learned Counsel for the revenue urged that it was a case of indirect relationship and came within the ratio of the aforesaid decision of this Court in Bombay Tyre International case (supra).
In this case, it was highlighted that manufacturer had interest in the buyer who were their distributors and the distributors were only charging limited commission, maintained showrooms, and did not deal in the products of competitors of the manufacturer.
It was further contended that sales of their products as original equipment, could not be considered as sales in the ordinary course of wholesale trade.
It was further highlighted that the norm of inter connected undertakings found in MRTP Act is not relevant to decide 'related persons ' in the Act.
It was further argued that mere area restriction is not relevant for proving mutuality of interests, but it has to be shown that the sale was not at an arms length and but a principal to principal transaction.
It appears from the letter dated 10th September, 1981 from the appellants to the Department that the distributors paid for their own advertisements.
In some case, the manufacturer might release advertisements through the distributors.
It was also urged that even a sole distributor could be an independent buyer on behalf of the manufacturer and the distributor and in this connection reliance was placed on the observations of this A.K. Roy 's case S.C.).
After sales service undertaken by the distributors was more in the nature of replacement of defective goods sold, which any manufacturer was bound to do and that is a normal essential service of a distributor.
Regarding the 'mark up ' allowed by the manufacturer to the distributor as indicating special relationship, it was contended that it was provided for in the context of the requirement to indicate maximum selling price to be marked on the goods, and in fact, it was in this context that the appellants had made a reference to the MRTP Commission.
The Tribunal held that the distributors were not related persons and in the light of the observations of this Court in Atic In 362 dustries case (supra) set out hereinbefore.
We are of the opinion that what was necessary to find out, was whether the buyer is holding company or subsidiary company or relative of the manufacturer.
From the explanation of the relationship furnished in this case, such is not the position.
It appears that the link between the respondents T.I.Miller Ltd. company and T.I. & M. Sales Ltd., is the main distributors of M/s. Tube Investments of India Ltd., who are the holding company of the respondents.
This relationship does not satisfy the criteria for establishing the related persons concept.
These were limited companies at the material time, and it will be difficult to say that a limited company has any interest direct or indirect in the business carried on by one of its shareholders.
It has been explained that the mark up in the price was allowed in connection with the requirement to display the maximum sale price.
The sales pattern shows also sales to other than distributors and it is not restricted only to the appointed distributors of T.I. India Limited.
In the premises the Tribunal 's upholding the order of the Appellate Collector, was right and correct.
In the background of the facts mentioned hereinbefore and in the light of the decisions of this Court in Bombay Tyre International and Atic Industries cases (supra), we are of the opinion that the Tribunal was right and there is no cause for interference with the order of the Tribunal.
In the premises, we decline to admit the appeals.
H.S.K. Appeals dismissed. | % The respondents manufactured goods which were assessable under Item 68 of the Central Excise Tariff.
The respondents filed price lists for the sale of the goods through their distributors one of them being M/s. T.I & M Sales Ltd., quoting their price to the distributors as assessable value.
Subsequently the respondents required that the price charged by them from buyers at the factory gate should be accepted as the assessable value and not the price to the distributors.
The Assistant Collector found that the distributors were related persons as per section 4 of the and the price at which the distributors sold the goods should therefore be the assessable value.
On appeal by the appellant revenue, the Appellate Collector held that these could not be held to be the related persons.
The Revenue had found that there was an agreement existing between the respondents and their distributors according to which they were the company 's distributors for the sale of their goods.
Major portion of the sales were effected through M/s. T.I. & M. Sales Ltd. who were the main distributors of M/s. Tube Investments of India Ltd. and its subsidiary companies and rest of the sales through the other two distributors.
M/s. Tube Investment of India was the holding company of M/s. T.I. Millers Ltd. The agreement between the assessee and the T.I Revenue had further found that there was a territorial earmarking for the operation of the distributors, who also undertook advertisements and helped the sub dealers for maintaining show rooms in dealer 's premises.
The distributors did not deal with competitor 's goods.
The Revenue had also noted that the assessee granted mark up to the distributors to cover their establishment expenses, travelling expenses, advertisements and 356 sundry expenses.
In view of this the revenue filed a review petition, but the Appellate Tribunal rejected the review petition and upheld the finding of the Appellate Collector.
Hence these appeals under section 351(b) of the Act.
The question was whether the distributors were related persons of the respondents and secondly whether the expenses incurred for maintaining the show room, advertisements etc.
should also be added to the assessable value.
Dismissing the appeals this Court, ^ HELD: To find out whether the distributors were related persons of the manufacturers it is necessary to find out whether the buyer is holding company or subsidiary company or relative of the manufacturer.
From the explanation of the relationship furnished in this case, such is not the position.
It appears that the link between the respondents T.I. Miller Ltd. Company and T.I. & M. Sales Ltd., is that the latter are the main distributors of M/s. Tube Investments of India Ltd., which is the holding company of the respondents.
This relationship does not satisfy the criteria for establishing the related persons concept.
These were limited companies at the material time, and it will be difficult to say that a limited company has any interest direct or indirect in the business carried on by one of its shareholders.
[362A C] The mark up in the price was allowed in connection with the requirement to display the maximum sale price.
The sales pattern shows also sales to other than distributors and it is not restricted only to the appointed distributors of T.I. India Limited.
In the background of the facts mentioned hereinbefore and in the light of the decisions of this Court in Bombay Tyre International and Atic Industries cases we are of the opinion that the Tribunal was right and there is no cause for interference with the order of the Tribunal.
[362C E] Union of India and others vs Atic Industries Limited, ; and Union of India and Others etc.
vs Bombay Tyre International Ltd. etc.
, [1984] 1 S.C.R. 347, referred to. |
ivil Appeal No. 2659 of 1986.
From the Judgment and Order dated 14.6.1985 of the Appellate Authority Delhi in Appeal No. 2 of 1985.
Anil Kumar Gupta and B.N. Singhvi for the Appellant.
Raja Ram Agarwal, Parveen Kumar and Vivek Gambhir for the Respondents.
The Judgment of the Court was delivered by RANGANATH MISRA, J.
The short question in this appeal by special leave is whether the appellant workman was entitled to interest on the gratuity due to him under the provisions of the (39 of 1972).
Appellant joined service under Respondent No. 1 in April 1944 and was relieved from service on his resignation with,effect from 24.5.2983.
The employer did not determine the amount ,of gratuity payable to the appellant as required under Section 7(2) of the Act.
On 7.6.
1983, the appellant furnished an application in Form l for payment of gratuity but no action was taken by the employer; then appellant approached the statutory controlling authority for determination of the amount of gratuity and requested that on the sum due interest may be paid.
The employer contested the claim both in regard to gratuity as also interest.
On 3. 12.
, the controlling authority determined the amount of gratuity at Rs. 16,380 and directed the Respondent No. 1 to pay along with compound interest of 9 per cent.
Thereupon PG NO 744 Respondent No., 1 challenged the order before he appellate Authority.
The appellate Authority affirmed the determination of gratuity but set aside the order for payment of interest.
We have beard learned counsel for both parties in regard to payability of interest.
Relevant portions of section 7 of the Act, as it stood in 1983, when the cause of action arose, may now be extracted: "7: Determination of the amount of gratuity: (1) A person who is eligible for payment of gratuity under this Act or any person authorised, in writing, to act on his behalf shall send a written application to the employer, within such time and in such form, as may be prescribed, for payment of such gratuity.
(2) As soon as gratuity becomes payable, the employer shall, whether an application referred to in sub section (1) has been made or not, determine the amount of gratuity and give notice in writing to the person to whom the gratuity is payable and also to the controlling authority specifying the amount of gratuity so determined ; (3)The employer shall arrange to pay the amount of gratuity, within such time as may be prescribed, to the person to whom the gratuity is payable ; (4) (a) If there is any dispute as to the amount of gratuity payable to an employee under this Act or as to the admissibility of any claim of, in relation to, an employee for payment of gratuity, or as to the person entitled to receive the gratuity, the employer shall deposit with the controlling authority such amount as he admits to be payable by him as gratuity.
Explanation ' Where there is a dispute with regard to any matter specified in this clause the employee may make an application to the controlling authority for taking such action as is specified in clause (b).
(b) . . . . . . . . . . (c) . . . . . . . . . .
PG NO 745 (5) . . . . . . . . . ,, (6) . . . . . . . . (7) . . . . . . . . Sec. 8: Recovery of gratuity: If the amount of gratuity payable under this Act is not paid by the employer, within the prescribed time, to the person entitled thereto, the controlling authority shall, on an application made to it in this behalf by the aggrieved person, issue a certificate for that amount to the Collector, who shall recover the same, together with compound interest thereon at the rate of nine per cent per annum, from the date of expiry of the prescribed time, as arrears of land revenue and pay the same to the person entitled thereto.
" The provisions of Section 7 have been amended twice, first by Act 25 of 1984 with effect from 1.7.1984 and again by Act 22 of 1987.
The 1987 Amendment has substituted sub section (3) and added sub section (3A) in Section 7 to the following effect: "(3) The employer shall arrange to pay the amount of gratuity within thirty days from the date it becomes payable to the person to whom the gratuity is payable.
If the amount of gratuity payable under sub section (3) is not paid by the employer within the period specified in sub section (3), the employer shall pay, from the date on which the gratuity becomes payable to the date on which it is paid, simple interest at such rate, not exceeding the rate notified by the Central Government from time to time, repayment of long term deposits, as that Government may,by notification specify . .
" The controlling authority had directed interest as provided in Section 8 to be paid which the Appellate Authority had vacated.
From facts of the case, it is clear that the stage for action under section 8 had not been reached inasmuch the appellant had not applied for recovery of gratuity to the Collector.
It is only when the Collector issues a certificate for recovery of the dues as a public demand that interest as provided under Section 8 is admissible.
PG NO 746 There was no provision in the Act for payment of interest when the same was quantified by the controlling authority and before the Collector was approached for its realisation.
In fact, it is on the acceptance of the position that there was a lacuna in the law that Act 22 of 1987 brought about the incorporation of sub section (3A) in Section 7.
That provision has prospective application.
Learned counsel for the appellant tried to rely upon the provisions of the Interest Act and the provisions of Section 34 of the Code of Civil Procedure.
We do not find any support for the appellant 's stand from either of the provisions.
Admittedly, no notice was given demanding interest and the controlling authority is not a court for falling back on Section 34 of the Code.
We are satisfied in the facts of the case that the appellant was not entitled to interest on the amount of gratuity found due to him.
Since that was the only matter agitated in the appeal with the conclusion indicated, this appeal has to fail and is dismissed.
There would be no order for costs.
G.N. Appeal dismissed. | The appellant was in the service of Respondent firm from April,1944 till he resigned on 24.5.83.
The employer did not determine the amount of gratuity payable to the appellant.
Appellant furnished the necessary application for payment of gratuity and since no action was taken by the employer, the appellant approached the statutory controlling authority for gratuity and interest thereon.
The employer contested.
The controlling authority determined the amount of gratuity at Rs.16,380 and directed the employer to pay the same along with compound interest at 9%.
On appeal by the employer, the appellate authority confirmed the determination of gratuity but set aside the order for payment of interest.
This appeal by special leave is in regard to payability of interest on gratuity.
The appellant relied on the provisions of the Interest Act and section 34 of the Code of Civil Procedure, also.
Dismissing the appeal, HELD: If It is only when the Collector issue a certificate for recovery of the dues as a public demand that interest as provided under Section 8 is admissible.
[745Hl 1.2 In the instant case the appellant is not entitled to interest on the amount of gratuity found due to him.
The controlling authority had directed interest as provided in Section 8 to be paid, which the Appellate Authority had vacated.
From the facts of this case, it is clear that the stage for action under section 8 had not been reached in as much the appellant had not applied for recovery of gratuity to the Collector.
[745G H] PG NO 742 PG NO 743 2.
There was no provision in the Act for payment of interest when the same was quantified by the controlling authority and before the Collector was approached for its realisation.
In fact, it is on the acceptance of the lacuna in the law that Act 22 of 1987 brought about the incorporation of sub section (3A) in Section 7.
But that provision has prospective, and not retrospective application.
[746A B] 3.
The provisions of the Interest Act and the provisions of Section 34 of the Code of Civil Procedure would be of no avail to the appellant since no notice was given demanding interest and the controlling authority is not a court for falling back on section 34 of the Code.
[746C] |
Appeals Nos.
107 111 of 1963.
Appeals by special leave from the judgment :and order dated March 23, 1961 of the Punjab High Court in Income tax Reference No. 14 of 1960.
R. Ganapathi Iyer and R.N. Sachthey, for the appellant (in all the appeals).
S.T. Desai, R.K. Gauba, B.P. Singh and Naunit Lal, for the respondent (in all the appeals).
March 24, 1964.
The Judgment of the Court was delivered by SARKAR, J.
We think that these appeals are covered by ;the judgment of this Court in Punjab Distilling Industries Ltd. vs Commissioner of Income tax(1) and the High Court (1) [1959] Supp. 1 S.C.R. 693.
448 was in error in its view that the ratio decidendi of that judgment was not applicable to them.
The earlier case had arisen out of the assessment of the same assessee but it was concerned with the years 1947 48 and 1948 49 while the present appeals are concerned with the years 1946 47, 1949 50, 1950 51, and 1951 52.
The accounting period of the assessee was from December 1, in one year to November 30 of the following year.
In both the cases the assessments were for income tax, excess profits tax and business profits tax.
The point for consideration in respect of all these taxes was, however, the same.
A full statement of the facts will be found in the Judgment in the earlier case and it is unnecessary to state them at length over again.
The assessee who was a distiller and seller of bottled country liquor, started collecting from its customers from the year 1945 besides the price of the liquor and the bottles in which the liquor was sold, a further charge called empty bottles return security deposit".
This charge was made at a certain rate per bottle delivered depending on its size on the term that it would be refunded as and when the bottles were returned to the assessee and that the entire sum collected on this account in respect of any one transaction would be refunded in full on return of 90 per cent of the bottles covered by it.
The question is whether this charge is a trading receipt asses sable to tax.
In the earlier case this Court held it to be assessable.
This Court then said (p. 687), "the trade consisted of sale of bottled liquor and the consideration for the sale was constituted by several amounts respectively called, the Price of the liquor, the price of the bottles and the security deposit.
Unless all these sums were paid the appellant would not have sold the liquor.
So the amount which was called security deposit was actually a part of the consideration for the sale and, therefore part of the price of what was sold.
" In respect of the years now under consideration the Income tax Officer taxed these charges and on appeal the Appellate Assistant Commissioner confirmed the Income tax Officer 's view.
On further appeal, however, the Income tax Tribunal reversed the decisions of the authorities below and held that these charges were loans and not trading receipts.
It may be stated that all this had happened before the afore said earlier judgment was delivered.
After the Tribunal 's decision, the Commissioner of Income tax obtained a reference of the following question to the Punjab High Court: "Whether on the facts and circumstances of the case the collections by the assessee company described in its accounts as 'empty bottle return security deposits ' were income assessable under Section 10 of the Income tax Act.
" 449 It is of interest to note that the earlier case also concerned an identical question and had been answered both by the High Court and this Court in the affirmative.
If the judgment in the earlier case covered the present ap peals, then the question referred would, of course, have to be ,answered in the affirmative.
The High Court, however, took the view that as a result of the amendment of the rules made under the Punjab Excise Act, 1914 which came into effect from April 1, 1948, the charges collected after that date were not covered by that judgment.
It held that the amended rule made the ratio decidendi of our judgment inapplicable to the charges collected after that date.
The rule referred to is r. 40(14)(f) and the relevant part of it on which the High Court based its view is as follows: (v) It is compulsory for the licensee to return at least 90 per cent.
of the bottles issued to him by the licensed distiller.
(vi) The licensed distiller may, at the time of issue, demand security at the rates of three rupees, two rupees or one rupee and eight annas per dozen quart, pint or nip bottles respectively upto 10 per cent.
of the bottles issued by him and confiscate the security to the extent falling short of the 90 per cent.
limit.
The licensee referred to in the earlier of the rules quoted is the wholesaler to whom the distiller sold his liquor.
It is not very clear what is meant by the words "upto 10 per cent.
of the bottles issued" or the words "falling short of the 90 per cent.
limit".
It is not necessary, however, to pursue this matter for we shall not be concerned with the precise meaning of these words.
It is not in dispute that some charge described as a deposit was realised on the term that it would be refunded in certain eventualities and that is enough for our purpose for the only question is whether this charge was a trading receipt.
The High Court thought that the earlier judgment of this Court had been based on three considerations, namely (1) that the charge concerned had been made without Government 's sanction and entirely as a condition imposed by the assessee itself for the sale of its liquor; (2) that it could not be security deposit for the return of the bottles for there was no right to their return and (3) that it was refundable under the contract of sale itself.
In the High Court 's view if these circumstances were not there, our decision would have been different.
The High Court held that since the amended rules came into force, none of these considerations was available and, therefore, the LP(D) ISCI 15a 450 charges could not be held to be trading receipts.
The following quotation from the judgment of the High Court fairly summarises its reasoning: "The amended rules were given effect from 1st April, 1948.
To securities demanded in accordance with the above rules the three considerations which prevailed with their Lordships of the Supreme Court and which have been mentioned above will not apply to the instant case.
It cannot, therefore, be said, as was the case in the appeal before their Lordships of the Supreme Court, that the 'additional amounts had been taken without Government 's sanction and entirely as a condition imposed by the appellant itself for the sale of its liquor '.
Again it cannot be said that the 'wholesalers were under no obligation to return the bottles. ' Lastly, in view of the statutory rule amended in 1948 it cannot be said that the deposit 'was part of each trading transaction a) id was refundable under the terms of the contract relating to trading transaction under which it had been made.
" It is not in dispute that if the High Court was in error in this reasoning, the present case will be governed by the earlier decision.
With respect to the learned Judges of the High Court, we think that the earlier judgment of this Court has been misunderstood by them.
That judgment had not been based on the three points mentioned by the High Court and this we now proceed to show.
The first point of distinction between the two cases was based on the observation in the earlier case that the additional amounts had been taken without Government 's sanction and entirely as a condition imposed by the appellant itself for the sale of its liquor '.
The High Court apparently thought that by this observation it was suggested that if the amounts had been taken under Government 's sanction, then they would not have been taxable.
We are wholly unable to agree that this is a correct reading of that judgment.
That observation contained only a recital of fact and was made for the purpose of distinguishing these amounts from the other amounts charged by the assessee as price of bottles to which we have earlier referred.
The other amount was charged under a scheme framed by the Government and called the "buy back scheme".
We find nothing in the earlier judgment to show that the conclusion there arrived at was based on the fact that the charge had not been made with the sanction of the Government.
That nothing turned on whether a charge was made under a Government scheme or purely as a matter of contract would indeed appear to have always been the common case.
Thus even before the 451 amended rules had come into force, the assessee had been 'collecting under the aforesaid "buy scheme" which had the sanction of the Government, from its customers as price of the bottles, a charge which was refundable on the return of the bottles.
The charge now under consideration is a charge additional to that collected under the 'buy back scheme ' and this we have earlier said.
It has never been in dispute, either in the earlier case or now, that the charge under the 'buy back scheme ' which was collected under Government 's sanction constituted a taxable income.
This Court had never said, nor was it ever contended by the assessee that a collection would not be taxable if it had been made with the sanction of the Government.
The first point of distinction sought to be made by the High Court is, therefore, unfounded.
The second point made by the High Court was that the observation in the earlier judgment that the charge could not be a security for the return of the bottles as there was no right to such return, was no longer applicable as under the amended rules there was a right to the return of the bottles.
We do not agree for reasons to be stated later, that under the amended rules there was such a right but we will assume for the present that there was.
Now, the argument in connection with which that observation was made was that if the charges were deposits for securing the return of the bottles, they were not trading receipts.
By the aforesaid observation this Court dealt with the first part of this argument and said that the assumption that the charges were for securing the return of the bottles was unfounded for there was no right to such return.
If the charges were not by way of security deposit the argument must, of course, fail.
So that was one answer that was given to the argument.
But this Court did not stop there and proceeded to consider the argument as a whole, namely, whether if the charges were security deposits, they were not trading receipts.
Now, the reason why it was said that if the charges were security deposits they were not trading receipts is to be found in two cases on which the argument was based.
The first was the case of Davies vs Shall Company of China Ltd.(1).
In that case the Company had delivered its product to certain agents for sale and payment of the sale proceeds to it.
The Company took money from each agent as deposit to secure itself against the risk of default by him to account for the sale proceeds.
It was observed by Jenkins L.J., "Mr. Grant described the agents ' deposits as part of the Company 's trading structure, not trade receipts but anterior to the stage of trade receipts, and I think that is a fair description of them.
It seems to (1) LP(D)ISCI 15 452 me that it would be an abuse of language to describe one of these agents, after he had made a deposit, as a trade creditor of the Company in respect of the deposit, not on account of any goods supplied or services rendered by him in the course of its trade, but simply by virtue of the fact that he has been appointed an agent of the Company with a view to him trading on its behalf, and as a condition of his appointment has deposited with or, in other words, lent to the Company the amount of his stipulated deposit.
" That was the kind of security deposit which Mr. Sastri appearing for the assessee on the earlier occasion said the "empty bottles return security deposits" were.
The real point, therefore, in contending that the deposits were security deposits was to establish that they were not part of the trading transactions at all but related to a stage anterior to the trading transactions.
This contention was rejected and it was held that the "empty bottles return security deposits" were not the kind of deposits considered in the Shall Company case.
The other case on which Mr. Sastri then relied was K.M. section Lakshmanier & Sons vs Commissioner of Income tax and Excess Profits Tax Madras(1).
That case dealt with three trade arrangements.
Mr. Sastri contended that the "empty bottles return security deposits" were the kind of deposits dealt with in the third arrangement considered in that case but this argument also failed.
Under the third arrangement, the trader took from its constituent at the commencement of an expected series of trading transactions with it a deposit and kept the same till the business connection came to an end whereupon the deposit was refundable to the Constituent with interest at 3 per cent per annum after deduction thereout of any amount remaining due, from the constituent on the trading transactions.
The understanding was that the constituent would pay for each purchase made by him from the trader during the continuance of the business connection and it was only where he failed to make the payment that the amount due became liable to be deducted from the deposit.
This deposit was held by this Court to be a loan for these reasons: "The amount deposited by a customer was no longer to have any relation to the price fixed for the goods to be delivered under a forward contract either in installment or otherwise.
Such price was to be paid by the customer in full against delivery in.
respect of each contract. . .
It was only at the end of the 'business connection ' with the appellants that an adjustment was to be made towards any possible liability arising out (1) ; 453 of the customer 's default. .
The transaction had thus all the essential elements of a contract of loan." (P. 1063).
None of these cases, therefore, was concerned with the question whether a security deposit was by its very nature such that it could not be a trading receipt.
The first case dealt with an actual security deposit but it was held that that deposit was not a trading receipt not for the reason that it was a security deposit but for the reason that it formed, the structure under which trading transactions producing trading receipts were conducted and was not itself connected with any trading transaction.
In the second case the receipt was held to be a loan; that it might be also a security deposit was not even mentioned.
It was held not to be a trading receipt because it had no connection with the trading transactions but related to a stage anterior to the trading transactions.
It is, therefore, clear that the contention that the charges formed a security deposit had been advanced only for the purpose of showing that they were not a part of the trading transactions.
The question was not really whether the charges were security deposits but whether they were part of the trading transactions or had been made at anterior stages.
This Court decided that they were part of the trading transactions and were not relatable to an anterior stage.
That is all that it was called upon to decide and did decide.
That on the earlier occasion this Court was not concerned with the question whether the charges made were security deposits or not would appear from the following observations occurring at p. 690. "Mr. Sanyal was prepared to argue that even if the amounts were securities deposited for the return of the bottles, they would still be trading receipts, for they were part of the trading transactions and the return of the bottles was necessary to enable the appellant to carry on its trade, namely, to sell liquor in them.
As we have held that the amounts had not been paid as security for the return of the bottles, we do not consider it necessary to pronounce upon this contention.
" This Court, therefore, did not decide that if the deposits bad been made to secure the return of the bottles, they could not be a trading receipt.
The High Court was in error in distinguishing the present case from the earlier one on the basis that this Court had then so decided.
We now turn to the question whether under the amended rules there was any right in the distiller to the return of the bottles.
We think there was not and in this respect the two cases are identical; in none was the charge in fact a security deposit.
The reason for that view is this.
The liquor passed through three sales before it reached the consumer; first the distiller sold it to wholesaler then the wholesaler to a retailer and lastly, the retailer to the consumer, If the 454 rules created an obligation on the wholesaler to return the bottles to the distiller, then the rules would provide for a return of the bottles to the wholesaler by the retailer and to the retailer by the consumer; without such rules it would be idle to require the wholesaler to return the bottles to the distiller.
We have not been shown anything creating a right in the wholesaler or the retailer to a return of bottles.
Clearly, the consumers were under no obligation to return the bottles in which they bought liquor.
Sub clause (v) of the rule on which the High Court based itself, referred to the return of the bottles in which liquor was sold.
In the absence of P. right in the wholesaler to a return of the bottles from the retailer, it would be insensible to read that provision as creating an obligation on the wholesaler to return the bottles.
He had no means under the rules to perform that obligation.
That rule, therefore, must be read as intending only to lay down that if the wholesaler could not return the bottles, his deposit was liable to be confiscated under sub cl.
Again, the rules do not lay down any procedure by which the distiller might enforce the return of the bottles to him, which they would have undoubtedly done if it was intended to give him a right to the return of the bottles.
Indeed there is nothing to show that he can obtain such a return.
Whether the wholesaler would be liable to punishment under the Act for breach of his obligation to return the bottles or not is to no purpose, for we are now concerned with the right of the distiller to obtain a return of the bottles.
It seems to us that the only reason why the rules required a wholesaler to return the bottles to the distiller was to authorise the imposition of a term of the sale upon the breach of which, the charges made for the bottles would cease to be refundable.
We now come to the last point of distinction made by the High Court.
On the earlier occasion this Court had said that the amount deposited was refundable under the terms of the contract constituting the trading transaction and was, therefore, a trading receipt.
The learned Judges of the High Court seem to 'have been of the opinion that since the rule was amended, the deposits had to be made under it and, therefore, were not thereafter received under the contract or as part of the trading transaction constituted by it.
With great respect to the learned Judges, there appears to be some confusion here.
The rule by its own force does not compel a deposit to be made.
The terms of the rule make this perfectly clear.
All that it does is to empower a distiller to take a deposit.
But the deposit must be taken under a contract in regard to it; it is not taken under the rule itself.
In other words, all that the rule does is to authorise the making of a contract concerning the deposit on the terms mentioned in it, the object apparently 455 being to avoid any question as to its validity arising later.
We may here point out that the trade in liquor is largely control ( led by Government regulations.
It must, therefore, be held that the deposit was actually taken under a contract; it was none the less so though the contract was authorised by the stationery rules.
The third point of distinction on which the High Court relied was, therefore, also without foundation.
Whether if the deposits had been made without a contract and Indirectly under the rules and in respect of a trading transaction made by a contract they would have been trading receipts or not, is not a question that arises in the present appeals and on that question we express no opinion now.
For these reasons we think that these appeals are completely governed by the earlier judgment of this Court and we answer the question referred in the affirmative.
We should state that even according to the High Court the amounts collected as "empty bottles return security deposit" prior to April 1, 1948, were chargeable to tax.
The appeals are allowed and the respondent will pay the costs here and below.
There will be one set of costs allowed as hearing fee.
Appeals allowed. | The assessee, a distiller of country liquor, carried on the business of selling liquor to licensed whole salers.
The assesses :started collecting from its customers from the year 1945 besides the price of the liquor and the bottles in which the liquor was sold a further charge called "empty bottles return security deposit.
" The entire sum collected on this account in respect of any one transaction would be refunded in full on return of 90 per cent.
of the bottles covered by it.
The question for consideration before this Court was whether the charge "security deposit" amounted to a trading receipt assessable to Income Tax.
Held: The amounts paid to the assessee and described as 'security deposit ' were trading receipts and therefore income of the assessee assessable to tax.
These amounts were paid as an integral part of the commercial transaction of the sale of liquor in bottles and represented an extra price charged for the bottles.
They were not security deposits as there was nothing to secure, there being no right to the return of bottles.
These appeals are covered by the judgment of this Court in Punjab Distilling Industries Ltd. vs Commissioner of Income tax.
Punjab Distilling Industries Ltd. vs Commissioner of Income.
tax [1959] Supp.
1 S.C.R. 693, relied on.
Davies vs Shell Company of China Ltd. (1951)32 T.C. 133 and K.M.S. Lakshmanier & Sons vs Commissioner of Incometax and Excess Profits Tax, Madras [1953] S,.
C.R. 1057, distingushed. |
il Appeals Nos.
399 403/1962.
Appeal from the judgment and order dated February 17, 1961 of the Andhra Pradesh High Court in Writ Petitions Nos. 400, 431 to 433 and 495 of 1958.
K.Srinivasamurthy and Naunit Lal, for the appellants (in all the appeals).
K.R. Chaudhuri and B. R. G. K. Achar, for the respon dents (in all the appeals).
March 20, 1964.
The Judgment of the Court was delivered by WANCHOO, J.
These are five connected appeals on certi ficates granted by the High Court of Andhra Pradesh.
They involve a common question of law and will be dealt with to gether.
The brief facts necessary to understand the question of law raised in these appeals are these.
The appellants manufacture medicines in which they have to use alcohol.
Before Parliament passed the Medicinal and Toilet Preparations (Excise Duties) Act, No. 16 of 1955, (hereinafter referred to as the Act), the appellants were working under licences granted under the Hyderabad Abkari Act, No. 1 of 1316 F.
Under that Act certain rules called the Medical Preparations and Spirituous Rules, 1345 F were framed and r. 36 thereof provided that "the expenses of the establishment for the supervision of the work shall be borne by the pharmaceutical laboratory (licensee) as per the decision of the Commissioner Excise".
It appears that for the manufacture of medicines, the appellants used to be supplied with alcohol.
Further the State Government posted on the bonded manufacturies of the appellants certain supervisory excise staff, and r. 36 was obviously framed to reimburse the Government for expenses incurred in that behalf.
After the Act came into force from April 1, 1957, the appellants who were manufacturing medicinal preparations were governed by it and the Rules framed thereunder and took licences under the Act.
The appellants then contended that as the Act had repealed all previous provisions with respect to medicinal preparations, they were no longer bound to pay the charges prescribed under r. 36 of 1345 F Rules.
Their contention was that this rule along with such provisions of the Hyderabad Abkari Act, which concerned medicinal prepara tions were repealed by the Act and the Rules framed there under.
The State Government could therefore no longer ask them to pay the costs of the establishment posted at their 378 bonded manufacturies for supervision*.
The appellants thereupon filed writ petitions in the High Court challenging the levy of these charges.
The petitions were opposed on behalf of the State and its contention was that even though the Act and the Rules framed thereunder had come into force from April 1, 1957, r. 36 of the 1345 F Rules continued and was not repealed by the Act and the Rules framed thereunder, and the State was entitled to the expenses of the supervisory staff and could realise it from the appellants.
The High Court held that r. 36 could not be said to have been repealed by the Act and the Rules framed thereunder and was still good law.
In this connection the High Court pointed out that the Hyderabad Abkari Act was not concerned only with medicinal preparations but was a general Act dealing with excise including alcohol, and that alcohol in the ultimate analysis was liquor; therefore the State Government which supplied alcohol to the appellants for the purpose of making medicinal and toilet preparations for which no duty was paid was entitled to see that the alcohol was not used for purposes other than that for which it was supplied to the appellants.
Accordingly the High Court held that r. 36 of the 1345 F Rules was designed to achieve this object, under the general law of excise contained in the Hyderabad Abkari Act, and was therefore good.
In consequence the writ petitions were dismissed.
The appellants then applied for certificates to appeal to his Court, which were granted; and that is how the matter has come up before us The only question that falls for consideration therefore is whether after the coming into force of the Act and the Rules,r. 36 of the 1345 F Rules can still be said to survive.
There is no doubt that the Hyderabad Abkari Act was a general Act and before the Constitution came into force, r. 36 of the 1345 F Rules would be good law.
Under the Constitution, however, medicinal and toilet preparations came under entry 84, List I of the Seventh Schedule to the Constitution, which provides for duties of excise on tobacco and other goods manufactured or produced in India, except (a) alcoholic liquors for human consumption; (b) opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal and toilet preparations containing alcohol or any substance containing opium, Indian hemp and other narcotic drugs and narcotics.
No charge could thereafter be levied on the manufacture of medicinal preparations except by the Union in the shape of duties under item 84 of List I. * The State Government however insisted on the payment of the charges.
379 But under article 277 of the Constitution "any taxes, duties, cesses or fees, which, immediately before the commencement of this Constitution were being lawfully levied by the Government of any State may, notwithstanding that those taxes, duties, cesses or fees are mentioned in the Union List, continue to be levied and to be applied to the same purposes until provision to the contrary is made by Parliament by law".
In view of this provision, all duties and charges levied by the State before the coming into force of the Constitution on the manufacture of medicinal preparations could continue to be levied until law was made by Parliament otherwise.
It is not in dispute that the Act came into force from April 1, 1957 and is a law made otherwise by Parliament within the meaning of article 277, and therefore duties and other charges levied by the State in connection with medicinal preparations could no longer be levied by it.
Further the Act specifically provides in section 21 that "if, immediately before the commencement of this Act, there is in force in any State any law corresponding to this Act, that law is hereby repealed".
It is true that the Hyderabad Abkari Act was a general law which was concerned with liquor and intoxicating drugs generally; it thus applied to alcohol also (treating it as liquor) used for manufacturing medicinal preparations.
The effect of section 21 therefore is that so far as the Hyderabad Abkari Act applied to the use of alcohol, treating it to be liquor, in the manufacture of medicinal and toilet preparations, the Hyderabad Abkari Act must be deemed to have been repealed to that extent only by section 21.
Reliance is placed on behalf of the State on the proviso to section 21, which lays down that "all rules made under any law hereby repealed shall, so far as they are not inconsistent with this Act, have the same force and effect as if they had been respectively made under this Act and by the authority empowered hereby is in that behalf.
" It is therefore con tended that by virtue of the proviso to section 21, r. 36 of the 1345 F Rules must be deemed to continue.
We are of opinion that there is no force in this contention.
Rules were framed under the Act in 1956 and came into force along with the Act.
Rule 143 of these Rules provides that all rules made under any law corresponding to the Act in force in any State are hereby repealed except as respects things done or omitted to be done before such repeal.
Consequently all rules framed for the purpose of the manufacture of medicinal preparations came to an end in view of r. 143 of 1956 Rules.
Therefore r. 36 of 1345 F Rules, which appears in the Medicinal Preparations and Spirituous Rules must be held to be no longer good law so far as it applies to medicinal preparations.
That is one reason why we consider that r. 36 must be held to have been repealed after the coming into force of the Act and the Rules framed thereunder.
The proviso to section 21 on which reliance has been placed 380 cannot change the position ciew of the new Rules framed in 1956 with respect to medicinal preparations.
As soon as the new Rules came into force the old rules must fall and there is a specific provision in the new Rules (namely r. 143) which says that all rules made under any law corresponding to the Act are hereby repealed.
We may refer in this connection to the construction of r. 36 of the Rules of 1345F.
It provides that the expenses of the establishment for the super vision of the work shall be borne by the pharmaceutical laboratory.
The establishment which has to be paid for under r. 36 therefore is for the supervision of the work done by the pharmaceutical laboratories.
Now the work done by a pharmaceutical laboratory is to manufacture medicinal preparations.
Rule 36 therefore provides that expenses of the establishment for the supervision of the work of medicinal preparations manufactured by pharmaceutical laboratories have to be paid by the laboratory concerned.
The supervisory staff which has to be paid for under r. 36 therefore is meant for the supervision of the manufacture of medicinal preparations and it is for that purpose only that expenses have to be borne by the laboratory concerned.
The purpose of the rule therefore is clearly covered by the Act and the Rules framed thereunder and it cannot survive the Act and the Rules in view of section 21 of the Act and r. 143 of the 1956 Rules, and the proviso to section 21 cannot be availed of by the State.
This brings us to the alternative argument on behalf of the State, namely, that in any case the rule still remains good because it is meant to carry out the general purpose of the Hyderabad Abkari Act, namely to see that unauthorised sale of alcohol is not made for human consumption by the labora tory to which it is supplied for purposes of manufacture of medicinal preparations.
Therefore it is said that the rule is good inasmuch as it is concerned with the enforcement of the general law relating to alcohol and intoxicating drugs contained in the Hyderabad Abkari Act.
We are of opinion that there is no force in this contention either.
In the first place, as we have already indicated, the main object of the supervisory staff mentioned in r. 36 is to supervise the manufacture of medicinal preparations.
In that connection the supervisory staff will certainly see that the alcohol supplied is used for the purpose for which it is supplied and is not used in any other manner.
Rule 36 is only concerned with seeing that the manufacture of medicinal preparations is made properly and is done under the supervision of the establishment attached to each laboratory,, and it is only incidentally that in that connection the establishment is also to see that the alcohol supplied is not used otherwise than for the purpose of manufacture.
That however will not make the rule good under the Hyderabad Abkari Act, which deals with alcohol and intoxicating drugs generally.
381 What we have said above is borne out if we look at the 1956 Rules.
Rule 20 provides that in case of manufacture in bond (and we are concerned in the present appeals with such manufacture) alcohol on which duty has not been paid shall be used under excise supervision.
Rule 42 provides that "it shall be open to the Excise Commissioner to determine the size of the supervisory staff in consultation with the licencee.
" It is clear therefore that under the 1956 Rules supervisory staff is attached to bonded manufacturies which manufacture medicinal preparations.
This is also the purpose of r. 36.
Further r. 141 provides that "the licencee of a bonded manufactory or warehouse shall, where so required by the Excise Commissioner, provide the officer and the staff posted to the manufactory or bonded warehouse with suitable lodging conveniently situated to the factory or bonded warehouse premises at a rent not exceeding 10 per cent of the pay of each officer so accommodated.
If for any reason the licencee is not able to provide such accommodation he shall provide suitable accommodation to the satisfaction of the Excise Commissioner near the manufactory or bonded warehouse recovering only 10 per cent of the pay of the occupant.
" Then r. 45 provides that "tile officer in charge shall exercise such supervision as is required to ensure that alcohol issued for a certain preparation is added to the materials which go to make that preparation and that no portion of such alcohol is diverted to other purpose.
" It is clear therefore from these rules that the supervisory staff is attached to a bonded manufactory for the purpose of supervision to see that the manufacture is carried on properly and also to see that alcohol issued for the purpose of manufacture is not diverted to any other use.
We cannot therefore accept the argument that simply because the supervisory staff has got to see that alcohol supplied, assuming it to be liquor, is not misused, r. 36 is still good law because its purpose is to see that the general law relating to alcohol and intoxicating drugs contained in the Hyderabad Abkari Act is carried out.
As the 1956 Rules show it is the duty of the supervisory staff attached to a bonded manufactory to see that the manufacture is properly made and that alcohol supplied is not diverted to any use except that of the manufacture of the preparation.
This being the purpose of the 1956 Rules, the levy under r. 36 of 1345 F cannot be justified on the ground that under that rule the supervisory staff has to see that the general law relating to alcohol and intoxicating drugs is not violated.
There is no doubt that the field covered by r. 36 of the 1345 F Rules is completely covered by the Rules framed under the Act and therefore r. 36 can no longer be justified as good under the general law relating to alcohol and intoxicating drugs.
We may add that the Act or the 1956 Rules make no provision for any such charge as is provided in r. 36 of 1345 F Rules, the intention being that the duty under the Act will cover all expenses 382 for enforcing it.
The fact that members of the supervisory staff are the servants of the respondent makes no difference because they function under the Act and the rules framed thereunder and not under the Hyderabad Act.
We are therefore of opinion that reading section 21 of the Act and r. 143 of the Rules framed thereunder, r. 36 of 1345 F Rules must be held to have been repealed and that it is not saved by the proviso to section 21.
We therefore allow the appeals, set aside the orders of the High Court, and direct the issue of writs as prayed for.
The appellants will get their costs from the respondents One set of hearing costs.
Appeals allowed. | The appellants are manufacturers of medicine in which they have to use alcohol.
According to r. 36 of the Medical Preparation and Spirituous Rules, 1345 F framed under the Hyderabad Abkari Act, 1316 F the appellant used to pay certain fees to the State Government for the supervision of the use of alcohol by the appellants.
After the coming into force of the Medical and.
Toilet Preparations (Excise Duties) Act, 1955 and the Rules framed thereunder the appellants contended that since R. 36 was repealed by this Act they had not to pay that fee.
On the refusal of the State Government to accept their contention the appellants filed writ petitions before the High Court challenging the power of the Government to levy the fee.
But the High Court held that R. 36 was not repealed and dismissed the writ petitions.
Thereupon the appellant filed the present appeals on certificates granted by the High Court.
Before this Court it was contended on behalf of the appel lant that section 21 of the 1955 Act in terms repealed any corresponding State law and therefore R. 36 stood repealed.
The respondent contended that the proviso to that section saved all previous rules which were not inconsistent with the Act and hence R. 36 should be deemed to be in force.
It was further contended by the respondent State that R. 36 remained in force because it was meant to carry out the general purpose of the Hyderabad Abkari Act which was a general Act relating to alcohol and intoxicating drugs.
Held:(i) By virtue of Entry 84 List I of the VII Schedule to the Constitution no charge could be levied on the manufacture of medicinal preparations except by the Union of India and since the 1955 Act is a law made otherwise by Parliament within the meaning of article 277 the duties and other charges which used to be levied by the State in connection with medicinal preparations could no longer be levied by it.
Further the effect of section 21 of the Act is that so far as the Hyderabad Act applied to the use of alcohol in the manufacture of medicinal and toilet preparations, the Hyderabad Act must be deemed to have been repealed.
(ii)By reasons R. 143 of the 1956 Rules r. 36 must be held to have been repealed after the coming into force of the 1955 Act and the rules framed thereunder.
The purpose of R. 36 is clearly covered by the 1955 Act and the rules framed thereunder and it cannot survive the said Act and Rules in view of section 21 of the Act and r. 143 and the proviso to section 21 cannot be availed of by the State.
377 (iii)The field covered by R. 36 is completely covered by the Rules framed under the Act and therefore R. 36 can no longer be justified as good under the general law relating to alcohol and in ,, toxicating drugs as contended by the State. |
minal Appeal No. 134 of 1962.
Appeal by special leave from the judgment and order dated July 17, 1962 of the Andhra Pradesh High Court in Criminal Revision Case No. 298 of 1961.
A. section R. Chari, G. D. Gupta, section Balakrishnan, R. K. Garg, section C. Agarwala, D. P. Singh and M. K. Ramamurthi, for the appellant.
section G. Patwardhan and B. R. G. K. Achar, for the respon dent.
March 23, 1964.
The Judgment of the Court was delivered by J.
RAGHUBAR DAYAL, J. The facts leading to this appeal, by special leave, are these: The Madras Public Service Commission, hereinafter referred to as the Service Commission, by its notification published 411 in the Fort St. George Gazette dated August 3, 1948, invited applications for appointment of Assistant Surgeons in the Madras Medical Service (Men 's Section), from persons who had rendered temporary service as Assistant Surgeons in that Service at any time between September 3, 1939 and December 31, 1947 and from persons who had rendered War Service and possessed the qualifications mentioned in paragraph 3 of the notification.
Paragraph 3 of the notification, inter alia, reads: "Applicants must satisfy the Commission (a) that they are registered practitioners within the meaning of the Madras Medical Registration Act, 1914; (b) that they possess the L.M.S. degree or the M.B., B.S., degree of a University in the Province or an equivalent qualification.
" The appellant, who was at the time serving as a Civil Assistant Surgeon in the Madras Medical Service on a tempo rary basis, applied for the permanent appointment to the posts notified by the Public Service Commission.
In this application 'he made the following representations, which have been found ;to be false, by the Courts below: (i) that his name was Kaza Krishnamurthy; (ii) that his place of birth was Bezwada, Krishna district; (iii) that his father was K. R. Rao of Bezwada; and (iv) that he held the degree of M.B.B.S., II Class, from the Andhra Medical College, Vizagapatam, Andhra University.
On these facts, the appellant was convicted of the offence under section 419 I.P.C. for having cheated the Madras Public Service Commission by personating as Kaza Krishnamurthy and misrepresenting that he had the necessary qualifications for the post advertised inasmuch as he held the degree of M.B.B.S., and that this deception of the Service Commission was likely to have caused damage to its reputation.
It may now be mentioned that the appellant was also tried for offences under section 420 and section 465 I.P.C. in connection with certain acts committed by him in June and October, 1944.
The trial Court acquitted him of the offence under section 465, but convicted him of the other offence.
He was, however, acquitted on appeal, by the Sessions Judge, of the offence under section 420 I.P.C.
The appellant 's conviction under section 419 I.P.C. was confirmed by the Sessions Judge and the revision against that 412 order was dismissed by the High Court.
it is against this order of the High Court that the appellant has preferred this appeal after obtaining special leave.
It has been contended for the appellant that on the facts, established in the case, no offence under section 419 I.P.C. is made out against him, as the appellant 's efficiency as a surgeon is not in dispute, he having secured good reports from his superiors during the period of his service and as therefore there could be no question of the Service Commission suffering damage in its reputation.
On the contrary, it is urged for the State that the offence of cheating is made out against the appellant as he deceived the Service Commission and that such deception was likely to damage its reputation as he deceived the Service Commission and obtained from it 'property ' viz., the admission card entitling him to sit at the Competitive Examination for the appointment of candidates for these posts, and as the appellant also deceived the Government of the State by his false representations, and dishonestly induced it to appoint him in service and pay him salary during the period of his service.
Section 415 I.P.C., defines 'cheating ' and reads: "Whoever, by deceiving any person, fraudulently ordishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to 'cheat '.
Explanation A dishonest concealment of facts is a deception within the meaning of this section".
Cheating can be committed in either of the two ways des cribed in section 415 I.P.C. 'Deceiving a person ' is common in both, the ways of cheating.
A person deceived may be fraudulently or dishonestly induced to deliver any property or to consent to the retention of any property by any person.
The person deceived may also be intentionally induced to do or to omit to do anything which he would not have done if not deceived and which act of his caused or was likely to cause damage or harm in body, mind, reputation or property.
The Courts below, as already stated, found that the appel lant cheated the Service Commission by deceiving that he held the degree of M.B.B.S. and by intentionally inducing the: 413 Commission to recommend his appointment to the post of Civil Assistant Surgeon, 11 Class, and that this act of the Service Commission was likely to damage its reputation as the appellant did not really possess the degree of M.B.,B.S. Assuming, without deciding, that such a deception of the Service Commission and its recommendation could, in certain circumstances, cause damage to its reputation, we are of opinion that in the circumstances of this case there was no likelihood of the causing of such damage to its reputation.
There is nothing on the record to show that the Service Commission could have ordinarily detected the deception or that the appointment of the applicant to the post in the Medical Service was the appointment of a person who proved to be inefficient.
On the contrary, the evidence on the record shows that for about 10 years between his appointment and the institution of this case, he served efficiently and obtained good reports from the Departmental Superiors.
His incompetency for the post was due to his having not obtained the minimum academic qualifications prescribed for the candidates for these posts.
We are therefore of opinion that the appellant has not committed the offence of 'cheating ' as defined in the latter part of section 415 I.P.C., even though he had deceived the Service Commission by re presenting himself to be a duly qualified candidate, and thus induced it to select him for the post.
It was argued for the State that the Public Service Commission held a competitive examination and must have therefore issued an admission card to the appellant entitling him to sit at that competitive examination and that therefore the appellant having induced by deception the Service Commission to deliver to him the admission card which is 'property ', committed the offence of 'cheating ' as defined in the first part of section 415 I.P.C. There is no force in this contention for the simple reason that there is nothing on the record to indicate that an admission card was issued entitling the appellant to sit at the competitive examination.
In fact, no examination as such took place, and the contention for the respondent appears to have been made under a misapprehension arising out of the letter of the Secretary of the Service Commission to the Surgeon General with the Government of Madras stating that he was enclosing the list containing the names and other particulars of 45 candidates who were successful at the competitive examination held by the Commission for the direct recruitment of Civil Assistant Surgeons, Class II (Men) in the Madras Medical Service.
It is however clear from the record that the candidates were simply interviewed by the Commission.
There is nothing on the record to show that any written examination to which admission was by admission cards, took place.
The judgment of the Magistrate states: 414 "The accused was interviewed by the Service Commission as seen from Exhibit P 70, extract of Service Commission particulars".
The same statement is made in the judgment of the Sessions Judge who said: "The accused sent an application exhibit P 72. . showing that he passed M.B.,B.S. degree examination, and on receiving it and interviewing him, the Public Service Commission selected him as Civil Assistant Surgeon, Class 1".
The High Court states the same in its judgment.
It said: "In 1948 he sent an application to the Madras public Service Commission for selection as class 11 Civil Assistant Surgeon and was selected as such following an interview by the said body".
In these circumstances, we cannot hold merely on the basis of suggestions, that any competitive written examination was held and that any admission card was issued to the appellant entitling him to sit at the examination and, consequently, cannot hold that the offence of cheating by dishonestly inducing the Service Commission to deliver him property was committed by the appellant.
The only other question to determine now is whether the appellant deceived the Government of Madras and dishonestly induced it to deliver something in the form of salary to the appellant.
It is urged that the appointment to the post lay with the Government and not with the Service Commission and that 'the Government would not have appointed him to the post in the Medical Service if it had not believed that the appellant possessed the necessary qualifications which, in his case, would be a degree of M.B., B.S., and that such a belief was entertained by the Government on account of the deception practised by the appellant in misrepresenting in his application that he held such a degree.
On the other hand, it is contended for the appellant that the delivery of 'property ' is to be by the person deceived, in view of the language of section 415 I.P.C., and that the person deceived, if any, was the Service Commission and not the Government, the application containing the misrepresentation having been made to the Service Commission and not to the Government.
We accept the contention for the respondent.
The ap pointments to the Medical Services are made by Government.
The Service Commission simply selected the candidates and recommends their names to Government for appointment.
This is clear from letter Exhibit P. 47 from the Secretary to the Service Commission to the Surgeon General with the Government of Madras.
The letter refers to the enclosing 415 of a list containing the names and other particulars of the candidates who were successful at the examination, their names being arranged in order of merit.
It refers to the relaxing of a certain rule in view of the paucity of candidates and states that they may be appointed, if necessary, pending receipt of the certificate of physical fitness and a further communication from the commission.
This is also clear from the provisions of the Government of India Act, 1935.
Section 241 provided that appointments in connection with the affairs of a Province will be made by the Governor of the Province.
Sub section
(1) of section 266 makes it a duty of the Provincial Public Service Commission to conduct examinations for appointments to the Services of a Province.
Clause (a) of sub section
(3) provides that the Provincial Public Service Commission shall be consulted on all matters relating to methods of recruitment to civil services and for civil posts and cl.
(b) provides that it shall be consulted on the principles to be followed in making appointments to civil services and posts and on the suitability of candidates for such appointments.
The Public Service Commission is constituted in pursuance of the provisions of section 264.
It is thus a statutory body and independent of the Government.
This aspect of a Public Service Commission was emphasized in State of U.P. vs Manbodhan Lal Srivastava(1) when considering the corresponding provisions of article 320 of the Constitution.
This Court said: "Once, relevant regulations have been made, they are meant to be followed in letter and in spirit and it goes without saying that consultation with the Commission on all disciplinary matters affecting a public servant has been specifically provided for in order, first, to give an assurance to the Services that a wholly independent body, not directly concerned with the making of orders adversely affecting public servants, has considered the action proposed to be taken against a particular public servant, with an open mind; and, secondly, to afford the Government unbiassed advice and opinion on matters vitally affecting the morale of public services".
It is in view of these provisions that the Public Service Commission invites applications for appointment to the various posts under the Government and subsequently makes a selection out of the candidates for appointment to those posts.
The selection may be after holding a written examination Dr after interviewing candidates or after doing both.
Names oil the candidates selected are arranged in order of merit and forwarded to the Government.
The Government is expected, as a rule, (1) ; 543. 116 to make appointments to the posts from out of the list, in the same order.
It has, however, discretion not to appoint any part of the persons so selected and securing a place in the order of merit which would have ordinarily led to his appointment.
Any representation made in an application for appointments is really a representation made to the Government, the appointing authority, and not only to the Public Service Commission to which the application is presented and which has to deal with that application in the first instance.
up to the stage ,of selection.
The object of the applicant was to secure an appointment and not merely to deceive the Public Service Commission and sit at the examination or to appear at the interview.
The deception was practised for that purpose and therefore there seems to be no good reason for holding that the deception came to an end once the Service Commission was deceived and had taken action on it as a result of the deception.
A false representation in an application to the Service Commission continues and persists to be so till the application is considered by the final authority responsible for making the appointments and must therefore be deemed to be made to that final authority as well.
In the instant case, when the recommendation of the Service Commission was sent to the Government, the qualifications of the recommended candidates, including the fact that the appellant had passed the M.B.,B.S. examination were mentioned.
The Government therefore believed that the appellant possessed the degree of M.B.,B.S., that as the Service Commission had scrutinized the application in that regard and had satisfied itself that the appellant possessed that degree.
The consequence of that is that the Government were led to believe that fact, which thus became a false representation.
We are therefore of opinion that the appellant 's misre presentation to the Service Commission continued and persisted till the final stage of the Government passing an order of appointment and that therefore the Government itself was deceived by the misrepresentation he had made in his application presented to the Service Commission.
The fact that the Service Commission is an independent statutory authority has no relevant bearing on this question.
It is a statutory body as it is constituted under he provisions Of a statutes.
It is independent of the Government in the sense that in its selection of candidates or in its tendering advice to the Government it does not take any hint or instructions or due from the Government.
It brings to bear its own independent mind to judge the comparative merits of the candidates and their suitability to the posts they apply for.
Its function is to advise the Government on the suitability of the candidates.
It is therefore a statutory adviser to Government in the matter of appointment to the Services.
Deception of such an adviser is 417 deception of the Government which is expected to pay heed to its advice and act accordingly.
There have been cases in which servants or agents of an authority have been deceived while the loss has been suffered by the authority concerned.
In such cases, the person deceiving the servants or agents has been held to have deceived the authority concerned, though no direct question was raised about the deception being made not to the authority but to is servant.
The principle of the cases, to our mind, fully applies to the case of candidates deceiving the Public Service Commission and thereby deceiving the Government in believing that they satisfied the various conditions prescribed for candidates for those appointments.
We may refer to some such cases.
In the Crown vs Gunput(1) the accused who had produced a railway pass with an altered number before the ticket collector when traveling by a train, was held to have thereby dishonestly induced the railway company to do or omit to do what they otherwise would not have done or omitted by the production of the altered pass.
The deception of the ticket collector was considered to be deception of the railway company.
In P. E. Billinghurst vs H. P. Blackburn(2) certain bills were presented by a company for payment.
They were checked by Government officials who were deceived by certain repre sentations made by subordinate officials through whom the bills had passed, and consequently payments were made in satisfaction of the demands under the bills.
The persons concerned in causing the deception were convicted of cheating the Government.
In Legal Remembrancer vs Manmatha Bhusan Chatterjee and Legal Remembrancer vs Hridoy Narain(3) it was held that if the evidence showed that responsible officers of the East Indian Railway Company and its Asansol Office were deceived and induced either to allot wagons to a certain colliery which would not otherwise have been allotted or to make out wagon chalans for the colliery which would not otherwise have been made, it was sufficient to support the allegations in the charges that the railway company was, by reason of deceipt, induced to act in a certain way.
The deception of the responsible officers was thus taken to be the deception of the railway company, the possible damage to whose reputation was remote.
In Emperor vs Fazal Din(4) it was held that the deception practised was likely to cause damage or harm to the person on (1)1868 Punj.
Col. Case No. 6.
(2) (3)I.L.R. (4)1906 L/P(D)ISCI 14 418 whom it was practised or to the railway authorities whose agent he was in the matter of appointments.
In Queen Empress vs Appasaimi(1) the act of the accused in obtaining, by personation, a hall ticket from the Superintendent at a University Examination and in signing the name of another person on the examination papers was held to indicate an intention on his part to lead the University authorities to believe that the examination papers were answered by the other person.
This again is on the principle that the deception of the Superintendent who was working for the University was a deception of the University itself.
Similarly, in Ashwini Kumar Gupta vs Emperor(2) the accused personated another person at a University examination cheating the Registrar.
It was held that this not only damaged the reputation of the Registrar, but also that of the University.
Reference may also be made to the case reported as In re: Hampshire Land Company(3) in which a Society had lent money to a company on the borrowing of the directors of that company who were not competent to borrow, the resolution conferring on them the power of borrowing being invalid for certain reasons.
It was held that the Society had a right to assume, in a case like that, that all the essentials of internal management had been carried out by the borrowing company.
On the same principle it can be said that the Government of the State had a right to assume that the Service Commission had verified that the candidates selected by it for appointment by the Government possessed the necessary qualifications and in that view the scrutiny by the Service Commission can be said to be on behalf of the Government.
The Government appointed the appellant to a post in its Medical Service on being induced by deception that he was fully qualified for the appointment.
In consequence of the appointment, Government had to pay him.
the salaries which fell due.
It is clear therefore that the appellant, by deceiving the Government, dishonestly induced it to deliver property to him and thus committed the offence of cheating under section 415 I.P.C. as he pretended to be Kaza Krishnamurthy which he was not.
The offence really committed by him was 'cheating ' by personation, punishable under section 419 I.P.C.
The conviction of the appellant for this offence is therefore correct.
We accordingly dismiss his appeal and order that he will surrender to his bail and serve out the sentence.
Appeal dismissed. | The appellant applied for a post advertised by the Madras Public Service Commission, making certain representations in his application which were found to be false.
He was convicted under section 419 Indian Penal Code for having cheated the commission.
This conviction was confirmed by the Sessions Judge and the revision was dismissed by the High Court.
Held: (i) Cheating can be committed in either of the two ways described in section 415 Indian Penal Code. 'Deceiving a person ' is common in both the ways of cheating.
(ii) The appellant 's misrepresentation to the Service Com mission continued and persisted till the final stage of the Government itself was deceived by the misrepresentation made in the application presented to the Service Commission.
The Service Commission is a statutory adviser to the Government in the matter of appointment to the Service.
Deception of such an adviser is deception of the Government which is expected to pay heed to its advice and act accordingly.
State of U.P. vs Manbodhan Lal Srivastava ; , The Crown vs Gunput, 1868 Punj.
Case No. 6, P. E. Billinqhurst vs H. P. Blackburn, , Legal Remembrancer vs Manmatha Bhusan Chatterjee, & Legal Remem brancer vs Hridoy Narian I.L.R. , Emperor vs Fazal Din , Queen Empress vs Appasami, I.L.R. Mad. 151.
Ashwani Kumar Gupta vs Empreror.
I.L. R. and In re: Hampshire Land Company, referred to. |
Appeal No. 251 of 1963.
Appeal by special leave from the judgment and order dated March 20, 1957, of the Patna High Court in Civil Revision No. 40 of 1956.
M. C. Setalvad, and R. C. Prasad, for the appellants.
The respondent did not appear.
March 24, 1964.
The short question which arises in this appeal is whether the term "wages" as defined by section 2(vi) of the (No. 4 of 1936) (hereinafter called 'the Act ') includes wages fixed by an award in an industrial dispute between the employer and his employees.
This question has to be answered in the light of the definition prescribed by section 2(vi) before it was amended in 1958.
The subsequent amendment expressly provides by section 2(vi) (a) that any remuneration payable under any award or settlement between the parties or order of a Court, would be included in the main definition under section 2(vi).
The point which we have to decide in the present appeal is whether the remuneration payable under an award was not already included in the definition of wages before the said definition was amended.
It is common ground that between the appellant, Sasamusa Sugar Works Ltd., and its workmen, the respondents, an award had been made by an Industrial Tribunal fixing the pay of the employees at Rs. 2/2/ per day, and in pursuance of the said award, the management of the appellant had entered into an agreement with the respondents that effect would be given to the wage structure, prescribed by the said award.
This agreement was subsequently published in the Bihar Gazette as a part of the award.
In spite of the award and the agreement, the appellant paid its employees only As.
/ 10 / per day and that led to the present claim made by the respondents under section 15 of the Act.
The respondents contended before the payment of wages authority that the refusal of the appellant to pay to them wages at the rate awarded, in substance, amounted to an illegal deduction from their wages and on that basis, they asked for an order from the authority directing the appellant to pay to the respondents the said prescribed wages.
The appellant raised two pleas against the respondents ' claim.
It urged that section 15 of the Act was inapplicable, because the rates of wages fixed by the award did not fall within the definition of wages prescribed by section 2(vi) and it also argue,, that the claim of the respondents was barred by limitation.
421 The authority has found that section 2(vi) includes wages prescribed by the Industrial Tribunal, and so, it has rejected the appellants ' contention that the applications made by the respondents were incompetent under section 15 of the Act.
In regard to the question of 'limitation, the authority did not decide the said question as a preliminary question, because it held, and, in our opinion, rightly, that it was a mixed question of fact and law, and so, it had to be tried after recording evidence.
The appellant challenged the correctness of the conclusion of the authority that the applications made by the res pondents were competent under section 15 of the Act before the Patna High Court by filing a petition under article 226 of the Constitution.
The High Court has affirmed the finding of the authority and held that section 15 was applicable to the case, because the wages prescribed by the award did amount to wages as defined by section 2(vi) of the Act.
On that view, the writ petition filed by the appellant was dismissed.
It is this order which the appellant seeks to challenge before us by its present appeal by special leave.
Section 2(vi) as it stood at the relevant time, provides, inter alia, that wages means all remuneration, capable of being expressed in terms of money, which would, if the terms of the ,contract of employment, express or implied, were fulfilled, be payable.
Mr. Setalvad for the appellant contends that before it is held that the wages prescribed by the award fall under section 2(vi), it must be shown that they constitute part of the terms of the contract of employment, either express or implied.
The terms in question need not be express and can be implied; but they must be terms which arise out of the contract of employment, and since an award made by an Industrial Tribunal cannot be said to amount to a contract of employment, the wage structure prescribed by the award cannot fall within the definition prescribed by section 2(vi).
That, in brief, is the substance of the argument raised by the appellant.
We are not inclined to hold that even under the unamended definition of wages, rates of remuneration prescribed by an award could not be included.
In dealing with the question of construing the unamended definition of the term "wages", it is essential to bear in mind the scope and character of the powers conferred on Industrial 'Tribunals when they deal with industrial disputes under the provisions of the Indus trial Disputes Act.
It is now well settled that unlike ordinary civil courts which are bound by the terms of contract between the parties when they deal with disputes arising between them in respect of the said terms, Industrial adjudication is not bound to uphold the terms of contract between the employer and the employees.
If it is shown to the satisfaction of Industrial adjudication that the terms of contract of employment, 422 for instance, need to be revised in the interests of social justice. it is at liberty to consider the matter, take into account all relevant factors and if a change or revision of the terms appears to be justified, it can, and often enough it does, radically change the terms of the contract of employment.
The development of industrial law during the last decade bears testimony to the fact that on references made under section 10(1) of the Industrial Disputes Act, terms of employment have constantly been examined by industrial adjudication and wherever it appeared appropriate to make changes in them, they have been made in accordance with the well recognised principles of fair play and justice to both the parties.
Therefore the basic assumption made by Mr. Setalvad in contending that section 2(vi) cannot take in the wages prescribed by the award, is not well founded.
When an award is made and it prescribes a new wage structure, in law the old contractual wage structure becomes inoperative and its place is taken by the wage structure prescribed by the award.
In a sense, the latter wage structure must be deemed to be a contract between the parties, because that, in substance, is the effect of industrial adjudication.
The true legal position is that when industrial disputes are decided by industrial adjudication and awards are made, the said awards supplant contractual terms in respect of matters covered by them and are substituted for them.
That being so, it is difficult to accede to the argument that the wages prescribed by the award cannot be treated as wages under section 2(vi) of the Act before it was amended.
The amendment has merely clarified what, in our opinion, was included in the unamended definition itself.
In this connection,we may incidentally refer to the decision of this Court in the South Indian Bank Ltd. vs A. R. Chacko(1), where it has been observed by this Court that the very purpose for which industrial adjudication has been given the peculiar authority and right of making new contracts between employers and workmen makes it reasonable to think that even though the period of operation of the award and the period for which it remains binding on the parties may elapse in respect of both of which special provisions have been made under sections 23 and 29 respectively the new contract would continue to govern the relations between the parties till it is replaced by another contract.
This observation clearly and emphatically bring out that the terms prescribed by an award, in law, and in substance, constitute a fresh contract between the parties.
This question appears to have been considered by the Bombay and the Calcutta High Courts.
In Jogendra Nath (1) A.I.R. 1964 S.C. 15.
423 Chatterjee and Sons vs Chandreswar, Singh(1), the Calcutta High Court appears to have taken the view which supports Mr. Setalvad 's argument, whereas in the Modern Mills Ltd. vs V. R. Mangalvedhkar(2), and in V. B. Godse, Manager, Prabha Mills Ltd., vs R. M. Naick, Inspector, under the Payment of Wages Act(3), the Bombay High Court has interpreted section 2(vi) to include wages directed to be paid by industrial adjudication.
In our opinion, the Bombay view correctly represents the true legal position in the matter.
The result is, the appeal fails and is dismissed.
The matter will now go back to the authority under the Act for disposal in accordance with law.
There would be no order as to costs.
Appeal dismissed (1) A.I.R. 1951 Cal. 29.
(2) A.I.R. 1930 Bom. | In pursuance of an award made by an Industrial Tribunal fixing the pay of the employees at Rs. 2/2/ per day, the management of the appellant had entered into an agreement with its workmen, that the effect would be given to the wage structure prescribed by the said award.
In spite of the award and the agreement, the appellant paid its employees only As.
/10/ per day and that led to the present claim made by the respondents under section 15 of the Payment of Wages Act.
They asked for an order from the payment of wages authority directing the appellant to pay the said prescribed wages.
Against the respondent 's claim it was urged by the appellant that section 15 of the Act was inapplicable, because the rates of wages fixed by the award did not fall within the definition of wages prescribed by section 2(vi) of the Act.
The authority rejected the appellant 's contention.
The appellant then challenged the correctness of the conclusion of the authority before the High Court under article 226 of the Constitution.
The High Court dismissed the writ petition and affirmed the finding of the authority.
It held that section 15 was applicable to the case, because the wages prescribed by the award did amount to wages as defined by section 2(vi) of the Act.
On appeal by Special Leave the appellant contended that before it is held that the wages prescribed by the award fall under section 2(vi), it must be shown that they constitute part of the terms of the contract of employment, either express of implied.
Held: The argument is not well founded.
When an award is made and it prescribes a new wage structure, in law the old contractual wage structure becomes inoperative and its place is taken by the wage structure prescribed by the award.
In a sense, the latter wage structure must be deemed to be the contract between the parties, because that, in substance, is the effect of industrial adjudication.
The true legal position is that when industrial disputes are decided by industrial adjudication and awards are made, the said awards supplant contractual terms in respect of matters covered by them and are substituted by them.
That being so, it is difficult to hold that the wages prescribed by the award cannot be treated as wages under section 2(vi) of the Act before it was amended.
The amendment has merely clarified what was included in the unamended definition itself.
South Indian Bank Ltd. vs A. R. Chacko, A.I.R, 1964 S.C. 1522, referred to.
Jogindra Nath Chatterjee and Sons, V. Chandreswar Singh, A.I.R., , inapplicable.
Modern Mills Ltd. vs V. R. Mangalvedhikar, A.I.R., 1950 Bom.
342 and V. B. Godse, Manager, Prabha Mills Ltd. vs R. M. Naick , approved L/P(D)lSCI 14(a) 420 |
Appeal No. 240 of 1955.
732 Appeal by special leave from the judgment and order dated September 3, 1953, of the Bombay High Court in Income tax Reference No. 15 of 1953.
Hardayal Hardy and D. Gupta, for the appellant.
G. section Pathak, section P. Mehta, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the respondent.
February 3.
The Judgment of Gajendragadkar and Wanohoo, JJ. was delivered by WANCHOO, J.
In this matter by our order made on April 24, 1958, we had referred the case back to the Tribunal to submit a further statement of case on certain questions.
That statement of case has now been drawn up by the Tribunal and sent to this Court.
The matter is now ready for decision.
This is an appeal by the Commissioner of Incometax, Bombay, against the judgment of the High Court at Bombay given on a reference under section 60(2) of the Income tax Act answering the question referred, in the negative.
That question was, " Whether, in any event, on the facts found by the Tribunal, there was any remittance by the petitioner to Bombay within the meaning of and assessable under section 4(1) (b) (iii) of the Income tax Act,.
" The assessment year concerned was 1948 49, the accounting year being 2003 Sambat.
The facts found may now be stated.
At the relevant time, Bhavnagar was a ruling State and therefore outside British India.
There was a mill there which we shall, for brevity, call the Bhavnagar Mills.
The assessee and his brother Gordhandas had large sums in deposit with the Bhavnagar Mills.
These sums were profits earlier earned by the assessee and his brother in Bhavnagar.
The amounts deposited belonged to the assessee and his brother in equal shares, The Bhavnagar Mills kept an account of these deposits.
This account showed that on April 7, 1947, a sum of Rs. 50,000/ had been paid out to Harkisondas Ratilal and another sum of the same amount to Dilipkumar Trikamlal.
There is another mill in Bombay which we shall call the Bombay Mills.
The account of the Bombay Mills showed that on April 3, 733 1947, Rs. 50,000/ had been received from each of Harkisondas Ratilal and Dilipkumar Trikamlal.
Harkisondas Ratilal and Dilipkumar Trikamlal were the benamidars for the assessee and his brother and the entries indicated that the moneys had been withdrawn from the Bhavnagar Mills by the assessee and his brother and advanced to the Bombay Mills.
The assessee and his brother were in full control of both the Bhavnagar Mills and the Bombay Mills.
On these facts the Tribunal had come to the conclusion that there had been a remittance of the assessee 's profits from Bhavnagar to Bombay, namely, Rs. 50,000/ being half of the amounts mentioned above, on account of his share and such remittance was taxable tinder section 4(1) (b) (iii).
The assessee raised the question with which we are concerned in view of this decision.
The High Court held that under the section income is taxable only when it is brought into or received in the taxable territory by the assessee himself and not when it is so brought into or received on behalf of the assessee and that all that the facts found by the Tribunal showed was that the assessee disposed of his accumulated income in Bhavnagar by directing his debtor, the Bhavnagar Mills, to pay an amount not to himself but to a third party, namely, the Bombay Mills.
According to the High Court, , " The result was that only one debtor was substituted for another.
This did not amount to a receipt of the money by the assessee himself in Bombay or to a bringing of it into Bombay by him.
" In this view of the matter, the High Court answered the question referred in the negative.
When the appeal was heard by us on the earlier occasion, the learned Advocate for the appellant contended that even on the basis on which the High Court had proceeded, namely, that there was only a substitution of one debtor for another, it has to be said that the money was received by the assessee himself in Bombay.
The contention was that the respondent could not become a creditor of the Bombay Mills unless he advanced the moneys to them.
734 His point was that even assuming that the receipt of the cheque by the Bombay Mills drawn in its favour by the Bhavnagar Mills did not amount to receipt of moneys by the respondent, as soon as the Bombay Mills credited the amount of it to the respondent, there was nationally a receipt of the money by the assessee and an advance of it by him to the Bombay Mills to create the debt.
The learned advocate for the assessee said in answer to this contention that there was nothing to show that the agreement for the advance of the money by the assessee to the Bombay Mills had not been made at Bhavnagar.
He also said that there was nothing to show as to how the money or the cheque came from Bhavnagar to Bombay and that it might have been that it was agreed between the assessee and the Bombay Mills at Bhavnagar that the money would be deposited in the Bombay Mills to the credit of the assessee and the cheque or the money might have been delivered to the Bombay Mills or its agent at Bhavnagar.
His contention was that if such was the case and on the evidence it could not be said that it was not then the notional receipt of the money by the assessee and its advance by him to the Bombay Mills, if any, would have taken place in Bhavnagar and when the money was thereafter brought to Bombay, it was the Bombay Mills ' own money.
In this view of the matter, according to the learned advocate for the assessee, the moneys could not be subject to tax under the section.
In this position of the arguments then advanced, we observed as follows : " It seems to us that this contention of the learned advocate for the respondent has to be dealt with before this appeal can be finally disposed of.
We therefore think it fit to refer the case back to thaT Tribunal to submit a further statement of case, after taking such evidence as may be necessary, as to show how the cheque was brought from Bhavnagar to Bombay and what agreement had been made between the parties concerned as a result of which the amount of the cheque was credited in the names 735 of Harkison Ratilal and Dilipkumar Trikamlal in the accounts of the Bombay Mills.
The Tribunal will submit its report within four months.
In view of this order we refrain from expressing any opinion on any of the points argued at the bar.
" It is pursuant to this order that the further statement of case has been submitted by the Tribunal.
In its statement of case now submitted the Tribunal found the following facts: The Bhavnagar Mills had an account in the Bank of India Limited at one of its Bombay Branches.
A cheque book in respect of this account was with the assessee who had power to operate it on behalf of the Bhavnagar Mills.
The assessee acting on behalf of the Bhavnagar Mills drew a cheque on the Bhavnagar Mills aforesaid account in the Bank of India Limited on April 3, 1947, in favour of self.
This was done in Bombay.
This cheque was handed over by the assessee to the Bombay Mills in Bombay for being credited in the account of the Bombay Mills in the names of Harkison Ratilal and Dilipkumar Trikamlal which were really the benami names of the assessee and his brother.
The Bombay Mills on the same date presented this cheque to another branch of the Bank of India Ltd. in Bombay where they had an account, for deposit in that account.
The actual entries in the books of the different branches of the Bank were made on April 5, 1947.
The Bombay Mills also made entries in their own books crediting the moneys received on the cheque, to Harkison Ratilal and Dilipkumar Trikamlal.
The assessee in his turn instructed the Bhavnagar Mills to debit the joint account of himself and his brother with it in the sum of Rs. 1 lac as having been paid to Harkison Ratilal and Dilipkumar Trikamlal.
This entry was actually made a little later, namely on April 7, 1947.
The facts now found would show that nothing had been done at Bhavnagar.
It was also found that as the Bombay Mills needed moneys and the assessee had money with the Bhavnagar Mills, he utilised these latter moneys for an advance being made by him out of it to the Bombay Mills, 94 736 As will appear from our earlier order hereinbefore set out, none of the points arising in the appeal had been decided by us on that occasion.
The question that we have to decide is whether on these facts it can be said that income had been brought into or received in Bombay by the assessee.
The relevant portion of the section is in these terms : " 4.
(1) Subject to the provisions of this Act, the total income of any previous year of any person includes all income, profits and gains from whatever source derived which (a). are received or are deemed to be received in the taxable territories in such year by or on behalf of such person, or (b). if such person is resident in the taxable territories during such year, (i). accrue or arise or are deemed to accrue or arise to him in the taxable territories during such year, or (ii) accrue or arise to him without the taxable territories during such year, or (iii).having accrued or arisen to him without the taxable.territories before the beginning of such year and after the 1st day of April, 1933, are brought into or received in the taxable territories by him during such year, or (c). if such person is not resident in the taxable, territories during such year, accrue or arise or are deemed to accrue or arise to him in the taxable territories during such year.
" In the present case we are concerned with cl.
In order however to understand what the words " brought into or received in the taxable territories by him " mean we have to consider the whole scheme of this subjection.
The subjection mainly deals with the total income of any previous year which is chargeable to income tax under section 3 of the Act.
It is divided into three parts.
The first part, which is el.
(a) provides that all income, profits and gains received or deemed to be received in the taxable territories in such year by or on behalf of such person will be included in the taxable income.
So far as el.
(a) is 737 concerned, it is immaterial whether the person is resident in the taxable territories or is not resident therein; as long as income etc.
is received in the taxable territories by or on behalf of such person in the previous year, it is liable to be included in the computation of total income.
Under this clause therefore it is the receipt in the previous year that is material and the residence of the person to be taxed is immaterial.
It has been held under this clause that receipt must be the first receipt in the taxable territories and if income etc.
has been received elsewhere in the same year and is then brought into the taxable territories it should not be considered to be income etc.
received in such year in the taxable territories: (see Keshav Mills Ltd. vs Commissioner of Income tax The basis of this decision obviously is that cl.
(a) is dealing with the receipt of income etc.
in the taxable territories in the year in which it has accrued or arisen and in those circumstances it is the first receipt of such income in the taxable territories that gives rise to liability of the charge of income tax.
If such income etc.
accruing or arising in the previous year has already been received outside the taxable territories it cannot be said to be received again as such in the taxable territories, if it is brought from the place where it was received as such into the taxable territories.
The second part which is cl.
(b) deals with the case of a person Who is resident in the taxable territories during such year.
In his case all income which accrues or arises or is deemed to accrue or arise to him in the taxable territories during such year is chargeable to income tax; besides, all income etc.
which accrues or arises to him without the taxable territories during such year is also chargeable to income tax.
Then comes the part with which we are directly concerned and which provides that all income etc.
which having accrued or arisen to such person without the taxable territories before the beginning of such year and after the first day of April 1933 is brought (1) ; 738 into or received in the taxable territories by him during such year will be chargeable to income tax.
This is a special provision relating to income etc.
which has accrued or arisen not in the previous 'year but in years previous to that though after April 1, 1933.
This special provision relating to a person resident in the taxable territories must be distinguished from the provision in el.
(a) in connection with which it has been held that the receipt there meant must be the first receipt, for cl.
(a) applies irrespective of whether the person is resident in the territories or not to income etc.
of the previous year received in the taxable territories in the same year.
Clause (b)(iii) on the other hand refers to income etc.
which accrued before the previous year and is brought into or received in the taxable territories in such year by a person resident therein, and obviously the considerations which led this Court to hold in Keshav Mills case(1) that the receipt in el.
(a) means the first receipt would not apply to this special provision in cl.
(b)(iii).
Mr. Pathak for the respondent however argues that the words in cl.
(b)(iii) are the same as in cl.
(a), namely, " are received " and therefore the receipt in cl.
(b)(iii) must also be the first receipt.
These words however are not terms of art and in our opinion their meaning must receive colour from the context in which they are used.
In the context of cl.
(a) these words could only refer to the first receipt; but it does not follow from this that in the context of el.
(b)(iii) also they refer only to the first receipt.
Let us see what el.
(b)(iii) is meant to provide for.
It will be noticed that el.
(a), cl.
(b)(i) and (ii) and cl.
(c) deal only with income etc.
which has arisen in the previous year while el.
(b)(iii) deals with a special class of cases where a person resident within the taxable territories had income etc.
accruing or arising to him without the taxable territories and which he did not bring in the taxable territories as and when it arose but does so many years later.
In such a case it stands to reason that the income etc.
having arisen to such person, may be years before the previous year, must (1) ; 739 have been received by him outside the taxable territories ; but it is urged that cl.
(b)(iii) does not speak of receipt outside the taxable territories but only speaks of income etc.
having accrued or arisen to him without the taxable territories and that it is possible that though the income etc. might have accrued long ago it might not have been received even outside the taxable territories.
This is theoretically possible; but in our opinion it is clear that when el.
(b)(iii) speaks of income etc.
having accrued or arisen, without the taxable territories it is implicit in it further that such income etc.
having accrued or arisen without the taxable territories had already been received there.
Considering that el.
(b)(iii) applies to all income having accrued or arisen after the first day of April 1933 (that is more than 27 years ago now) it does not seem reasonable to hold that the words " having accrued or arisen " used in that clause have no reference to its receipt also outside the taxable territories.
It seems to us therefore that what cl.
(b)(iii) provides is that if any income etc. had arisen or accrued outside the taxable territories and had been received there sometime before the previous year and if such income etc.
is brought into or received in the taxable territories by such person in the previous year it will be liable to be charged under section 3.
In the circumstances, looking to the special pro.
vision of el.
(b)(iii) it would be reasonable to infer that what it contemplates is bringing into or receipt in the taxable territories in the previous year of income etc.
which had already accrued or arisen without the tax.
able territories earlier than the previous year and may have also been received there.
Any other interpretation would really make that part of cl.
(b)(iii) which refers to," received in the taxable territories " more or less useless, for it is not likely that income having accrued or arisen outside the taxable territories before the previous year should not have been received also outside the taxable territories.
Therefore, the reason.
able interpretation of el.
(b)(iii) is that if a person resident in the taxable territories has already received without the taxable territories any income etc.
accruing or arising to him without the taxable territories 740 before the previous year brings that income into or receives that income in the taxable territories he would be chargeable to income tax under section 3.
Therefore, for the purpose of cl.
(b)(iii) the receiving in the taxable territories need not be the first receipt.
We shall later consider what will be the effect of this interpretation on the facts of this case.
Then there is cl.
(c), which deals with the case of a person resident outside the taxable territories to whom income etc.
has accrued or arisen or is deemed to have accrued or arisen in the taxable territories during the previous year.
It will thus be seen that cl.
(a) deals with a person who may or may not be a resident in the taxable territories and makes the income etc.
accruing or arising to him in the previous year liable to income tax if it is received or deemed to be received by him in the taxable territories also within the same year ; cl.
(b) deals with the case of a person who is resident in the taxable territories and gives a wider definition of the total income and cl.
(c) deals with a person not resident in the taxable territories and makes only such of his income as accrues or arises or is deemed to accrue or arise in the previous year in the taxable territories liable to income tax in addition to what is provided in el.
Let us now see on the facts of this case whether the respondent can be said to have received this sum of Rs. 50,000/ in the taxable territories during the previous year.
The statement of the case shows that this sum was income etc.
of the respondent which accrued to him outside the taxable territories and had been received by him there and deposited in the Bhavnagar Mills in his account.
It is also clear from the facts which we have set out already that this money which was lying to the credit of the respondent in the Bhavnagar Mills was received by him by means of a cheque on the Bank of India Ltd., Bombay, in which the Bhavnagar Mills had an account and on which the respondent had the authority to draw.
Having thus drawn the money by a cheque on the said bank, the respondent advanced it to the Bombay Mills and the cheque was cashed by the Bombay Mills and the 741 money was credited into the account of the respondent 's benamidars in the Bombay Mills.
There was thus clearly receipt in the previous year of income etc.
which had accrued to the respondent outside the taxable territories before the previous year and he would therefore be chargeable under section 3 of the Act with respect to this amount.
The High Court has held that the income would be taxable only when it is brought into or received in the taxable territories by the assessee himself and not when it was so brought or received on behalf of the assessee.
The relevant words of el.
(b)(iii) with which we are concerned are these: "are brought into or received in the taxable territories by him during such year.
" We have held that this is a case of receipt by the respondent in the taxable territories; it is therefore unnecessary to consider in the present case whether the words " brought into the taxable territories by him " mean that the income must be brought in by the person himself as held by the High Court.
This being a case of receipt, there can be no doubt that income etc.
was received by the respondent and the indirect, method employed in this case for receiving the money would none the less make it a receipt by the respondent himself Reference in this connection may be made to Bipin Lal Kuthiala vs Commissioner of Income tax, Punjab (1), where it was held that the money was received by the assessee even though in fact what bad happened there was that the assessee directed his debtor in Jubbal which was outside the taxable territories to pay money to his creditor in British India.
It was held that in the circumstances there was receipt of income in British India, though the method employed was indirect.
We are therefore of opinion that the respondent is liable to pay incometax on the sum of Rs. 50,000/ under section 4(1)(b)(iii) of the Act and the question framed therefore must be answered in the affirmative.
The result is that the appeal is allowed and the order of the High Court set aside.
The appellant will get the costs of this appeal and in the court below.
(1) A.I.R. 1956 S.C. 634.
742 SARKAR, J.
The facts necessary for this appeal are few and simple.
The assessee, who is the respondent in this appeal, was a resident of Bombay.
He had certain in come in Bhavnagar, a place without the taxable territories, which he had kept in deposit with a concern there.
This concern had an account in a bank in Bombay.
The assessee, presumably as one of the officers of the concern, could operate this account.
He drew, in Bombay, a cheque on this account which cheque eventually found its way into the account of a. concern in Bombay in a bank there and was credited in that account.
The Bombay concern thereafter made entries in its own books of account in respect of the amount of the cheque in favour of two persons of the names of Harkison Ratilal and Dilipkumar Trikamlal.
The Bhavnagar concern, in its turn, a few days later debited the account that the assessee had with it in respect of the deposits, with the amount of the cheque as moneys paid to these two persons.
These two persons however were only benamidars for the assessee.
The transactions, therefore, showed that the assessee had withdrawn the money from the concern at Bhavnagar out of its accumulated income and advanced it to the concern in Bombay.
The Tribunal found it as a fact that the assessee had utilised in Bombay his income lying at Bhavnagar for making an advance in Bombay.
These transactions took place in April 1947.
I have simplified the facts a little for clarity.
Actually the account in the concern at Bhavnagar was in the joint names of the assessee and his brother and the advance to the concern in Bombay was really in their joint names.
The assessee 's share was half of the amount of the cheque and with that share alone we are concerned in this case.
On these facts half the amount of the cheque as representing the assessee 's share of the accumulated income, was included in his total income, for assessment to income tax for the year 1948 49 under section 4(1)(b)(iii) of the Income tax Act, 1922.
That section so fair as is material is in these terms 743 section .4.
(1) Subject to the provisions of this Act, the total income of any previous year of any person includes all income, profits and gains from whatever source derived which (a). are received or are deemed to be received in the taxable territories in such year by or on behalf of such person, or (b). if such person is resident in the taxable territories during such year, (iii).having accrued or arisen to him without the taxable territories before the beginning of such year and after the 1st day of April, 1933, are brought into or received in the taxable territories by him during such year, or The only question is whether the assessee can be said to have " brought into " or " received " this income in Bombay within the meaning of sub cl.
(iii) of section 4(1)(b).
No other objection to the assessment was raised.
The respondent first contends that he cannot be said to have " received " the income in Bombay.
He contends that on the facts found it must be held that he had already " received " the income in Bhavnagar and he could not " receive " it again in Bombay or anywhere else.
It seems to me that this contention is well founded.
This Court has held that " Once an amount is received as income, any remittance or transmission of the amount to another place does not result in I receipt ', within the meaning of this clause, at the other place ": Keshav Mills Ltd. vs Commissioner of Income tax, Bombay (1).
No doubt, the observation was made with regard to el.
(a) of section 4(1).
But I am unable to find any reason why the word should have a different meaning in sub cl.
(iii) of a. 4(1)(b).
On the contrary, the words " brought into " in subel.
(iii) would furnish a reason, if one was necessary, for the view that the word " ' received " there means received for the first time.
I venture to think that this Court did not in Keshav Mills case (1), hold that that word in section 4(1)(a) meant, (1) , 962, 95 744 " the first receipt after the accrual of the income ", because of anything in the context in which the word occurred but because, in the nature of things, income can be " received " only once and not more than once, and a subsequent dealing with income after it has been received, can never be a " receipt " of income.
It seems to me that what was said in connection with the Act as it then stood, in Board of Revenue vs Ripon Press(1), namely, "that you cannot receive the same sum of money qua income twice over, once outside British India and once inside it " expresses the inherent nature of receipt of income and still holds good and unless the context compels a different meaning, which I do not find the present context to do, income can be received only once.
As, in the present case, it seems fairly clear that the assessee had received the income in Bhavnagar, I do not think he can be taxed on it on the basis that he " received " it in Bombay over again.
If, however, the assessee did not " receive " the income in Bombay, it seems clear to me that he "brought into" Bombay that income.
He got in Bombay an amount which he had earlier received in Bhavnagar as income, for he advanced it to a concern in Bombay and this he could not do if he had not got it.
The getting of the income in Bombay may not have been the receipt of it but how could he got it if he did not bring it in ? After the assessee received the income in Bhavnagar, it remained all the time under his control and that is why he could not receive it again: see Sundar Das vs Collector of Gujrat (2).
An assessee might however, change the shape of the income received.
Section 4(1) (b)(iii) does not require that in order that income may be brought into the taxable territories it is necessary, that the shape of the income should not have been changed since it was first received.
Indeed, it has not been contended to the contrary.
Sub clause (iii) of section 4(1)(b) would have completely defeated itself if it required that the income had to be kept in the same ,shape in which it had been received.
Whatever shape (1) Mad.
706 711.
(2) Lah.
745 the income had assumed, the assessee had it with him all the time as income and for the purpose of sub cl.
(iii) it could be brought into the taxable territories in that shape.
Now what the assessee had done with the income in this case was to put it with a party in Bhavnagar.
The income then took the shape of a debt due to him.
It became a right to receive money or moneys worth.
When he had that debt discharged in Bombay, he must have had it brought into Bombay.
Therefore he had brought the income into Bombay.
Suppose he had received the income in the shape of coins and had kept it in his safe at Bhavnagar and brought the coins into Bombay.
There would have been no doubt that he had brought the income into Bombay.
Suppose again, he had put the income originally received by him at Bhavnagar in a bank there and then he obtained a draft from the bank payable in Bombay and brought the draft from Bhavnagar to Bombay and cashed it there.
Again, there would be little doubt that he had, by this process, brought the income into Bombay.
It is well known that though income in income tax law is generally contemplated in terms of money, it may be conceived in other forms.
In fact anything which represents and produces money and is treated as such by businessmen, would be income: see per Lord Lindley in Gresham Life Assurance Society Ltd. vs Bishop (1) and per Lord Halsbury L.C. in Tennant vs Smith (2).
If the bringing of the bank draft would be bringing of income, I am unable to see why the bringing of a right to receive the money would not be bringing of income when that right has been exercised and turned into moneys worth.
Such a right would be based on a promise by the debtor to pay and though verbal, would be considered by businessmen to represent money.
The assessee in Bombay used that right and obtained moneys worth.
He accepted the Bhavnagar concern 's cheque in Bombay, gave it a pro tanto discharge for the debt owing by it to him.
He used the cheque in acquiring a new asset, namely, a promise by the (1) ; 296, (2) ; , 156.
746 Bombay concern to pay money.
Therefore, in my view, the respondent assessee was liable under section 4(1)(a), (b)(iii) to be taxed ON the amount of the cheque as income which he had brought into the taxable territories.
I would hence allow the appeal and answer the question referred, in the affirmative.
Appeal allowed. | The assessee, resident in British India, had some money in deposit with a concern in Bhavnagar, outside British India.
On April 7, 1947, he transferred part of it to a concern in Bombay.
He was assessed to tax on this amount under section 4(i)(b)(iii) of the Income tax Act.
The assessee contended that to attract the application of section 4(i)(b)(iii) the receipt in the taxable territory must be the first receipt of income.
Held, that the assessee was liable to tax on this amount.
Per Gajendragadkar and Wanchoo, JJ.
Where a person, resident in the taxable territories, has already received, outside the taxable territories, any income etc.
accruing or arising to him outside the taxable territories before the previous year brings that income into or receives that income in the taxable territories he would be chargeable to income tax thereon.
Though for the purposes of cl.
(a) of section 4 the receipt must be the first receipt of income in the taxable territories, for the purposes of cl.
(b)(iii) the receiving in the taxable territories need not be the first receipt.
Keshav Mills Ltd. vs Commissioner of Income tax ; , referred to.
Per Sarkar, J.
The income could not be said to have been "received" in the taxable territory within the meaning of cl.
(b)(iii) as income could be received only once.
But it is clear that the assessee " brought into " Bombay that income.
It was immaterial in what shape he received the income in Bhavnagar and in what shape he brought it in Bombay.
Keshav Mills Ltd. vs Commissioner of Income tax ; , Board of Revenue vs Ripon Press Mad.
706 and Sundar Das vs Collector of Gujrat (1922) I.L.R. , applied.
Gresham Life Assurance Society Ltd. vs Bishop [1902] A.C. 287 and Tennant vs Smith ; , referred to. |
Appeal No. 490 ,of 1962.
Appeal by special leave from the judgment and order dated October 20, 1959 of the Punjab High Court in Regular Second Appeal No. 1591 of 1959.
Kartar Singh Chawla and Harbans Singh, for the appellants.
I. M. Lal and M. R. K. Pillai, for the respondents.
March 24, 1964.
The Judgment of the Court was delivered by HIDAYATULLAH, J.
This is a defendants ' appeal by special leave against the order of the High Court of Punjab dated October 20, 1959 dismissing summarily second appeal filed by the appellants.
The suit was filed by the respondents for possession of a plot, a house and a Kaur and half share in certain lands as preferential heirs of one Pohla after the death 431 of Pohla 's widow Punjab Kaur on February 7, 1952.
The plaintiffs are Mst.
Nikko, sister of Pohla and Jarnail Singh, son of Mst.
Har Kaur who was another sister of Pohla.
The first appellant Mara is a collateral of 4th degree of Pohla and the other two appellants are Mara 's sons.
The following genealogy gives the relationship of the parties: Sualtani : : : : : : Sohela Baghaila : : : : Mara defendant No.1 : : Pir Bux Jaimal Sunder : : died sonless : : and wifeless : : : : : Mohinder Singh Major : : : Singh Pohla Mst.
Har Kaur Mst.
Nikku defendant defendant (son) (daughter) alias Punjab No.2 No.3 : : Kaur (daughter) : : wife of Santa Shrimati Jarnail son Singh Jat, Punjab of Arjun resident of widow Plaintiff Ayali Kalan, No.2 No.2 Plaintiff No.2 The parties are Jhalli Jats of village Chomon, Tehsil and District Ludhiana.
The plaintiffs claimed that the property was non ancestral and according to the Riwaj applicable to the family, sisters excluded collaterals in respect of both ancestral and non ancestral properties.
It appears that after the death of Panjab Kaur, Mara got one of the fields mutated in his own name and thereafter took possession of the whole property.
He made gifts to his sons of some of the properties and that is why they were joined in the suit.
Mara and his elder son Mohinder Singh filed a joint written statement in which they raised many pleas the details whereof need not be given here.
They claimed that according to the custom applicable to the family, sister and sister 's sons were excluded from inheritance in respect of properties whether ancestral or nonancestral.
They however claimed that the property was ancestral and denied the genealogy.
The Subordinate Judge, Second Class, Ludhiana framed six issues of which issues No. 2, 3 and 4 alone are important in this appeal.
Those issues are: "2.
Whether the property is ancestral qua Pohla and Mara?" "3.
Whether the question of the nature of the property is material for the decision of tons case?" 432 "4.
Whether the plaintiffs are preferential heirs to the estate of Mst.
Panjabo widow of Pohla?" The parties led voluminous oral evidence in the case but the Subordinate Judge did not rely upon it.
We have not been referred to any portion of this evidence in this appeal.
The learned Subordinate Judge held that the suit lands were not ancestral and further that no evidence was produced to prove that the other properties were ancestral.
On the third issue he referred to question No. 52 from the Riwaj i am relating to the settlements of 1882 and 1909 1910 (Exts.
and D 2) in which it is stated that among the Jhalli Jats of Tehsil Ludhiana sisters or sisters ' sons never succeed.
He, however, held on the authority of Ahmad vs Mohammad and others(1) that since question refers only to ancestral property and that the nature of the property was thus material.
On the fourth issue he held on the strength of the answer to question No. 52 that sisters and their sons were excluded from ancestral property but as the answer was not applicable to non ancestral property the personal law would apply unless special custom was proved.
He therefore placed the burden on ,he defendants relying upon Harnam Singh vs Mst.
Gurdev Kaur, (2) MSt.
Sukhwant Kaur vs section Balwant Singh and others(3) and Mst.
Jeo vs Ujagar Singh.(4) As he had already rejected the oral evidence and there was no other proof that the property was ancestral, he decreed the suit.
On appeal the District Judge, Ludhiana remitted three issues to the trial Judge and they were as follows: "Issue No. 4: Whether there is any custom by which the parties are governed according to which the plaintiffs are entitled to succeed to the ancestral as well as non ancestral left by the Pohla in preference to Mara defendant?" "Issue No. 4A: Whether under the custom by which parties are governed the defendant Mara is a preferential heir to the plaintiffs in respect of the ancestral as well as non ancestral property of Pohla deceased?" (1) A.I.R. 1936 Lah.
(2) (3) A.I.R. 1951 Simla 242.
(4) 433 "Issue No. 4B: If the custom set out by the parties is not proved, whether the plaintiffs are preferential heirs to Mara defendant under personal law applicable to the parties?" On these issues the report of the Subordinate Judge, First Class, Ludhiana was against the contention of the defendants.
The learned District Judge held, in agreement with the Subordinate Judge, that the lands in suit were not ancestral and he held also that there was no evidence to show that among the Jhalli Jats of Ludhiana collaterals excluded sisters and sisters ' sons in respect of non ancestral property.
He referred to Exts.
9, 10, 12 and 13 which were judgments in other cases as evidencing the contrary.
He accordingly dismissed the appeal.
The Second appeal filed thereafter was dismissed summarily by the High Court.
The first question to decide is whether these lands are ancestral or non ancestral.
The concurrent finding of the two courts below is that none of the properties in dispute is ancestral.
The High Court prima facie saw no reason to differ from any of the conclusions of the courts below.
It is contended on the strength of a Kafiat of Thulla Malla prepared at the settlement of 1882 that this land came into possession of one Sekhu who was admittedly a common ancestor in the family and the property, which is now in dispute, must be regarded as ancestral.
It is contended that the finding is vitiated because the two courts below did not read this Kafiat alongwith the extracts from the Records of rights of the years 1882 and 1909 1910 in which the names of Jaimal and Sunder, sons of Baghela, and of Pir Bux son of Sohila are shown as persons in enjoyment of half shares in these lands.
It is argued that the lands in suit are thus proved to be ancestral as they belonged to Sekhu the common ancestor and the Riwaj i am as disclosed in question No. 52 applies to the case.
It appears, however, from the Kafiat as well as the Record of Rights that these lands were once abandoned and when people came back Sekhu got possession of some lands but in addition to these Sekhu 's descendants had acquired the share of one Dalpat in the Thulla and subsequently the entire estate of another holder, namely, Maidas was purchased by Jaimal, Sunder and Sohila.
This shows that the lands in dispute are not entirely ancestral but are made up of lands which may be described as ancestral and non ancestral.
Now, it has been ruled in the Punjab consistently that where lands are so mixed up that the ancestral and nonancestral, portions cannot be separated they must be regarded 434 as non ancestral, unless it is shown which are ancestral and which are not.
This was laid down by the Privy Council in Avtar Singh vs Thakar Singh(1).
It was held by Mr. Justice Kapur (as he then was) in Indar Singh vs Gulzara Singh and others(2) basing himself upon Saif ul Rahman vs Mohammand Ali Khan(3) and Jagtar Singh vs Raghbir Singh(4) that land ceases to be ancestral if it comes into the hands of an owner otherwise than by descent.
Once these conclusions are reached, it is quite obvious that the decision of the District Judge not to apply the answer to question No. 52 to non ancestral land was right.
It may be mentioned that the answers to questions refer to ancestral property only and this is now firmly established.
In fact, it was not denied at the hearing.
It is, however, contended that there are decisions to show that the right of the collaterals was recognised in respect of even non ancestral land to the exclusion of sisters and their sons.
No ruling from the Law Reports has been brought to our notice.
Some cases from the Ambala and Amritsar Dis tricts are cited but those obviously cannot be any authority, because, as is well known, custom in the Punjab changes from district to district, tehsil to tehsil and pargana to pargana.
It has been ruled in this Court that paragraph 24 of Rattingan 's Digest which excludes sisters from inheritance from non ancestral property is too widely stated.
(See Ujagar Singh vs Mst.
Jeo(5) and (Waryam Singh and Others vs Smt.
Sukhi and another) (Civil Appeal No. 452 of 1961 decided on April 23, 1963).
The learned District Judge cited some instances in which the sisters and sisters ' sons were allowed to succeed in preference to collaterals.
One of the documents filed by the defendants in the suit (Ext.
D 6) also supports the contention of the respondents.
In this view of the matter it cannot be said that the application of the personal law to the family by the courts below was erroneous.
It is contended lastly that the rulings only show that collaterals of 5th degree are excluded and there is no case showing that a collateral of 4th degree was excluded.
If personal law applies, as it does, a collateral of the 4th degree is also excluded.
In our judgment this appeal must fail and is accordingly dismissed with costs.
Appeal dismissed.
(1) 35 I.A. 206.
(2)A.I.R. (3) I.L.R (4) I.L.R. (5) (1959 Supp. 2 S.C.R. 781. | Claiming inheritance to the properties of one P a Jhalli Jat of Ludhiana Tehsil, the respondents, who were P 's sister and sister 's son filed a suit against the appellants P 's collaterals.
The Subordinate Judge decreed the suit and an appeal to the District Judge was dismissed.
They held that the lands in suit were not ancestral and that there was no evidence to show that among the Jhalli Jats of Ludhiana collaterals excluded sisters and sister 's son in respect of non ancestral property.
An appeal to the High Court was also dismissed.
Held: (i) Where lands are so mixed up that the ancestral and non ancestral portions cannot be separated they must be regarded as non ancestral unless it is shown which are ancestral and which are not.
Avtar Singh vs Thakar Singh, 35 I.A. 206, applied.
Land ceases to be ancestral if it comes into the hands of any owner otherwise than by descent.
Inder Singh vs Gulzara Singh, A.I.R, 1951 Punj.
345, Saif ulRahman vs Mohammad Ali Khan, I.L.R. and Jagtar Singh vs Raghbir Singh, I.L.R. , referred to.
(ii) The application of the personal law to the family by the courts below was correct and paragraph 24 of Rattingan 's Digest which excludes sisters from inheritance from non ancestral property is too widely stated.
Ujagar Singh vs Mst.
Jeo, [1959] Supp. 2 S.C.R. 781 and Waryam Singh vs Smt.
Sukhi, CA No. 452/61 decided on 23 4 1963 (non reportable) referred to. |
MINAL APPEAL No. 193 of 1962.
Appeal from the judgment and order dated March 12,1962 of the Allahabad High Court (Lucknow Bench) at Lucknow in Criminal Reference No. 21 of 1961.
O. P. Rana, Atiqur Rehman and C. P. Lal, for the appellant.
The respondent did not appear.
March 24, 1964.
The Judgment of the Court was delivered by HIDAYATULLAH, J.
This is an appeal by certificate granted by the High Court of Allahabad (Lucknow Bench) against its order dated March 12, 1962 quashing the trial of the respondents for an offence under section 15(1) of the Uttar Pradesh Private Forests Act (VI of 1949).
This trial com menced on February 11, 1959 on a complaint by the District Magistrate Bahraich.
The charge against the first respondent was that he sold one tamarind tree to respondent No. 2 for the purpose of felling and removing it without obtaining permission from the competent authority and that against respondent No. 2 was that he felled the tree and removed it.
The complaint was transferred from one Magistrate to another 437 till it came on the file of Mr. T. B. Upadhaya who was a Magistrate of the Second Class.
After Mr. Upadhaya had re corded all the evidence and examined the two respondents the powers of Magistrate, First Class were conferred on him.
Thereafter he pronounced judgment in the case and finding respondents guilty he sentenced them to pay a fine of Rs. 501 each or to, undergo simple imprisonment for one month.
The respondents filed an appeal before the Additional Sessions Judge, Bahraich which was later converted into a revision.
The learned Additional Sessions Judge made a reference to the High Court recommending that the trial before the Magistrate, First Class be quashed as he had no jurisdiction to try the offence.
This reference was heard by Mulla, J. who did not agree with the opinion of Beg, J. In Jaddu and others vs State,(1) on which the Additional Sessions Judge had relied.
Beg, J. had taken the same view in a subsequent case also Harbans Singh and others vs State.(2) Mulla, J. was of the opinion that the trial was proper, but as these rulings stood in his way, he made a reference of the case to a larger Bench.
The case was heard by a Division Bench consisting of B. N. Nigam and section D. Singh, JJ.
The learned Judges differed amongst themselves: Mr. Justice Nigam was of the view that the trial was valid but Mr. Justice Singh did not agree with him.
The case was then placed before Mr. Justice Verma who agreed with Mr. Justice Singh.
As a result, the conviction and sentence passed on the respondents were set aside.
The case was, however, certified by the High Court as fit for appeal and the present appeal has been filed.
Which of the two views is the right one is the short question in this appeal.
Section 15(2) of the Uttar Pradesh Private Forests Act confers jurisdiction to try offences under the first sub section on Magistrates of the Second and the Third Class.
The trial in the present case was by a Magistrate of the First Class, and if there was no jurisdiction in him to try the offence then the proceedings were rightly declared void under section 530(p) of the Code of Criminal Procedure.
According to the opinion of Mr. Justice Nigam which finds support from the order of reference made by Mulla, J., there is nothing to prevent the First Class Magistrate from trying an offence under section 15(1) of the Act, because under Schedule III of the Code of Criminal Procedure the ordinary powers of a Magistrate, First Class include the ordinary powers of a Magistrate of the Second Class.
According to the other view, the Forests Act confers jurisdiction on Magistrates of the Second and the Third Class and this excludes jurisdiction of any superior Magistrate.
(1) A.I.R. 1952 All.873.
(2) A.I.R. 1953 All.179.
438 Section 15 of the Forests Act reads as follows "15, Offences under this Chapter and trial of such offences and penalties thereof: (1) Any person who contravenes any of the provisions of this Chapter or deviates from the prescriptions of a sanctioned working plan without the previous sanction of the Forest Officer shall be punishable with fine not exceeding one hundred rupees for the first offence and with fine not exceeding one thousand rupees or simple imprisonment not exceeding three months or both for the second or any subsequent offence.
(2) Offences under this section shall be triable by a Magistrate of the Second or Third Class, and proceedings under this section may be instituted on a complaint made by the landlord of the notified area or forest in respect of which the offence is alleged to have been committed or by any right holder of such a notified area or forest or by the Forest Officer or by any officer specially empowered by the Provincial Government in this behalf.
(3) (4) The question is one of interpretation of the first part of sub section
(2) which says that offences under section 15 shall be triable by a Magistrate of the Second or Third Class.
It does riot use the phrase "any Magistrate" nor does it specify "a Magistrate of the First Class".
The question is whether the words of the sub section exclude a First Class Magistrate.
The answer to this, in our opinion, is furnished by sections 28 and 29 of the Code of Criminal Procedure.
They provide as follows: "28.
Offences under Penal Code Subject to the other provisions of this Code any offence under the Indian Penal Code may be tried (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".
Offences under other laws (1) Subject to the other provisions of this Code, any offence under any other law shall, when any Court is mentioned in this behalf in such law, be tried by such court.
439 (2) When no Court is mentioned, it may be tried by the High Court or subject as aforesaid by any Court constituted under this Code by which such offence is shown in the eighth column of Second Schedule to be triable".
The scheme of the Criminal Procedure Code is that it Provides separately for trial of offences under the Penal Code and for offences under any other law.
The court which is to try them is indicated in the Code in the eighth column of the Second Schedule.
The first part deals with offences under the Penal Code and the second part with offences under any other law.
The last entry in the Second Schedule provides for the trial for offences under any other law which are punishable with imprisonment for less than one year or with fine only and they are made triable by "any Magistrate".
If the matter were governed by the Second Schedule, the last entry would undoubtedly have comprehended a Magistrate, First Class.
But section 29 says that offences under any other law shall be tried by that court which that law mentions and it is only when no court is mentioned that the eighth column of the Second Schedule is applicable.
Here sub section
(2) of section 15 mentions the courts by which offences under section 15(1) are triable and section 29(1) excludes the application of the second part of the Second Schedule.
The words of sub section
(1) of section 29 are peremptory.
There is no escape from them.
They say that 'subject to the other provisions of the, Code ' any offence under any other law shall be tried by the court when such court is mentioned in that law.
A case under section 15(1) therefore, is triable only by the two courts named therein, namely, Magistrates of the Second and the Third classes and not by any other Magistrate.
The appellant relies upon the words 'subject to the other provisions of the Code ' and refers to the Third Schedule.
But that Schedule deals with the ordinary powers of the Magistrates under the Criminal Procedure Code.
The words of the second sub section of section 15 are not rendered ineffective by the prescription of the ordinary powers of the Magistrates.
To call in aid Schedule III would render the provisions of section 29 redundant and useless at least in those cases where the second part of the Second Schedule applies.
What section 15(2)) does is to prescribe a particular court and in view of the words of section 29(1) no other court can try offences under section 15(1) even though the powers of those courts may be superior to those of Magistrates of the Second and the Third Class.
If the Second Schedule itself, which prescribes the courts for the trial of offences under laws other than the Penal Code, is excluded, the Third Schedule cannot bring about the same result indirectly.
The provisions of the Third Schedule must 440 therefore be taken to define general powers and not to create jurisdictions to try offences which the Second Schedule does.
It was argued before us that there is no point in prescrib ing that the Magistrates of the Second and the Third Class can try subsequent offences because their powers under section 32 do not extend as far as the punishment prescribed by section 15(1).
This question does not arise directly but it may be said that two views are possible: one is that by implication the powers of these Magistrates are extended beyond what is prescribed under section 32.
The other is that in a case where the Magistrate feels that a heavier punishment should be imposed he can take recourse to the provisions of section 349 of the Code and make a recommendation to a Magistrate who can impose adequate punishment in the case.
The words "subject to the other provisions of the Code" would enable this to be done.
In our opinion, therefore, the scheme of the Code read with the provisions of section 15 of the Forests Act clearly show that offences under section 15 are not triable by any Magistrate as it would be if the Second Schedule were applicable.
They are therefore triable by such Magistrates as have been named in the second sub section.
There is good reason for holding this, because a conviction by a Magistrate of the Second or the Third Class, as the case may be, is open to an appeal whereas a conviction by a Magistrate of the First Class and a sentence of fine of Rs. 501 or under or a fine of Rs. 200/ after a summary trial is not appealable.
It is possible that it was intended that a right of appeal should be conferred and therefore the trial of these offences was restricted to Magistrates of the Second and the Third Class.
This was pointed out by Mr. Justice Beg in Harbans Singh and others vs State(1) and was also referred to by Mr. Justice Verma in the opinion in the present case.
In our opinion, it is a circumstance which may be taken into account.
It is forcefully illustrated in this case.
An appeal would have lain against the same decision if the Magistrate had not been given the powers of a First Class Magistrate during the trial.
The respondents were robbed of a right of appeal.
In any event, in view of the clear words of section 29(1), the trial of these cases ought to have been before a court designated in section 15(2) and as the trial was before a Magistrate who was not empowered to try the offence the proceedings were rightly declared void under section 530(p) of the Code of Criminal Procedure.
We accordingly hold that the decision under appeal was correct.
The appeal fails and is dismissed.
Appeal dismissed.
(1) A.I.R. 1953 All. | On a complaint by the District Magistrate the respondents were put on trial for an offence under section 15(1) of the Uttar Pradesh Private Forests Act, 1949.
The charge against the first respondent was that he sold one tamarind tree to respondent No. 2 for the purpose of felling and removing it without obtaining permission from the competent authority and that against respondent No. 2 was that he felled the tree and removed it.
The complaint was transferred from one Magistrate to another till it came on the file of Mr. Upadhya, a Magistrate of Second Class.
After he had recorded all the evidence and examined the two respondents, the powers of Magistrate, First Class were conferred on him.
Thereafter, by his judgment the respondents were found guilty and sentenced to pay a fine of Rs. 50/ each or to undergo simple imprisonment for one month.
On appeal, which was later converted into a revision the Additional Sessions Judge made a reference to the High Court recommending that the trial before the Magistrate, First Class be quashed as he had no jurisdiction to try the offence.
The reference was heard by Mulla, J., who was of the opinion that the trial was proper but as the rulings of the same Court stood in his way, he referred the case to a larger Bench.
The case was heard by a Division Bench and the learned Judges differed amongst themselves.
Mr. Justice Nigam was of the view that the trial was valid but Mr. Justice Singh did not agree with him.
The case was then placed before Mr. Justice Verma who agreed with Mr. Justice Singh and the conviction and sentence passed on the respondents were set aside.
According to the opinion of Mr. Justice Nigam which found support from the order of reference made by Mulla, J., there was nothing to prevent the First Class Magistrate from trying an offence under section 15(1) of the Act, because under Schedule III of the Code of Criminal Procedure the ordinary powers of a Magistrate, First Class include the ordinary powers of a Magistrate of the Second Class.
According to the other view, the Forests Act confers jurisdiction on Magistrates of the Second and Third Class and this excludes jurisdiction of any superior Magistrate.
On appeal by certificate: Held: (i) The words of the second sub section of section 15 of the Act or not rendered ineffective by the prescription of the ordinary powers of the Magistrates.
To call in aid Schedule III would render the provisions of section 29 of the Code of Criminal Procedure redundant and useless at least in those cases where the second part of the second schedule applies.
What section 15(2) does is to prescribe a particular court and in view of the words of section 29(1) no other court can try offences under section 15(1) even though the powers of those courts may be superior to those of 436 Magistrates of the Second and Third Class.
In the Second Schedule itself, which prescribes the courts for the trial of offences under law other than the Penal Code, is excluded, the Third Schedule cannot bring about the same result indirectly.
The provisions of the Third Schedule must therefore be taken to define general powers and not to create jurisdiction to try offences which the second schedule does.
(ii) The scheme of the Code read with the provisions of triable by any Magistrate as it would be if the Second Schedule were applicable.
They are therefore triable by such Magistrates as have been named in the second sub section.
There is good reason for holding this, because a conviction by a Magistrate of the second or the third class, as the case may be is open to an appeal whereas a conviction by a Magistrate of the First Class and a sentence of fine of Rs. 50/ or under a fine of Rs. 200/after a summary trial is not appealable.
It is a circumstance which must be taken into account.
It is forcefully illustrated in this case.
An appeal would have laid against the same decision if the Magistrate had not been given the powers of a First Class Magistrate during the trial.
The respondents were robbed of a right of appeal.
In any event, in view of the clear words of section 29(1) the trial of these cases ought to have been before a court designated in section 15(2) and as the trial was before a Magistrate who was not empowered to try the offence the proceedings were rightly declared void under section 530(p) and of the Code of Criminal Procedure.
Jaddu vs State, A.I.R., 1952 All.372 and Harbans Singh vs State, A.I.R. 1953 All. 179, referred to. |
Appeal No. 46 of 1961.
Appeal from the judgment and decree dated July 17, 1958 of the Patna High Court in Appeal from Original Decree No. 162 of 1952.
Sarjoo Prasad and D. N. Mukherjee, for the appellant.
R. C. Prasad, for respondents Nos.
565 April 1, 1964.
The Judgment of the Court was delivered by MUDHOLKAR, J.
This is an appeal by a certificate granted by the High Court of Patna under article 133(1)(a) of the Constitution, and arises out of a suit instituted by the appellant against the respondents for the recovery of a sum of Rs. 57,000/ .
The appellant holds permanent lease hold rights over a colliery called the Jealgora Govindpur Colliery and had worked the colliery himself for some time.
On January 31, 1949, he granted a sub lease of the colliery to respondent No. 4 for a term of five years.
At that time, 2803 tons of slack and rubble coal was lying in the colliery, and under the terms of a separate agreement executed by respondent No. 4, he was liable to pay for this coal at the rate of Rs. 10/ per ton after selling it.
According to the appellant, this coal was sold by respondent No. 4, but he was not paid its price amounting to Rs. 28,030/ .
Further, according to him, royalty and commission were due to him from the respondents in respect of the coal extracted by them from the colliery, as also Rs. 1,355 / 8 / 3 on account of a loan taken by them from him on February 17, 1949.
The total claim was tentatively valued by him at Rs. 57,000/ .
He joined respondents 1, 2 and 5 as defendants to the suit on the ground that these three persons along with respondent No. 4 formed a partnership firm known as Saurashtra Coal Concern which was joined in the suit as defendant No. 5 and is now respondent No. 3 before us.
The appellant 's case was that respondent No. 4 was a benamidar for the partnership firm and, therefore, all the respondents were liable for the claim.
Respondents 4 & 5, who are father and son, admitted the appellant 's contention that the lease was obtained by respondent No. 4 on behalf of the partnership firm, but their contention was that they surrendered their lease hold interest to the appellant on November 1, 1950, which was accepted by him, and that he was, therefore, not entitled to the claim in respect of royalty and commission from them for the period subsequent to November 1, 1950.
Further, according to them, the coal which was lying in the colliery was not actually weighed at the time of the agreement and the figure of 2803 tons was put down only as a rough estimate.
According to them, on the date of the surrender of the lease by them, there was a stock of more than 2803 tons of slack and rubble, etc., as well as soft coke, including the stock left by the appellant at the time of granting the sub lease, because that could not be sold, and the appellant took possession of the entire stock lying in the colliery in November, 1950, after promising to adjust it towards the dues.
They, therefore, 566 disclaimed all liability to pay the price of 2803 tons of coal.
They also denied having taken a loan from the appellant as alleged by him.
No separate written statement was filed on behalf of respondent No. 3, but respondents 1 & 2, who were defendants 2 & 4 in the trial court, denied the appellant 's claim totally.
According to them, respondent No. 4 took the sub lease in his personal capacity and not on behalf of the 'other respondents.
They averred that there was no privity of contract between them and the appellant and that, therefore.
he was not entitled to a decree against them.
The real facts, according to them, are that the respondent No. 4 took a sublease of the property from the appellant and gave a managing agency of the same to the Saurashtra Coal Concern of which the first respondent is the financing partner and the second respondent is the working partner.
This concern was, they say, never a sub lessee of the appellant.
They also denied having anything to do with the stock of coal which the appellant is alleged to have sold to the 4th respondent.
The trial court negatived the claim of the appellant in respect of the loan but decreed the claim for Rs. 28,030/ as the price of coal and commission thereon against all the respondents.
It further passed a preliminary decree for ascertaining the precise amount of royalty and commission which would be due to the appellant on account of the sub lease.
The trial court further said that the minimum amount under this head would be Rs. 26,000/ .
Respondents 1 to 3 preferred an appeal to the High Court and the High Court accepted it.
Thus, the position now is that the decree of the trial court stands only against respondents 4 & 5, but has been set aside as against respondents 1 to 3.
In view of the fact that both the courts below have found concurrently that the sub lease in question was taken by respondent No. 4 alone, the only point urged by Mr. Sarjoo Prasad in support of the appeal is that respondent No. 4 being a partner in the Saurashtra Coal Concern, all the partners of the firm are liable under the lease inasmuch as the firm admittedly came into possession of the demised colliery.
He points out that even according to respondents 1 to 3, they came into possession of the demised colliery immediately after the execution 'of the sub lease, and wants this Court to infer from this that the partnership had already come into existence before the lease was obtained.
This, however, has never been the case of the appellant in the courts below.
The only case which he put forward was that the lease was taken by respondent No. 4 on behalf of all the respondents.
In other words, his case was that respondent No. 4 was a benamidar for the partnership firm.
It is only 567 this case which the respondents had to meet, and in our judgment, it would not be proper to permit the appellant to make out an entirely new case at this stage.
Apart from that, section 22 of the , clearly provides that in order to bind a firm by an act or an instrument executed by a partner on behalf of the firm, the act should be done or the instrument should be executed in the name of the firm, or in any other manner expressing or implying an intention to bind the firm.
The sub lease was not executed in the name of the firm, and it has been found by the courts below that respondent No. 4 in obtaining the lease, did not act 'on behalf of the firm.
This in substance means +,hat in obtaining the sub lease, the parties to it did not intend to bind the firm by that transaction.
In support of his contention, Mr. Sarjoo Prasad has strongly relied upon the decision in Karmali Abdulla Allarakia vs Vora Karimji Jiwanji and others(1).
That was a case in which the question for consideration was whether one of the two partners is liable upon a hundi drawn by one of the partners though the hundi was not drawn in the name of the firm.
The Privy Council following the decision in Gouthwaite vs Duckworth(1) held that the other partner would be liable though on the face of it the hundi did not purport to be on behalf of the firm.
That decision, however, does not help the appellant, because while the transaction in connection with which the hundi was drawn, was admittedly a partnership transaction, in the case before us, it has been found that the transaction, that is, the taking of the sub lease, was not on behalf of the partnership.
The next case relied upon was Mathura Nath Choudhury vs Sreejukta Bageswari Rani and others(2).
In that case, the question was whether the firm is liable for the money borrowed by one of its partners.
The High Court pointed out that this is a question of fact and depends upon the facts and circumstances of each particular case.
In that case also, it was found that the liability arose upon a contract entered into by one of the partners in connection with the partnership business.
This case is, therefore, similar to the one just referred to above.
The third case relied upon is Pandiri Veeranna vs Grandi Veerabhadraswami(4).
In that case, the question was whether the fact that one of the several partners had authority to acknowlede liability to save limitation as against his partners, had to be established only by direct evidence or whether it could be inferred from the surrounding circumstances.
The High Court held that it was (1) ILR at 274, etc.
(2) (1810) 12 East 421.
(3) 46 CLJ 362.
(4) ILR Bench).
568 permissible to establish the existence of authority from the surrounding circumstances.
The case is thus of no assistance to the appellant.
The next case relied upon was Lakshmishankar Devshankar vs Motiram Vishnuram, etc.(1).
There, it was held that where money borrowed by one partner in the name of the firm but without the authority of the co partners has been applied to paying off the debts of the firm, the lender is entitled in equity to repayment by the firm of the amount which he can show to have been so applied and the same rule extends to money bona fide borrowed and applied for any legitimate purposes of the firm.
It is difficult to appreciate how this case advances the present matter further, because here, the sub lease has not been obtained in the name of the firm.
The last case relied upon was Gordhanadas Chliotalal Seth vs Mahant Shri, Raghuvirdasji Gangaramji(2) That again is a case in which the firm was held to be bound by the debts contracted by the managing partner for the purposes of the factory run by the firm.
All the partners were held liable, because the transaction was entered into, by the managin partner for the purpose of the partnership business.
This case is similar to the one just referred to above and is, therefore, of no assistance to the appellant.
Mr. Sarjoo Prasad also referred to two other decisions in Ram Kinkar Banerjee and others vs Satya Chararan Srimani and others(3) and Raja Sri Sri Jyoti Prasad Singh Deo Bahadur vs Samuet Henry Seddon(4).
In these cases, the defendants sought to be made liable were assignees of a lease, but that is not the case here.
Indeed, Mr. Sarjoo Prasad quite rightly conceded that respondents 1 to 3 cannot be made liable upon the ground that there was a privity of estate between them and the appellant.
We, therefore, agree with the High Court that the decree should be limited only against respondents 4 and 5, and dismiss the appeal with costs.
Appeal dismissed.
(1)6 BLR 1106.
(2) 34 BLR 1137.
(3)AIR (4) ILR 19 Pat.
433 at 459. | The plaintiff appellant instituted a suit against the defen dants respondents for the recovery of a sum of Rs. 57,000/ .
The appellant was holding permanent lease hold rights over a certain colliery.
On January 31, 1949 the appellant granted a sub lease of the colliery to respondent No. 4 for a term of 5 years.
He joined respondents 1, 2 and 5 as defendants to the suit on the ground that these three persons along with respondent No. 4 formed a partnership firm known as Saurashtra Coal Concern which was joined in the suit as defendant No. 5.
The appellant 's case was that respondent No. 4 was a benamidar for the partnership firm and, therefore, all the respondents were liable for the claim.
Respondents 1 and 2 denied the appellant 's claim totally.
According to them, respondent No. 4 took the sub lease in his personal capacity and not on behalf of the other respondents.
Respondents 4 and 5 who are father and son, admitted the appellant 's case that the lease was obtained by respondent No. 4 on behalf of the partnership firm.
The trial court passed the decree against all the respondents.
On appeal, the High Court set aside the decree as against respondents 1 to 3 but affirmed the same against respondents 4 and 5.
Held: that Section 22 of the , clearly provides that in order to bind a firm by an Act or an ins trument executed by a partner on behalf of the firm, the Act should be done or the instrument should be executed in the name of the firm, or in any other manner expressing or implying an intention to bind the firm.
The sub lease was not executed in the name of the firm.
On the facts of this case it was held that in obtaining the sub lease, the parties to it did not intend to bind the firm by that transaction, and therefore the decree should be limited only against respondents 4 and 5.
Karmali Abdullah Allarakia vs Vora Karimji Jiwanji, I.L.R. , Gouthwaite vs Duckworth, (1810) 12 East 421, Mathura Nath Choudhury vs Sreejukta Bageswari Rani, 46 C.L.J. 362, Pandiri Veeranna vs Grandi Veerabhadi aswami.
T.L.R. , Lakshmishankar Devshankar vs Motiram Vishnuram, 6 B.L.R. 1106 and Gordhandas Chhotalal Seth v, Mahant Shri Raghubirdasi Gangaramji, 34 B.L.R. 1137, distinguished. |
Appeal No.241 of 1961.
Appeal from the judgment and decree dated March 4, 1958, of the Patna High Court in Appeal from Appellate Decree No. 1335 of 1952.
634 R.S. Sinha and R.C. Prasad, for the appellants.
Sarjoo Prasad and B. P. Jha, for the respondents nos.
1 and 2.
April 3, 1964.
The judgment of the Court was delivered by DAS GUPTA, J.
This appeal arises out of a suit for re demption of a large number of usufructuary mortgages in favour of the defendants.
The plaintiff who owned 1.67 acres.
of lands which were recorded in Khata 56 and 10.56 acres in Khata 57 in village Sarifabad gave 1.27 acres out of Khata 56 and 8.24 acres out of Khata 57 lands in mortgage to the several defendants by separate mortgage bonds.
Part of the remaining land was sold by him and the rest settled by him with the first defendant on Batai terms.
The plaintiff 's case is that under the terms of the mortgage bonds the mortgagees were liable to pay rent to the landlord.
The mortgagees however defaulted in the payment of rent for some years.
A suit for the arrears of rent was brought by the landlord and a decree obtained.
In execution of the decree the lands were sold.
The purchasers were one Besolal and Mst.
Kirti Kuer, who according to the plaintiff, were only benamidars of defendants 1 and 2 and other mortgagees.
It is his case that this purchase enured for the benefit of the mortgagor, that is, the plaintiff, and so the right of redemption of the mortgagees has not been affected.
The prayers were for a declarations that the purchase was for the benefit of the plaintiff and for redemption of the mortgagees.
The suit was contested by defendants 1 and 2 only.
Of these defendants, Chamroo Sao is the purchaser, and Besolal, defendant 2 is the son of the other purchaser Mst.
Kirti Kuer.
They denied the allegation that Besolal and Mst.
Kirti Kuer were their benamidars and contended that the right of redemption has been extinguished by the court sale.
The Trial Court held that the plaintiff had failed to show that the auction purchasers were benamidars of the mortga gees and in that view dismissed the suit.
On appeal, the Additional District Judge, Patna, came to a contrary conclusion.
He held that the put chase, though in the name of Besolal and Mst.
Kirti Kuer was really by the, first and the second defendants.
He also accepted the plaintiff 's case that under the terms of the mortgage bonds the mortgagees were liable to pay the rent and the rent sale having been brought about due to the default of the mortgagor and the mortgagee they could not be allowed to take advantage of the sale.
So, according to the learned Judge, the equity of 635 redemption in favour of the plaintiff still subsisted and that he was entitled to redeem the mortgaged property.
Accordingly, he set aside the judgment of the Trial Court and passed a preliminary decree for redemption.
Against this decree the two defendants appealed to the High Court of Patna.
The appeal came up for hearing in the first instance before a Single Judge (Mr. justice Sahai).
On a consideration of the evidence, he was of opinion that the liability of rent of 2.67 acres was upon defendant I and that payment of rent of 87 acres which was purchased and 1.76 acres which was taken in ijra, the total being 2.43 acres, was upon defendant 2, that for payment of rent of 3.83 acres was upon the other defendants, and the plaintiff was liable to pay the rent of only about 3.39 acres out of the entire area of 1.67 acres of Khata No. 56 and 10.65 acres of Khata No. 57.
The question which therefore arose was whether section 90 of the Trusts Act would operate to keep the equity of redemption alive in cases where the sale took place due to the default of the mortgagor as well as the mortgagees, the default on the part of the mortgagees, who purchased the properties at the sale being also substantial.
The learned Judge referred this point for decision to a Division Bench.
The Division Bench of the High Court held that section 90 of the Trusts Act did not apply to these circumstances.
In this view the High Court allowed the appeal, set aside the decree of the first appellate court and restored the decree of the Trial Court.
The present appeal by Mst.
Basmati Devi, who is the legal representative of the original plaintiff who was substituted in his place, is against the High Court 's decision dismissing the suit.
In coming to a conclusion that section 90 of the Trusts Act did not apply to cases where the sale took place due to the default of the mortgagor as well as the mortgagee, the High Court appears to have followed a number of previous decisions of the same High Court.
In support of the appeal it is urged that the view taken by the High Court in the present case as well as the previous decisions of the Patna High Court is incorrect and defeats the very object of section 90 of the Indian Trusts Act.
Section 90 of the Indian Trusts Act is in these words: "Where a tenant for life, co owner, mortgagee or other qualified owner of any property, by availing himself of his position as such, gains an advantage in 636 derogation of the rights of the other persons interested in the property, or where any such owner, as representing all persons interested in such property, gains any advantage, he must hold, for the benefit.
of all persons so interested, the advantage so gained but subject to repayment by such persons of their due share of the expenses properly incurred, and to, an indemnity by the same persons against liabilities properly contracted, in gaining such advantage.
" The question for consideration is whether in circumstances like the present where the decree and the sale in execution of it are brought about by the default of both the mortgagor and the mortgagee, the mortgagee can be said to have taken advantage of his position by purchasing the property at the sale.
The High Court appears to think that unless the sale was brought about by the default of the mortgagee alone the mortgagee cannot be said to have taken advantage of his position in making the purchases.
What seems to have weighed with the learned Judges is that even if the mortgagee had done his duty by paying the rent he was liable to pay, the sale would still have taken place as the mortgagor did not pay that portion of the rent which he was liable to pay.
So, they thought that the mortgagees, though they took advantage of the fact that the property had been brought to sale, could not be said to have taken advantage of their position as mortgagees.
With this view we are unable to agree.
In our opinion, the fact that the mortgagor had made a default, does not alter the position that the mortgagee had also defaulted in paying the rent he was liable to pay.
By his default he has contributed to the position that a suit had to be brought for arrears of rent and ultimately to the position that the property was put to sale in execution of the decree obtained in the suit.
This contribution to the bringing about of the sale was a. direct result of his position as a mortgagee.
When therefore he purchased the property himself at the sale in execution of the rent decree he clearly gained an advantage by availing himself of his position as a mortgagee.
This, in our opinion, is the position in law even if the mortgagee 's liability was to pay less than the major portion of the rent of the holdings.
Whether this would be true even where the portion which the mortgagee is liable to pay is so very small that the property is not ordinarily likely to be brought to sale for that amount, it is unnecessary for us to decide in the present case.
In the present case, the finding is that the liability of the defendants 1 and 2 was to pay a substantial portion of the rent.
To say in such circumstances that they did not take 637 advantage of their position as mortgagees is entirely unrealistic Such a construction would put a premium on dishonesty on the part of mortgagees whenever the entire burden of payment of rent was not left squarely on the mortgagee as under the provision of s.76 of the Transfer of Property Act.
Mr. Sarjoo Prasad, who appeared before us on behalf of the respondents, tried to persuade us that in any case the plaintiff 's suit should fail as regards the lands recorded in Khata No. 57.
As, according to him, these mortgagees were not at all liable to pay any portion of the rent of this holding.
He drew our attention in this connection to exhibit 2, the mortgage bond executed in favour of Chamroo Sao, and to the statement made therein: "Annual rent payable to the zamindar is the concern of me, the executant".
This argument proceeds on the basis that the holding recorded in Khata No. 57 continued to be separate and distinct from the Khata No. 56.
It is thus in direct conflict with the plea of these very defendants in their written statement that the two holdings had been consolidated into one holding with one rental.
As the oral and documentary evidence on the Paper Book prepared in the appeal did not clearly show whether or not these two holdings had become one, we called for one of the documents, exhibit B which seemed likely to throw some light on the matter.
The document has now been received.
It is the copy of a judgment of a suit between these parties in which this very question, viz., whether the two holdings had been consolidated into one or not, was raised.
It was decided hat such consolidation had taken place.
It is clear that it was after such consolidation that the second rent suit was brought in respect of that consolidated holding and it was that consolidated holding which was sold in execution of the decree.
It is clear therefore that the mortgage bond Ex.2 in which the mortgagor accepted liability to pay rent to the zamindar in respect of the mortgaged land in Khata No. 57 does not affect the correctness of the High Court 's finding that the liability to pay rent of the holding that was sold was partly of the mortgagor and partly of the mortgagees and, that it was the default of both the mortgagor and the mortgagees that brought about the sale.
Accordingly, we allow the appeal, set aside the judgment and decree of the High Court and restore the decree made by the Additional District Judge, Patna.
A Pleader Commissioner shall be appointed by the trial court on a deposit of Rs. 50/ as his fees by the present appellant within two months from this date for taking accounts as to the amount due to the defendants on the date of the decree.
A preliminary decree for redemption shall be passed in the usual terms.
As the suit as also the appeal before the District Judge had been brought in forma pauperis the High Court made an order 638 directing the plaintiff to pay the court fee on the plaint as well as on the memorandum of appeal.
That order is set aside.
Instead, we order the first and the second defendants in the suit to pay the court fee payable on the plaint as also on the memorandum of appeal.
The present appeal to this Court has also been brought by the appellant as a pauper.
As she has succeeded in the appeal, we order the contesting respondents, i.e., the first and the second defendants, to pay the court fee payable on the memorandum of appeal to this court.
The appellant will get her costs from the first and the second defendants through out.
Appeal allowed. | The plaintiff brought a suit for redemption of a large num ber of usufructuary mortgages in favour of the defendants.
The case of the plaintiff was that under the terms of the mortgage bonds the mortgagees were liable to pay rent to the land lord.
The mortgagees, however, defaulted in the payment of rent for some years.
A suit for arrears of rent was brought by the land lord and a decree obtained.
In execution of the decree the lands were sold.
According to the plaintiff, the purchasers of the mortgaged lands were only benamidars of defendants 1 and 2 and other mortgagees.
The plaintiff claimed that the right of redemption was not affected by the Court sale because the purchase was for the benefit of the plaintiff.
The suit was contested by defendants 1 and 2 only.
Their case was that the right of redemption had been extinguished by the court sale; that the purchasers were not the benamidars of the defendants.
The Trial Court dismissed the suit.
On appeal, the Additional District Judge set aside the judgment of the Trial Court and passed a preliminary decree for redemption.
Against this decree the two defendants appealed to the High Court.
The appeal was heard by the Division Bench.
The High Court held that in the present case section 90 of the Trusts Act did not apply because the court sale took place due to the default of the mortgagor as well as the mortgagees.
In this view the High Court set aside the decree of the first Appellate Court and restored the decree of the trial court.
Held: The fact that the mortgagor had made a default, does not alter the position that the mortgagee had also defaulted in paying the rent he was liable to pay.
By his default he has contributed, to the position that a suit had to be brought for arrears of rent and ultimately to the position that the property was put to sale in execution of the decree obtained in the suit.
This contribution to the bringing about of the sale was a direct result of his position as a mortgagee.
When therefore he purchased the property himself at the sale in execution of the rent decree he clearly gained an advantage by availing himself of his position as a mortgagee.
This is the position of law even if the mortgagee 's liability was to pay less than the major portion of the rent of the holdings.
In this view section 90 of the Trusts Act applies to the facts of this case. |
eal No. XXXIV of 1950.
Appeal by special leave from an Award of the All India Industrial Tribunal (Bank Disputes) Bombay, dated 1st Janu ary, 1950.
The facts of the case are set out in the judg ment.
Dr. Bakshi Tek Chand (Veda Vyas and S.K. Kapur, with him) for the appellant.
B. Sen for the respondents.
Alladi Krishnaswami Aiyar (Jindra Lal, with him) for the Union of India. 1950.
May 26.
The Court delivered judgment as follows : KANIA C.J I have read the judgments prepared by Messrs. Fazl Ali, Mahajan and Mukherjea JJ.
461 in this case.
As the views in those judgments in respect of the nature of the duties and functions of the Industrial Tribunal do not show agreement I consider it necessary to add a few words of my own.
In my opinion, the functions and duties of the Indus trial Tribunal are very much like those of a body discharg ing judicial functions, although it is not a Court.
The rules framed by the Tribunal require evidence to be taken and witnesses to be examined, cross examined and re exam ined.
The Act constituting the Tribunal imposes penalties for incorrect statements made before the Tribunal.
While the powers of the Industrial Tribunal in some respects are different from those of an ordinary civil Court and it has jurisdiction and powers to give reliefs which a civil Court administering the law of the land (for instance, 'ordering the reinstatement of a workman) does not possess in the discharge of its duties it is essentially working as a judicial body.
The fact that its determination has to be followed by an order of the Government which makes the award binding, or that in cases where Government is a party the legislature is permitted to revise the decision, or that the Government is empowered to fix the period.
of the opera tion of the award do not, to my mind, alter the nature and character of the functions of the Tribunal.
Having consid ered all the provisions of the Act it seems to me clear that the Tribunal is discharging functions very near those of a Court, although it is not a Court in the technical sense of the word.
The next question is whether under article 136 the Court has jurisdiction to entertain an application for leave to appeal against the decision of such a body.
It is not dis puted that the Court has power to issue writs of certiorari and prohibition in respect of the work of the Tribunal.
The only question is whether there is a right of appeal also.
In my opinion the wording of article 136 is wide enough to give jurisdiction to the Court to entertain an application for leave to appeal, although it is obvious that having regard to the nature of the functions of the Tribu nal, this Court will be very reluctant to entertain such an application.
462 As regards the merits, I do not think this is a case in which I would admit the appeal.
The aggrieved parties may apply for redress by adopting other appropriate proceedings.
The appeal therefore should be dismissed with costs.
FAZL ALl J.
The important question to be decided in this case is whether the present appeal lies at all to this Court.
The question is not free from difficulty, but on the whole I am inclined to think that 'the appeal does lie.
It is fully recognized that the scope article 136 of the Constitution is very wide, but the significance of the language used in the section can be appreciated only by comparing it with the articles which precede it.
Article 132 deals with the appellate jurisdiction of the Supreme Court in cases involving a substantial question of law as to the interpretation of the Constitution, and the words used in that article are: "appeal. from any judgment, decree or finalorder." Article 133 deals with appeals in civil matters and the same words are used here also.
Arti cle 134 deals with appeals in criminal matters, and the words used in it are: "appeal. from any judgment, final order or sentence." In article 136, the words "judg ment" and "decree," which are used in articles 132 and 133 are retained.
Similarly, the words "judgment" and "sen tence" occurring in article 134 are also retained.
But the expression "final order" becomes "order," and, instead of the High Court, reference is made to "any court.
" Cer tain other words are also used in the article which seem to me to have a special significance, these being "determina tion," "cause or matter" and "tribunal.
" It is obvious that these words greatly widen the scope of article 136.
They show that an appeal will lie also from a determination or order of "any tribunal" in any cause or matter.
Can we then say that an Industrial Tribunal does not fall within the scope of article 136 ? If we go by a mere label, the answer must be in the affirmative.
But we have to look further and see what are the main functions of the Tribunal and how it proceeds to discharge those functions.
This is necessary because 463 I take it to be implied that before an appeal can.
lie to this Court from a tribunal it must perform some kind of judicial function and partake to some extent of the charac ter of a Court.
Now there can be no doubt that the Industrial Tribunal has, to use a well known expression, "all the trappings of a Court" and performs functions which cannot but be regarded as judicial.
This is evident from the rules by which the proceedings before the Tribunal are regulated.
It appears that the proceeding before it commences on an application which in many respects is in the nature of a plaint.
It has the same powers as are vested in a civil Court under the Code of Civil Procedure when trying a suit, in respect of discovery, inspection, granting adjournment, reception of evidence taken on affidavit, enforcing the attendance witnesses, compelling the production of documents, issuing commissions, etc.
It is to be deemed to be a civil Court within the meaning of sections 480 and 482 of the Criminal Procedure Code, 1898.
It may admit and call for evidence at any stage of the proceeding and has the power to administer oaths.
The parties appearing before it have the right of examination, cross examination and re examination and of addressing it after all evidence has been called.
A party may also be represented by a. legal practitioner with its permission.
The matter does not rest there.
The main function of this Tribunal is to adjudicate on industrial disputes which implies that there must be two or more parties before it with conflicting cases, and that it has also to arrive at a conclusion as to how the dispute is to be ended.
Prima facie, therefore, a Tribunal like this cannot be excluded from the scope of article 136, but before any final conclu sion can be expressed on the subject certain contentions which have been put forward on behalf of the respondents have to be disposed of.
The first contention is that the Industrial Tribunal cannot be said to perform a judicial or quasi judicial function.
since it is not required to be guided by any recognized substantive law in deciding disputes 464 which come before it.
On the other hand, in deciding industrial disputes, it has to override contracts and create rights which are opposed to contractual rights.
In these circumstances, it is said that the very questions which arose before the Privy Council in Moses vs
Parker Ex parte Mose (1) arise in this case, these questions being : (1) How can the propriety of the Tribunal 's decision be tested on appeal, and (2) What are the canons by which the appellate Court is to be guided in deciding the appeal ? Their Lordships of the Privy Council undoubtedly felt that these were serious questions, but they had no hesitation in saying that "if it were clear that appeals ought to be allowed.
such difficulties would doubtless be met somehow.
" This, in my opinion, is a sufficient answer to the difficul ty raised.
The Tribunal has to adjudicate in accordance with the provisions of the .
It may sometimes override contracts, but so can a Court which has to administer law according to the Bengal or Bihar Money lenders Act, Encumbered Estates Act and other similar Acts.
The Tribunal has to observe the provisions of the special law which it has to administer though that law may be dif ferent from the law which an ordinary Court of justice administers.
The appellate Court, therefore, can at least see that the rules according to which it has to act and the provisions which are binding upon it are observed, and its powers are not.exercised in an arbitrary or capricious manner.
The second contention, which is a more serious one, is that the adjudication of the Tribunal has not all the at tributes of a judicial decision, because the adjudication cannot bind the parties until it is declared to be binding by the Government under section 15 of the Industrial Dis putes Act.
It is said that the adjudication is really in the nature of an advice or report which is not effective until made so by the Government.
It appears that a similar objection was raised in Rex vs Electricity Commissioner 's, London Electricily ' (1) Joint Committee Co. (1920) Ex Parte (1) for the purpose of deciding whether a writ of certiorari should be Issued in the circumstances of the case but was dis.
posed of in these words : "It is necessary, however, to deal with what i think was the main objection of the Attorney General.
In this case he said the Commissioners come to no decision at all.
They act merely as advisers.
They recommend an order embodying a scheme to the Minister of Transport, who may confirm it with or without nodifications.
Similarly the Minister of Trans port comes to no decision.
He submits the order to the Houses of Parliament, who may approve it with or without modifications.
The Houses of Parliament may put anything into the order they please, whether consistent with the Act of 1919, or not.
Until they have approved, nothing is decided, and in truth the whole procedure, draft scheme, inquiry, order, confirmation, approval, is only part of a process by which Parliament is expressing its will, and at no stage is subject to any control by the Courts.
It is unnecessary to emphasize the constitutional importance of this contention. .
In the provision that the final decision of the Commissioners is not to be operative until it has been approved by the two Houses of Parliament I find nothing inconsistent with the view that in arriving at that decision the Commissioners themselves are to act judicially and within the limits prescribed by Act of Parliament, and that the Courts have power to keep them within those limits.
It is to be noted that it is the order of the Commissioners that eventually takes effect; neither the Minister of Trans port who confirms, nor the Houses of Parliament who approve, can under the statute make an order which in respect.
of the matters in question has any operation.
I know of no author ity which compels me to hold that a proceeding cannot be a judicial proceeding subject to prohibition or certiorari because it is subject to confirmation or approval, even where the approval has to be that of the Houses of Parlia ment.
The authorities are to the contrary. ' ' (1) 466 It is well known that a writ of certiorari can issue only against an order of a judicial or quasi judicial tribu nal and if it is permissible for the High Court to.
issue a writ of certiorari against an Industrial Tribunal, which fact was not seriously disputed before us, I find it diffi cult to hold that the tribunal does not come with in the purview of article 136.
If a subordinate Court acts in excess of its jurisdiction or assumes a jurisdiction which it does not possess, the appellate Court can always interfere and do what is contemplated to be done by a writ of certiorari.
It is to be noted that under section 15 of the , in cases where the appropriate Govern ment is not a party to the dispute, all that the Government has to do on receiving the award of the Tribunal is to declare it to be binding and to state from what date and for what period it will be binding.
Section 15.(2) is mandatory and it provides: "On receipt of such award, the appropriate Government shall by order in writing declare the award to be binding. . " Thus the Government cannot alter, or cancel, or add to the award, but the award must be declared to be binding as it is.
In substance, therefore, the adjudication of the Tribunal amounts to a final determination of the dispute which binds the parties as well as the Government.
Our attention was however drawn to the proviso to section 15 (2), which runs as follows: "Provided that where the appropriate Government is a. party to the dispute and in its opinion it would be inexpe dient on public grounds to give effect to the whole or any part of the award, it shall on the first available opportu nity lay the award together with the statement of its rea sons for not making a declaration as aforesaid before the Legislative Assembly of the Province, or where the appropri ate Government is the Central Government, before the Central Legislative Assembly, and shall, as soon as may be, cause to be moved therein a resolution for the consideration of the 467 award, and the Legislative Assembly may, by its resolution, confirm, modify, or reject the award.
" This proviso was relied upon by the respondents to show that the right to appeal from the award could not have been contemplated in any case.
But the Act itself makes a dis tinction between cases in which the Government is a party and those in which the Government is not a party.
The proviso relates to a very special type of case and as at present advised I do not wish to express any opinion as to whether an appeal lies to this Court or not in such a case, but, in my judgment, where the Government has only to de clare the award to be binding, an appeal shall lie.
It is necessary here to say a few words as to the scope of the appeal.
As was pointed out by this Court in Pritam Singh vs The State(1), the power under article 136 of the Constitution being a special power is to be exercised only in special cases.
The rule so laid down is bound to re strict the scope of the appeal in practice in almost all the cases which fall under article 136.
But in some cases a limitation will be imposed on the scope of the appeal by the very nature of the case and of the tribunal from which an appeal is sought to be brought, and a case under the Indus trial Disputes Act seems to be an example of such a case.
Dealing now with the merits of the appeal, I am not prepared to hold that this is a proper case for interference with the adjudication of the Tribunal.
The power of this Court was invoked by the appellants on four grounds.
These grounds have been elaborately examined by Mahajan J. and two of them have been pronounced to be wholly inadequate for justifying our interference.
My view with regard to these two grounds is identical with that of Mahajan J. and I do not wish to add to what he has already said on the subject.
The remaining two grounds also are, in my opinion, wholly insufficient to justify the exercise of our special power under article 136.
One of these grounds is that the award of the Tribunal is based on no evidence whatsoever.
I do not, however, find that this ground (1) ; 60 468 was urged in this form in the application for special leave to appeal to this Court.
All that was intended to be urged was that the appellants wanted to adduce evidence but were not allowed to do so.
From the decision of the Tribunal however, it appears that the evidence that was shut out related to one isolated point only and the Tribunal might well have been justified in not allowing evidence to be admitted on a point which in its opinion had no direct bearing on the issue before them.
After hearing the re spondents on this particular point, I am not disposed to hold that the Tribunal has committed such an error as would justify the interference of this Court.
The last ground urged is that the award has been signed by only two members of the Tribunal though it originally consisted of three persons and though the entire hearing of the dispute had taken place before all the three persons.
This objection does not appear to me to be fatal to the jurisdiction of the Tribunal, because under section 8 of the Act it is not obligatory on the Government to appoint a new member to fill a vacancy if one of the members ceases to be available at any time during the proceedings.
Under that section, if the Chairman ceases to be available, the Govern ment must appoint his successor, whereas if a member ceases to be available the Government may or may not appoint any one to fill his place.
In the present case, our attention was drawn to some correspondence which shows that one of the members was called upon to act as a member of another Tribu nal and the award in question was pronounced after informing the Government of the procedure which the Chairman and the remaining members intended to adopt.
In the view I have taken, this appeal must fail, and I would accordingly dismiss it with costs.
MAHAJAN J. This is an appeal by special leave from the determination of an industrial dispute by the Industrial Tribunal appointed under Ordinance VI of 1949.
Bharat Bank Limited, Delhi, the appellant, is a company registered under the Indian Companies Act.
469 Its employees made certain demands and as a result of an unfavourable response from the bank it appears that they struck work on the 9th March, 1949.
The bank in its turn served notices on them to resume work and proceeded to discharge a number of them between the 19th March and 24th March as they failed to do so.
The Central Government constitued a Tribunal consisting of three persons for the adjudication of industrial disputes in banking companies under section 7 of the (XIV of 1947), The disputes mentioned in schedule II of the notifi cation were referred under section 10 of the Act to this Tribunal.
Item 18 of this schedule reads as follows : "Retrenchment and victimization (Specific cases to be cited by employees).
" The dispute under this item between the Bharat Bank and its employees was heard by the Tribunal at Delhi and its award was made on the 19th January, 1950.
It was published in the Government of India Gazette dated 4th February, 1950, and was declared to be binding for a period of one year.
The award of the Tribunal was signed by two out of its three members.
A preliminary objection was raised on behalf of the Central Government as well as on behalf of the respondents that this Court had no jurisdiction to grant special leave to appeal against the determination of an Industrial Tribu nal inasmuch as it did not exercise the judicial powers of the State and that its determination was not in the nature of a judgment, decree or order of a Court so as to be ap pealable.
This being the first case in which special leave was granted from the determination of an Industrial Tribu nal, it is necessary to examine the provisions of the Con stitution dealing with this matter and if possible, to define the limits of the jurisdiction of this Court under article 136.
This article is in these terms : "(1) Notwithstanding anything in this Chapter, the Supreme Court may, in its discretion, grant special leave to appeal from any judgment, decree, determination, sentence or order m any cause or matter passed 470 or made by any court or tribunal in the territory of India.
(2) Nothing in clause (1) shall apply to any judgment, determination, sentence or order passed or made by any court or tribunal constituted by or under any law relating to the Armed Forces.
" The article occurs in Chapter IV of Part V of the Consti tution: "The Union Judiciary.
" Article deals with the establishment and constitution of the Supreme Court.
Article 131 confers original jurisdiction on this Court in certain disputes arising between the Government of India and the States etc.
Articles and 133 deal with the appellate juris diction of the Court in appeals from High Courts within the territory of India in civil matters.
By article 134 limited right of appeal in criminal cases has been allowed.
The Judicial Committee of the Privy Council which was the high est Court of appeal for India prior to 10th October, 1949, was not a Court of criminal appeal in the sense in which this Court has been made a Court of criminal appeal under article 134.
It could only entertain appeals on the crimi nal side in exercise of the prerogative of the King.
Article 135 empowers this Court to hear all appeals which under existing laws could be heard by the Federal Court of India.
By the Abolition of Privy Council Jurisdiction Act, 1949,which came into force on the 10th October, 1949, all the powers that were possessed by the Judicial Committee of the Privy Council in regard to cases or matters arising in India became exercisable by the Federal Court of India whether those powers were exercisable by reason of statutory authority or under the prerogative of the King.
The powers of the Judicial Committee were conferred upon it by the Judicial Committee Act, 1844 (7 & 8 Vict., C. 69).
Appeals lay to His Majesty in Council from judgments, sentences, decreesor orders of any Court of justice within any British colony or possession abroad.
Closely following article 135 which confers all the powers of the Judicial Committee on the Supreme Court comes article 136.
The language employed in this article is very wide and is of a comprehensive character.
Powers given 471 are of an overriding nature.
The article commences with the words "Notwithstanding anything in this Chapter.
" These words indicate that the intention of the Constitution was to disregard in extraordinary cases the limitations contained in the previous articles on this Court 's power to entertain appeals.
These articles dealt with the right of appeal against final decisions of High Courts within the territory of India.
Article 136, however, overrides that qualification and empowers this Court to grant special leave even in cases where the judgment has not been given by a High Court but has been given by any Court in the territory of India; in other words, it contemplates grant of special leave in cases where a Court subordinate to a High Court has passed or made any order and the situation demands that the order should be quashed or reversed even without having recourse to the usual procedure provided by law in the nature of an appeal, etc.
The word "order" in article 136 has not been qualified by the word "final.
" It is clear, therefore, that the power to grant special leave under this article against an order of a Court could be exercised with respect to interlocutory orders also.
Another new feature introduced in article 136 is the power given to grant special leave against orders, and determinations etc.
of any tribunal in the territory of India.
This word did not find place in the Judicial Committee Act, where the phrase used was "a Court of jus tice.
" It is the introduction of this new expression in article 136 that has led to considerable argument as to its scope.
Another expression that did not find place in the Judicial Committee Act but has been introduced in article 136 is the word "determination." A question has been raised as to the meaning to be given to these words in the article.
On the one hand, it was contended that the words "determina tion" and "tribunal" were introduced in the article in order to bring within the scope of the applellate jurisdiction of this Court all orders of tribunals of different varieties and descriptions.
On the other hand, it was said that the words "determination" and "tribunal" were added in the article by way of abundant caution and 472 the intention was that if a tribunal exercised the judicial powers of the State and the decision was passed in the exercise of that power, this Court as the highest judicial Court in the Republic would have power, if it considered, necessary in the ends of justice, to grant special leave.
Clause (2) of article 136 excludes the jurisdiction of this Court in respect of military Courts.
or Tribunal.
It is interesting to observe that in articles 138, 139 and 140 the Constitution has conferred powers on Parliament for further enlargement of the powers of this Court.
Two points arise for determination in this case: (1) whether the word "tribunal" in this article has been used in the same sense as "Court," or whether it has been used in a wider sense, and (2) whether the word "determination" in the article includes within its scope the determinations made by Industrial Tribunals or other similarly constituted bodies or whether it has reference only to determinations of a Court or a tribunal of a purely judicial character.
It was conceded by the learned counsel appearing for the Cen tral Government, Mr. Alladi Krishnaswami Aiyar, that if any tribunal, whether administrative, domestic or quasi judi cial, acts in excess of its jurisdiction, then it can be controlled by the High Courts under the powers conferred on them by article 226 by the issue of a writ of certiorari.
It was said that if the Industrial Tribunal in this case could be proved to have trespassed beyond the limits 0 its statutory jurisdiction, then the remedy lies elsewhere and not by a petition of special leave under article 136.
Mr. Alladi 's contentions may be briefly summarized as follows: (1) The expression "tribunal " means seat of a judge, or a court of justice.
Its necessary attribute is that it can give a final judgment between two parties which carries legal sanction by its own force.
That the word "tribunal" in juxtaposition to the word "court" could only mean a tribunal 'which exercised judicial functions of the State and did not include within its ambit a tribunal which had quasi judicial or administrative powers.
(2) The kinds of orders against which special leave to appeal could be given under article 136 473 have to be of the same nature as passed by a Court , ' in other words, it was said that unless there was a judicial determination of a controversy between two parties, the order would not be appealable.
That in the case of an Industrial Tribunal what gives binding force to the award is the declaration of the government, that the spark of life to it is given by that declaration and without that, the award of the Tribunal is lifeless and has no enforceability and hence cannot be held to be of an appealable nature.
It was further said that in cases between the Government and its employees, by the procedure prescribed in the Act the award could also be rejected, and that being so, by its own deter mination a tribunal could not impose a liability or affect rights.
Dr. Bakshi Tek Chand, appearing for the bank, on the other hand argued that whenever a tribunal, whether exercis ing judicial or quasi judicial functions, determined a matter in a judicial manner, then such a determination is within article 136.
It was said that an Industrial Tribunal has no administrative or executive functions, that its duty is to adjudicate on an industrial dispute, i.e., to act as a Judge, on certain kinds of disputes between employers and employees and that its functions are of a judicial nature, though the ambit of the powers conferred is larger than that of an ordinary Court of law inasmuch as it can grant reliefs which no Court of law could give, but that is because of the powers conferred on it by law.
It was argued that the plain words of the article should not be given a narrow meaning when the intention of the Constitution was to confer the widest power on this Court.
It was further contended that as between private employers and employees and even in certain cases between Government and its employees the decision of the Tribunal was binding on the Government and Government had no power either to affirm, modify or reject it.
All that it was authorised to do was to announce it and by its declaration give it enforceability; that fact, howev er, could not affect the question of appealability of the determination under article 136.
It was finally argued that powers should be exercised by this Court wherever there is a miscarriage 474 of justice by a determination of any tribunal and that if the intention of the Constitution by use of the word "tribunal"was in the same sense as "court," then it was not necessary to import it in article 136, because all tribunals that exercise judicial functions fall within the definition of the word "court" though they may not have been so de scribed.
After considerable thought I have reached the conclusion that the preliminary objection should be overruled.
I see no cogent reasons to limit the plain words of the statute and to place a narrow interpretation on words of widest ampli tude used therein.
In construing the articles of the Con stitution it has always to be remembered that India has been constituted into a sovereign democratic republic in order to ensure justice to all its citizens.
In other words, the foundations of this republic have been laid on the bedrock of justice.
To safeguard these foundations so that they may not be undermined by injustice occurring anywhere this Court has been constituted.
By article S2 of the Constitu tion the Court is empowered to see that the fundamental rights conferred on the citizens by the Constitution are not in any way affected.
By article 136 it has been given overriding power to grant special leave to appeal against orders of courts and tribunals which go against the princi ple of natural justice and lead to grave miscarriage of justice.
The exercise of these, powers could only have been contemplated in cases which affect the rights of people living within the territory of India in respect of their person, property or status.
The question, therefore, for consideration is whether the jurisdiction conferred by use of unambiguous phraseology and by words which have a plain grammatical meaning and are of the widest amplitudeshould be limited and restricted on considerations suggested by Mr. Alladi.
The construction suggested by the learned counsel, if accepted, would in the first instance make the use of certain words in the article unnecessary and redundant and would run counter to the spirit of the Constitution.
It must be presumed that the draftsmen of the Constitution knew well the fact that there were a number of tribunals consti tuted in this country 475 previous to the coming into force of the Constitution which were performing certain administrative, quasi judicial or domestic functions, that some of them had even the trap pings of a Court but in spite of those trappings could not be given that description.
It must also be presumed that the Constitution makers were aware of the fact that the highest Courts in this country had held that all tribunals that discharged judicial functions fell within the definition of the expression "Court.
" If by the use of the word "tribu nal" in article 136 the intention was to give it the same meaning as "Court," then it was redundant and unnecessary to import it in the article because, by whatever name de scribed, such a tribunal would fall within the definition of the word "Court.
" The word "Court" has a well known meaning in legislative history and practice.
As pointed out in Halsbury 's Laws of England, the word "Court" originally meant the King 's Palace but subsequently acquired the meaning of (1) a place where justice was admin istered, and (2) the person or persons who administer it.
In the Indian Evidence Act it is defined as including all judges and magistrates and all persons except arbitrators legally authorized to take evidence.
This definition is by no means exhaustive and has been framed only for the pur poses of the Act.
There can be no doubt that to be a Court, the person or persons who constitute it must be entrusted with judicial functions, that is, of deciding litigated questions according to law.
However, by agreement between parties arbitrators may be called upon to exercise judicial powers and to decide a dispute according to law but that would not make the arbitrators a Court.
It appears to me that before a person or persons can be said to constitute a Court it must be held that they derive their powers from the State and are exercising the judicial powers of the State.
In R.v.
London County Council (1), Saville L.J. gave the following meaning to the word "Court" or "judicial authori ty" : (1) [1931]2K.B. 215.
61 476 "It is not necessary that it should be a Court in the sense that this Court is a Court, it is enough if it is exercising, after hearing evidence, judicial functions in the sense that it has to decide on evidence between a proposal and an opposition; and it is not necessary to be strictly a Court if it is a tribuna which has to decide rightly after hearing evidence and opposition.
" As pointed out in picturesque language by Lord Sankey L.C. in Shell Co. of Australia vs Federal Commissioner of Taxation(1), there are tribunals with many of the trappings of a Court which, nevertheless, are not Courts in the strict sense of exercising judicial power.
It seems to me that such tribunals though they are not full fledged Courts, yet exercise quasi judicial functions and are within the ambit of the word "tribunal" in article 136 of the Constitution.
It was pointed out in the above case that a tribunal is not necessarily a Court in this strict sense because it gives a final decision, nor because it hears witnesses oath nor because two or more contending parties appear before it between whom it has to decide, nor because it gives deci sions which affect the rights of subjects nor because there is an appeal to a Court, nor because it is a body to which a matter is referred by another body.
The intention of the Constitution by use of the word "tribunal" in the article seems to have been to include within the scope of article 136 tribunals adorned with similar trappings as Court but strictly not coming within that definition.
Various defi nitions of the phrase "judicial power" have been given from time to time.
The best definition of it on high authority is the one given by Griffith C.J. in Huddart, Parker & Co. vs Moorehead(2), wherein it is defined as follows : "The words 'judicial power ' as used in section 71 the Constitution mean the power which every sovereign author ity must of necessity have to decide controversies between its subjects, or between itself and its subjects, whether the rights relate to life, liberty or property.
The exer cise of this power does not begin [19311 A. C. 275.
(2) ; , 357. 477 until some tribunal which has power to give a binding and authoritative decision (whether subject to appeal or not) is called upon to take action.
" It was conceded that a tribunal constituted under the , exercises quasi judicial powers.
That phrase implies that a certain content of the judicial power of the State is vestedit and it is called upon to exercise it.
An attempt was made to define the words "judicial" and "quasi judicial" in the case of Cooper vs Wilson (1).
The relevant quotation reads thus : "A true judicial decision presupposes an existing dis pute between two or more parties, and then involves four requisites : (1) The presentation necessarily orally) of their case by the parties to the dispute; (2) if the dispute between them is a question of fact, the ascertainment of the fact by means of evidence adduced by the parties to the dispute and often with the assistance of argument by or on behalf of the parties on the evidence; (3) if the dispute between them is a question of law, the submission of legal argument by the parties, and (4) a decision which disposes of the whole matter by a finding upon the facts in dispute and application of the law of the land to the facts so found, including where required a ruling upon any disputed question of law.
A quasi judicial decision equally presup poses an existing ' dispute between two or more parties and involves (1) and (2), but does not necessarily involve (3) and never involves (4).
The place of (4)is in fact taken by administrative action, the character of which is determined by the Minister 's free choice.
" The extent of judicial power exercised by an ]industrial Tribunal will be considered hereinafter in the light of the observations cited above.
Reference was made to certain passages from Professor Allen 's book on Law and Order, Chapter IV, page 69, where mention is made of the kinds of administrative tribunals functioning in various countries today.
Porter on Adminis trative Law, 1929 Edn., (1) , at p. 340.
478 page 194, was also relied upon.
There can be no doubt that varieties of administrative tribunals and domestic tribunals are known to exist in this country as well as in other countries of the world but the real question to decide in each case is as to the extent of judicial power of the State exercised by them.
Tribunals which do not derive authority from the sovereign power cannot fall within the ambit of article 136.
The condition precedent for bringing a tribu nal within the ambit of article 136 is that it should be constituted by the State.
Again a tribunal would be outside the ambit of article 136 if it is not invested with any part of the judicial functions of the State but discharges purely administrative or executive duties.
Tribunals, however, which are found invested with certain functions of a Court of justice and have some of its trappings also would fall within the ambit of article 136 and would be subject to the appellate control of this Court whenever it is found neces sary to exercise that control in the interests of justice.
It is now convenient to consider whether a tribunal constituted under the , exer cises all or any one of the functions of a Court of justice and whether it discharges them according to law or whether it can act as it likes in its deliberations and is guided by its own notions of right and wrong.
The phrase "industrial dispute" has been defined in section 2 clause (k) of the Act as follows : "any dispute or difference between employers and em ployees, or between employers and workmen, or between work men and workmen, which is connected with the employment or non employment or the terms of employment or with the condi tions of labour, of any person.
" Such a dispute concerns the rights of employers and employees.
Its decision affects the terms of a contract of service or the conditions of employment.
Not only may the pecuniary liability of an employer be considerably affect ed by the adjudication of such dispute but it may even result in the imposition of punishments on him.
It may adversely 479 affect the employees as well.
Adjudication of such a dis pute affects valuable rights.
The dispute and its result can always be translated in terms of money.
The point for decision in the dispute usually is how much money has to pass out of the pocket of the employer to the pocket of the employee in one form or another and to what extent the right of freedom of contract stands modified to bring about indus trial peace.
Power to adjudicate on such a dispute is given by section 7 of the statute to an Industrial Tribunal and a duty is cast on it to adjudicate it in accordance with the provisions o Act.
The words underlined clearly imply that the dispute has to be adjudicated according to law and not in any other manner.
When the dispute has to be adjudicated in accordance with the provisions of the Act, it follows that the tribunal has to adhere to law, though that law may be different from the law that an ordinary Court of justice administers.
It is noteworthy that the tribunal is to consist of experienced judicial officers and its award is defined as a determination of the dispute.
The expression "adjudication" implies that the tribunal is to act as a judge of the dispute; in other words, it sits as a Court of justice and does not occupy the chair of an administrator.
It is pertinent to point out that the tribunal is not given any executive or administrative powers.
In section 38 of the Act power is given to make rules for the purpose of giving effect to the provisions of the Act.
Such rules can provide in respect of matters which concern the powers and procedure of tribunals including rules as to the summoning of witness es, the production of documents relevant to the subject matter and as to appearance of legal practitioners in pro ceedings under this Act.
Rule 3 of these rules provides that any application for the reference of an industrial dispute to a tribunal shall be made in form (A) and shall be accompanied by a statement setting forth, inter alia, the names of the parties to the dispute and the specific matters of dispute.
It is in a sense in the nature of a plaint in a suit.
In rule 13 power is given to administer oaths.
Rule 14 provides as follows : "A tribunal may accept, admit or call for 480 evidence at any stage of the proceedings before it and in such manner as it may think fit.
" Rule 17 provides that at its first sitting the tribunal is.
to call upon the parties to state their case.
In rule 19 provision has been made for proceedings ex parte.
Rule 21 provides that in addition to the powers conferred by sub section (3) of section 11 of the Act, a tribunal shall have the same powers as are vested in a civil Court under the Code of Civil Procedure when trying a suit, in respect of the following matters, namely, (a) discovery and inspection; (b) granting of adjournment; (c) reception of evidence taken on affidavit; and that the tribunal may summon and examine suo motu any person whose evidence appears to it to be material.
It further says that the tribunal shall be deemed to be a civil Court within the meaning of sections 480 and 482 of the Code of Criminal Procedure, 189S. Rule 21 says that the representatives of the parties, appearing before a tribunal, shall have the right of examination, cross exami nation and re examination and.
of addressing the Court or Tribunal when all evidence has been called.
In rule 30 it is provided that a, party to a reference may be represented by a legal practitioner with the permission of the tribunal and subject to such conditions as the tribunal may impose.
In section 11 (3) it is laid down that a tribunal shall have the same powers as are vested in a civil Court under the Code of Civil Procedure when trying a suit, in respect of the following matters, namely, (a) enforcing the attendance of any person and examining him on oath; (b) compelling the production of documents and material objects; (c) issuing commissions for the examination of witnesses; (d) in respect of such other matters as may be prescribed; and every in quiry or investigation by a tribunal shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 of the Indian Penal Code.
It is difficult to conceive in view of these provisions that the Industrial Tribunal per forms any funCtions other than that of a judicial nature.
The tribunal has certainly the first three requisites and characteristics of a Court as defined above.
It has cer tainly a considerable element of the fourth also inasmuch as. 481 the tribunal cannot take any administrative action, the character of which is determined by its own choice.
It has to make the adjudication in accordance with the provisions of the Act as laid down in section 7.
It consists of persons who are qualified to be or have been judges.
It is its duty to adjudicate on a serious dispute between employers and employees as affecting their right of freedom of contract and it can impose liabilities of a pecuniary nature and disobedience of its award is made punishable.
The powers exercisable by a tribunal of this nature were considered in a judgment ' of the Federal Court of India in Western India Automobile Association vs Industrial Tribunal, Bombay (x), and it was observed that such a tribunal can do what no Court can, namely, add to or alter the terms or condi tions of the contract of service.
The tribunal having been entrusted with the duty of adjudicating a dispute of a peculiar character, it is for this reason that it is armed with extraordinary powers.
These powers, however, are derived from the statute.
These are the rules of the game and it has to decide according to these rules.
The powers conferred have the sanction of law behind it and are not exercisable by reason of any discretion vested in the members of the tribunal.
The adjudication of the dispute has to be in accordance with evidence legally adduced and the parties have a right to be heard and being represented by a legal practitioner.
Right to examine and cross examine witnesses has been given to the parties and finally they can address the tribunal when evidence is closed.
The whole procedure adopted by the Act and the rules is modelled on the Code of Civil Procedure.
In my opinion, therefore, the Industrial Tribunal has all the necessary attributes of a Court of justice.
It has no other function except that of adjudicating on a dispute.
It is no doubt true that by reason of the nature of the dispute that they have to adju dicate the law gives them wider powers than are possessed by ordinary Courts of law, but powers of such a nature do not affect (1) [1949]] F.C.R. 321.
482 the question that they are exercising judicial power.
Stat utes like the Relief of Indebtedness Act, or the Encumbered Estates Act have conferred powers on Courts which are not ordinarily known to law and which affect contractual rights.
That circumstance does not make them anything else but tribunals exercising judicial power of the State, though in a degree.
different from the ordinary Courts and.
to an extent which is also different from that enjoyed by an ordinary Court of law.
They may rightly be described as quasi judicial bodies because they are out of the hierarchy of the ordinary judicial system but that circumstance cannot affect the question of their being within the ambit of article 136.
It may also be observed that the tribunal is deemed to be a civil Court for certain purposes as laid down in rule 21 of the rules above cited and in section 11(3) of the Act.
As a civil Court if it exercises any of the powers contem plated by this section its decisions would become subject to appeal to a District Judge and a fortiori this Court 's power under article 136.
would at once be attracted in any case in respect of these matters.
Again, in Chapter VI of the Act breach of the terms of an award has been made punishable by section 29 of the Act.
The result therefore, is that disobedience of the terms of an award is punishable under the Act.
That being so, a determination of the tribu nal not only affects the freedom of contract and imposes pecuniary liability on the employer or confers pecuniary benefits on the employees, but it also involves serious consequences as failure to observe those terms makes a person liable to the penalties laid down in Chapter VI.
An award which has these serious consequences can hardly be said to have been given by a tribunal which does not exer cise some of the most important judicial functions of the State.
Considerable stress was laid by Mr. Alladi on the provi sions of sections 15 and 19 of the Act.
Section 15 enacts as follows : "(1) Where an industrial dispute has been referred to a Tribunal for adjudication, it shall hold its 483 proceedings expeditiously and shall, as soon as practicable on the conclusion thereof, submit its award to the appropri ate Government.
(2) On receipt of such award, the appropriate Govern ment shall by order in writing declare the award to be binding.
Provided that where the appropriate Government is a party to the dispute and in its opinion it would be inexpe dient on public grounds to give effect to the whole or any part of the award, it shall on the first available opportu nity lay the award together with the statement of its rea sons for not making a declaration as aforesaid before the Legislative Assembly of the province, or where the appropri ate Government, is the Central Government, before the Cen tral Legislature, an d shall, as soon as may be, cause to be moved therein a resolution for the consideration of the award; and the Legislative Assembly or as the case may be, the Central Legislature, may by its resolution confirm, modify or reject the award.
(3) On the passing of a resolution under the proviso to sub section (2), unless the award is rejected thereby, the appropriate Government shall11 by order in writing declare the award as confirmed or modified by the resolution, as the case may be, to be binding.
(4) Save as provided in the proviso to subsection (3) of section 19, an award declared to be binding under this section shall not be called in question in any manner.
" As regards clause (4), it was conceded rightly that a law dealing with industrial disputes and enacted in the year 1947 could not in any way,affect the provisions of the Constitution laid down in article 136.
It was however, strenuously urged that the award of the tribunal had no binding force by itself and unless the appropriate Govern ment made a declaration in writing under clause (2) of section 15, this award was a lifeless document and had no sanction behind it and therefore it could not have been contemplated that if would be appealable even by special leave.
In my opinion, this contention is unsound.
The provisions of clause (2) of 484 section 15 leave no discretion in the Government either to affirm, modify or reject the award.
It is bound to declare it binding.
It has no option in the matter.
In such a situation it is the determination by the tribunal that matters.
Without that determination Government cannot function.
It does not possess the power either to adjudi cate the dispute or to alter it in any manner whatsoever.
That power vests in the tribunal alone.
The rights of the parties are really affected by the adjudication contained in the award, not by the Government 's declaration which is automatic.
It is no doubt true that announcement of the award by the Government gives it binding force but that does not affect the question of the appealability of the determination under article 136 of the Constitution.
The apposite answer to this contention may be given in the language of the decision in Rex vs Electricity Commissioners (1).
The relevant passage runs thus : "It is necessary, however, to deal with what I think was the main objection of the Attorney General.
In this case he said the Commissioners come to no decision at all.
They act merely as advisers.
They recommend an order embodying a scheme to the Minister of Transport, who may confirm it with or without modifications.
Similarly the Minister of Trans port comes to no decision.
He submits the order to the Houses of parliament, who may approve it with or without modifications.
The Houses of Parliament may put anything into the order they please, whether consistent with the Act of 1919, or not.
Until they have approved, nothing is decided, and in truth the whole procedure, draft scheme, inquiry, order, confirmation, approval, is only part of a process by which Parliament is expressing its will, and at no stage is subject to, any control by the Courts.
It is unnecessary to emphasize the constitutional importance of this contention.
Given its full effect, it means that the checks and safeguards which have been imposed by Act of Parliament, including the freedom from compulsory taking, can be removed, and new and onerous and (1) , at 207.
485 inconsistent obligations imposed without an Act of Parlia ment, and by simple resolution of both Houses of Parliament.
I do not find it necessary to determine whether, on the proper construction of the statute, resolutions of the two Houses of Parliament could have the effect claimed.
In the provision that the final decision of the Commissioners is not to be operative until it has been approved by the two Houses of Parliament I find nothing inconsistent with the view that they act judicially and within the limits pre scribed by Act of Parliament, and that the Courts have power to keep them within those limits.
It is to be noted that it is the order of the Commissioners that eventually takes effect, neither the Minister of Transport who confirms, nor the Houses of Parliament who approve.
can under the statute make an order which in respect of the matters in question has any operation.
I know of no authority which compels me to hold that a proceeding cannot be a judicial proceeding subject to confirmation or approval, even where the approval has to be that of the Houses of Parliament.
The authorities are to the contrary The observations, though they relate to a case which concerns the issue of a writ of prohibition and certiorari, have application to the present case.
Here no discretion whatsoever has been left in the Government in ordinary cases to either modify or t0 reject the determination of the tribunal.
The fact that the Government has to make a decla ration after the final decision of the tribunal is not in any way inconsistent with the view that the tribunal acts judicially.
It may also be pointed out that within the statute itself a clue has been provided which shows that the circumstance that the award has to be declared by an order of Government to be binding does not affect the question of its appealability.
In article 136 clause (2) express provi sion has been made for excepting from the ambit of article 136 the decisions of military courts and tribunals.
It follows that but for the exception it was considered that these would be within article 136 clause (1).
It is quite clear from the various provisions of the Army Act that the decisions of military tribunals or courts are subject to confirmation either by 486 the Commander in Chief or various other military authori ties.
It is only after such confirmation that 'that can operate.
It has never been considered that fact in any way affects the question of their appealability.
Rex vs Minister of Health (1) also supports this view.
There by the Housing Act, 1925, by section 40, a local authority which had prepared an improvement scheme was required to present a petition to the Minister praying that an order should be made confirming such scheme.
Sub section (3) provided that the Minister after considering the peti tion may cause a local inquiry to be made and may by order confirm the scheme with or without conditions or modifica tions.
In sub section (5) it was stated that the order of the Minister when made shall have effect as if enacted in this Act.
It was held be the Court of Appeal that as the order made by the Minister was made without the statutory conditions having been complied with it was ultra vires and therefore a writ of certiorari should issue for the purpose of quashing it.
Reliance was placed by Scrutton L.J. on Rex vs Electricity Commissioners (2).
The same.view was ex pressed in Minister of Health vs The King (3).
It was observed that judicial review by prohibition or a writ of certiorari was permissible if the Minister of Health in confirming the order exceeded his statutory powers.
It is clear therefore that simply because an order has to be confirmed by a Minister or by the Government it in any way affects the power of judicial review.
Reference may also be made to the observations in Smith vs The Queen (4).
At page 623 it was observed that it is a common principle in every case which has in itself the character of a judicial pro ceeding that the party against whom a judgment is to operate shall have an opportunity of being heard.
In this sense it can hardly be disputed that the proceeding before an indus trial Tribunal is a judicial proceeding.
In my judgment, therefore, the contention raised by Mr. Alladi that this (1) (3) [1931] A.C. 494; (2) (4) 3 A.C. 245.
487 Court cannot exercise its powers under article because the decision of the tribunal has no force till a declaration is made by the Government cannot be sustained.
As regards section 19, it was contended that an award declared by the appropriate Government under section 15 to be binding can only come into operation on such date as may be specified by the appropriate Government and can only remain in operation for such period not exceeding one year, as may be fixed by that Government and it was said that herein the Government had the power to state the period from which the award was to commence and the time for which it was to remain in force.
This section does not, in my opin ion, affect the question of the appealability of the deter mination of the tribunal.
Government has certain functions to perform in its own sphere after the award is made.
In certain cases it is bound to declare that award binding.
In other cases, when it is itself a party to the dispute, it has certain overriding powers and these overriding powers are that if it considers that the award is not in public interests it may refer it to the legislature.
The legisla ture, however, has the power to modify, accept or reject the award.
These overriding powers presuppose the existence of a valid determination by a tribunal.
If that determina tion is in excess of jurisdiction or otherwise proceeds in a manner that offends against the rules of natural justice and is set aside by exercise of power under article 136, then no occasion arises for exercise of governmental power under the Act.
Given a valid award, it could not be denied that the Government could exercise its powers in any manner it con sidered best and the exercise of that power is outside the constitution of this Court.
In this connection reference was made to Moses vs Parker (1).
The passage on which emphasis was laid reads as follows : "The Court has been substituted for the commissioners to report to the governor.
The difference is that their report is to be binding on him.
Probably it was (1) [1896] A.C. 488 thought that the status and training of the judges made them the most proper depositaries of that power.
But that does not make their action a judicial action in the sense that it can be tested and altered by appeal.
It is no more judicial than was the action of the commissioners and the governor.
The Court is to be guided by equity and good conscience and the best evidence.
So were the commissioners.
So every public officer ought to be.
But they are expressly exoner ated from all rules of law and equity, and all legal forms.
How then can the propriety of their decision be tested on appeal ? What are the canons by 'which this Board is to be guided in advising Her Majesty whether the Supreme Court is right or wrong ? It seems almost impossible that decisions can be varied except by reference to some rule, whereas the Court making them is free from rules.
If appeals were allowed, the certain result would be to establish some system of rules, and that is the very thing from which the Tasmanian Legislature has desired to leave the Supreme Court free and unfettered in each case.
If it were clear that appeals ought to be allowed such difficulties would doubt less be met somehow.
But there are strong arguments to show that the matter is not of an appreciable nature.
" One would have expected that after this opinion the decision would have been that the Judicial Committee had no jurisdiction to entertain the appeal but their Lordships proceeded to base their decision not on this ground but on the ground that this was not a fit case for the exercise of the prerogative of the King.
In my opinion, the observations made in that case have no apposite application to the provi sions of the statute with which we are concerned.
I do not see any difficulty in this case in testing the propriety of the determination of the tribunal.
This Court is not to substitute its decision for the determination of the tribu nal when granting relief under article 136.
When it chooses to interfere in the exercise of these extraordinary powers, it does so because the tribunal has either exceeded its jurisdiction or has approached the questions referred to it in a manner which is likely to 489 result in injustice or has adopted a procedure which runs counter to the well established rules of natural justice.
In other words, if it ,has denied a hearing to a party or has refused to record his evidence or has acted in any other manner, in an arbitrary or despotic fashion.
In such cir cumstances no question arises of this Court constituting itself into a tribunal and assuming powers of settling a dispute.
All that the Court when it entertains an appeal would do is to quash the award and direct the tribunal to proceed within the powers conferred on it and approach the adjudication of the dispute according to principles of natural justice.
This Court under article 136 would not constitute itself into a mere court of error.
Extraordinary powers have to be exercised in rare and exceptional cases and on well known principles.
Considered in the light of these principles, there is no insuperable difficulty in the present case of the nature pointed out in the passage cited above.
It was conceded that the High Court could exercise powers under section 226 and could quash an award but it was said that under article 136 this power should not be exer cised in an appeal.
I do not see why ? Particularly when after the High Court has passed any decision on an applica tion made to it in exercise of the powers under section 226, that decision could be brought to this Court in appeal.
In the matter of an industrial dispute where expedition is the crux of the matter, it is essential that any abuse of powers by such tribunals is corrected as soon as possible and with expedition.
It may be mentioned that it is no novel practice for a court empowered to grant special leave to exercise its powers even though there may be intermediate rights of appeal or other remedies available, if it is considered essential to do so in extraordinary situations.
Vide Bent wick 's Privy Council Practice, 3rd Edn., page 125.
Therein it is stated as follows : "In several cases from Jamaica, the Privy Council grant ed leave to appeal to the Queen in Council directly from the Supreme Court, without an intermediate appeal (which would have been attended with much 490 expense and delay) to the Court of Error in the island, there being in each of those cases manifestly some point of law raised which deserved discussion.
" The cases were In Re Barnett(1), Harrison vs Scott (2), and Attorney General of Jamacia vs Manderson (s).
The phraseology employed in article 136 itself justifies this course.
The article empowers this Court to grant special leave against sentences or orders made by any court.
In all other articles of the Constitution right of appeal is con ferred against final decisions of the highest court of appeal in the country but under this article power is given to this Court to circumvent that procedure if it is considered necessary to do so.
I am, therefore, of the opinion that the mere circumstance that a remedy in the nature of a writ of certiorari is open to the petitioners does not necessarily lead to the conclusion that the power of this Court under article 136 is circumscribed by that circumstance.
Whenever judicial review is permissible in one form or another, this Court as the highest Court in the land can exercise its special powers and circumvent ordinary procedure by granting special leave.
What it has to ulti mately decide it can decide earlier.
I now proceed to examine some of the cases to which reference was made by Mr. Alladi.
Three Australian cases were cited which concern the construction of sections 51, 71 and 72 of the Australian Constitution (63 and 64 Vict., c. 12).
Section 72 requires that every Justice of the High Court and every Justice of any other Court created by the Parliament of the Common wealth shall subject to the power of removal contained in the section be appointed for life.
Section 71 confers the whole judicial power of the Commonwealth upon the Courts therein mentioned and no other tribunal or body can exercise that power.
Every Court referred to in section 71 has to be constituted in the manner provided by section 72.
The ques tion in these cases was as to the meaning of the phrase "judicial power of the Commonwealth.
" Similar (1) 4 Moo. 453. (2) 5 Moo. 357. (3) 6 Moo. 239. 491 phraseology has not been used in any part of the Constitu tion of India and in these circumstances it is difficult to derive any assistance from these decisions in solving the problem before us.
The Constitution of India is not mo delled on the Constitution of Australia and that being so, any observations made in decisions given under that Consti tution cannot be held to be a safe guide in the interpreta tion of language employed in a Constitution differently drafted.
The first of these cases is Waterside Workers ' Federa tion of Australia vs
J.W. Alexander Ltd. (1).
Therein it was held that the power conferred by the Commonwealth Concilia tion and Arbitration Act 1904 1915 upon the Commonwealth Court of Conciliation and Arbitration to enforce awards made by it is part of "the judicial power of the Commonwealth "within the meaning of section 71 of the Constitution, and can only be vested in the courts mentioned in that section.
Mr. Alladi placed reliance on a passage at page 467 in the judgment of Isaacs and Rich JJ., which reads as follows : "The arbitral part of the Act, therefore, is quite within the power of pl. xxxv, and is not intended by the Act to be exercised by an ordinary Court of Justice, which, it is suggested, Parliament by some strange perversity proceed ed to destroy at birth.
It is true that enforcement provi sions are found. .
But all this was in imitation of the State Acts of Arbitration, and not in reliance on the Judi cature Chapter of the Federal Constitution.
The arbitral portion of the Act is, in our opinion, perfectly good, subject to its severability from any other portion which may be bad.
" It was argued that the Industrial Tribunal here was an arbitration tribunal of the same kind as in Australia and exercises similar functions.
It is however pertinent to observe that the phraseology employed in section 15 of the Indian Act is different from that used in the Australian statute.
The Indian statute has constituted different bodies for different purposes.
An Industrial Tribunal has been constituted (1) 25 C.L.R. 63 492 only to discharge one function of adjudication.
It is not described as an arbitral tribunal.
The Act has avoided the use of the word "arbitration" either in preamble or in any of its relevant provisions though the determination has been named as an award.
In these circumstances it is unsafe to seek any guidance from observations made in this case.
The next case to which reference was made is Rola Co. (Australia) Proprietary Ltd. vs The Commonwealth (1).
The question here was whether the Women 's Employment Board constituted under the Women 's Employment Act, 1942, did not exercise the judicial power of the Commonwealth.
It was held that the Board exercised functions which were arbitral in character.
Emphasis was laid on a passage occurring in page 198 of the report which reads as follows : "An industrial award lays down rules of conduct for the future.
It does not purport to ascertain and enforce exist ing rights; it is directed to the creation of new rights.
It is urged on behalf of the plaintiff that a determination of the Committee does not create a rule of conduct binding the parties for the future, but that it authoritatively deter mines a possibly controverted question of fact and that the making of such an authoritative determination is necessarily an exercise of judicial power.
Reference is made to the frequently quoted statement of Griffith C.J. in Huddart Parker & Co. Pty. Ltd. vs Moorehead (2), approved by the Privy Council in Shell Co. of Australia Ltd. vs Federal Commissioner of Taxation (8):__ "I am of opinion that the words 'judicial power ' as used in section 71 of the Constitution mean the power which every sovereign authority must of necessity have to decide controverises between its subjects or between itself and its subjects, whether the rights relate to life, liberty or property.
The exercise of this power does not begin until some tribunal which has power to give a binding and authori tative decision (whether subject to appeal or not) is called upon to take action." (1) ; (2) a C.L.R. 330 at 357.
(3) 493 Reg.
5C gives Committees power.
to decide controversies between subjects relating to their rights and the regulation purports to make those decisions binding and authoritative.
I am not satisfied that the words of Griffith C.J. are properly interpreted when it is said that they mean that a power to make binding and authoritative decisions as to facts is necessarily judicial power.
I direct attention to the concluding words " is called upon to take action.
" In my opinion these words are directed to action to be taken by a tribunal which has power to give a binding and authorita tive decision.
The mere giving of the decision is not the action to which the learned Chief Justice referred.
If a body which has power to give a binding and authoritative decision is able to take action so as to enforce that deci sion, then, but only then, according to the definition quoted, all the attributes of judicial power are plainly present.
I refer to what I say more in detail hereafter, that the Privy Council, in the Shell case (1), in which approval was given to the definition quoted, expressly held that a tribunal was not necessarily a Court because it gave decisions (even final decisions) between contending parties which affected their rights.
In Huddart Parker 's case (2), Isaacs 1. referred to the statement of Palles C.B. in R.v.
Local Government Board for Ireland (3) "to erect a tribunal into a 'Court ' or 'juris diction ', so as to make its determinations judicial, the essential element is that it should have power, by its determination within jurisdiction, to impose liability or affect rights." "By this," said the learned Chief Baron, "I mean that the liability is imposed, or the right affected by the determination only, and not by the fact determined, and so that the liability will exist, or the right will be affected, although the determination be wrong in law or in fact.
It is otherwise of a ministerial power.
If the existence of such a power depends upon a contingency, al though it may be necessary for the officer to determine whether (1) (2) ; at 383.
(3) at p. 373.
494 the contingency has happened, in order to know whether he shall exercise the power, his determination does not bind.
The happening of the contingency may be questioned in an action brought to try the the act done under the alleged exercise of the power.
But where the determination binds, although it is based on an erroneous view of facts or law, then the power authorizing it is judicial.
There we get a modern use of the term 'judicial power '.
" This state ment of the characteristics of judicial power looks to what, in Waterside Workers ' Federation of Australia vs Gilchrist, Watt & Sanderson Ltd.(1), Isaacs and Rich JJ.
referred to as the creation of instant liability in specified persons as distinct from laying down a rule or standard of conduct for the future.
The decision of an ordinary Court that B is bound to pay money to A applies a pre existing standard of rights and duties not created by the Court itself, with the result that there is an immediately enforceable liability of B to pay to A the sum of money in question.
The decision of the Wom en 's Employment Board does not create any such liability, nor does the determination of a Committee of Reference create any such liability.
In order to impose an immediale ly enforceable liability upon any employer, for example, to pay wages to a particular female, it would be necessary for the female or some person on her behalf (see reg.
9A) to sue in a court of competent jurisdiction.
If such a proceeding succeeded there would then be a liability created by the determination of the court.
such a proceeding the determina tion of the Committee of Reference would be evidence of the facts to which it related, but that determination would not in itself create "liability.
" The concluding words of the passage quoted above at once distinguish the present case from the Australian case.
The award given by an Industrial Tribunal in respect either of bonus or higher wages, etc.
is enforceable by its own force and by the coercive machienary of the Act and it is not merely a declaration of a character that furnishes a cause of action to the employee to bring a suit on its foot to recover the C.L.R. 482, 512.
495 wages.
An arbitral tribunal 's decision cannot be enforced unless it has the sanction of a Court of justice behind it but the award of the Tribunal is enforceable under the Act itself by the coercive machinery provided therein.
It is the terms of the award that are enforceable and not the terms of the order made by the Government.
It is the breach of the terms of the award that is punishable and not any breach of Government 's order.
The Government itself is bound to declare the award binding and it has no option whatsoever in the matter.
It is no doubt true that the tribunal has not only to decide the existing rights and liabilities of the parties and it can lay down rules of conduct for the future but it does so because by law it is authorised to do so.
Its decision carries the sanction with it.
The Government is bound to give effect to it and the statute enforces it by coercive machinery.
In my view, therefore, this decision again has no relevancy to the present case.
The third case to which reference was made is Shell Co. of Australia vs Federal Commissioner of Taxation (1).
That was an income tax matter and the decision has been consid ered in an earlier part of this judgment.
Reference was also made to Mohammad Ahmad vs Governor General in Council ("), in which it was held that an improvement trust was not a civil Court subordinate to the High Court under section 115 of the Code of Civil Procedure.
That has no bearing to the matter in issue here.
Similar point was discussed in Hari vs Secretary of State for India (3).
Labour Relations Board vs John East Iron Works Ltd. (4) is a Canadian case and the decision proceeded on the same lines as in the Australian cases.
Mr. Sen appearing for the respondents placed reliance on O 'Connor vs Waldron (5).
The relevant passage occurs at page 81 which runs thus : The law as to judicial privilege has in process of time developed.
Originally it was intended for the protection of judges sitting in recognised Courts of (1) (3) I.L.R. (2) I.L.R. (4) A.I.R. 1949 P.C. 129.
(5) , 496 Justice established as such.
The object no doubt was that judges might exercise their functions free from any danger that they might be called to account for any words spoken as judges.
The doctrine has been extended to tribunals exer cising functions equivalent to those of an established Court of Justice.
In their Lordships ' opinion the law on the subject was accurately stated by Lord Esher in Royal Aquari um etc.
Ltd. vs Parkinson (1), where he says that the privi lege applies wherever there is an authorized inquiry which, though not before a Court of Justice, is before a tribunal which has similar attributes.
This doctrine has never been extended further than to Courts of Justice and tribunals acting in a manner similar to that in which such Courts act '" The learned counsel contended that the. word "tribunal" in article 136 could only have reference to those tribunals which exercise functions equivalent to that of a Court of Justice.
I have no hesitation in holding that the Industrial Tribunal has similar attributes as that of a Court of Jus tice in view of the various provisions to which I have made reference.
Reference was also made to certain passages occuring in pages 422 and 428 of Toronto Corporation vs York Corporation (2).
That was a case of the Municipal Board of Ontario.
It was held there that the Board was merely an administrative tribunal.
Next reliance was placed on R.v.
National Arbitration Tribunal, Ex parte Horatio Crowther & Co. Ltd.(3).
That dealt with the powers of tile National Arbitration Tribunal.
In my opinion this citation also is not of much assistance.
It was again urged by Mr. Alladi that the word "tribu nal" was introduced in the article to provide for cases of tribunals like the Board of Revenue.
The suggestion does not appear to be sound, because a Revenue Board has all the attributes of a Court of justice and falls within the defi nition of the word "Court" in matters where it adjudicates on rights of parties.
(6) (7) [1938] A.C. &15.
(8) 497 The word "tribunal" has been used in previous legisla tion in a number of statutes and it is difficult to think that the Constitution when it introduced this word in arti cle 136 intended to limit its meaning to only those tribu nals which though not described as Courts strictly speaking, were discharging the same or analogous functions as were being discharged by Courts.
For the reasons given above I am of the opinion that the word "tribunal" in article 136 has to be construed liberally and not in any narrow sense and an Industrial Tribunal inasmuch as it discharges functions of a judicial nature in accordance with law comes within the ambit of the article and from its determination an application for spe cial leave is competent.
The question now to determine is whether the exercise of overriding powers of this Court can be justified on any ground whatsoever in the present case.
As I have already said, exceptional and extraordinary powers of this character can only be justifiably used where there has been a grave miscarriage of justice or where the procedure adopted by the Tribunal is such that it offends against all notions of legal procedure.
Dr. Bakshi Tek Chand for the petitioner bank urged four grounds justifying exercise of the special jurisdiction of this Court.
Firstly, he contended that the word "victimiza tion" used in clause 18 of the reference had been interpret ed in such a manner by the Tribunal that it had usurped jurisdiction to decide disputes which were never referred to it.
In my view this is not a matter which can justify the exercise of the powers under article 136.
This Court is not a mere Court of error.
The word "victimization" has not been defined in the statute and is not in any sense a term of law or a term of article It is an ordinary English word which means that a certain person has become a victim, in other words, that he has been unjustly dealt with.
It was argued that the word has acquired a special meaning in regard to industrial disputes and connotes a person who becomes a victim of the employer 's wrath by reason of his trade union activities and that the word cannot relate to a person who has been merely unjustly dismissed.
Be that as it may.
498 The determination of the Tribunal has not been materially affected by this interpretation of the word to any large extent and that being so, it does not call for the exercise of the special power.
The second ground urged was that the Tribunal has erred in ordering reinstatement of persons who were guilty of an illegal strike.
It was contended that section 23 (b) of the Act has been wrongly construed by it and as a result of this misconstruction persons who were guilty of a wrong and who could not have been reinstated have been reinstated.
In brief, the argument was that under section 23(b) when a matter has been referred to a tribunal in respect of an earlier strike, any strike during the pendency of that dispute is an illegal strike and that was the situation here.
The employees of the bank had struck work in December, 1948.
That dispute had been referred to an Industrial Tribunal.
It was during the pendency of that dispute that another strike took place which led to the dismissal of the employees who have now been reinstated by the present award.
The Calcutta High Court has held that a strike during the pendency of the period of truce and during the pendency of an earlier dispute before a tribunal is illegal even if it is brought about as a result of fresh and new demands which are not covered by the earlier dispute.
One of the members of the Tribunal thought that the decision laid down the law correctly on the point, but the other member thought that the decision was erroneous.
Both of them, however, agreed that whether the strike was legal or illegal that point did not in any way affect the question that they had to decide under issue 18.
The consequences of an illegal strike are laid down in the Act and certain penalties are provided therein.
The Act nowhere states that persons guilty of illegal strike cannot be reinstated.
Be that as it may.
The reference to the Tribunal was made by the Government in respect of an illegal.
strike and the Tribunal was bound to give its decision on the reference.
Item 18 of schedule II clearly empowers the tribunal to deal with cases of victimi zation as a result of the third strike which the petitioner described as illegal.
The Tribunal may be 499 wrong in the view they have taken but it seems to me this is again not a question of that vital character which would justify the grant of special leave under article 136.
The next question raised by the learned counsel that the award of the Tribunal is based on no evidence whatsoever.
This contention requires serious consideration.
I have examined the proceedings of the Tribunal and it appears that all ' it did was that as required by rule 17 at the first sitting it called upon the parties to state their cases.
Mr. Parwana on behalf of the employees stated their respec tive cases and Mr. Ved Vyas who represented the bank stated the bank 's case and after the cases had been stated the proceedings terminated and both parties addressed arguments and the Tribunal proceeded to give its award.
Whether the charge of victimization in individual cases was proved or not depended on proof of certain facts which had to be established by evidence.
The onus of proving victimization clearly rested on the employees.
No evidence whatsoever was led on their behalf.
The statement of the case by Mr. Parwana was not on oath.
There was no examination or cross examination of Mr. Parwana.
No affidavit supporting the facts stated by Mr. Parwana was filed by him or by any employee.
Mr. Parwana produced an abstract of the corre spondence but the original correspondence was not produced.
The bank disputed the facts stated by Mr. Parwana by means of a lengthy affidavit.
It seems no reference was made even to this affidavit by the Tribunal.
No counter affidavit was filed in reply to the facts stated in this 'affidavit.
The bank wanted to call some evidence.
Particular reference was made in respect of a scurrilous letter issued by one Bhatta charya on behalf of the employees and distributed by them, which it is alleged considerably shook the credit of the bank.
This opportunity was denied to it.
It was contended before us that the bank wanted to lead evidence on certain matters and that the opportunity to lead it was denied.
There is nothing on the record to support this contention.
The result therefore is that the facts on the basis of which allegations of victimization have been 64 500 made are neither supported by an affidavit nor by any evi dence and the award is based on no evidence whatsoever.
The Act as well as the rules framed under it contemplate a proper hearing, discovery and inspection of documents and production of evidence, etc.
None of this procedure was followed by the Tribunal.
It is difficult to see on what material the Tribunal has given its award as there is none existing on the present record and the respondents ' counsel could not point out to any such material.
At one time during the argument I was inclined to think that possibly both parties by agreement consented to treat the statement of case as evidence in the case and did not wish to produce any other evidence, but the affidavit filed on behalf of the bank disputes all the facts stated by Mr. Parwana.
The only evidence on the record is the bank 's affidavit and if the facts contained in the affidavit are accepted, then the determination made by the Tribunal cannot stand.
It seems to me therefore that the procedure adopted by the Tribunal was against all principles of natural justice and the award is thereby vitiated and should be set aside.
It happens that when the safeguard of an appeal is not provided by law the tendency sometimes is to act in an arbitrary manner like a benevolent despot.
Benevolent despotism, however, is foreign to a democratic Constitution.
The members of the Tribunal seem to have thought that having heard the state ment of the cases of the parties they could proceed to a judgment on their own view of its right or wrong unaided by any material.
That kind of procedure to my mind is unwar ranted by the statute and is foreign to a democratic Consti tution.
In these circumstances it is the compelling duty of this Court to exercise its extraordinary powers and to quash such an award.
The last contention raised by Bakshi Tek Chand was that though a Tribunal consisting of three persons was appointed to adjudicate on the dispute, the award has only been signed by two of them.
Reference in this connection was made to section 16 of the Act which says that the award of a Tribu nal shall be in writing and shall be signed by all the members of the 501 Tribunal and that nothing in the section shall be deemed to prevent any member of the Tribunal from recording a minute of dissent.
The provisions of the section are mandatory and have not been complied with.
It is common ground that the case was stated by the parties at a sitting when all the members of the Tribunal were present and the arguments were heard by all of them.
No sitting took place subsequent to this which would have necessitated the carrying on of pro ceedings by two members of the Tribunal by a quorum.
When the matter has been heard by all the three members, the award should have been given by all of them.
Therefore the award given by two of them is not the award of the Tribunal constituted by the Government.
It is therefore vitiated and has to be quashed.
Reference in this connection was made to section 8 of the Act which reads as follows : "If the services of the chairman of a Board or of the chairman or other member of a Court or Tribunal cease to be available at any time the appropriate Government shall, in the case of a chairman, and may in the case of any other member, appoint another independent person to fill the vacancy, and the proceedings shall be continued before the Board, Court or Tribunal so reconstituted.
" The Tribunal was never reconstituted by the Government by any notification.
Under section 7 a Tribunal has to be constituted in accordance with the provisions of the Act by the Government.
The Government having constituted a Tribunal of three persons it had power under section 8 to reconsti tute it but did not exercise that power.
The result there fore is that the Tribunal as originally constituted was not the Tribunal which gave the award in this reference.
Only two members have given the award.
It was said that one of the members ceased to be available and the Government was not bound to fill up that vacancy.
There is no material on the record to prove whether any member became unavailable and if so, when.
But even if a member becomes unavailable and the Government does not choose to fill up the vacancy, still the Government has to reconstitute the Tribunal by saying that 502 two members will now constitute the Tribunal.
An affidavit with two telegrams annexed was filed before "us on behalf of the respondents which disclosed that Mr. Chandrasekhara Aiyar who was one of the members of the Tribunal, in Novem ber, 1949, was appointed a member of the Boundary Commission in Bengal and that the other two members sent a telegram to the Labour Ministry asking it to fill up the vacancy or to reconstitute the Tribunal.
The advice given by the Ministry was that they could proceed as they were and that the Gov ernment would later on, if necessary, fill up the vacancy.
We are not concerned whether the advice given was right or wrong.
But the fact remains that the Tribunal was never reconstituted and it was not denied that Mr. Chandrasekhara Aiyar is now sitting in the same Tribunal without being again nominated to it and the Tribunal is hearing the same reference under the other issues referred to it.
Moreover, I do not see why after having heard the reference he could not give the award even if he was in Calcutta or sign the award given by the other two members.
The idea of three persons hearing a case and two of them deciding it is repug nant to all notions of fairness.
It may well have been that the opinion of the third may have influenced the other two or the decision arrived at may have been quite different.
It so happened in this case that two members of the Tribunal differed on an important question of law but somehow adjust ed their differences and gave a unanimous award.
The presence of the third in such a situation may have very vitally affected the result.
After a good deal of thought I feel that it would be most dangerous for this Court to condone proceedings of this character.
If exceptional powers are not exercised even when a body legally constitut ed under the statute does not function according to the statute, then they defeat the very purpose of the Constitu tion.
Reference in this connection may be made to the deci sion of their Lordships of the Privy Council in Fakira vs King Emperor (1).
In that case section 377 (1) A.I.R. 1937 P.O. 119.
503 of the Code of Criminal Procedure as modified and as ap plicable to Hyderabad stood as follows : "In every case so submitted, the confirmation of the sentence or order passed by the Court of the Resident at Hyderabad shall, when such Court consists of two or more Judges, be made, passed and signed by at least two of them." In Fakira 's case the order of confirmation was only made, passed and signed by one of them, though the Court of the Resident consisted of two Judges.
Their Lordships held that the peremptory provisions of section 377 had not been complied with and that the sentence passed had not been validly confirmed.
The appeal was allowed and the case was remitted to the Court of the Resident.
The provisions of section 18 of the are also of a peremptory nature.
Reference may also be made to a case arising under the Bar Councils Act reported in In re An Advocate, Madras(1), where one member of the tribunal under that Act had died and had not signed the report.
It was held that the tribunal ceased to be properly constituted and that the report could not be considered.
For the reasons given above I would quash this award and direct that the Tribunal which is still functioning should readjudge item 18 of the reference and then submit its award on this point to Government.
The employees cannot be held responsible for the method of procedure adopted by two members of the Tribunal.
Each party will have to bear their own costs in this Court.
The appeal is allowed to the extent indicated above.
MUKHERJEA J.
This appeal, which has come up before us on special leave, is directed against an award made by the All India Industrial Tribunal, dated the 19th of January, 1950.
The Tribunal was constituted by the Central Govern ment under section 7 of the and a large number of disputes (1) A.I.R. 1942 Mad.
504 between several Banking companies and their emiployees were referred to it for adjudication.
Amongst these Banking companies were the Bharat Bank Limited, the appellants before us, and the disputes between them and their employ ees, who are respondents in this appeal, related inter alia to a number of cases of retrenchment and victimization which the latter alleged against the former.
The Tribunal held its enquiry in Delhi in respect to the cases which were connected with the Delhi Branch of the appellants and as a result of the same, made their award on 19th January, 1950, holding that 26 persons, who were employees under the appel lants, were improperly dismissed by the latter and should be reinstated.
Further directions were given in the award regarding the salaries and allowances that were to be paid to the dismissed employees.
This award was declared to be binding in terms of the provisions of sections 15 and 19 of the by the Central Government on 30th of January, 1950, and it was directed to remain in operation for a period of one year.
It is against this award that the present appeal has been preferred.
On behalf of the Indian Union which appeared as an intervener in this appeal, as also on behalf of the respond ents, a preliminary objection was taken challenging the competency of the appeal.
The contention put forward by Sir Alladi Krishnaswami Aiyar, who appeared for the inter vener, in substance, is that article 136 of the Indian Constitution, under which special leave was prayed for and obtained by the appellants in this case, does not contem plate or include within its scope an appeal against an award of an Industrial Tribunal which is not vested with, and cannot exercise, judicial powers, and the decision of which cannot, therefore, rank as a judicial determination.
The Industrial Tribunal, it is said, is an administrative body exercising quasi judicial functions and this Court cannot be called upon to exercise the powers of an appellate Court in respect to the decision of a tribunal which is really a part of the administrative machinery of the Govern ment.
505 In reply to this objection, it has been urged by Sir Tek Chand that the Tribunal constitutedunder the is really and in substance, a Court or judicial tribunal which is invested with the power and authority to exercise judicial functions; and in any event, the language of article 136 of the Constitution is wide enough to include an appeal from the award or determination of any tribunal, be it judicial or not.
There are two questions which require consideration on this preliminary point.
The first is, whether the award or decision of an Industrial Tribunal constituted under the is a judicial decision in the proper sense of the expression or is it the pronouncement of an administrative or quasi judicial body which may exercise some of the functions of a Court of law but is really not so ? The other question turns upon the construction to be put upon article 136 of the Constitution particularly on the meaning to be given to the words 'tribunal ' and 'determina tion ' occurring therein; and the question is whether the language is wide enough to include an adjudication or award of an Industrial Tribunal.
As regards the first question, it is to be noticed that owing to the intricate and complex system of Government that exists in a modern State and the vast expansion of social legislation of all sorts that have taken place in England and in other countries including our own, within the last few decades, the so called administrative and quasi judicial tribunals have come to be a permanent feature of our social and political system.
They function as adjudicating bodies in disputes concerning a large number of economic and.
social affairs.
In a sense they are governmental bodies appertaining to the executive and not to the judicial branch of the State, though in various matters they are armed with judicial powers analogous to those normally carried out by Courts of law.
The question is, what are the tests or distinguishing features, if any, which distinguish an admin istrative tribunal from a Court of law.
Once we are able to formulate these tests, we would be 506 in a position to determine whether a Tribunal functioning under the is or is not a judicial tribunal properly so called.
Whether a particular function or activity is judicial or not is often a difficult question to decide.
The point was elaborately dealt with by Lord Sankey who delivered the judgment of the Privy Council in Shell Co. of Australia vs Federal Commissioner of Taxation (1).
The question raised in that case was whether the Board of Review, which was set up in 1925 under the Commonwealth Income Tax legislation, was a Court exercising judicial powers of the Commonwealth ? The High Court of Australia decided by a majority that it was an administrative and not a judicial tribunal and this majority judgment was affirmed in appeal by the Privy Council.
Lord Sankey remarked in course of his judgment that "the decided cases show that there are Tribunals which possess many of the trappings of a Court but which, nevertheless, are not Courts in the strict sense of exercising judicial power.
Mere externals do not make a direction by an ad hoc tribunal to an administrative officer, an exercise by a Court of judicial power.
" The actual decision in the case rested on the ground that the Board of Review could not be a judicial tribunal, as its orders were not conclusive for any purpose whatsoev er.
The decision, it seems, has only a negative value.
The Lord Chancellor enumerated a series of negative propositions which stated inter alia that a tribunal is not necessarily a Court because two or more contending parties appear before it, nor because it hears witnesses, or gives a final deci sion which affects the right of the parties.
What the real or positive test is, the Privy Council did not care to formulate, though the judgment quoted, with approval, cer tain observations of Griffith C.J. given in another Austra lian case, namely, Huddart Parker & Co. vs Moorehead(" '), which to some extent neutralised the effect of the negative tests enumerated in the judgment.
The observations of Grif fith C.J. are as follows : (1) (2) ; , at p. 357.
507 "I am of opinion that the words 'judicial power '. mean the power which every sovereign authority must have of necessity to decide controversies between its subjects, or between itself and its subjcets, whether the rights relate to life, liberty or property.
The exercise of this power does not begin until some tribunal which has power to give a binding and authoritative decision (whether subject to appeal or not) is called upon to take action.
" It may be stated that the authority to hear and decide on evidence between a proposal and an opposition though it is one of the most essential of judicial powers, may be present is an administrative tribunal also.
In the majority of cases, administrative bodies are also armed with the powers of a Court of Justice in summoning witnesses, admin istering oaths and punishing disobedience to its order made for the purpose of effecting its enquiries (1).
As a matter of fact, it is usual to find that those features which were at one time attached exclusively to activities carried on in a Court of law are being extended to committees, commissions or boards conducting enquiries under directions or supervi sion of the Government.
The presence or absence of these features, therefore, does not furnish any conclusive test to determine whether a particular body is a judicial body or not.
In the observations of Griffith C.J. quoted above, the learned Chief Justice laid stress on the power to make a binding and authoritative decision as the essential element in the exercise of judicial power.
The exact meaning and implication of these expressions were the subject matter of discussion in later Australian cases and it was held by the majority of the Judges in Rola Co. (Australia) Pty.
Limited vs The Commonwealth (2), that t. hey do not simply mean that if an authority is given power to decide controverted ques tions of fact and its determination is made binding on the parties to the controversy, it would be sufficient to show that judicial power was entrusted to such authority.
A determination, it was pointed out, may be binding on the parties (1) Vide W F. O 'Connor vs Waldron at p, 82. ; 508 in the same sense as a contract is binding on them.
What is necessary is that the determination by its own force and without the aid or instrumentality of any other authority or power must affect the rights and obligations of the parties; or in other words, the decision itself irrespective of the facts decided, must create rights and impose obligations; and it should be enforceable as such under the ordinary law of the land.
This undoubtedly is one of the fundamental tests which distinguishes a judicial body from one which exercises administrative or quasi judicial functions.
Some times the decision or report of the administrative tribunal becomes operative after it is accepted by the head of the department under which the tribunal conducted its enquiries and it is then enforced by some sort of administrative process; or it might create rights between the parties which have to be sued upon in the ordinary way in a Court of law and it is only on the basis of a judgment or decree that is obtained in such action that relief could be had by the party.
The essence of judicial determination is that nothing further remains to be done except the enforcement of the judgment, a step which is compelled automatically by the law of the land.
The other fundamental test which distinguishes a judicial from a quasi judicial or administrative body is that the former decides controversies according to law, while the latter is not bound strictly to follow the law for its decision.
The investigation of facts on evidence adduced by the parties may be a common feature in both judicial and quasi judicial tribunals, but the difference between the two lies in the fact that in a judicial proceeding the Judge has got to apply to the facts found, the law of the land which is fixed and uniform.
The quasi judicial tribunal on the other hand gives its decision on the differences between the parties not in accordance with fixed rules of law but on principles of administrative policy or convenience or what appears to be just and proper in the circumstances of a particular case.
In other words, the process employed by an administrative tribunal in coming to its decision is not what is known as 'judicial 509 process ' (x).
Sir Maurice Gwyer in his deposition before the Committee on Minister 's Powers appointed by the English Parliament in 1929 stated that "a clear distinction is to be drawn between judicial and quasijudicial powers.
" The 'judicial power ' was defined by the witness as a power to decide a question of legal right in a dispute between par ties involving either a finding of fact or the application of a fixed rule or principle of law or involving both.
"The quasi judicial power," he defined as meaning "the power of giving decisions on questions of differences of an adminis trative and not justiciable character which cannot be deter mined by reference to any fixed law or principle of law but are matters of administrative discretion and judgment "(2).
In Cooper vs Wilson (3), Scott L.J. quoted with approval and adopted as the basis of his judgment the following passage from the report of the above committee: "A true judicial decision presupposes an existing dis pute between two or more parties, and then involves four requisites : (1) The presentation (not necessarily orally) of their case by the parties to the dispute; (2) if the dispute between them is a question of fact, the ascertain ment of the fact by means of evidence adduced by the parties to the dispute and often with the assistance of argument by or on behalf of the parties on the evidence; (3) if the dispute between them is a question of law, the submission of legal argument by the parties; and (4) a decision which disposes of the whole matter by a finding upon the facts in dispute and an application of the law of the land to the facts so found, including where required a ruling upon any disputed question of law.
A quasi judicial decision equally presupposes an existing dispute between two or more parties and involves (1) and (2) but does not necessarily involve (3) and never involves (4).
The place of (4) is in fact taken by administrative action, the character of which is determined by the Minister 's free choice.
" (1) See Robson 's Justice and Administrative Law, p. 74.
(2) Vide Committee of Minister 's Powers, Minutes of Evd., Vol.
II, pages 15 16 and also Robson 's Justice and Adminis trative Law, p. 319.
(3) 510 In our opinion these statements correctly bring out the distinction between a judicial tribunal and an administra tive body which exercises quasi judicial functions.
These being the essential features which distinguish the two classes of tribunals, we would have to ascertain with refer ence to the provisions of the , which class or category of tribunals an Industrial Tribunal comes under.
The object of the , as set out in the preamble, is "to make provisions for investigation and settlement of industrial disputes and for certain other purposes hereinafter appearing.
" The word "settlement" suggests the idea of establishing compromise between the interests of disputing parties.
There are three classes 'of authorities provided for by the Act who are entrusted with the powers and duties of investigation and settlement of industrial disputes.
First of all, there are conciliation officers or Boards of Concil iation, whose duties mainly are to induce parties to come to a fair and amicable settlement amongst themselves.
Second ly, there are Courts of Enquiry and though they are ' de scribed as Courts, their duties end with investigation into the matters referred to them and submitting reports there upon to the appropriate Government.
Lastly, there are Industrial Tribunals composed of independent persons who either are or had been Judges of a High Court or District Judges or are qualified for appointment as High Court Judges.
It will be seen from the descriptions given above that the Board of Conciliation or Court of Enquiry constituted under the could, on no account, be regarded as judicial tribunals.
To enable them to investi gate facts they are however armed with certain powers of compelling attendance of witnesses and production of docu ments etc.
These provisions are to be found in section 11 of the Act.
The significant thing to note is, that there is no distinction made in this respect between Conciliation Boards and Courts of Enquiry on the One hand and Industrial Tribunals on the other.
The same powers are conferred 511 the three classes of authorities without any distinction whatsoever and sub section (3) of section 11 further lays down that any enquiry or investigation by a Board, Court of Enquiry or Tribunal shall be deemed to be a judicial pro ceeding within the meaning of sections 193 and 228 of the Indian Penal Code.
This means that proceedings before an Industrial Tribunal or for the matter of that before the other two bodies also could be deemed to 'be judicial pro ceedings only for certain specified purposes.
The express provision making the proceedings judicial proceedings for those purposes only emphasises that they are not judicial proceedings otherwise.
Under section 15 (1), the Industrial Tribunal has got to submit its award to the appropriate Government and sub section (2) lays down that on receipt of such an award, the appropriate Government shall by order in writing declare the award to be binding.
A different provision has been made in regard to cases where the Government itself figures as a party to the dispute.
In such cases, if the Government considers it inexpedient on public grounds to give effect to the award either in whole or in part, it may, at the earli est opportunity, lay the award for consideration before the Provincial or Central Legislative Assembly as the case may be and the Legislative Assembly may.
by its resolution confirm, modify or reject the award.
After the resolution is passed, the Government is to declare the award so con firmed or modified to be binding [see sub section (3)].
Sub section (4) of section 15 expressly lays down that an award declared to be binding under any two of the previous sub sections shall not be called into question in any manner whatsoever.
The Government is not merely to declare the award binding but under section 19 (3), it has got to speci fy the date when the award would come into force and also to fix the period during which it would remain binding, and this period shall not exceed one year.
It will be seen, therefore, that there is nothing in the from which it could be inferred that the Industrial Tribunal really functions as a Court exercis ing judicial functions.
Regarding 512 the trappings or the external indicia of a Court, its i position is almost the same as that of the Board of Con ciliation or Court of Enquiry and Bakshi Sir Tek Chand concedes that the latter are not judicial tribunals at all.
The powers of an Industrial Tribunal are certainly wider than those of the other bodies, but it has no power to make a final pronouncement which would proprio vigore be binding on, and create rights and obligations between the parties.
It is for the appropriate Government to declare the award to be binding and the part which the Government plays in such matters is not a mechanical part merely, for the award can really become operative only when the date of its commence ment and the period of its duration are fixed, and it is for the Government and Government alone to.
fix the same.
With regard to the other class of cases, where the Government itself is one of the parties to the dispute, the position is still worse.
An award in such cases is always subject to the contingency of being rejected or modified by the legis lature before whom it could be placed for consideration at the option of the Government.
Where a contingency like this is attached to an award, it can never be regarded as a final or binding decision which is of the essence of a judicial proceeding.
The fact that in cases of disputes between private employers and their workmen, the Government has to accept the award as it is, makes no difference in principle.
Possibly, this rule was made in consideration of the status and training of the people who constitute the Tribunal, but nevertheless the determination cannot acquire any authority or force, so long as the appropriate Government does not make the declaration and fix the time of its operation as mentioned above.
In regard to the other class of awards, where the Government is one of the disput ing parties, the award on the face of it is neither the final nor the authoritative pronouncement on the matter in dispute, and it is always in the powers.
of one of the disputing parties to subject it to further scrutiny at the hands of the legislature who can reject the whole award or effect such changes in it as it considers proper.
This shows the real nature of the Tribunal and it is not and 513 could not be suggested that the Industrial Tribunal is a Tribunal which exercises judicial functions when the dispute is only between private employers and their workmen, and it ceases to be such when the employer is the Government it self.
We would now examine the process by which an Industrial Tribunal comes to its decisions and I have no hesitation in holding that the process employed is not judicial process at all.
In settling the disputes between the employers and the workmen, the function of the Tribunal is not confined to administration of justice in accordance with law.
It can confer rights and privileges on either party which it con siders reasonable and proper, though they may not be within the terms of any existing agreement.
It has not merely to interpret or give effect to the contractual rights and obligations of the parties.
It can create new rights and obligations between them which it considers essential for keeping industrial peace.
An industrial dispate as has been said on many occasions is nothing but a trial of strength between the employers on the one hand and the workmen 's organization on the other and the Industrial Tribunal has got to arrive at some equitable arrangement for averting strikes and lock outs which impede production of goods and the industrial development of the country.
The Tribunal is not bound by the rigid rules of law.
The process it employs is rather an extended form of the process of collective bargaining and is more akin to administrative than to judi cial function.
In describing the true position of an Industrial Tribu nal in dealing with labour disputes, this Court in Western India Automobile Association vs Industrial Tribunal, Bom bay, and others(1) quoted with approval a passage from Ludwig Teller 's well known work on the subject, where the learned author observes that "industrial arbitration may involve the extension of ,existing agreement or the making of a new one or in general the creation of new obligations or modification of old ones, while commercial arbitration generally (1) at p. 345.
514 concerns itself with interpretation of existing obligations and disputes relating to existing agreements.
" The views expressed in these observations were adopted in its entire ty by this Court.
Our conclusion, therefore, is that an Industrial Tribunal formed under the is not a judicial tribunal and its determination is not a judicial determination in the proper sense of these expres sions.
We now come to the other question as to whether an appeal could be taken to this Court against an award of an Industrial Tribunal by special leave under article 136 of the Constitution.
Article 136 is a part of Chapter IV of the Constitution which deals with the Union Judiciary.
The different jurisdictions of the Supreme Court have been prescribed in a series of articles commencing from article 131.
Article 131 defines the original jurisdiction of the Supreme Court.
Article 132 deals with its appellate powers in cases where substantial questions of law as to the inter pretation of the Constitution are involved.
Article 133 contains the provision relating to appeals in civil cases from judgments, decrees and orders of the High Courts;and article 134 makes provisions relating to criminal appeals.
Article 135 lays down that the Supreme Court shall have jurisdiction and powers with respect to any matter not covered by articles 133 and 134, if such jurisdiction and power could have been exercised by the Federal Court prior to the coming into force of the present Constitution.
Then comes article 136 which runs as follows: "(1) Notwithstanding anything in this Chapter, the Supreme Court may, in its discretion, grant special leave to appeal from any judgment, decree, determination, sentence or order in any cause or matter passed or made by any court or tribunal in the territory of India.
" The article is worded in the widest terms possible.
It vests in the Supreme Court a plenary jurisdiction in the matter of entertaining and hearing appeals by granting of special leave against any kind of judgment, decree or order made by any Court or tribunal in any 515 cause or matter and the powers could be exercised in spite of and overriding the specific provisions for appeal con tained in the previous articles.
The controversy so far as the present case is concerned mainly centers round the interpretation to be put upon two words, namely, "determi nation" and "tribunal" used in the article.
Does the word "tribunal" mean a judicial tribunal only and is the expres sion "determination" restricted to what is known as "judi cial determination"? Sir Alladi 's contention is that in interpreting these words we should follow the principle of ejusdent generis.
"Determination," he says, must be taken to be judicial determination which is of the same nature as decree, judg ment, order or sentence; and "tribunal" associated with the word" Court" could not but mean "judicial tribunal.
" Bakshi Sir Tek Chand on the other hand lays stress on the fact that the word "determination" was not in the origi nal draft Constitution, and it was subsequently added, presumably with a view to widen the scope of article 136 and include within it, the decisions of administrative and quasi judicial tribunals also.
He points out that according to the definition given in section 2 (b) of the , "award" means a determination either interim or final of an industrial dispute by an Industrial Tribunal.
There is undoubtedly something to be said in favour of both these views.
The difficulty, in our opinion, arises from the fact that neither of these terms "determination" or "tribunal" has a fixed or definite connotation in ordinary language.
The word "determination" means and signifies the ending of a controversy or litigation by the decision of a Judge or Arbitrator.
It cannot be said that it is restrict ed exclusively to proceedings in court.
Likewise, the dictionary meaning of the word "tribunal" is 'court of justice ' or 'seat of a Judge. ' By 'Judge ' we mean some authority by which contested matters are decided between rival parties.
Here again, it is not possible to say that the expression is applicable only to a 66 516 regular court of law.
If the tribunal is a full fledged judicial tribunal, it is not disputed that its decisions would be proper subject matter of appeal under article ,136 of the Constitution.
The question is whether this article includes within its scope the determinations of quasi judicial tribunals as well.
Our view is that ordinarily we should not put any re stricted interpretation upon the plain words of an article in the Constitution and thereby limit our powers of granting special leave for appeals, which the Constitution for best of reasons did not choose to fetter or circumscribe in any way.
At the same time, we must admit that some sort of restricted interpretation may be unavoidable in view of the context in which particular words appear; and certain re strictions may be implicit in the very purpose for which article 136 has been framed.
Article 136 empowers us in our discretion to hear appeals from pronouncements of all infe rior courts and tribunals.
With regard to law courts, no difficulty arises.
As regards tribunals which are not courts in the proper sense of the expression, it may not be proper, in our opinion, to lay down a hard and fast rule that no appeals could, on any account, be allowed against determina tions of such tribunals.
There are numerous varieties of these adjudicating bodies, whose structures vary greatly in character and composition and so do the powers and functions which they exercise.
The best thing to do would be to examine each type of cases as it arises and if we find that with regard to determinations emanating from certain tribu nals it is not possible for us to exercise fully and effec tively the powers of an appellate Court, such determinations must be held to lie outside the purview of article 136 of the Constitution.
This disability in the matter of exercising our powers as an appellate Court might arise from the fact that the rules and principles by which we ordinarily judge the sound ness or otherwise of judicial decisions are not capable of being applied to the determinations of certain administra tive tribunals.
It might also arise from the fact that the law under which the 517 tribunal functions prevents us from making any effective order which would be binding and operative of its own force without the intervention of some other power or authority; or there may be some kind of contingency attached to it.
In our opinion, these difficulties do confront us in the entertaining or hearing of an appeal against the decision of an Industrial Tribunal.
In the first place, as we have said above, the determination of an Industrial Tribunal does not become complete and binding unless and until it is declared to be so by the appropriate Government.
Till the Government makes such declaration, neither of the parties to the dis pute can have any real reason for filing an appeal.
An appeal, if it lies, could be filed after the determination has been declared binding.
But in such cases, is it the determination of the Tribunal merely which is challenged by way of appeal or is it ' the determination by the Tribunal to which has been super added a declaration by the Government ? The decision in the appeal would undoubtedly affect not merely the decision of the Tribunal but that of the Govern ment as well which is certainly not a tribunal within the meaning of article 136.
Assuming again that the award is set aside and we substitute our own determination in place of the award given by the Tribunal, will our award be enforce able by itself or will it require a declaration by the Government to make it binding ? If Government is itself a party to the dispute, will it be open to Government to place our decision for consideration by the Legislative Assembly? And will the Legislative Assembly be competent to reject or modify our award ? These problems arise because under sec tion 15 the award under the Act becomes binding only when the Government declares it to be so and if our judgment takes the place of the award of the Tribunal, all the in firmities that attach to the award must necessarily attach to our judgment also.
The other difficulty is no less formidable.
As said above, the Tribunal is not bound to decide the disputes by application of the ordinary law of the land.
A good deal depends upon questions of policy 518 and public convenience.
It is not possible for us to.judge the propriety of the decision by a reference to some stand ard or fixed rules and we think that the very policy of the law prevents us from interfering with the discretion exer cised by the Tribunal.
Where the direction is committed to any body or a tribunal exercising quasi judicial functions which are not lettered by ordinary rules of law, the tribunal should in the absense of any provision to the contrary be deemed to have the final authority in the exercise of that discretion.
We cannot sit in appeal over their decision and substitute our own discre tion for theirs.
,Questions, however, may and do arise where such quasi judicial body attempts to usurp jurisdiction which it does not possess.
It may assume jurisdiction under a mistaken view of law or refuse to exercise jurisdiction properly by adoption of extraneous or irrelevant considera tions;or there may be cases where in its proceedings the tribunal violates the principles of natural justice.
In all such cases the most proper and adequate remedy would be by writs of certiorari or prohibition and the Court having authority may direct that the decision of the body or tribu nal might be brought up to be quashed for lack of jurisdic tion or for mistake apparent on the face of it; and if the proceedings had not terminated at that time, a writ of prohibition may also be issued for preventing the tribunal from exceeding its jurisdiction.
The issuing of such writs would not be an exercise of appellate powers which means the rehearing of the case and passing of such judgment which in the opinion of the appellate Court the original tribunal should have made.
The object of these writs is simply to keep the exercise of powers by these quasi judicial tribu nals within the limits of jurisdiction assigned to them by law and torestrain them from acting in excess of their authority.
These principles are well settled and require no elucidation(1).
Our conclusion, therefore, is that article 136 of the Constitution does not contemplate a determination given by the Industrial Tribunal.
(1) Rex vs Electricity Commissioners ; Board of Education vs Rice 519 Even assuming for argument 's sake that we have got jurisdiction under article 136, the exercise of which would depend upon the circumstances of each case, in view of the reasons which we have set out above, this is not an appeal which, in our opinion, should be admitted even if we have the power to do so.
The result is that the preliminary objection succeeds and the appeal fails and is dismissed with costs.
PATANJALI SASTRI ' J.
I entirely agree with the judgment just now delivered by Mukherjea J. and I have nothing to add.
Appeal dismissed.
Agent for the Union of India: P.A. Mehta. | Held per KANIA (C.J. FAZL ALl, and MAHAJAN JJ.
(MUKH ERJEA and PATANJALI SASTRI JJ.
dissenting).
The functions and duties of the Industrial Tribunal constituted under , are very much like those of a body discharging judicial functions although it is not a Court, and under article 136 of the Constitution of India the Supreme Court jurisdiction to entertain an application for leave to appeal from decision of the Tribunal, even though it will be very to entertain such an application.
Per MUKERJEA J. (PATANJALI SASTRI J. concurring).
An Industrial Tribunal functioning under the is not a judicial tribunal.
The nature of the determinations made and the materials and considerations on which it has to decide a dispute are also such that the powers of an appellate court cannot be exer cised fully and effectively in respect of them and such determinations are therefore outside the purview of article 136 of the Constitution.
Even assuming that the Court had jurisdiction appeal, the present case was not a fit one for entertaining an appeal from the determination of the Tribunal.
[On the merits KANlA C. J., FAZL ALl, PATANJALI SASTRI and MUKHERJEA, JJ.
were of opinion that there was no ground for admitting the appeal.
MAHAJAN J. was of opinion that the award was bad and must be set aside.] |
Criminal Appeal No. 467 of 1988.
From the Judgment and Order dated 20th July, 1987 of the Gujarat High Court in Crl.
Appeal No. 260/87 with Crl.
Appeal No. 105/87 and Crl.
Appeal No. 444/87.
Soli J. Sorabji, Mukul Mudgal, E.K. Jose and P.H. Parekh for the Appellant.
PG NO 749 G.A. Shah, M.N. Shroff, B. Datta, A.K. Srivastava, P. Pramesh and Mrs. Sushma Suri for the Respondents.
The Judgment of the Court was delivered by JAGANNATHA SHETTY, J.
We grant Special leave and proceed to dispose of the appeal.
The appeal arises from a Judgment of the Gujarat High Court dated 20th July 1987in Criminal Appeal Nos.
260/1987, 105/1987 and 444/1987.
It raises a short but not very easy point for determination.
The point relates to sentencing practice as to concurrent or consecutive sentences.
The essential facts can be stated in summary form as follows: Appellant Mohd.
Akhtar Hussain alias Ibrahim Ahmad Bhatti is a Pakistani national.
On 15 April 1982, the gold 7(NN) tolas of foreign mark of the value of Rs. 1.4 crores was seized from his possession at Ahmedabad.
Later he was arrested.
On 23 September, a case was filed in the Court of Chief Metropolitan Magistrate, Ahmedabad in CC No. 1674 of 1982.
He was charged under section 85( I)(ii) of the Gold (Control) Act, 1968.
He pleaded guilty to the charge.
On 11 January, 1984 he was convicted and sentenced to imprisonment for 7 years and fine of Rs. 10 lakhs.
It is the maximum punishment prescribed under the Gold (Control) Act.
Upon appeal, the Bombay High Court confirmed that sentence but reduced the fine to Rs.5 lakhs.
The special leave petition filed by the appellant was dismissed by this Court.
That conviction and sentence became final.
When the appellant was under judicial custody in the aforesaid case, there was further investigation with regard to his smuggling activities.
It revealed widespread racket of smuggling gold and silver in collusion with several persons.
On 6 January, 1983 he was again prosecuted along with 18 others under section 335 of the .
The complaint in this case was filed before the Additional Chief Metropolitan Magistrate, Ahmedabad.
It was registered as CC No. 129/1986.
It was alleged in the complaint that the appellant and others had imported gold worth Rs. 12.5 crores and smuggled out of India silver worth Rs. 11.5 crores during December 1981 to February 1982.
In this case also the appellant did not wait for the trial of the case.
He pleaded guilty to the charge.
The other 18 accused, however, did not They denied the charge and the case against them is said to be still pending for disposal.
PG NO 750 On January, 1987, the trial Magistrate convicted the appellant, in the following terms: "Accused No. 1 in this case is proved guilty under Section 235 of and it is ordered that accused No. 1 is sentenced for 4 years (for four years R.I. and a fine of Rupees two lakhs (Rupees two lakhs only) and if fine not paid, further sentence of R.I. for six months more.
This sentence is to be undergone on expiration of sentence in Crl.
case No. 1674/82.
Accused is found guilty under section 120(B) of Indian Penal Code, but no separate sentence is ordered, for the same.
" The reasons given in support of the above conclusion are: "It is not proper to pass order only by taking the circumstances and difficulties of the accused.
Simultaneously, midway should be found looking to the circumstances of the nation and personal circumstances of the accused.
It is not possible to order sentence of both the cases of the accused, to run concurrently.
When the accused in previous case, was ordered to undergo sentence of seven years R.I. then, in this case it does not seem reasonable to order sentence for similar period i.e. detain in jail for 12 to 14 years and fine and if fine not paid, to undergo further more sentence.
The accused had pleaded guilty and requested for mercy.
It is in the interest of justice to show slight mercy in the order of sentence by the Court.
" Against this order of conviction and sentence there were appeals and counter appeals before the High Court.
The appellant appealed against the sentence on the ground that the sentences should have been made concurrent.
The State, on the other hand, demanded the maximum sentence again.
The maximum sentence prescribed under section 135 of the is also 7 years.
The State contended that in view of the enormity of the economic crime committed by the appellant, he should be given the maximum and consecutive.
The High Court accepted the State appeal, enhanced the sentence from 4 years to 7 years and made it consecutive.
Consequently, the High Court dismissed the appeal of the appellant.
The result is that he has to serve in all 14 years imprisonment which he has challenged in this appeal.
Section 427 Cr.
P.C. incorporates the principles of sentencing an PG NO 751 offender who is already undergoing a sentence of imprisonment.
The relevant portion of the Section reads : "427.(1) When a person already undergoing a sentence of imprisonment is sentenced on a subsequent conviction to imprisonment or imprisonment for life, such imprisonment or imprisonment for life shall commence at the expiration of the imprisonment to which he has been previously sentenced, unless the Court directs that the subsequent sentence shall run concurrently with such previous sentence.
xxxxx xxxxx xxxxx " The Section relates to administration of criminal justice and provides procedure for sentencing.
The sentencing court is, therefore,required to consider and make an appropriate order as to how the sentence passed in the subsequent case is to run.
Whether it should be concurrent or consecutive ? The basic rule of thumb over the years has been the so called single transation rule for concurrent sentences.
If a given transaction constitutes two offences under two enactments generally, it is wrong to have consecutive sentences.
It is proper and legitimate to have concurrent sentences.
But this rule has no application if the transaction relating to offences is not the same or the facts constituting the two offences are quite different.
In this appeal, the primary challenge to the sentence is based on assumption that the two cases against the appellant, under the Gold (Control) Act, and the pertain to the same subject matter.
It is alleged that the appellant was prosecuted under the two enactments in respect of seizure of 7,000 tolas of gold.
On this basis, reference is also made to Section 428 Cr.
P.C. claiming set off in regard to the period of imprisonment already undergone by the appellant.
The submission, in our opinion, appears to be misconceived.
The material produced by the State unmistakably indicates that the two offences for which the appellant was prosecuted are quite distinct and different.
The case under the may, to some extent, overlap the case under the Gold (Control) Act, but it is evidently on different transactions.
The complaint under the Gold (Control) Act relates to possession of 7,000 tolas of PG NO 752 primary gold prohibited under section 8 of the said Act.
The complaint under the is with regard to smuggling of Gold Worth Rs. 12.5 crores and export of silver worth Rs. 11.
5 crores.
On these facts, the Courts are not unjustified in directing that the sentences could be consecutive and not concurrent.
The question, however, remains to be considered is whether the maximum sentence under the is warranted? Whether, in the circumstances, it is wrong in principle to sentence the same offender the another maximum imprisonment? It is argued that the High Court has failed to take into consideration the total period of sentence which the appellant has to undergo.
It is also argued that since the conviction was based on the plea of guilty the appellant should have been given a credit in the sentence.
The personal problems of appellant are also highlighted for reduction in the sentence.
The High Court has refused to take into consideration the merciful plea of the appellant and much less the plea of guilty.
The enormity of the crime committed by the appellant, according to the High Court, warranted nothing less than the maximum sentence.
The High Court had this to say: "The individual hardships of the appellant and his family would be of no consequence at all.
If offence was such that the maximum sentence should have been awarded, then the learned Metropolitan Magistrate should not have made an illconceived attempt to find out a via media.
We, therefore, feel that the appeal filed by the State requires to be allowed.
The fact that the accused had pleaded guilty is of no consequence.
It is not the case of plea bargaining because the accused had pleaded guilty and yet he was given numerous opportunities to reconsider his decision.
If the accused even thereafter had pleaded guilty, the fact that he was awarded a seven years ' Rigorous imprisonment sentence in the previous case would be no ground for the learned Metropolitan Magistrate to award less than the maximum sentence if the facts of the case warranted such a maximum sentence.
The enormity of the crime called for nothing less than the maximum sentence.
" We have carefully perused the entire material on record.
It may be recalled that the appellant was given the maximum PG NO 753 sentence of 7 years in the previous case under Gold (Control) Act.
The conviction thereunder was also based on the plea of guilty.
The latter sentence under the was also on the plea of guilty.
Generally, it is both proper and customery for Courts to give credit to an accused for pleading guilty to the charge.
But no credit need be given if the plea of guilty in the circumstance is inevitable or the accused has no alternative but to plead guilty.
The accused being caught red handed is one such instance.
The first case under the Gold (Control) Act against the appellant falls into the latter category.
7,000 tolas of Gold of foreign mark of the value of Rs. 1.4 crores were seized from the possession of appellant.
The plea of guilty in that case was inevitable.
The Court was, therefore, justified in awarding the maximum sentence.
But the second case under the was not of that type.
Here the prosecution has to prove many things.
There are 18 other accused facing the trial in the same case.
The appellant, however, pleaded guilty perhaps on legal advise.
He must have been told that some credit for such plea would be given by the court and if the credit is not given and the maximum sentence is awarded the appellant is surely entitled to complain for giving the maximum sentence.
It is no doubt that the enormity of the crime committed by the accused is relevant for measuring the sentence.
But the maximum sentence awarded in one case against the same accused is not irrelevant for consideration while giving the consecutive sentence in the second case although it is grave.
The Court has to consider the totality of the sentences which the accused has to undergo if the sentences are to be consecutive.
The totality principle has been accepted as correct principle for guidance.
In R. vs Edward Charles French, [1982] Cr.
R. (S) p. 1 (at 6), Lord Lane, C.J., observed : "We would emphasize that in the end, whether the sentences are made consecutive or concurrent the sentencing judge should try to ensure that the totality of the sentences is correct in the light of all the circumstances of the case." The trial Magistrate in this case has properly considered all aspects including the plea of guilty and given good reasons for awarding 4 years R.I.
That means in all, the appellant has to undergo 11 years of imprisonment.
That by itself is quite long enough in a man 's life.
But the High Court took a narrow view of the whole matter with the enormity of the crime on the forefront.
The broad expanse of PG NO 754 discretion left by legislation to sentencing Courts should not be narrowed only to the seriousness of the offence.
No single consideration can definitively determine the proper sentence.
In arriving at an appropriate sentence, the court must consider, and some times reject,many factors.
The court must.
`recognise, learn to control and exlcude ' many diverse data.
It is a balancing act and tortuous process to ensure reasoned sentence.
In consecutive sentences, in particular, the Court cannot afford to be blind to imprisonment which the accused is already undergoing.
In the result, we allow the appeal, set aside the judgment of the High Court and restore that of the trial court.
M.L.A. Appeal allowed. | The appellant was charged under section 95(l)(ii) of the Gold (Control) Act, 1968 pursuant to seizure of 7,000 tolas of foreign mark gold from his possession.
He pleaded guilty to the charge and was convicted and sentenced to the maximum punishment of imprisonment for 7 years and fine of Rs.10 lakhs prescribed under the Act.
On appeal, the High Court confirmed that sentence but reduced the fine to Rs.5 lakhs.
The Supreme Court confirmed the sentence in a special Leave petition filed by the appellant.
While the appellant was under judicial custody, he was again prosecuted along with 19 others under section 135 of the Customs Act for smuggling of gold and export of silver out of India.
The appellant pleaded guilty to the charge and was convicted and sentenced for 4 years R.I. with fine of Rs.2 lakhs by trial court.
Both sentences were ordered to run consecutively.
On appeal, the High Court enhanced the sentence from 4 years to the maximum prescribed punishment of 7 years on the ground that the enormity of the crime committed by the appellant warranted nothing else than the maximum sentence.
Allowing the appeal by the appellant on the question of sentence, HELD: 1.
Section 427, Cr.
P.C. relates to administration of criminal justice and provides procedure for sentencing.
The basic rule of thumb over the years has been the so called single transaction rule for concurrent sentences.
If a given transaction constitutes two offences under two enactments generally, it is wrong to have consecutive sentences.
It is proper and legitimate to have concurrent sentences.
But this rule has no application if the transaction relating to offences is not the same or the facts constituting the two offences are quite different.[751C,D E] PG NO 746 PG NO 747 2(i) The enormity of the crime committed by the accused is relevant for measuring the sentence.
But the maximum sentence awarded in one case against the same accused is not irrelevant for consideration while giving the consecutive sentence in the second case although it is grave.
The court has to consider the totality of the sentences which the accused has to under go if the sentences are to be consecutive.
The totality principle has been accepted as correct principle for guidance.
[753E.F] R. vs Edward Charles French, [1982] Cr.
R. (S) p. 1 at 6, referred to.
In the instant case, the trial court has properly considered all aspects including the plea of guilty and given good reasons for awarding 4 years R.I.
That means in all, the appellant has to undergo 11 years of imprisonment.
That by itself is quite Long enough in a man 's life.
But the High Court took a narrow view of the whole matter with the enormity of the crime on the forefront.
[753G H] 2(ii) The broad expanse of discretion left by legislation to sentencing courts should not be narrowed only to the seriousness of the offence.
No single consideration can definitively determine the proper sentence.
In arriving at an appropriate sentence, the court must consider, and some times reject, many factors.
The court must `recognise, learn to control and exclude ' many diverse data.
It is a balancing act and tortuous process to ensure reasoned sentence.
In consecutive sentences, in particular, the court cannot afford to be blind to imprisonment which the accused is already undergoing.
[753H ; 754A B] 3.
Generally, it is both proper and customery for courts to give credit to an accused for pleading guilty to the charge.
But no credit need be given if the plea of guilty in the circumstance is inevitable or the accused has no alternative but to plead guilty.
The accused being caught red handed is one such instance.
[753B] |
Appeal No. 220/ 1963.
Appeal by special leave from the judgment and order dated January 9, 1961 of the Kerala High Court in I.T.R. Case No. 17 of 1959.
K. N. Rajagopal Sastri and R. N. Sachthey, for the ap pellant.
The respondent did not appear.
April 1, 1964.
The Judgment of the Court was delivered by SUBBA RAO, J.
This appeal by special leave preferred against the judgment of the High Court of Kerala at Ernakulam raises the question of the interpretation of section 7(1) of the Indian Income tax Act, 1922 (Act No. XI of 1922), hereinafter called the Act.
The respondent, L. W. Russel, is an employee of the English and Scottish Joint Co operative Wholesale Society Ltd., Kozhikode, hereinafter called the Society, which was incorporated in England.
The Society established a superan nuation scheme for the benefit of the male European members of the Society 's staff employed in India, Ceylon and Africa by means of deferred annuities.
The terms of such benefits were incorporated in a trust deed dated July 27, 1934.
Every European employee of the Society shall become a member of that scheme as a condition of employment.
Under the term of the scheme the trustee has to effect a policy of insurance for the purpose of ensuring an annuity to every member of the Society on his attaining the age of superannuation or on the happening of a specified contin gency.
The Society contributes 1/3 of the premium payable by such employee.
During the year 1956 57 the Society con tributed Rs. 3,333/ towards the premium payable by the respondent.
The Income tax Officer, Kozhikode Circle, in cluded the said amount in the taxable income of the respon dent for the year 1956 57 under section 7(1), Explanation 1 Sub cl.
(v) of the Act.
The appeal preferred by the respondent against 571 the said inclusion to the Appellate Assistant Commissioner of Income tax, Kozhikode, was dismissed.
The further appeal preferred to the Income tax Appellate Tribunal received the same fate.
The assessee thereupon filed an application under section 66(1) of the Act to the Income tax Appellate Tribunal for stating a case to the High Court.
By its order dated December 1, 1958, the Tribunal submitted a statement of case referring the following three questions of law to the High Court of Kerala at Ernakulam: (1) Whether the contributions paid by the employer to the assessee under the terms of a trust deed in respect of a contract for a deferred annuity on the life of the assessee is a 'perquisite ' as contemplated by section 7(1) of the Indian Income tax Act? (2) Whether the said contributions were allowed to or due to the applicant by or from the employer in the accounting year? (3) Whether the deferred annuity aforesaid is an annuity hit by section 7(1) and para.
(v) of Explanation 1 thereto? On the first question the High Court held that the employer 's contribution under the terms of the trust deed was not a perquisite as contemplated by section 7(1) of the Act.
On the second question it came to the conclusion that the employer 's contributions were not allowed to or due to the employee in the accounting year.
On the third question it expressed the opinion that the Legislature not having used the word 'deferred" with annuity in section 7(1) and the statute being a taxing one, the deferred annuity would not be hit by para.
(v) of Explanation 1 to section 7(1) of the Act.
The Commissioner of Income tax has preferred the present appeal to this Court questioning the correctness of the said answers.
The three questions formulated for the High Court 's opinion are interdependent and the answers to them turn upon the true interpretation of the relevant part of section 7(1) of the Act.
Mr. Rajagopala Sastri, learned counsel for the appellant, contends that the amount contributed by the Society under the scheme towards the insurance premium payable by the trustees for arranging a deferred annuity on the respondent 's superannuation is a perquisite within the meaning of section 7(1) of the Act and that the fact that the respondent may not have the benefit of the contributions on the happening of certain contingencies will not make the said contributions any the less a perquisite.
The employer 's share of the contributions to the fund earmarked for paying premiums of the insurance policy, the argument proceeds, vests in the respondent as soon as 572 it is paid to the trustee and the happening of a contingency only 'operates as a defeasance of the vested right.
The respondent is ex parte and, therefore, the Court has not the benefit of the exposition of the contrary view.
Before we attempt to construe the scope of section 7(1) of the Act it will be convenient at the outset to notice the pro visions of the scheme, for the scope of the respondent 's right in the amounts representing the employer 's contributions thereunder depends upon it.
The trust deed and the rules dated July 27, 1934, embody the superannuation scheme.
The scheme is described as the English and Scottish Joint Co operative Wholesale Society Limited Overseas European Employees ' Superannuation Scheme, hereinafter called the Scheme.
It is established for the benefit of the male European members 'of the Society 's staff employed in India, Ceylon and Africa by means of deferred annuities.
The Society itself is appointed thereunder as the first trustee.
The trustees shall act as agents for and on behalf of the Society and the members respectively; they shall effect or cause to be effected such policy or policies as may be necessary to carry out the scheme and shall collect and arrange for the payment of the moneys payable under such policy or policies and shall hold such moneys as trustees for and on behalf of the person or persons entitled thereto under the rules of the Scheme.
The object of the Scheme is to provide for pensions by means of deferred annuities for the members upon retirement from employment on attaining certain age under the conditions mentioned therein, namely, every European employee of the Society shall be required as a condition of employment to apply to become a member of the Scheme from the date of his engagement by the Society and no member shall be entitled to relinquish his membership except on the termination of his employment with Society; the pension payable to a member shall be provided by means of a policy securing a deferred annuity upon the life of such member to be effected by the Trustees as agents for and on behalf of the Society and the members respectively with the Co operative Insurance Society Limited securing the payment to the Trustees of an annuity equivalent to the pension to which such member shall be entitled under the Scheme and the Rules; the insurers shall agree that the Trustees shall be entitled to surrender such deferred annuity and that, on such deferred annuity being so surrendered, the insurers will pay to the Trustees the total amount of the premiums paid in respect thereof together with compound interest thereon; all moneys received by the Trustees from the insurers shall be held by them as Trustees for and 'on behalf of the person or persons entitled thereto under the Rules of the Scheme; any policy or policies issued by the insurers in connection with the 573 Scheme shall be deposited with the Trustees; the Society shall contribute one third of the premium from time to time payable in respect of the policy securing the deferred annuity in respect of each member as thereinbefore provided and the member shall contribute the remaining two thirds , the age at which a member shall normally retire from the service of the Society shall be the age of 55 years and on retirement at such age a member shall be entitled to receive a pension of the amount specified in Rule 6; a member may also, after following the prescribed procedure, commute the pension to which he is entitled for a payment in cash in accordance with the fourth column of the Table in the Appendix annexed to the Rules; if a member shall leave or be dismissed from the service of the Society for any reason whatsoever or shall die while in the service of the Society there shall be paid to him or his legal personal representatives the total amount of the portions of the premiums paid by such member and if he shall die whilst in the service of the Society there shall be paid to him or his legal personal representatives the total amount of the portions of the premiums paid by such member and if he shall die whilst in the service of the Society or shall leave or be dismissed from the service of the Society on account of permanent breakdown in health (as to the bona fides of which the Trustees shall be satisfied,) such further proportion (if any) of the total amount of the portions of the premiums paid by the Society in respect of that member shall be payable in accordance with Table C in the Appendix to the Rules; if the total amount of the portions of the premiums in respect of such member paid by the Society together with interest thereon as aforesaid shall not be paid by the Trustees to him or his legal personal representatives under sub section
(1) of r. 15 then such proportion or the whole, as the case may be, of the Society 's portion of such premiums and interest thereon as aforesaid as shall not be paid by the Trustees to such member or his legal personal representatives as aforesaid shall be paid by the Trustees to the Society; the rules may be altered, amended or rescinded and new rules may be made in accordance with the provisions of the Trust Deed but not otherwise.
We have given the relevant part of the Scheme and the Rules.
The gist of the Scheme may be stated thus: The object of the Scheme is to provide for pensions to its employees.
It is achieved by creating a trust.
The Trustees appointed thereunder are the agents of the employer as well as of the employees and hold the moneys received from the employer, the employee and the insurer in trust for and on behalf of the person or persons entitled thereto under the rules of the Scheme.
The Trustees are enjoined to take out policies of insurance securing a deferred annuity upon the 574 life of each member, and funds are provided by contributions from the employer as well as from the employees.
The Trus tees realise the annuities and pay the pensions to the employees.
Under certain contingencies mentioned above, an employee would be entitled to the pension only after super annuation.
If the employee leave the service of the Society or is dismissed from service or dies in the service of the Society, he will be entitled only to get back the total amount of the portion of the premium paid by him, though the trustees in their discretion under certain circumstances may give him a proportion of the premiums paid by the Society.
The entire amount representing the contributions made by the Society or part thereof, as the case may be, will then have to be paid by the Trustees to the Society.
Under the scheme the employee has not acquired any vested right in the con tributions made by the Society.
Such a right vests in him only when he attains the age of superannuation.
Till that date that amount vests in the Trustees to be administered in accordance with the rules , that is to say, in case the employee ceases to be a member of the Society by death or otherwise, the amount contributed by the employer with interest thereon, subject to the discretionary power exercisable by the trustees, become payable to the Society.
If he reaches the age of superannuation, the said contributions irrevocably become fixed as part of the funds yielding the pension.
To put it in other words, till a member attains the age of superannuation the employer 's share of the contributions towards the premiums does not vest in the employee.
At best he has a contingent right therein.
In 'one contingency the said amount becomes payable to the employer and in another contingency, to the employee.
Now let us look at the provisions of section 7(1) of the Act in order to ascertain whether such a contingent right is hit by the said provisions.
The material part of the section reads: Section 7(1) The tax shall be payable by an assessee under the head "salaries" in respect of any salary or wages, any annuity, pension or gratuity, and any fees, commissions, perquisites or profits in lieu of, 'or in addition to, any salary or wages, which are allowed to him by or are due to him, whether paid or not, from, or are paid by or on behalf of. . . a company. . . .
Explanation I For the purpose of this section perquisite includes (v) any sum payable by the employer, whether directly or through a fund to which the pro.
visions of Chapters IX A and IX B do not 575 apply, to effect an assurance on the life of the assessee or in respect 'of a contract of annuity on the life of the assessees.
This section imposes a tax on the remuneration of an employee.
It presupposes the existence of the relationship if employer and employee.
The present case is sought to be brought under the head "perquisites in lieu of, or in addition to, any salary or wages, which are allowed to him by or are due to him, whether paid or not, from, or are paid by or on behalf of a company".
The expression "perquisites" is defined in the Oxford Dictionary as "casual emoluments.
fee or profit attached to an office or position in addition to salary or wages".
Explanation 1 to section 7(1) of the Act gives an inclusive definition.
Clause (v) thereof includes within the meaning of "perquisites" any sum payable by the employer, whether directly or through a fund to which the provisions of Chs.
IX A and IX B do not apply, to effect an assurance on the life of the assessee or in respect of a contract for an annuity on the life of the assessee.
A combined reading of the substantive part of section 7(1) and cl.
(v) of Expl.
1 thereto makes it clear that if a sum of money is allowed to the employee by or is due to him from or is paid to enable the latter to effect an insurance on his life, the said sum would be a perquisite within the meaning of section 7(1) of the Act and, therefore, would be eligible to tax.
But before such sum becomes so exigible, it shall either be paid to the employee or allowed to him by or due to him from the employer.
So far as the expression "paid" is concerned, there is no difficulty, for it takes in every receipt by the employee from the employer whether it was due to him or not.
The expression "due" followed by the qualifying clause "whether paid or not" shows that there shall be an obligation on the part of the employer to pay that amount and a right on the employee to claim the same.
The expression "allowed", it is said, is of a wider connota tion and any credit made in the employer 's account is cover ed thereby.
The word "allowed" was introduced in the sec tion by the Finance Act of 1955.
The said expression in the legal terminology is equivalent to "fixed, taken into account, set apart, granted".
It takes in perquisites given in cash or in kind or in money or money 's worth and also amenities which are not convertible into money.
It implies that a eight is conferred on the employee in respect of those perquisites.
One cannot be said to allow a perquisite to an employee if the employee has no right to the same.
It cannot apply to contingent payments to which the employee has no right till the contingency occurs.
In short, the employee must have a vested right therein.
If that be the interpretation of section 7(1) of the Act, it is.
not possible to hold that the amounts paid by the Society 576 to the Trustees to be administered by them in accordance with the rules framed under the Scheme are perquisites allowed to the respondent or due to him.
Till he reaches the age of superannuation, the amounts vest in the Trustees and the beneficiary under the trust can be ascertained only on the happening of one or other of the contingencies provided for under the trust deed.
On the happening of one contingency, the employer becomes the beneficiary, and on the happening of another contingency, the employee becomes the beneficiary.
Learned counsel for the appellant strongly relied upon the decision of the King 's Bench Division in Smyth vs Stretton(1).
There, one Stretton, one of the Assistant Masters of Dulwich College, was assessed to income tax in the sum of pouns 385 in respect of his emoluments as Assistant Master received from the Governors of Dulwich College for the year ended the 5th day of April, 1901.
He objected to the assessment on the ground that it included pound 35 not liable to taxation, being amount placed to his credit by the Governors under the Provident Fund Scheme for the year 1900.
Channell, J., with some hesitation, came to the conclusion that the said sum was taxable.
That case was dealing with a scheme for the establishment of provident fund for the benefit of the Assistant Masters on the permanent staff of the Dulwich College.
Under para.
1 of the scheme the salaries of Assistant Masters were increased.
Clause (a) of para.
1 of the scheme provided that Assistant Masters having not less than five years, but less than fifteen years ' service, would be allowed an increase of 5 per cent, in their salaries; under cl.
(b) thereof, Assistant Masters having not less than 15 years ' of service and over, would get an increase of 7 1/2 per cent.
in their salaries; under cl.
(c) thereof, a further addition in their salaries, equal in amount to the above sums, should be granted from the same date to the Assistant Masters alluded to in (a) and (b), such addition being, however, subject to the conditions provided by para.
Paragraph 5 read: "That Assistant Masters having less than ten years ' service who may resign their appointments, or from any other cause than ill health cease to belong to the College, shall be entitled to receive the total increase sanctioned by (a) and the accu mulations thereof, but shall not receive the additional increase sanctioned by (c), or the accumulations thereof.
In the event of any such Assistant Master retiring from ill health the Governors, in addition to the increase sanctioned by (a), may grant him the further 5 per cent.
sanctioned by (c), and the accumulations thereof.
In the event of death of any such Assistant Master whilst in (1) , 46. 577 the service of the College, the 5 percent.
due by (c) as well as under (a), with the accumulations thereof, shall be paid to his legal representatives".
It was contended that the amount payable under cl.
(c) of para.
I was a contingent one without any vested character and, therefore, could not be described as income in any way.
The learned Judge construed the provisions of the scheme and rejected the contention.
The main reason for his conclusion is stated thus: "The result seems to me to be that I must take that sum as a sum which really has been added to the salary and is taxable, and it is not the less added to the salary because there has been a binding obligation created between the Assistant Masters and Governors of the Schools that they should apply it in a particular way".
No doubt it is possible for another court to come to a different conclusion on the construction of the provisions of the scheme; but the learned Judge came to the conclusion that cl.
(c) of para.
1 of the scheme provided for an additional salary to the Assistant Masters.
Indeed, the Court of Appeal in Edwards (H. M. Inspector of Taxes) vs Roberts(1) construed a similar scheme and came to the contrary conclusion and explained the earlier decision on the basis we have indicated.
There, the respondent was employed by a company under a service agreement dated 'August 21, 1921, which provided inter alia, that, in addition to an annual salary, he should have an interest in a "conditional fund", which was to be created by the company by the payment after the end of each financial year of a sum out of its profits to the trustees of the fund to be invested by them in the purchase of the company 's shares or debenture stock.
Subject to possible forfeiture of his interest in certain events, the respondent was entitled to receive the income produced by the fund at the expiration of each financial year, and to receive part of the capital of the fund, (or, at the trustees ' option, the investments representing the same) at the expiration of five financial years and of each succeeding year, and, on death whilst in the company 's service or on the termination of his employ ment by the company, to receive the whole amount then standing to the credit of the capital amount of the fund (or the actual investments).
The respondent resigned from the service of the company in September, 1927, and at that date the trustees of the fund transferred to him the shares which they had purchased out of the payments made to them by the company in the years 1922 to 1927.
He was assessed to income tax on the amount of the current market value of the (1) , 638, 640.
LP(D)ISCI 17 578 shares at the date of transfer.
The assessee contended that immediately a sum was paid by the company to the trustee& of the fund he became invested with a beneficial interest in the payment which formed part 'of his emoluments for the year in which it was made, and for no other year, and that, accordingly, the amount of the assessment for the year 1927 28 ought not, in any event, to exceed the aggregate of the sums paid by the company to the trustees, the difference between the amount and the value of the investments at the date of transfer representing a capital appreciation not liable to tax for any year.
The Court of Appeal rejected the contention.
Lord Hanworth, M. R., in rejecting the contention.
observed be said to have accrued to this employee a vested interest in these successive sums placed to his credit, but only that he had a chance of being paid a sum at the end of six years if all went well.
That chance has now supervened, and he has got it by reason of the fact of his employment, or by reason of his exercising an employment of profit within Schedule E.".
Maugham.
L. J., said much to the same effect thus: "The true nature of the agreement was that lie was to be entitled in the events, and only in the events mentioned in Clause 8 of the agreement, to the investments made by the Company out of the net profits of the Company as provided in Clause 6.".
The decision of Channel], J., in Smyth vs Stretton(1) was strongly relied upon before the appellate court.
But the, learned Judges distinguished that case on the round that under the scheme which was the subject matter Of that deci sion the sums taxed were really additions to the salary of the Assistant Master and that.
in any view, that decision should be confined to the facts of that case.
The principle laid down by the Court of Appeal, namely, that unless a vested interest in the sum accrues to an employee it is not taxable.
equally applies to the present case.
As we have pointed out earlier, no interest in the sum contributed by the employer under the scheme vested in the employee.
as it was only a contingent interest depending upon his reaching the age of superannuation.
It is not a perquisite allowed to him by the employer or an amount due to him from the employer within the meaning of section 7(1) of the Act.
We, therefore, hold that the High Court has given correct answers to the questions of law submitted to it by the Income tax Appellate Tribunal.
In the result, the appeal fails and is dismissed.
Appeal dismissed.
(1)(1904) 46. | The respondent is an employee of the English and Scottish Joint Co operative Wholesale Society Ltd. incorporated in England.
The Society established a superannuation scheme for the benefit of the male European members of its staff employed in India by means of deferred annuities.
Under the terms of the scheme, the trustee has to effect a policy of insurance for the purpose of ensuring an annuity to every member of the ,Society on his attaining the age of superannuation or on the happening of a specific contingency.
The Society contributed ,one third of the premium payable by each employee.
During the year 1956 57, the Society contributed Rs. 3333/ towards the premium payable by the respondent, an employee of the Society.
The Income tax Officer included the said amount in the taxable income of the respondent for the year 1956 57 under section 7(1), Explanation 1, sub cl.
(v) of the Act.
The appeals of the respondent were dismissed both by the Appellate Assistant Commissioner of Income tax and the Income tax Appellate 'Tribunal.
The Tribunal referred to the High Court the following three questions of law: (1) Whether the contribution paid by the employer to the assessee under the terms of a trust deed in respect of a contract for a deferred annuity on the life of the assessee is a perquisite as contemplated by section 7(1) of the Income tax Act? (2) Whether the said contributions were allowed to, or due to the applicant by or from the employer in the accounting year? (3) Whether the deferred annuity aforesaid is annuity hit by section 7(1) and para (v) of Explanation 1 thereto.
The High Court held that the employer 's contribution under the terms of the trust deed was not a perquisite as con templated by section 7(1).
The employer 's contributions were not allowed to or due to the employee in the accounting year.
The legislature not having used the word "deferred" with annuity in section 7(1) and the statute being a taxing one, the deferred annuity would not hit para (v) of Explanation 1 to section 7 (1) of the Act.
Against the decision of High Court, the appellant came to this Court by special leave.
Dismissing the appeal, 570 Held: The answers to the questions of law as given by the High Court were correct.
Unless a vested interest in the sum accrues to an employee, it is not taxable.
In the present case.
no interest in the sum contributed by the employer under the scheme vested in the employee, as it was only a contingent interest depending upon his reaching the age of superannuation.
it is not a perquisite allowed to him by the employer or an amount, due to him from the employer within the meaning of section 7(1) of the Act.
A perquisite is only that amount of money which is allowed to the employee by or is due to him from the employer or is paid to him to effect an insurance on his life.
Smyth vs Stretton, , and Edwards (H. M., Inspector of Taxes) vs Roberts, , referred to. |
Appeal No. 172 of 1964.
Appeal from the judgment and decree dated July 6, 1962 of the Calcutta High Court in Appeal from Original Decree No. 213 of 1959.
section T. Desai, B. Sen and B.P. Maheshwari, for the appllant.
H. N. Sanyal, Solicitor General, Ajit Kumar Sen and S.N. Mukherjee, for the respondent No. 1.
April 15, 1964.
The judgment of the Court was delivered by DAs GUPTA, J.
The subject matter of this litigation is a piece of land in the heart of the business centre of the city of Calcutta.
This was part of a block of 52 cottahs of land taken on lease on January 21, 1950 from the Official Trustee, West Bengal, by a private limited company, Raghuvanshi Private Ltd. The lease was a building lease for a period of 75 years commencing from January 21, 1950.
The lessee was required to complete the construction of a three or four storeyed building on the land within 1O years.
In September 1960, Raghuvanshi Private Limited in its turn leased 10 1/2 cottahs out of the 52 cottahs to a public limited company, Land and Bricks Ltd. This lease by Raghuvanshi Private Ltd., (hereinafter referred to as "Raghuvanshi") in favour of Land & Bricks Ltd., (hereinafter referred to as "Land & Bricks") created a monthly tenancy commencing from the 1st October 1950.
Land and Bricks in its turn sub let the entire 10 1/2 cottahs to the present appellant, Rupchand Gupta in his business name of Hind Airways.
The lease was on the terms as settled by two letters dated August 19, 1950 and September 5, 1950 between Hind Airways and Land and Bricks.
By the terms of the sub lease, the sub lessee undertook not to sub let the land to anybody, to vacate the land as soon as it was required by Land and Bricks for any purpose and not to construct anything on the land but only to use the open land for "garage purpose for motor vehicles".
Inspite of this undertaking however the appellant constructed a pacca structure on the land.
Land and Bricks protested un successfully and then started proceedings under the Calcutta 762 Municipality Act for demolition of the structures.
Those proceedings were also unsuccessful.
Land and Bricks, it appears, also served on the appellant in February 1953 a notice to quit.
This was not followed up by any suit in court.
But a suit for arrears of rent was instituted by Land and Bricks against the appellant in September 1955 and another in 1957.
Consent decrees were passed in both of these suits.
It appears ,that in about May or June 1954, Raghuvanshi was desirous of getting possession of the land it has leased to Land and Bricks.
The difficulty was that Land and Bricks having sublet to the appellant was not in a position to deliver possession to its lessor Raghuvanshi until and unless possession was obtained from the appellant.
It was in these circumstances that Raghuvanshi determined its lease in favour of Land and Bricks by a notice to quit dated the 11th April 1955.
Raghuvanshi then instituted a suit No. 3283 of 1955 in the High Court of Calcutta against Land and Bricks for possession of the land.
The appellant was not impleaded in the suit and Land and Bricks did not contest it.
An ex parte decree was made by the Court in favour of Raghuvanshi on the 11th May 1956.
The necessary legal consequences of that decree is that the plaintiff as the sub lessee of Land and Bricks has no right to stay on the land and has become a trespasser.
It is to avoid the consequence of that decree, that the present suit was brought by Rupchand Gupta.
His case is that the decree had been obtained "by fraud and collusion between the de fendants in order to injure the plaintiff and to evict the plaintiff from the said premises without any decree being passed against the plaintiffs" Both Land and Bricks and Raghuvanshi have been impleaded in the suit Land and Bricks as the first defendant, and Raghuvanshi as the second defendant.
Both of them denied the allegations of fraud and collusion.
The case that the decree was obtained by fraud was given up at the hearing and only the allegation that it was a collusive suit was pressed.
The Trial Judge held that there was collusion between defendant No. 1 and defendant No. 2 in the matter of obtain ing an ex parte decree in suit No. 3283 of 1955 and that the plaintiff was not bound by that decree.
He gave a declaration that the plaintiff was still a tenant under defendant No. 1 and was not liable to be ejected under the ex parte decree.
He also ordered the issue of an injunction restraining the defendants from taking any steps in execution of the ex parte decree.
On appeal by the defendant No. 2, Raghuvanshi, the decree made by the Trial Judge was set aside.
The learned Judges, who heard the appeal, came to the conclusion that 763 the plaintiff had failed to prove that the decree in suit No. 3283 of 1955 had been procured collusively.
So, they held that the plaintiff was bound by the decree in that suit.
It is against this decree of the appellate Bench of the High Court that the present appeal has been filed by the plaintiff Rupchand Gupta.
The only question for decision in the appeal is whether the plaintiff had established his allegation that the ex parte decree had been obtained as a result of collusion between Raghuvanshi and Land and Bricks.
The main circumstances on which the plaintiff relied to prove collusion and which according to the learned Judge established his case were these: Raghuvanshi and Land and Bricks though distinct entities had the same persons as directors.
The construction of building in terms of indenture of lease with Official Trustee was necessarily in the interests of shareholders of Raghuvanshi and so this was in the interest of Land and Bricks also as the main shareholders were the same.
The Calcutta Thika Tenancy Act, 1949 was a serious impediment in the way of the plaintiff 's eviction in any suit by Land and Bricks.
So, Land and Bricks attempted to get possession of the land by obtaining an order of demolition of structures by proceedings under the Calcutta Municipality Act.
When these failed and it was apprehended that a suit for ejectment by Land and Bricks might not succeed against the plaintiff that this device of having a suit by Raghuvanshi against Land and Bricks was decided upon by agreement between Raghuvanshi and Land and Bricks.
By arrangement between the two, Land and Bricks did not contest the suit and to avoid any risk of any defence being raised by the plaintiff he was not impleaded in the suit at all.
All the circumstances taken together justify, it was urged by the appellant, the conclusion that the defendant No. 2 colluded with defendant No. 1 to procure the exports decree for the purpose of executing that decree against the plaintiff.
One of the simplest definitions of collusion was given by Mr. Justice Bucknill in Scott vs Scott(1).
"Collusion may be defined", said the learned Judge, "as an improper act done or an improper refraining from doing an act, for a dishonest purpose".
Substantially the same idea is expressed in the definition given by Whatron 's Law Lexicon, 14th Edition, p. 212.
viz., "Collusion in judicial proceedings is a secret arrangement between two persons that the one should institute a suit against the other in order to obtain the decision (1) [1913] Law Rerports (Probate Division) 52.
764 of a judicial tribunal for some sinister purpose".
This definition of collusion was approved by the Court in Nagubai Ammal & ors., vs B. Shamma Rao and ors.(1).
Thus the mere fact that the defendant agrees with the plaintiff that if a suit is brought he would not defend it, would not necessarily prove collusion.
It is only if this agreement is done improperly in the sense that It dishonest purpose is intended to be achieved that they can be said to have colluded.
There is little doubt that in the present case Land and Bricks agreed with Raghuvanshi that the suit for ejectment would not be contested.
When the suit was instituted Land and Bricks did not contest and the ex parte decree was passed.
Raghuvanshi did not implead this appellant in that suit.
Can any of these acts, viz., Land and Bricks agreeing with Raghuvanshi that it would not contest the suit, the actual refraining by Land and Bricks from contesting the suit or the act of Raghuvanshi in not impleading the appellant, be an improper act or improper refraining from an act? We do not see how any of these things can be said +to be improper.
Taking the last action first, viz., Raghuvanshi 's omission to implead the appellant, it is quite clear that the law does not require that the sub lessee need be made a party.
It has been rightly pointed out by the High Court that in all cases possession of the laid on the basis of a valid notice to quit served on the lessee and does not implead the sub lessee as a party to the suit, the object, of the landlord is to eject the sub lessee from the land in execution of the decree and such an object is quite legitimate.
The decree in such a suit would bind the sub lessee.
This may act harshly on the sub lessee; but this is a position well understood by him when he took the subleases The law allows this and so the omission cannot be said to be an improper act.
Nor is it possible, in our opinion, to say that the omission of Land and Bricks to contest the ejectment suit was an improper act.
It has not been suggested that Land and Bricks had a good defence against the claim for ejectment but did not take it for the mere purpose of helping Raghu vanshi to get possession of the land.
Even if it had a good defence, we do not think it was bound to take it.
It may be that if Land and Bricks had a defence and the defence was such which if brought to the notice of the court would have stood in the way of any decree being passed in favour of Raghuvanshi there would be reason to say that the omission to implead the sub lessee was actuated by a dishonest pur pose and consequently was improper.
It is not necessary for (1) ; 765 us however to consider the matter further as neither in the courts below nor before us was any suggestion made on behalf of the appellant sub lessee that Land and Bricks had even a plausible defence against Raghuvanshi 's claim for ejectment.
We have already mentioned the fact that one of the circumstances which the plaintiff claimed showed collusion was that the Calcutta Thika Tenancy Act stood in the way of the plaintiff 's eviction of Land and Bricks.
It is unneces sary for us to decide whether or not the appellant was a Thika tenant within the meaning of the Calcutta Thika Tenancy Act, 1949.
If he was, that Act would undoubtedly have protected him against eviction by Land and Bricks.
That Act could however have no operation in a suit brought by Raghuvanshi against Land and Bricks.
It has been held by the High Court of Calcutta that the Thika Tenancy Act was designed to protect the Thika tenant from eviction by his landlord only and not against eviction from any source.
Shamsuddin Ahmed vs Dinanath Mullick & ors.
, Appeal from Original Decree No. 123 of 1957, decided on August 13, 1959).
The correctness of this view has not been challenged before us.
Nor is it the appellant 's case that Land and Bricks was a Thika tenant of Raghuvanshi.
Obviously, this could not be suggested, because Land and Bricks never erected any structure at all.
(See the definition of a Thika tenant in section 2, cl. 5 of the Calcutta Thika Tenancy Act, 1949).
On the materials on the record we are satisfied that there was no defence that Land and Bricks could have raised for resisting Raghuvanshi 's claim for ejectment.
The crux of the matter is: Was this attempt by Raghuvanshi to get possession of the land a dishonest or sinister purpose? We are asked by Mr. Desai to spell dishonesty out 'of the fact that the directors of Raghuvanshi and Land and Bricks were common and so the persons who were interested in Land.
and Bricks were also interested in seeing that Raghu vanshi had not to suffer for forfeiture of his lease for failure to comply with the covenant to construct a building by 1960.
All this may be taken to be true.
But, we are unable to see how this would make Raghuvanshi 's attempt to get possession of the land dishonest or sinister.
It is not as if Raghuvanshi did not actually want to get possession of the land but wanted to help Land and Bricks to get possession.
It has also to be remembered that the identity of the directors and the identity of the main shareholders do not in any way affect the position that in law and in fact Raghuvanshi and Land and Bricks were distinct and separate entities.
It is not even remotely suggested that Raghuvanshi and Land and Bricks were really one and the same person with two names.
766 If that had been so, there might have been good reason for thinking that it was in an attempt to surmount the obstacle represented by the Calcutta Thika Tenancy Act, 1949, that this mode of Raghuvanshi suing Land and Bricks for ejectment was resorted to.
Indeed, if Raghuvanshi and Land and Bricks were one and the same person possession of Land and Bricks would be possession of Raghuvanshi and a suit by Raghuvanshi to eject Land and Bricks would be meaningless.
But, that is not the appellant 's case.
It appears from the High Court 's judgment that the plaintiff 's counsel made it plain before the court that it was not his client 's case that the plain tiff 's real lessor was Raghuvanshi Private Ltd., and not Land and Bricks Ltd. In the present appeal before us also Mr. Desai argued on the basis that Land and Bricks and Raghuvanshi were distinct entities and that the lease of Land and Bricks under Raghuvanshi was a real subsisting lease at the time of Suit No. 3283 of 1955.
In our judgment, the appellate Bench of the High Court has rightly come to the conclusion that the plaintiff has failed to establish that the decree in Suit No. 3283 of 1955 was procured collusively.
The suit was therefore rightly dis missed.
The appeal is accordingly dismissed with costs.
Appeal dismissed. | Respondent No. 2 is the lessee of Respondent No. 1 and the appellant is the sub lessee.
Both the respondents Nos. 1 and 2 had the same directors.
Respondent No. 1 brought a suit against respondent No. 2 for eviction in which the appellant was not impleaded as a party.
By agreement between the present respondent Nos. 1 and 2 that suit was not defended and ex parte decree was obtained in favour of respondent No. 1.
By virtue of this decree the appellant as a sub lessee of respondent No. 2 became a tresspasser and had no right to remain on the land.
To avoid this situation the appellant filed a suit to set aside the decree on the ground that it was obtained by collusion.
The Trial Judge accepted his contention and gave a direction that the appellant still remained a tenant and directing the defendants in that suit from taking any steps in execution of the ex parte decree.
On appeal the trial Court 's decree was set aside on the ground that the present appellant had failed to prove that the ex parte decree was obtained collusively.
Before this Court the same contentions as in the courts below were raised.
Held: (i) The mere fact that the defendant agreed with the plaintiff that if a suit is brought he would not defend it would not necessarily prove collusion.
It is only if this agreement is done improperly in the sense that a dishonest purpose was intended to be achieved that they can be said to have colluded.
Scott vs Scott.
1913 Law Reports (Probate Division) 52 and Nagubai Ammal & Ors.
vs B. Shamma Rao, ; , referred to.
(ii) The law allows a landlord to institute a suit against a lessee for the possession of the land on the basis of a valid notification without impleading the sub lessee and the decree in such suit would bind the sub lessee and hence the suit instituted by respondent No. 1 in the present case cannot be said to have constituted an improper act.
(iii) The omission of the respondent No. 2 to defend the earlier suit was not also an improper act because even if it had a good defence it was not bound to take it.
(iv) Even if the appellant was a Thika tenant within the meaning of the Calcutta Thika Tenants Act, 1949, it would have protected him against eviction by respondent No. 2 but It would not have given protection against the eviction by respondent No. 1 because the Act was designed to protect the Thika Tenant from eviction by the landlord only and not against eviction from any other source.
761 Shamsuddin Ahmad vs Dinanath Mullick, Appeal from original decree No. 123 of 1957, decided on 13 8 59.
(v) The respondents Nos. 1 and 2 are two distinct legal entitles and therefore simply because both had the same directors it cannot be said that the purpose of the suit was dishonest or sinister.
(vi) The appellate Bench of the High Court has correctly decided that the present appellant has failed to establish that the impugned decree was procured collusively. |
Appeals Nos. 396 413 of 1963.
Appeals by special leave from the judgment and order dated October 26, 1961 of the Kerala High Court in Writ Appeals Nos. 104 106, 107, 109, 112, 108, 113, 114, 111, 115, 116, 119, 120, 123, 124 and 122 of 1964.
M. C. Setalvad, J. B. Dadachanji, 0.
C. Mathur and Ravinder Narain, for the appellants (in all the appeals).
V. P. Gopalan Nambiar, Advocate General, Kerala and V. A. Seyid Muhammed, for the respondent (in all the appeals).
April 10, 1964.
The judgment Of GAJENDRAGADKAR, C.J., SHAH AND SIKRI JJ.
was delivered by SHAH J. The dissenting Opinion Of WANCHOO and AYYANGAR JJ. was delivered by AYYANGAR J. SHAH, J. The Sales tax Officer, Special Circle Ernakulam assessed the appellants under the Travancore Cochin General Sales Tax Act XI of 1125 M.E., to pay sales tax on transactions of sale of tea chests at the auctions held at Fort Cochin in the years 1956 57 to 1958 59, rejecting their contention that the sales were exempted from tax by virtue of article 286(1)(b) of the Constitution.
The appellants then petitioned the High Court of Kerala for writs of certiorari quashing the orders of assessment and for writs of prohibition restraining the Sales tax Officer from proceed ing with the collection of tax in pursuance of the orders of assessment.
Vaidialingam J., rejected the petitions and his order was confirmed in appeal by a Division Bench of the High Court of Kerala.
With special leave, the appellants have appealed to this Court.
The transactions of sale sought to be taxed by the Revenue authorities are in tea, which is a controlled commodity.
The Parliament enacted the Tea Act (19 of 1953) to provide for the control by the Union of the tea industry, including the control of cultivation of tea in, and of export of tea from, India and for that purpose to establish a Tea Board and to levy customs duty on tea exported from India.
By section 3(f) "export" is defined as taking out of India by land, sea or air to any place outside India other than a country Or territory notified in that behalf by the Central Government by notification in the Official Gazette. "Export allotment" is defined by section 3(g) as the total quantity of tea which may be exported during any one financial year.
Section 17(1) places an embargo upon exportation of tea unless covered by a licence issued by or on behalf of the Board.
Section 18 provides that no consignment of tea shall be shipped or water borne to be shipped for export or shall be exported until the owner has delivered to the Customs Collector a valid export licence or special export licence or a 709 valid permit issued by or on behalf of the Board or the Central Government as the case may be, coverning the quantity to be shipped.
Section 19 authorises the Central Government to declare export allotments of tea for each financial year, and by section 20 it is provided that any tea estate shall, subject to conditions as may be prescribed, have the right to receive under the Act an export quota for each financial year.
Section 21 provides that the owner of a tea estate to which an export quota has been allotted for any financial year shall have the right to obtain at any time ,export licences during that year to cover the export of tea upto the amount of the unexhausted balance of the quota.
The export quota right is, by cl.
(2) of section 21, transferable, subject to such conditions as may be prescribed and the transferee of such right may again transfer the whole or any part of his right provided that nothing in the sub section shall operate to restrict the issue of licences for the export of tea expressed to be sold with export rights.
The other provisions are not material in deciding this group of appeals.
Trade in tea in the State of Kerala internal as well as export is carried on through certain defined channels.
A manufacturer of tea applies for and obtains from the Tea Board allotment of export quota rights on payment of the necessary licence fee.
The manufactured tea in chests is then sent to M/s. T. Stanes & Company Ltd. who warehouse the chests at Willingdon Island.
Chests of tea are then sold by public auction through brokers at Fort Cochin.
With the chests of tea for which export quota rights are obtained, export quota rights are sold by the auctioneer.
At the auction sale, bids for tea chests with export quota rights are given by the agents or intermediaries in Cochin of foreign buyers.
Tea chests are delivered at the warehouses by M/s. T. Stanes & Company Ltd. to the purchasers whose bids are accepted.
The agents or intermediaries of the foreign buyers then obtain licences from the Central Government for export of tea chests under the export quota rights vested in them under the purchases made at the auction sales.
Tea cannot therefore be exported otherwise than under a licence: such a licence may be issued to a manufacturer or to the purchaser of the quota granted by the Central Gov ernment to the manufacturer when tea is sold with export rights.
When auctions of tea with the export rights are held at Fort Cochin, it is in this group of appeals common ground, sellers on whose behalf the auctioneer acts as the agent know that bids are offered by the buyers of tea for the purpose of export.
It is also known that the bidder is an agent or an intermediary of a foreign buyer.
710 Is the sale by auction to the agent of intermediary of the foreign buyer, in the course of export within the meaning of article 286(1) of the Constitution '? If the sale is in the course of export out of the territory of India.
any State law which imposes or authorises the imposition of a tax on such sale is, because of article 286(1)(b), invalid.
Before the Constitution was amended by the Constitution (Sixth Amendment) Act, 1956, there was no legislative guidance as to what were transactions of sale in the course of export out of the territory of India.
But by the Constitution (Sixth Amendment) Act, cl.
(2) of article 286 was substituted for the original clauses, and thereby the Parliament was authorised to formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in cl (1).
The Parliament has under the Central Sales Tax Act (74 of 1956) enacted by section 5 that "a sale or purchase of goods.
shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India.
" This was legislative recognition of what was said by this Court in the State of Travancore Cochin and others vs The Bombay Company Ltd(1) and State of Travancore Cochin and others vs Shanmugha Vilas Cashew Nut Factory and others(2) about the port of the goods out of the territory of India" in article 286(1) (b).A transaction of sale which occasions export, or which is effected by a transfer of documents of title after the goods have crossed the customs frontiers, is therefore exempt from sales tax levied under any State legislation.
The appellants set out in their respective petitions the manner in which sales tax of tea chests were conducted at Fort Cochin and in certain petitions affidavits in reply even were not filed by the State of Kerala.
In the remaining petitions in which affidavits in reply were filed it was contended that the export of goods was made by the purchasers who had taken delivery of the goods from the manufacturers in Travancore Cochin and in pursuance of the export licences obtained by the purchasers goods were exported, but such subsequent export by the purchasers did not affect the character of the sales by the manufacturers to the purchasers.
It is true that there is no finding by the Sales tax authorities that the respective purchasers at the auction were agents of foreign buyers, but the Advocate appearing.
on behalf of the State argued the case before the High Court on the footing that the bids were offered at the auctions by (1) ; (2 ) ; 711 the agents or intermediaries or foreign buyers, and the Court proceeded to dispose of the case before it on that footing.
Vaidialingam J., held that transactions of sale were complete when bids for purchase of tea together with the export quota rights were accepted, and the sellers had no concern with the actual export which was effected by the auction purchasers to their foreign principals.
It could not, therefore, in the view of the learned Judge, be held that the sales in question had as an integral part thereof occasioned export, that is, the sales preceded the export and were not in the course of export.
The High Court in appeal held that the ban imposd by article 286(1)(b) predicated a casual connection between the sale and the export a con nection which is intimate and real.
The sale, it was said, must inextricably be bound up with the export and form an 'integral part thereof, so that without export the sale is not ,effectuated; but as the sale imposed or involved no obligation to export, there was no movement under the contract of sale and exemption claimed was not admissible.
Correctness of this view is challenged in this appeal.
To constitute a sale in the course of export of goods out of the territory of India, common intention of the parties to the transaction to export the goods followed by actual export of the goods, to a foreign destination is necessary.
But intention to export and actual exportation are not sufficient to Constitute a sale in the course of export, for 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 or 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 resultant export form parts of a single transaction": State of Travancore Cochin and others vs The Bombay Company Ltd.(1).
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 (1) ; 712 export, but is not necessarily to be regarded as one in the course of export, unless the sale occasions export.
And 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.
Without such a bond, a transaction of sale cannot be called a sale in the course of export of goods out of the territory of India.
There are a variety of transactions in which the sale of a commodity is followed by export thereof.
At one end are transactions in which there is a sale of goods in India and the purchaser immediate or remote exports the goods out of India for foreign consumption.
For instance, the foreign purchaser either by himself or through his agent purchases goods within the territory of India and exports the goods and even if the seller has the knowledge that the good, , are intended by the purchasers to be exported, such a transaction is not in the course of export, for the seller does not export the goods, and it is not his concern as to how the purchaser deals with the goods.
Such a transaction without more cannot be regarded as one in the course of export because etymologically, "in the course of export", contemplates an integral relation or bond between the sale and the export.
At the other end is a transaction under a contract of sale with a foreign buyer under which the goods may under the contract be delivered by the seller to a common carrier for transporting them to the purchaser.
Such a sale would indisputably be one for export, whether the contract and delivery to the common carrier are effected directly or through agents.
But in between lie a variety of transactions in which the question whether the sale is one for export or is one in the course of export i.e., it is a transaction which has occasioned the export, may have to be determined on a correct appraisal of all the facts.
No single test can be laid as decisive for determining that question.
Each case must depend upon its facts.
But that is not to say that the distinction between transactions which may be called sales for export and sales in the course of export is not real.
In general where the sale is effected by the seller, and he is not connected with the export which actually takes place, it is a sale for export.
Where the export is the result of sale, the export being inextricably linked up with the sale so that the bond cannot be dissociated without a breach of the obligation arising by statute, contract or mutual understanding between the parties arising from the nature of the transaction, the sale is in the course of export.
It may be conceded that when chests of tea out of the export quota are sold together with the export rights, the goods are earmarked for export, and knowledge that the goods were purchased by the bidders for exporting them to.
713 the foreign principals of the bidders must clearly be attri butable to them.
Does the co existence of these circumstances, impress upon the transactions of sale with the character of a transaction in the course of export out of the territory of India '? We are unable to hold that it does.
That the tea chests are sold together with export rights imputes knowledge to the seller that the goods are purchased with the intention of exporting.
But there is nothing in the transaction from which springs a bond between the sale and the intended export linking them up as part of the same transaction.
Knowledge that the goods purchased are intended to be exported does not make the sale and export parts of the same transaction, nor does the sale of the quota with the sale of the goods lead to that result.
There is no statutory obligation upon the purchaser to export the chests of tea purchased by him with the export rights.
The export quota merely enables the purchaser to obtain export licence, which he may or may not obtain.
There is nothing in law or in the contract between the parties, or even in the nature of the transaction which prohibits diversion of the goods for internal consumption.
The sellers have no concern with the actual export of the goods, once the goods are sold.
They have no control over the goods.
There is therefore no direct connection between the sale and export of the goods which would make them parts of an integrated transaction of sale in the course of export.
Decided cases on which reliance was placed at the Bar have mainly been of cases in which the benefit of the exemption of article 286(1)(b) was claimed in respect of sales preceding the export sale.
Such a sale preceding the export could not, it was held, without doing violence to the language of article 286(1)(b), be given the benefit of the exemption from tax imposed by State legislation merely because of its historical connection with the export sale.
In a majority of the cases to be presently referred there were at least two salessale under which goods were procured followed by a sale under which the goods so procured were exported, and the claim of the Revenue to tax the first transaction was upheld.
It may be regarded as therefore settled law that where there are two sales leading to export the first under which goods are procured for sale and the property in the goods passes within the territory of India, and the second by the buyer to a foreign party resulting in export the first cannot be regarded as a sale in the course of export, for a sale in the course of export must be directly and integrally connected with the export.
It cannot also be predicted that every sale which results in export is to be regarded as sale in the course of ex.
We may briefly refer to the cases which have come before this Court.
Justification for citation of the cases is 714 not to evolve a pinciple from the actual decisions, but to highlight the grounds on which the decisions were rendercd.
The first case which came before this Court in which article 286(1)(b) fell to be construed was the State of Travancore Cochin and others vs The Bombay Company Ltd.(1).
The assessee who had exported coir products to foreign purcha sers claimed exemption from sales tax relying upon article 286(1)(b).
The Revenue authorities held that property in the goods having passed within the State, the transactions, were liable to tax.
The High Court disagreed with that view, holding that a sale in the course of export was not merely a sale when the goods had crossed the customs frontiers, but included a transaction which precede export.
This Court agreed with the High Court.
In appeal Patanjali Sastri C.J., speaking for the Court observed that sales which occasioned export were within the scope of the exemption under article 286(1)(b).
But that was a case in which on the facts found there could be no dispute that the sale by the assessee occasioned export, for in pursuance of the contract the assessee had exported the goods sold.
The next case which came before this Court was the State of Travancore Cochin and others vs Shanmugha Vilas Cashew Nut Factory and others(2).
It was held by this Court that purchases in the State made by the exporters for the purpose of export are not within the exemption granted by article 286(1)(b) of the Constitution.
Patanjali Sastri C.J., speaking for the majority of the Court observed: "The word 'course ' etymologically denotes movement from one point to another, and the expression 'in the course of ' not only implies a period of time during which the movement is in progress but postulates also aconnected relation.
* * * * A sale in the course of export out of the country should similarly be understood in the context of clause (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.
" He further observed that the phrase "integrated activities ' 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.
It is in that sense that the two activities the sale and the export were said to be integrated.
But a purchase for the purpose of export like production or manufacture for export, being only an act (1) ; (2) ; 715 preparatory to export could not be regarded as an act done "in the course of the export of the goods out of the territory of India".
In the State of Madras vs
Gurviah Naidu and Company Ltd.(1), section R. Das, Actg.
C.J., observed that an assessee who goes about purchasing goods after securing orders from foreign purchasers is not exempt from liability to pay tax by virtue of article 286(1)(b) of the Constitution in respect of the purchases made by him because, those purchases do not themselves occasion the export.
Goods were undoubtedly bought for the purpose of export, but the purchase did not occasion the export within the meaning of article 286(1)(b) of the Constitution.
In State of Mysore and another vs Mysore Shipping and Manufacturing Co. Ltd. and others(2), it was held that where goods were sold to a licenced exporter by the assessee and the licenced exporter sold the goods to a foreign purchaser it could not be said that the first was in the course of ex port.
The licenced exporter was not an agent of the assessee and the two sales could not have both occasioned the export: it was only the second sale which did that, and the assessee not being a party to it either directly or through the exporter or through his agents, the first sale with which alone the assessee was associated did not occasion the export.
If it did not, then it hardly matters whether the goods were exported through the instrumentality of the exporter or not, because all sales that precede the one that occasioned the export were taxable.
In this case the Court expressed the opinion that for the sale to be one which occasions the export it must directly concern the assessee as an exporter.
In East India Tobacco Company vs The State of Andhra Pradesh and another (3) this Court held that only the sale under which the export is made that is protected by article 286(1)(b) of the Constitution and a purchase made locally by a firm doing business of exporting tobacco, which preceded the export sale did not fall within its purview though it is made for the purpose of or with a view to export.
One more judgment of this Court may be noticed: B. K. Wadeyar vs M/s. Daulatram Rameshwarlal(4).
The assessees in that case sold goods to an Indian purchaser, who had agreed to sell them to a foreign buyer.
The sales by the assessees "were on F.O.B. contracts under which they (1) A.I.R. (1956) S.C. 158.
(2) A.I.R. (1958) S.C. 1002.
(3) ; (4) ; 716 continued to be the owners" till the goods crossed the cus toms barrier, and entered the export stream.
It was held by this Court that since the goods remained the property of the assessees till they reached the export stream, the sales were exempt from tax imposed by a State under article 286(1)(a).
This was undoubtedly a case of two sales resulting in export, and the first sale was held immune from State taxation: but that was so because the property in the goods had passed to the Indian purchaser when the goods were in the export stream.
The first sale itself was so inextricably connected with the export that it was regarded as a sale in the course of export.
Mr. Setalvad on behalf of the appellants placed strong reliance upon the judgment of the Madras High Court in of Madras(1).
That was a case in which a dealer in the Stater of Madras in hides and skins after purchasing raw hides tanned them and sent them to Kovai Tanned Leather Co. Madras who acted as the dealer 's agent for sale.
Kovai Tanned Leather Company sold the goods to Dharamsee Parpia who acted as an agent of Srivan Brothers (Eastern) Ltd., London.
There was another transaction between Kovai Tanned Leather Co. and Gordon Woodroffe and Company Ltd. who acted as agents for a foreign principal.
The Salestax Tribunal refused to accept the transaction to Dharamsi Parpia as an export sale on the ground that Kovai Tanned Leather Company delivered the goods to the exporter Dharamsi Parpia and thereafter the exporter obtained the bills of lading, and that the sale became complete in the Madras State before shipment, and it was on that account not a sale in the course of export.
The High Court disagreed with that view.
Jagadisan J., speaking for the Court observed: Where there is privity of contract between the foreign buyer and the seller in the taxing territory and the concluded sale between them occasions the export even if the property in the goods sold passes within the territory the transaction is nevertheless one in respect of which Article 286 imposes a ban on the State to levy tax.
" We are not concerned to decide whether there was evidence in that case on which the High Court could come to the conclusion that the sale occasioned the export.
But Mr. Setalvad relied upon the observation in support of the pro position that in all cases where there is a contract for purchase of goods in the taxing territory, between a local merchant and a foreign buyer acting through his agent, and the (7)13 S.T.C. 629.
717 goods are after purchasing the same exported by the agent, the transaction must be deemed to be one in the course of export.
We are unable to accept that contention.
We do not read the judgment as laying down any such proposition, and none such is legitimately deducible.
The second transaction in favour of Gordon Woodroffe & Co. was found to be one in which property in the goods passed beyond the customs frontier.
Such a transaction would indisputably be a sale in the course of export.
In our view the transactions of sale in the present case did not occasion the export of the goods, even though the appellants knew that the buyers in offering the bids for chests of tea and the export quotas were acting on behalf of foreign principals, and that the buyers intended to export the goods.
There was between the sale and the export no such bond as would justify the inference that the sale and the export formed parts of a single transaction or that the sale and export were integrally connected.
The appellants were not concerned with the actual exportation of the goods, and the sales were intended to be complete without the ex port, and as such it cannot be said that the said sales occasioned export.
The sales were therefore for export, and not in the course of export.
The appeals therefore fail and are dismissed with costs.
One hearing fee.
AYYANGAR, J. We regret our inability to concur in the order that these appeals should be dismissed.
We are clearly of the opinion that the appeals should be allowed.
This batch of 18 appeals which have been heard together are directed against a common judgment of the High Court of Kerala and are before this Court by virtue of special leave granted to the appellants.
The appellants filed writ petitions in the High Court which were dismissed by the learned Single Judge whose judgment was affirmed on appeal by a Bench of the High Court.
It is from this judgment that these appeals have been brought.
The appellants are 18 tea estates which tire carrying on the business of growing and manufacturing tea in their estates.
Their claim is that the teas grown by them have been sold by them "in the course of the export of goods out of the territory of India" within article 286(1)(b) of the Consti tution and they, therefore, claim that the State of Travan core Cochin in which these sales took place was not entitled to impose sales tax upon these sales.
The question for consideration is whether these sales effected by the appellants are, as they claim, sales "in the course of export".
It is common ground that the tea sold 718 under the transactions involved in these appeals was actual ly exported out of the territory of India.
Doubtless, this circumstance would not per se render the sales which preceded the export "sales in the course of export" but the argument submitted to us is that these exports are so directly and immediately linked up with the sales effected by the appellants and so integrated with them that the two form part of the same transaction as to render the sales "sales in the course of export".
It was presented in this form, relying on the decision of this Court in State of Travancore Cochin vs Shanmugha Vilas Nut Factory(1) where the learned Chief Justice observed: "The word 'course ' etymologically denotes movement from one point to another and the expression 'in the course of ' not only implies a period of time during which the movement is in progress but postulates also a connected relation. .
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. . emphasised the integral relation between the two where the contract of sale itself occasioned the export as the ground for holding that such a sale was one taking place in the course of export.
" It is this integrality that is involved in the concept which is expressed by the words that "the sale that occasions the export" is "a sale in the course of export".
The details of the sales on which tax is sought to be levied by the respondent, together with the facts relating thereto, as well as the several contentions urged before us and the decisions on which reliance is placed on either side have all been narrated in the judgment just now pronounced and we do not think it necessary to restate them.
Similarly, the provisions of the and the rules framed thereunder so far they are relevant for the decision of the question involved in these appeals have also been set out and so we are not repeating them either.
We shall confine ourselves to the very restricted area of our disagreement with our learned brethren which has occasioned this separate judgment.
(1) [1954] S.C.R.53 719 As preliminary to the discussion of the question involved, we shall put aside certain types of transactions as regards which there is no dispute that they clearly fall on one side of the line of the other.
On the one side of the line would be the case where a seller in pursuance of a contract of sale with a foreign buyer puts the goods sold on board a ship bound for a foreign destination.
Such a sale would be an "export sale" which would undoubtedly be within the con stitutional protection of article 286(1)(b).
In regard to this type, however, we would make this observation.
In such a case we consider that it would be immaterial whether or not with reference to the provisions of the Sale of Goods Act, read in conjunction with the terms and stipulations of any particular contract, the property in the goods passes to the buyer on the Indian side of the customs frontier or beyond it.
In either event the sale would have occasioned the export, for the sale and the export form one continuous series of transactions, the one leading to the other not merely in point of time but integrated by reason of a common intention which is given effect to.
In such a case it would be seen that there is but one sale to the foreign buyer "which occasions the export", and which is implemented in accordance with the terms of the contract by an actual export which is the sine qua non of "a sale in the course of export".
A case on the other side of the line would be one where the sale is effected to a resident purchaser who effects the export by sale of the goods purchased to a foreign buyer.
Here the first sale to the buyer who enters into the export sale would not be a "sale in the course of export" for it would not be the particular sale which occasions the export, notwithstanding that the purchase might have been made with a view to effect the export sale, or to implement a contract of sale already entered into with a foreign buyer.
That such a sale is not one "in the course of export" has been repeatedly held by this Court (See State of Travancore Cochin vs Shanmugha Vilas Cashew Nut Factory(1), State of Madras vs Gurviah Naidu and Co. Ltd.(2), State of Mysore vs Mysore Spinning and Manufacturing Co. Ltd.(3) and East India Tobacco Co. vs The State of Andhra Pradesh(4).
This second type of case involves two sales one to a resident purchaser who purchases it with a view to effect an export and the second, the export sale or sale in the course of export by the purchaser to a foreign buyer.
The existence of the two sales and the consequent dissociation between the (1) ; (2) A.I.R. 1956 S.C. 158 = 6 S.T.C. 717.
(3)A.I.R. (4) ; 720 first sale and the export causes a hiatus between that sale and the export and destroys the integrality of the two events or transactions viz., the sale and the factual export.
The sales involved in the present appeals are not of the 2nd type for here there is a single sale direct to a foreign buyer, the contract being concluded with and the goods sold delivered to his agent.
It is hardly necessary to add that for purposes relevant to the decision of the question before us there could be no difference in legal effect between a sale to a foreign buyer present in India to take delivery of the goods for transport to his country and a sale to his resident agent for that purpose.
Pausing here we should mention that there is no dispute (1) that the persons who bid at the auction at Fort Cochin and purchased the teas of the assessees were agents of foreign buyers or (2) regarding their having made these purchases under the directions of their foreign principals in order to despatch the goods to the latter a contractual obligation that they admittedly fulfilled.
Under the sales here involved, though to foreign buyers and intended for export, the goods were not under the terms of the contract of sale placed by the seller on board the ship in the course of its outward voyage and that is the only reason why they do not conform strictly to the first type of an export sale which we have described earlier.
But the question is, do not these sales also "occasion the export" and in that sense sales "in the course of export" The test which has been laid down by this Court for deter mining the proximity of the connection between the sale and the export so as to bring the sale within the constitutional exemption in article 286(1)(b) is the integrality of the two events the sale and the export.
The question to be answered is therefore whether the sales now under consideration do not form part and parcel of a single integrated transaction with the export or are they distinct, distant and mediate, the sale and the export being related to each other only in sense of one leading to the other or the one succeeding the other merely in point of time.
If the former, the sales are within article 286(1)(b), but if the connection between the two is as described later, they are outside the exemption.
What then are the facts of the present case.
Before re stating them for their being examined in the light of the criteria we have just specified, it is necessary to emphasise certain matters.
When the assessees sought an opportunity to adduce evidence as to the facts which they offered to prove to establish their claim to the constitutional protection, the assessing authorities accepted their statements as correct and did not desire them to adduce evidence and so 721 no detailed evidence was led.
If therefore on an examination of the legal position it is now found that there is any lacunae in the statement of facts or in the evidence whose existence would have brought the sales within the exemption, it appears to us that the appellant assessees should in fairness be afforded an opportunity to adduce evidence to establish their case.
We say so particularly because it could by no, means be said that the law was clear as to the facts necessary to be proved to claim exemption in the case of sales of the type now before us.
To proceed with the facts, the assessees had applied for and obtained export quotas with a view to effect exports of a quantity of tea grown and processed by them.
The sales at Fort Cochin were effected along with the export rights , ranted to the Appellant estates.
the contract being that the purchaser at the auction would obtain a transfer of the ex port quota right of that estate whose tea he purchased to the extent needed to effect export of the tea purchased.
The purchases were thus made only on the basis that the export rights of the seller would be transferred to the buyer and on the basis of these transfers the purchasers obtained export licences from Government for exporting the tea and effected the exports.
The purchases were made by agents of foreign principals and it was part of the contractual duty Of these agents vis a vis the principals to consign the goods purchased to them without avoidable delay.
There was proof by the certificates produced that these agents had fulfilled their obligations to their principals and had shipped the goods bought as early as practicable to foreign destinations.
The principal contention urged by the learned Advocate General of Kerala to persuade us to hold that the sales did not "occasion the export" was based on two circumstances: (1) that it was not part of the contract between the assessees and their buyers that the goods shall only be ex ported and not sold in the local market.
In other words, it was urged that in the absence of such a specific term of contract it would have been open to the buyers to have diverted the goods from being exported and to have sold them locally.
This was so far as the contractual relationship between the assessee sellers and the buyers from them under the sale was concerned, (2) dealing next with the effect of the provisions of the and the rules framed thereunder on the sales effected by the assessees, the submission was that section 21 and other provisions of the merely enabled an export to be effected and did not require the goods in regard to which they were issued to be exported.
In other words, it was stressed that the did not impose any obligation on the quota holder or his transferee 722 to export the goods covered by the quota and that conse quently the buyer even after taking a transfer of the export quota rights alongwith his purchase was not compelled by law to export and was not precluded from failing to export and selling the goods locally.
On this reasoning the argument was that here was a purchase under which the purchaser was free to export or not to export and the mere fact that he chose to export would not render the sale to him one which occasioned the export or one "in the course of export".
We consider that these arguments do not sufficiently take into account the actualities of the situation, but proceed on investing on formal requirements a significance which is not warranted.
When learned counsel says that there was no term in the contract between the seller and the buyer that the goods purchased were not to be sold locally but have to be export ed, he is right only in the sense that it is not any express term of the contract.
But could it be said that that was not the implicit common understanding on which the entire transaction was concluded.
The buyer was not interested in the purchase except on terms of the export quota rights being transferred to him and that was why the transfer of the export right was effected or contracted to be effected as part and parcel of the sale of the goods.
Again, the buyer was an agent, who as we have stated earlier was not free to deal with the tea purchased by effecting a local sale, but was under an obligation to his foreign principal to export the goods purchased to a foreign destination.
It was with such a buyer that the assessee entered into the transaction of sale.
On these facts we are satisfied that it was part of the understanding between the seller and the buyer, inferable from all the circumstances attendant on the transaction that the buyer was bound to export.
Pausing here, we would add that, we understand that importance is attached in this context to the need of a term in the sate contract laying an obligation on the part of the buyer to export only for the purpose of demonstrating the intimate connection between the sale and the export for establishing that it was the sale that occasioned the export.
If we are right, then what is of significance is the real and common intention of the two parties to the transaction whether they contemplated the goods purchased being sold locally, or whether they intended the goods sold being only exported and not whether there is such a term in the contract between the parties.
Coming next to the contention that the does not compel export of goods covered by the quotas granted, we might mention that no evidence was led as to the prices prevailing in the local market as compared to that in the foreign countries where the principals of the resident buyers rested, which would have disclosed whether a local sale of the tea bought ostensibly for export was in a commercial sense within the bounds of possibility, though if one went by the rationale underlying the provisions of the and in particular sections 17, 21 and 22, one gets the impression that export quota rights were considered to have a considerable value in the market which would be some indication that a buyer with an export quota would never sell in the local market.
Thus it might be that even though the statute does not in terms prohibit internal sale of tea purchased alongwith export quota rights, this could be explained by the circumstance that the right to export tea is considered a privilege which secures economic advantages to the exporter and hence there was no need for any statutory compulsion to do so.
We are making this observation because Parliament and the Central Government are keen on promoting exports and in the case of some commodities like sugar where the external price is lower than the local price, the regulations framed in that behalf require exports to be effected under compulsion.
We consider therefore that the absence of a compulsive provision in the requiring export of the quantity allotted to the estates, is not very material and that Parliament might well have left it optional with the estate owners to export seeing that economic factors provided the requisite compulsion.
If there was a contract or understanding between the buyer and seller by which the latter was to export the goods bought, it is conceded the sale of the assessee did occasion the export and in our view on the facts established, we con sider this condition satisfied.
We would therefore allow the appeals and set aside the assessment in so far as they included the sales involved in these appeals.
ORDER In accordance with the opinion of the majority, the appeals are dismissed with costs.
One hearing fee.
Appeal dismissed. | The appellants were carrying on the business of growing and manufacturing tea in their estates.
The sellers of tea were the appellants; the purchasers were local agents of Foreign buyers.
The sales were by public auction at Fort Cochin.
They were conducted by brokers of tea.
The sales were in conformity with the provisions of Tea Act of 1953.
The Sales tax Officer assessed the appellants to pay sales tax on transactions of sale of tea chests at the auctions held at Fort Cochin in the years 1956 57 to 1958 59.
Against the orders of assessment the appellants filed petitions before the High Court for writs of certiorari and for writs of prohibition re straining the Sales tax Officer from proceeding with the collection of sales tax.
The petitions were dismissed by the High Court.
With special leave the appellants appealed to this Court.
It was the common case of all the appellants that the pur chases by the local agent of foreign buyers were with a view to export the goods to their principals abroad and that the goods were in fact exported out of India.
It was contended on behalf of the appellants that the sales of tea were "in the course of export out of the territory of India", and thus exempt from taxation under article 286(1)(b) ,of the Constitution.
Held: (per Gajendragadkar, C. J., Shah and Sikri, JJ.) (i) A transaction of sale which occasions export, or which is effected by a transfer of documents of title after the goods have crossed the customs frontiers, is exempt under article 286(1)(b) of the Constitution from sales tax levied under any State legislation.
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.
Etymological the expression "in the course of export", contemplates an integral relation or bond between the sale and the export.
In general where a sale is effected by the seller, and the seller is not connected with the export which actually takes place, it is a sale for export.
Where the export is the result of sale, the export being inextricably linked up with sale so that the bond cannot be dissociated without a breach of the obligations arising by statute.
contract of mutual understanding between the parties arising from the nature of the transaction the sale is in the course of export.
707 (ii) A sale in the course of export predicates a connection between the sale and export, the two activities being so in tegrated 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 the present case there was between the sale and the export no such bond as would justify the inference that the sale and the export formed parts of a single transaction or that the sale and export were integrally connected.
The appellants were not concerned with the actual exportation of the goods, and the sales were intended to be complete without the export, and as such it cannot be said that the said sales occasioned export.
The sales were therefore for export and not in the course of export.
Therefore the sales by the appellant to the agents of foreign buyers do not come with the purview of article 286(1)(b) of the Constitution.
State of Travancore Cochin vs Bombay Company Ltd. ; , distinguished.
State of Travancore Cochin V.Shanmugha Vilas Cashew Nut Factory; , , State of Madras vs Gurviah Naidu and Company Ltd. A.I.R. 1956 S.C. 158, State of Mysore vs Mysore Shipping and Manufacturing Co. Ltd. 13 S.T.C. 529 and B.K. Wadear vs M/s. Daulatram Rameshwarlal , relied on.
M. R. K. Abdul Salem and Company vs Government of Madras, 13 S.T.C. 629, explained.
Per Ayyangar, J.
In the present case the sale and the export being related to each other in the sense of one lead .
in. to the other are therefore within article 286(1)(b) of the Constitution.
There could be no difference in legal effect between a sale to a Foreign buyer present in India to take delivery of the goods for transport to his country and a sale to his resident agent for that purpose.
The buyer was an agent, who was not free to deal with the tea purchased by effecting a local sale, but was under an obligation to his Foreign principal to export the goods purchased to a Foreign destination.
The goods purchased were in fact exported from this country.
It was with such a buyer that the appellants entered into the transaction of sale.
In other words it was a part of understanding between the seller and the buyer, inferrable from all the circumstances attendant on these transactions that the buyer was bound to export.
State of Travancore Cochin vs Shanmugha Vilas Cashew ; , State of Madras vs Gurviah Naidu and Co. Ltd. A.I.R. 1956 S.C. 158, State of Mysore vs Mysore Spinning and Manufacturing Co. Ltd. A.I.R. 1958 S.C. 1002 and East India Tobacco Co. vs The State of Andhra Pradesh, [1963]1 S.C.R. 404, referred to.
(ii) Even though the Tea Act does not in terms prohibit in ternal sale of tea 'Purchased alongwith export quota rights, this could be explained by the circumstance that the rights to export tea is considered a privilege which secures an economic advantage to the exporter and hence there was no need for any statutory compulsion to do so.
L/P(D) ISCI 23(a). . |
Appeals Nos.
507 508 of 1963.
Appeal by special leave from the judgment and order dated November 4, 1950, of the Orissa High Court in Special Jurisdiction Cases Nos. 38 and 39 of 1958.
R.Ganapathy Iyer and R. N. Sachthey, for the appellant (in both the appeals).
817 B.Sen and section N. Mukherjee, for the respondents (in both the appeals).
April 21, 1964.
The Judgment of the Court was delivered by SIKRI, J.
The respondent, hereinafter referred to as the the dealer, filed a return for the quarter ending June 30, 1951, under the Orirsa Sales Tax Act (Orissa Act XIV of 1947) (hereinafter referred to as the Act).
He claimed a deduction of Rs. 2,40,000/ under section 5(2)(a)(ii) in respect of the goods sold to a registered dealer, named M/s. Lal & Co. Ltd., BA 1335.
Similarly, for the quarter ending September 30.
1951, he claimed a deduction of Rs. 15,677/1/3.
By two assessment orders passed under section 12(2) of the Act, the Sales Tax Officer, Cuttack III circle, Jaipur, Orissa, determined the tax payable allowing the deduction of Rs. 2,40,000/ and Rs. 15,677/l/3, under section 5(2)(a)(ii).
The dealer filed appeals to the Assistant Collector, Sales Tax, challenging the assesment on grounds which are not relevant.
The dealer later filed revisions against the decision of the Assistant Collector.
While the revisions were pending, the legislature amended the Orissa Sales Tax Act, in 1957, by Orissa Sales Tax (Amendment) Act (Orissa Act XX of 1957).
The effect of this amendment was that revisions were treated as appeals to Sales Tax Tribunal, and it enabled the Government to file cross objec tions.
The State of Orissa, in pursuance of this amendment, filed memorandum of cross objections challenging the deduc tion of Rs. 2,40,000/ and Rs. 15,677/l/3, on the ground that the dealer had not produced any declaration, as required under r. 27(2) of the Orissa Sales Tax Rules, 1947, as evidenced from the Check Sheet kept on record.
The Tribunal upheld this objection and directed that fresh assessments be made.
Certain other questions were raised before the Tribunal by the dealer, but as nothing turns on them as far as these appeals are concerned, they are not being mentioned.
The Tribunal stated a case to the High Court and one of the questions referred to was "whether the assessing officer was not wrong in allowing deduction of Rs. 2,40,000/ for the quarter ending on 30 6 51 and Rs. 15,677/1/3 for the quarter ending on 30 9 51 from the respective gross turnover of the applicant.
" The High Court, following its earlier decision in Member, Sales tax Tribunal, Orissa vs Messrs section Lal & Co. Limited (1) answered the question in the affirmative.
The State of Orissa having obtained special leave from this Court, these appeals are now before us for disposal.
Mr. Ganapathy lyer, on behalf of the State of Orissa, has contended before us that it is clear that r. 27(2) was not complied with, and, therefore, the Sales Tax Officer was wrong (1) (1961) 12 S.T.C. 25. 818 in allowing the said deduction.
The answer to the question referred depends on the correct interpretation of section 5(2)(a)(ii), Co. and r. 27(2).
They read thus: "section 5(2)(a)(ii) sales to a registered dealer of goods specified in the purchasing dealer 's certificate of registration as being intended for resale by him in Orissa and on sales to a registered dealer of containers or other materials for the packing of such goods.
Provided that when such goods are used by the registered dealer for purposes other than those specified in his certificate of registration, the price of goods so utilised shall be included in his taxable turnover." "Rule 27(2).
Claims for deduction of turnover under sub clause (ii) of clause (a) of sub section (2) of section 5 A dealer who wishes to deduct from his gross turnover on sales which have taken place in Orissa the amount of a sale on the ground that he is entitled to make such deduction under sub clause (ii) of clause (a) of sub section (2) of section 5 of the Act, shall produce a copy of the relevant cash receipt ,or bill according as the sale is a cash sale or a sale .on credit in respect of such sale and a true declaration in writing by the purchasing dealer or by such responsible person as may be authorised in writing in this behalf by such dealer that the goods in question are specified in the purchasing dealer 's certificate of registration as being required for resale by him or in the execution of any contract: Provided that no dealer whose certificate of registration has not been renewed for the year during which the purchase is made shall make such a declaration and that the selling dealer shall not be entitled to claim any deduction of sales to such a dealer.
" It is, plain from the terms of section 5(2)(a)(ii) that a selling ,dealer is entitled to a deduction in respect of sales to a registered dealer of goods, if the goods are specified in the purchasing dealer 's certificate of registration as being intended for re sale by him in Orissa.
No other condition is imposed by the above section.
The proviso deals with consequences that follow if the purchasing dealer uses them for purposes other than those specified in his certificate of registration, and ,directs that, in that event, the price of goods so utilised shall 819 be included in his turnover.
Therefore, there is nothing in the section itself that disentitles a selling dealer to a deduction, but if the contingency provided in the proviso occurs, them the price of goods is included in the taxable turnover of the buying dealer.
But Mr. Ganapathy lyer says, be it so, but the rule making authority is entitled to make ruler, for carrying out the purposes of the Act, and r. 27(2) is designed to ensure that a buying dealer 's certificate of registration does, in fact, mention that the goods are intended for resale by him, and for that purpose it has chosen one exclusive method of proving the fact before a Sales Tax Officer.
He further urges that no other method of proving that fact is permissible.
Rule 27(2) is mandatory and if there is breach of it the selling dealer is not entitled to deduction.
The learned counsel for the res pondent, on the other hand, contends that r. 27(2) is directory.
He points out that the word 'shall ' should be read as 'may ', in the context.
He further says that supposing the selling dealer brought the original certificate of registration of a buying dealer and produced it before the Sales Tax Officer, according to the appellant, this would not be enough, but this could never have been intended.
In our opinion, r. 27(2) must be reconciled with the section and the rule can be reconciled by treating it as directory.
But the rule must be substantially complied with in every case.
It is for the Sales Tax Officer to be satisfied that, in fact, the certificate of registration of the buying dealer contains the requisite Statement, and if he has any doubts about it, the selling dealer must satisfy his doubts.
But if he is satisfied from other facts on the record, it is not necessary that the selling dealer should produce a declaration in the form required in r. 27(2), before being entitled to a deduction.
We are, therefore, of the opinion that the High Court came to a correct conclusion.
The High Court is correct in holding that the production of a declaration under r. 27(2) is not always obligatory on the part of a selling dealer when claiming the exemption.
It is open to him to claim exemption by adducing other evidence so as to bring the transaction within the scope of section 5(2)(a)(ii) of the Act.
In this case, the Sales Tax Officer was satisfied by a mere statement of the dealer and it has not been shown that in fact the registration certificate of the buying dealer, M / s section Lal & Co., did not contain the statement that the goods were intended for resale by him in Orissa.
The appeals accordingly fail and are dismissed with costs.
One set of hearing fee.
Appeals dismissed. | Assessment orders were passed by the Sales Tax Officer allowing the deductions of two amounts claimed by the respondent dealer under section 5(2)(a)(ii) of the Orissa Sales Tax Act in respect of goods sold to a registered dealer.
The respondent dealer filed appeals to the Assistant Collector Sales Tax, challenging the assessment on grounds which were not relevant and against those decisions revisions were filed by the dealer.
While the revisions were pending the Orissa Sales Tax Act was amended by Orissa Sales Tax (Amendment) Act (Orissa Act, 10 of 1957) with the result that revisions were treated as appeals to the Sales Tax Tribunal, and it enabled the Government to file cross objections.
In pursuance, the State filed cross objections challenging the deductions on the ground that the dealer had not produced any declaration as required under r. 27(2) of the Orissa Sales Tax Rules, 1947.
The Tribunal upheld this objection and directed that fresh assessments be made.
On statement of the case, the High Court answered that the assessing officer was not wrong in allowing the deductions.
On appeal by special leave).
Held:(i) There is nothing in section 5 (2) (a) (ii) itself that disentitles a selling dealer to a deduction, but if the contingency provided in the proviso occurs, then the price of goods is included in the taxable turnover of the buying dealer.
(ii)The production of a declaration under r. 7(2) is not always obligatory on the part of a selling dealer when claiming the exemption.
It is open to him to claim exemption by adducing other evidence so as to bring the transaction within the scope of section 5(2)(a)(ii).
Rule 27(2) must be reconciled with the section and the rule can be reconciled by treating it as directory.
But the rule must be substantially complied with in every case.
It is for the Sales tax Officer to be satisfied that, in fact.
the certificate of registration of the buying dealer contains the requisite statement, and if he has any doubts about it, the selling dealer must satisfy his doubts.
But if he is satisfied from other facts on the record, it is not necessary that the selling dealer should produce a declaration in the form required in r. 27(2).
before being entitled to a deduction.
Member Sales tax Tribunal, Orissa vs Mls.
section Lai & Co. (1961) 12 S.T.C. 25, referred to. |
Appeals Nos.
680 to 682 of 1963.
Appeals by special leave from the judgment and decree dated February 8, 1960 of the Board of Revenue, U. P. in petitions Nos.
203 to 205 of 1958 59.
J. P. Goyal, for the appellant (in all the appeals).
Brijbans Kishore and Ramesh B. Saxena, for respon,dents Nos.
I to 3 (in all the appeals).
April 17, 1964.
The judgment of the Court was delivered ,by HIDAYATULLAH, J.
This judgment shall also govern the disposal of C. A. 681 of 1963.
These are appeals by special leave of this Court against a common order of the Board of Revenue, U.P. dated February 8, 1960 disposing of three .appeals.
Civil Appeal No. 682 of 1963 (since compromised) was also against the same decision.
The appellant in each 'of these appeals is one Amba Prasad who was the Zamindar of village Rhonda, Pargana and Tehsil Khurja, District Bulandshahr, before the coming into operation of the U. P. Zamindari Abolition and Land Reforms Act, 1950.
The opposite parties (who will be referred to as the answering respondents in this judgment) are persons whose names were recorded in column 23 (miscellaneous) in the Khasra for the year 1356 Fasli, as persons in possession and who claim, by reason of the entry, to be the recorded, occupants of the fields in dispute, and to have 'obtained adhivasi rights in the fields under section 20 of the Abolition Act.
Though the point in dispute appears to lie within a very narrow compass the history of litigation in respect of these plots is as tedious as it is long.
It must unfortunately be told to get a true measure of the ,arguments in the appeals.
Amba Prasad brought two suits under section 180 of the U.P. Tenancy Act, 1939 for ejectment from the fields now in dis pute and for damages, against Mohammad Ali and Mst.
Sharifan respectively because their names A ere recorded in the Khasra as tenants 'bila tasfia lagan '.
These suits were dismissed by the trial Judge and Aniba Prasad 's appeal to the Commissioner failed on November 30, 1943.
Amba Pra.sad then appealed to the Board of Revenue, U.P. and succeeded.
The order of the Board of Revenue, U. P. is dated March 19, 1949 (item No. 25).
Mohammad Ali had died by L/P(D)ISCI 26 802 then and was represented by one Faivazali and six others.
Sarifan had also died and was represened by one Abdul Sattar alias Chunna Khan and two others.
As a result of the decision of the Board of Revenue possession of the fields was delivered to Amba Prasad on July 1, 1949 the day of the commencement of the year 1357 Fasli.
The dakhalnamas are items Nos. 44 and 45 in this record and they mention fields Nos.
427/2, 428/2, 429, 430 and 380 (item No. 44) and fields Nos. 416, 418/1 and 418/2 (item No. 45) of village Rhonda, Pargana and Tehsil Khurja, District Bulandshahr.
Immediately after obtaining possession of the fields Amba Prasad was required to commence proceedings under section 145, Criminal Procedure Code before the Sub Divisional Magis trate, Anupshahr against Faiyazali and Abdul Sattar and others and on January 13, 1951 these proceedings terminated in favour of Amba Prasad (item No. 28).
The Sessions Judge Bulandshahr made a reference to the High Court of Allahabad recommending that the order be vacated but the High Court declined to interfere.
The order of the High Court is dated October 20, 1951 (item No. 29).
Meanwhile Amba Prasad started a prosecution under section 218, Indian Penal Code against the Lekhpal alleging that he had made false entries in the Revenue papers but the Magistrate, 1st Class, Buland shahr discharged him by his order dated July 24, 1950 (item No. 26).
An application for revision of the order filed by Amba Prasad was dismissed by the Sessions Judge, Bulandshahr on October 10, 1950 (item No. 27).
During the pendency of the proceedings under section 145,.
Criminal Procedure Code these fields remained under atta chment from August 23, 1949 (1358 F.) to November 6, 1951 (1359 F.).
Two suits were then commenced in the court of the Munsif, Khurja for declaration that crops of the fields under attachment belonged to the plaintiffs.
One suit (97 of 1951) was filed by Abdul Noor Khan and others (answering respondents) and the other (67 of 1952) was filed by Sarfraz Ali Beg and 8 others (respondents in C. A. 682 of 1963since compromised).
These suits were directed against Amba Prasad and the plaintiffs claimed to be in possession of the fields by virtue of entries to this effect in the remarks column of the Khasras of the relevant years.
These suits failed on August 9, 1952 and August 8, 1953 respectively (vide items Nos. 30 and 32).
It appears that proceedings under section 107,, Criminal Procedure Code were also started against A. Noor khan and others before Magistrate, 1st Class, Bulandshahrand they were bound over to keep the peace.
There is on the file of this case an order of the Sessions Judge, Buland shahr dismissing their application in revision on February 24, 1953 (item No. 31).
803 Meanwhile, the answering respondents and Sarfraz Ali and others commenced on November 6, 1951 three suits under section 61 read with section 183 of the U. P. Tenancy Act, 1939 .for declaration of Sirdar rights and to claim hereditary rights under section 180/2 ibid.
These suits were decreed against Amba Prasad by the Judicial Officer, Anupshahr on July 14, 1953.
He held that the Dakhaldehi of July 1, 1949 did not affect the plaintiffs and since they were shown to be in possession they were entitled to succeed (item No. 33).
Amba Prasad filed an appeal and the Commissioner, Meerut Division re versed the decision by his order dated April 1, 1954 (item No. 35).
The Board of Revenue, U. P. also dismissed the appeal of the plaintiffs on September 17, 1955 (item No. 38).
On October 10, 1953 two suits were filed by the answering respondents in these two appeals and a third by the res pondents in C. A. No. 682 of 1963 which has been compro mised.
These suits were under section 232/2O of the U. P. Zamin dari Abolition and Land Reforms Act.
It is with these suits that we are concerned in the appeals.
Two suits also under section 232/20 of the Abolition Act were filed by Ayub Ali Khan and Abdul Sattar Khan and others against Amba Prasad.
The answering respondents and Sarfraz Ali and others were joined as defendants in those suits.
The plaints in these two suits are dated December 28, 1954 and December 20, 1954 (items Nos. 36 and 38).
They were dismissed by the Sub Divisional Magistrate, Khurja on % lay 16, 1955.
The Addi tional Commissioner, Meerut, dismissed the appeals on Janu ary 30, 1950 in default of appearance (item No. 39).
On September 4, 1958 the Sub Divisional Officer, Khurja dismissed the three suits filed by the answering respondents ,and the respondents in the companion appeal.
In these suits the answering respondents relied on extracts from the Khasras of 1355F, 1356F, 1357F, 1358F and 1359F as showing their possession.
These lands, however, were under attachment from August 23, 1949 (1358F) to November 6, 1959 (1359F) and could not be in the possession of the answering respondents in the years 1358F and 1359F.
This fact was noticed by the Commissioner, Meerut Division, in his order dated April 1, 1954 and he cast doubts on the entries in 1355F ,and 1356F.
The Sub Divisional Officer took up the same line of reasoning and pointed 'out that in years subsequent to 1355F the entry would have found place in column 6 of the Khasra and not the remarks column.
He accordingly held that the entries of 1355 F and 1356 F were unreliable and .the answering respondents had not acquired adhivasi rights.
On Appeal, the Additional Commissioner, Meerut, reversed ,the decision on April 19, 1959 and decreed the suits.
Before the Commissioner the answering respondents claimed that as L /P(D)ISCI 26(a) 804 they were recorded occupants in 1356F they were not required to prove actual possession.
This proposition, it appears, was conceded by the counsel for Amba Prasad.
He only argued that the entries were not in accordance with paragraph 87 of the Land Records Manual and they were considered spurious in earlier litigation.
He also claimed that the answering respondents were barred by the principle of res judicata because though they were parties to the suits of Ayub Ali Khan and Abdul Sattar they did not claim adhivasi rights in those suits.
The learned Commissioner pointed out that the entries were no doubt suspected to be spurious by the Commissioner on April 1, 1954, but this was after July 1. 1952 which was the date of vesting and the case therefore was outside Expla nations 11 and III of section 20(b) of the Abolition Act.
The learned Commissioner, therefore, was of the opinion that them entries could not be discarded as they must have been completed under the rules before April 30, 1949, that is to say, even before the Dakhaldehi.
He held that the answering respondents (appellants before him) had acquired adhivasi rights.
Amba Prasad appealed to the Board of Revenue.
The Board dismissed his appeal on February 8, 1960 by the order now impugned.
This time the learned counsel for Amba Prasad conceded that the entry was made but contended that it was fraudulently made after July 1, 1949 and referred to the prosecution of the Lekhpal.
The Board 'of Revenue pointed out that there was no order for the correction of the entry before the date of vesting and the Lekhpal was acquitted of ' the charge under section 218, Indian Penal Code.
Since the entries were not corrected as required by Explanation 11 to section 20 the conditions of section 20(b) of the Abolition Act were held to be satisfied and the appeal was dismissed.
Mr. Goyal on behalf of Amba Prasad contends that these suits were barred by res judicata.
He submits that in the previous suits filed by Ayub Ali Khan and Abdul Sattar and others, the answering respondents were made defendants and could have raised the plea that they had acquired adhivasi rights and as they did not raise such a plea they cannot now raise it.
We do not accept this Contention.
The answering respondents had filed these suits even before Ayub Ali Khan and Abdul Sattar had filed their suits.
Further, the suits filed by Ayub Ali Khan and Abdul Sattar did not decide anything because they were dismissed owing to a technical flaw in the plaint.
Even the appeal was dismissed in default of appearance.
Lastly, the answering respondents and Amba Prasad were co defendants and no issue between them was tried or decided even if one was necessary to be tried.
805 Mr. Goyal next contends that the answer in respondents must show that they were in possession and that under Explanation I to section 20 they were evicted after June 30, 1948.
He submits that these conditions are not fulfilled by them.
Mr. Goyal also wishes to withdraw the concession made on behalf of Amba Prasad before the Tribunals below that the answering respondents need not prove their possession.
He says that the concession was made because there were rulings of the Allahabad High Court which bound the Revenue Tri bunals.
He submits that these rulings should be considered and urge that possession in 1356 Fasli must be proved.
He further submits that even entries in the Khasra and Khatauni to be of value must be made in accordance with sections 28 and 33 of the U. P. Land Revenue Act and he relies on paragraph 87 of the Land Record Manual to contend that the entries in favour of the answering respondents were irregular.
These contentions though they appear to be many are really two.
The first questions the entry and the other the right of the answering respondents even if the record be correct to claim adhivasi rights under section 20 of the Abolition Act.
We shall consider them separately.
The first question is whether these entries were regularly made.
It is pointed out that they were doubted by the Revenue Tribunals in some other proceedings and that the Lekhpal was also prosecuted under section 218, Indian Penal Code.
That, however, does not prove in these proceedings that the entries are spurious.
The Lekhpal was discharged and the Additional Commissioner has held here: "By making the entry in the remarks column it is also not possible to attribute any dishonest or collusive entry.
It appears that Shri Amba Prasad had filed a criminal case against the patwari but this was after the entries in the remarks column in favour of appellants had been made.
The entry in 1356 fasli cannot be discarded on the remarks in the judgments referred by the learned counsel for the respondent.
It appears that Sri Mohammad Ali and Srimati Sharifan were the proprietors and they mortgaged their share with present respondents and Sri Amba Prasad purchased the equity of redemption and got the share partitioned.
There was litigation between Sri Amba Prasad and Sri Mohammad Ali and Srimati Sharifan upto High Court.
Sri Amba Prasad and others filed suits against Srimati Sharifan and Sri Mohammad Ali under section 180 and it was decreed in the 2nd appeal on 19 3 49.
The possession was delivered on 1 7 1949, in execution of the decree.
The Khasra for 1356 fasli under 806 the rules may have been deposited some time before 31st July 1950 but the entries in the Khasras had to be completed upto 30th April 1949" Mr. Goyal relies upon paragraph 87 of the Land Records Manual and argues that the names of persons occupying land without the consent of persons whose names are recorded in column 5 of the khasra should have been entered in column 6 but column 6 is crossed out.
It is, however, to be seen that when a tenant leaves the neighbourhood without leaving in charge of his holding, a person responsible for the pay ment of his rent as it falls due and without giving a written notice to the land holder of such arrangement, the Lekhpal is required to show the name of the actual cultivator in the column of remarks preceded by the word 'qabiz ' (see Para.
85(c)).
That is how the entry stands and there is nothing on the record of this case on the strength of which it can be said that the entry in 1356F was not regularly made.
If it was wrong Amba Prasad ought to have got it corrected but the doubts cast on the entry cannot be said to have corrected it .as required by Explanation III to section 20 of the Abolition Act.
There is thus no doubt that the answering respondents were recorded as 'qabiz ' in 1356F.
There is also no doubt that if they were 'qabiz ' they were dispossessed after June 30, 1948.
The possession of Amba Prasad did not begin ,earlier than July 1, 1949.
There is nothing to show that the possession of the answering respondents was disturbed bet ween these two dates, because the attachment came much later.
Mr. Goyal, however, contends that the burden is on ,the answering respondents to prove their possession and eviction after June 30, 1948 before they can regain possession as adhivasis under section 20.
Mr. Brij Bans Kishore, however, joins issue and claims that the answering respondents have done enough when they show that they are recorded as 'occupants ' in the year 1356F.
He contends that it is not necessary to show possession though he does not admit that the Ian were not in his clients ' possession.
We have pointed out above that the eviction could not have taken place before July 1, 1949.
The Dakhalnamas show that possession was given to Amba Prasad on July 1, 1949.
In so far as the appellant is concerned he was not in possession before that date and the khasra for 1356F shows that the answering respondents were 'qabiz ' (in possession).
It is ,contended that the suit is for possession and the date of dispossession has not been given as required by rule 183.
No such objection appears to have been made at any time.
In any event, that date is useful only to calculate limitation and it is not Amba Prasad 's cases that there is any such bar.
807 The real dispute thus is whether a person who is recorded as 'qabiz ' but not as a tenant or a sub tenant can get the advantage of section 20 of the Abolition Act and claim rights as an adhivasi.
It is convenient at this stage to set out the material portions of section 20: "20.
Every person who (a) * (b) was recored as occupant (i)of any land (other than grove land or land to which section 16 applies) in the khasra or khatauni of 1356F prepared under sections 28 and 33 respectively of the U.P. Land Revenue Act, 1901, or who was on the date immediately preceding the date of vesting entitled to regain possession thereof under clause (c) of subsection (1) of section 27 of the United Provinces Tenancy (Amendment) Act, 1947, or (ii) * * * * be called adhivasi of the land and shall, subject to the provisions of this Act, be entitled to take or retain possession thereof.
Explanation I Where a person referred to in clause (b) was evicted, from the land after June 30, 1948, he shall notwithstanding anything in any order or decree, be deemed to be a person entitled to regain possession of the land.
Explanation II Where any entry in the records referred to in clause (b) has been corrected before the date of vesting under or in accordance with the provisions of the U. P. Land Revenue Act, 1901, the entry so corrected shall for the purposes of the said clause, prevail.
Explanation III For the purposes of explanation 11 an entry shall be deemed to have been corrected before the date of vesting if an order or decree of a competent court requiring any correction in records has been made before the said date and had become final even though the correction may not have been incorporated in the records.
Explanation IV For the purposes of this section " occupant" as respects any land does not include a person who was entitled as an intermediary to the land or any share therein in the year l356 Fasli.
" The scheme of the section may now be noticed.
The section, speaking generally says that certain persons "recorded" a,, "occupants" of lands (other than grove lands or lands to which section 16 applies) shall be known as adhivasis and. 808 shall be entitled to retain or to regain possession of them, after the date of vesting which was July 1, 1952.
Such persons do not include an intermediary (Explanation IV).
Such persons must be recorded as occupants in the khasra or khatauni for 1356F (1 7 48 to 30 6 49).
If such a person is in possession be continues in possession.
If he is evicted after June 30, 1948 he is to be put back in possession notwithstanding anything in any order or decree.
By fiction such persons are deemed to be entitled to regain possession (Explanation 1).
The emphasis has been laid on the record of khasra or khatauni of 1356F and June 30, 1948 is the datuni line.
The importance of an entry in these two documents is further apparent from explanations 11 and 111.
Under the former, if the entry is corrected before the date of vesting (1 7 52), the corrected entry is to prevail and under the latter the entry is deemed to be corrected (even though not actually corrected) if an order or decree of a competent court ordering the correction had been made before the date of vesting and the order or decree had become final.
There are thus two date lines.
They are June 30, 1948 and July 1, 1952, and the title to possession as adhivasi depends on the entries in the khasra or khatauni for the year 1356F. Before we proceed to decide whether the answering respondents satisfy the above tests we must consider what is meant by the terms 'occupant ' and 'recorded '.
The word 'occupant ' is not defined in the Act.
Since khasra records possession and enjoyment the word 'occupant ' must mean a person holding the land in possession or actual enjoyment.
The khasra, however, may mention the proprietor, the tenant, the sub tenant and other person in actual possession, as the case may be.
If by occupant is meant the person in actual possession it is clear that between a proprietor and a tenant the tenant, and between a tenant and the sub tenant the latter and between him and a person recorded in the remarks column as "Dawedar qabiz" the dawedar qabiz are the occupants.
This is the only logical way to interpret the section which does away with all intermediaries.
If rights are not to be determined except in the manner laid down by the section, the entries must be construed as explained by the four explanations.
Once we find out the right person in the light of the explanations, that person continues as an adhivasi after July 1, 1952, provided he is in possession or was evicted after June 30, 1948.
If he was evicted after June 30, 1948 he is entitled to regain possession in spite of any order or decree to the contrary.
The word 'occupant ' thus signifies occupancy and enjoyment.
Mediate possession, (except where the immediate possessor holds on behalf of the mediate possessor) is ,of no consequence.
In this way even persons who got into Occupation when lands were abandoned get recognition.
The 809 section eliminates inquiries into disputed possession by ac cepting the records in the khasra or khatauni of 1356F, or its correction before July 1, 1952.
It was perhaps thought that all such disputes would have solved themselves in the four years between June 30, 1948 and June 30, 1952.
There was, however, for some time a difference of opinion, on the point whether possession in 1356F should be proved, between the High Court of Allahabad and the Board of Revenue.
Section 20 came before this Court in The Upper Ganges Sugar Mills Ltd. vs Khalil ul Rehman and others(1) where the correctness of Lala Nanak Chand vs The Board of Revenue, U.P.(2) was challenged oil the ground that it had held that a mere entry in 1356F without possession in that year was sufficient.
This Court did not decide the question and left it open.
Subsequently, the Allahabad High Court in several decisions including the Full Bench decision in Ram Dular Singh and another vs Babu Sukh Ram and others(3) has endorsed the earlier view in Nanakchand vs Board of Revenue, U.P.(2) In L. Bhal Singh vs Bhop and another(4) the following passage from Nanak Chand 's case was expressly approved: "It seems to us that clauses (b)(i) and (b)(ii) of Sec. 20 do not require the proof of actual possession in the year 1356F.
What they require merely is the entry of a person 's name as an occupant in the Khasra or Khatauni of 1356F.
The words of the section are clear.
(Every person who was recorded as occupant in the Khasra or Khatauni in 1356F. etc.).
The words are not "every person who was an occupant in 1356F": nor are the words "every person who was recorded as an occupant in the year 1356F and who was also in possession in that year".
There is no warrant for introducing words in the section which are not there.
This conclusion is reinforced by what is stated in Explanation 11".
The Board of Revenue in Sugriva vs Mukhi etc.(5) has also adopted the same view.
In view of the long established line 'of cases we see no justification for reopening of this question.
The decision of the Board of Revenue was therefore right.
The appeal fails and is dismissed with costs.
One set of hearing fees.
Appeal dismissed.
(1) ; (2) (3) (4) at p. 291. | On October 10, 1953, the respondents filed suits under section 232 read with section 20 of the U. P. Zamindari Abolition, and Land Reforms Act, 1950 against the appellant before the Sub Divisional Officer.
Before the coming into operation of the Abolition Act the appellant (Amba Prasad) was Zamindar of the disputed land.
The names of the respondents were recorded in column 23 (miscellaneous) in the Khasra for the year 1356 Fasli as persons in possession of the disputed land.
The respondents claimed adhivasi rights under section 20 of the Abolition Act because they were recorded as occupants of the fields in dispute in the Khasra for 1356 Fasli.
The common case of the respondents was: (i) that they were in possession of the suit land (ii) that they were dispossessed after June 30, 1948 by the appellant, (iii) that as they were recorded occupants in 1356F they were not required to prove actual possession.
The case of the appellant was that the entry was fraudulently made after July 1, 1949.
These suits were dismissed by the Sub Divisional officer.
On appeal, the Additional Commissioner held that the respondents had acquired the adhivasi fights.
Against this order Amba Prasad (the appellant) appealed to the Board of Revenue.
The Board of Revenue dismissed the appeals.
The appellant then filed appeals in this Court.
Held:(i) Under section 20 of the Abolition Act (U. P. Zamindari Abolition and Land Reforms Act) a person continues as an adhivasi after July 1, 1952.
provided he is in possession or was evicted after June 30, 1948.
If he was evicted after June 30, 1948 he is entitled to regain possession in spite of any order or decree to the contrary.
(ii)The words "recorded as occupants" in section 20 of the Abo lition Act mean persons recorded as occupants in the Khasra or Khatauni for 1356 Fasli (1 7 48 to 30 6 49).
Such persons do not include an intermediary.
The word "occupant" must mean a person holding the land in possession or actual enjoyment.
Mediate possession (except where he immediate possessor holds on behalf of the mediate possessor) is of no consequence.
(iii)The appellant was not entitled to raise the plea of the correctness of the entry in Khasra because the entry was not corrected before the date of vesting (1 7 52) as required by Explanation (ii) to section 20 of the Abolition Act.
(iv)The title to possession as adhiwasi depends on the entries in the Khasra or Khatauni for the year 1356 Fasli.
Section 20 of the Abolition Act does not require the proof of actual possession.
Therefore, section 20 eliminates inquiries into disputed possession by accepting the record in the Khasra or Khatauni of 1356F. or its correction before July 1, 1952.
801 The Upper Ganges Sugar Mills Ltd. vs Khalil ul Rehman, ; , referred to.
Lala Nanak Chand vs Board of Revenue, U. P., 1955 A.L.J. 408, Ram Dular Singh vs Babu Sukh Ram, , Bhal Singh vs Bhop and Anr., and Sugriva vs Mukhi etc., , approved. |
Appeal No. 145 of 1963.
Appeal from the judgment and order dated November 16.
1959, of the Madras High Court in Case Reference No. 82 of 1956.
section K. Kapur and R. N. Sachthey, for the appellant.
section Swaminathan and R. Gopalakrishnan, for the respondent.
847 section T. Desai, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for the intervenor.
April 24, 1964.
The judgment Of SUBBA RAo and SIKRI In, JJ. was delivered by SIKRI J. SHAH J. delivered a dissenting Opinion.
SIKRI, J. This is an appeal by the Commissioner of Income Tax, Madras, against the judgment of the High Court, dated November 16, 1959, on a certificate granted by the High Court under section 66A(2) of the Indian Income Tax Act, 1922.
The respondent, Mir Mohd. Ali, hereinafter referred to as the assessee, is a bus owner and transport operator at Vel lore, North Arcot District.
He had a fleet of buses, and during the year of account ending with March 31, 1950 (relevant to assessment year 1950 51) he replaced the petrol engines in two of his buses (MDJ 583 and MDJ 723) by new Diesel engines, incurring an expenditure of Rs. 18,544/in this connection.
Before the Income Tax Officer, apart from claiming normal depreciation under the first Paragraph of cl.
(vi) of section 10(2), he also claimed depreciation under the second paragraph of cl.
(vi) and cl.
(via) of the Indian Income Tax Act, 1922.
The Income Tax Officer only allowed 25 per cent depreciation under the first paragraph of cl.
The assessee appealed unsuccessfully to the Appellate Assistant Commissioner on this point.
There were other points involved in the appeal but as we are not concerned with them in this appeal, they are not being mentioned.
On further appeal, the Appellate Tribunal held that "the assessee is not entitled to extra depreciation under section 10(2) (vi) or section 10(2)(via) because however important the engine might be for running of a motor, it is after all part of an equipment and it cannot by itself become "machinery" for the purpose of claiming extra depreciation, as envisaged in these sub sections.
We have to hold that the "installation of the new engines is only a capital addition, for the above reasons the assessee was rightly refused the extra depreciation he claims".
The Income Tax Appellate Tribunal, on the application of the assessee, referred the following question to the High Court: "Whether extra depreciation is admissible under the provisions of section 10(2)(via) of the Income Tax Act, in respect of a diesel oil engine fitted to a motor vehicle in replacement of the existing engine.
" We may mention that another question regarding disallowance of interest had also been referred to the High Court but we are not concerned with that in the present appeal.
848 As the High Court felt that there had been an accidental slip in framing the question, it amended the question as and the amended question reads: "Whether extra depreciation is admissible under the provisions of section 10(2)(vi) and section 10(2)(via) of the Income Tax Act in respect of the diesel oil engines fitted to the motor vehicles in replacement of the existing engines".
The High Court answered this question in the affirmative i.e., in favour of the assessee.
The Commissioner of Income Tax, on obtaining a certificate under section 66A(2) of the Income Tax Act, has filed this appeal.
Before attempting to answer the question, it is necessary to set out the relevant provisions of the Income Tax Act.
The relevant provisions, as in force at the relevant time, were: section 10(2) Such profits or gains shall be computed after making the following allowances, namely (iv)in respect of insurance against risk of damage or destruction of buildings, machinery, plant, furniture, stocks or stores, used for the purposes of the business, profession or vocation, the amount of any premium paid; (v) in respect of current repairs to such buildings, machinery, plant or furniture, the amount paid on account thereof; (vi)in respect of depreciation of such buildings, machinery, plant, or furniture being the property of the assessee, a sum equivalent, where the assets are ships other than ships ordinarily plying on inland waters, to such percentage on the original cost thereof to the assessee as may in any case or class of cases be prescribed and in any other case, to such percentage on the written down value thereof as may in any case or class of cases be prescribed; and where the buildings have been newly erected, or the machinery or plant being new has been installed, after the 31st day of March, 1945, a further sum (which shall however not be deductible in determining the written down value for the purposes of this clause) in respect of the year of erection or installation equivalent, (a) in the case of buildings the erection of which is begun and completed between the 1st day 849 of April 1946 and the 31st day of March 1952 (both dates inclusive), to fifteen per cent of the cost thereof to the assessee; (b) in the case of other buildings, to ten per cent of the cost thereof to the assessee; (c) in the case of machinery or plant, to twenty per cent of the cost thereof to the assessee: Provided that (via) in respect of depreciation of buildings newly erected, or of machinery or plant being new which has been installed, after the 31st day of March, 1948, a further sum (which shall be deductible in determining the written down value) equal to the amount admissible under clause (vi) (exclusive of the extra allowance for double or multiple shift working of the machinery or plant and the initial depreciation allowance admissible under that clause for the first year of erection of the building or the installation of the machinery or plant) in the assessments for such of the five years commencing on the 1st day of April, 1949, and ending with the 31st day of March, 1954: Provided that where, in respect of such machinery or plant, the assessee establishes that the market value of similar machinery or plant on the 31st day of March, 1953, is lower than the original cost, then, subject to the provisions of clause (vi), there shall be made in the assessment for the year commencing next after that date a further allowance (which shall be deductible in determining the written down value) of an amount by which the written down value of the machinery or plant as on that date (without deduction of the initial depreciation admissible in the first year) would have exceeded the corresponding written down value thereof as on the same date if the market price of the machinery or plant had been taken as the actual cost of the assessee; (vii)in respect of any such building, machinery or plant which has been sold or discarded or demolished or destroyed, the amount by which the written down value thereof exceeds the amount 850 for which the building, machinery or plant, as the case may be, is actually sold or its scrap value: Provided that (5) In sub section (2) . . `plant ' includes vehicles, books, scientific apparatus and surgical equipment purchased for the purpose of the business, profession or vocation. ." The point at issue before us has been considered by three High Courts.
The Bombay and Andhra Pradesh High Courts have held against the assessee while in the judgment under appeal, the Madras High Court has held in favour of the assessee.
The High Court of Andhra Pradesh, in the case of B. Srikantiah vs Commissioner of Income Tax Andhra Pradesh(1), followed the Bombay case and expressly dissented from the Madras case.
In the judgment under appeal (reported as Mr. Mohd. Ali vs Commissioner of Income Tax, Madras(2), the High Court arrived at the conclusion by the following steps: (a)Machinery must be given the same meaning with reference to each of the statutory provisions, in section 10(2)(vi) and section 10(2)(via); (b) A diesel engine is machinery by the test laid down in the case of Corporation of Calcutta vs Chairman, Cossipore and Chitpore Municipality(3); (c) Machinery does not cease to be machinery merely because it has to be used in conjunction with one or more machines.
Nor does it cease to be machinery merely because it is, for instance, installed as part of a manufacturing or industrial plant; (d) The statutory provision for depreciation is in the alternative.
Whether it is plant or whether it is machinery without its being itself a plant, the assessee is entitled to claim the statutory allowance for depreciation.
The question then is: Which is the correct view? First, the history of para two of cl.
(vi) may be noticed.
The object of the Income Tax (Amendment) Act, 1946 (VIII of 1946), which first inserted the provisions regarding extra depreciation, was to encourage the modernisation and re habilitation of industry and trade.
The Second World War (2) (3) 190. 851 had ended recently and during the long war machinery and plant had not only not been replaced or modernised but had been subjected to excessive wear and tear and needed rehabilitation.
During the War, there had also been great,,, advance in technology.
It is then pertinent to point out that the word 'machinery ' occurs in cls.
(iv), (v), (vi) and (via) of section 10(2).
Prima facie the same meaning must be given to the word ,machinery ' in all these clauses.
If a machine is machinery for purposes of giving an allowance in respect of insurance or for repairs or in respect of normal depreciation or for the purpose of para one of cl.
(vi), it must also be machinery for the purpose of second para of cl.
(vi) and cl.
(via).
But it is said that the scheme of para two of cl.
(vi) and cl.
(via) is different from that of para one of cl.
(vi) inasmuch as before it can qualify for extra depreciation, the machinery must be new and must be installed, and the rate of depreciation is provided in the Act itself.
Keeping in view this scheme, it is urged that the word 'machinery ' must be given a restricted meaning in para two of cl.
(vi) and cl.
(via), and the meaning suggested is that it must be a "self contained unit capable of being put to use in the business, profession or vocation for the benefit of which it was installed".
That this is the true meaning, it is further said, is evidenced by the definition of the word 'plant ' in section 10(5).
It is argued that this definition indicates that for purposes of para two of cl.
(vi) and cl.
(via), 'plant ', including a vehicle should be viewed as a unit and component parts thereof are excluded from its purview, and 'machinery ' should also be considered in the same light.
Let us now examine these contentions.
First, we do not think that there is anything in the scheme of the second para ,of cl.
(vi) and cl.
(via) that throws any light on the construction of the word 'machinery ' in these clauses.
It is true that the machinery must be new and it must be installed and the rate of allowance is prescribed in the Act itself.
But the requirement that the machinery must be new does not tell us what is 'machinery '.
Assuming for the present that a diesel engine is machinery, if an assessee buys and instals a secondhand diesel engine, he will not be given the extra allowance under the second para of cl.
(vi), and the ground would be that the engine is not new and not that because it is second hand, it is not machinery.
Similarly, if it is purchased but not installed, the ground of refusal would be that it has not been installed and not that because it has not been installed it has ceased to be machinery.
Suppose a new machinery is purchased but not installed, it would not qualify for extra depreciation on the ground that it has not been 852 installed and not because it has ceased to be machinery due to its non installation.
The fact that the rate of depreciation is provided for in the Act has also no bearing on the question of the construction of the word 'machinery '.
This fact only indicates that the legislature had made up its mind as to the extent of encouragement to be given to industry and, therefore, it did not consider it necessary to delegate this to the rule making authority.
The definition of the word 'plant ' in section 10(5) equally does not throw any light on the meaning of the word 'machinery '.
The word 'plant ' is of wide import, but even so it may be argued that vehicles, books, scientific apparatus and surgical equipment are not 'plant ' in all businesses, pro fessions and vocations.
The legislature settled this possible controversy, but without throwing any light on the true meaning of the word 'machinery '.
What then is the test for determining whether a mechanical contrivance is machinery for the purposes of second para of cl.
(vi) and cl.
(via)? The Privy Council in the case of Corporation of Calcutta vs Chairman, Cossipore and Chitpore Municipality(1) hazarded the following definition of `machinery ': "The word 'machinery ', when used in ordinary language prima facie, means some mechanical contrivances which, by themselves or in combination with one or more other mechanical contrivances,.
by the combined movement and inter dependent operation of their respective parts generate power, or evoke, modify, apply or direct natural forces with the object in each case of effecting so definite and specific a result.
" They had already observed that the word 'machinery ' must mean more than a collection of ordinary tools.
The Privy Council case was not a tax case but prima facie the ordinary meaning of the word 'machinery ' and the word machinery ' is an ordinary and not a technical word must, unless there is something in the context, prevail in the Indian Income Tax Act also.
According to the above definition, a diesel engine is clearly 'machinery '.
Indeed, r. 8 of the Income Tax Rules treats aero engines separately from aircraft.
It is true that this rule cannot be used to interpret the clauses in the Act but it does show that components of an aircraft, which are machinery, can be treated separately.
(1) Cal.
190 853 Further, when the assessee purchased the diesel engines, they were not 'plant ' or part of a plant, because they had not been installed in any vehicle.
They were, according to the definition given by the Privy Council, machinery.
They, were not yet part of a plant, and, according to the Act, 20 ' per cent of the cost thereof was allowable to the assessee.
All the conditions required by the Act are satisfied.
If we look at the point of time of purchase and installation, what was purchased and installed was machinery.
The learned counsel next contended that the assessee is not entitled to extra depreciation because a diesel engine cannot be said to be installed.
He urges that the word 'installed ' is wholly inappropriate to cover the fixing of a diesel engine in a motor vehicle.
We are of the opinion that there is no force in this contention.
As observed by the Bombay High Court in the case of Commissioner of Income Tax vs Saraspur Mills Ltd.(1) the expression 'installed ' did not necessarily mean 'fixed in position ' but was also used in the sense of 'inducted or introduced ' , or to use the language of the Madras High Court in the case of Commissioner of Income Tax, Madras vs Sri Ram Vilas Services (Pvt) Ltd.(2), installed would certainly mean 'to place an apparatus in position for service or use '.
We are of the opinion that when an engine is fixed in a vehicle it is installed within the meaning of the expression in cls.
(vi) and (via).
Accordingly, we hold that the High Court was correct in answering the question referred to it in the affirmative.
The appeal, therefore fails and is dismissed with costs.
SHAH, J. I am unable to hold that the respondent is entitled to the allowance under section 10(2)(vi) paragraph 2, in respect of the diesel engines claimed by him.
Section 10 of the Indian Income tax Act provides that tax shall be payable on the profits and gains of an assessee under the head 'profits and gain of business, profession or vocation".
By sub section
(2) in the computation of taxable pro fits certain allowances prescribed therein are permissible.
We are primarily concerned in this appeal with the initial allowance permissible under the second paragraph of cl.
(vi) of sub section
But cls.
(iv), (v), (vi), (vi)(a) and (vii) are inter related and it may be necessary briefly to refer to those provisions By cl.
(iv) allowance for premium paid in respect of insurance against risk of damage or destruction of buildings, machinery, plant, furniture, stocks or stores, used for the purposes of the business, profession or vocation is admissible.
Under cl.
(v) an amount paid on account of any current repairs to such buildings, machinery, plant or furniture is (1), ( 2 ) 854 an admissible allowance.
Clause (vi) recognises by the first paragraph a right to normal depreciation of a percentage on the prescribed valuation of such buildings.
machinery, plant or furniture, which are the property of the assessees.
The second paragraph at the material time stood as follows: "and where the buildings have been newly erected, or the machinery or plant being new has been installed, after the 31st day of March, 1945, a further sum (which shall however not be deductible in determining the written down value for the purposes of this clause) in respect of the year of erection or installation equivalent, etc.
" Clause (vi)(a) which was inserted by Act 67 of 1949 permit ted a further depreciation allowance In respect of buildings newly erected or of machinery or plant being new which had been erected or installed after March 31, 1948, in not more than five successive assessments, for the financial years next following the previous year in which such buildings were erected, or machinery or plant installed.
Clause (vii) permitted as an allowance the difference between the written down value and the sale price or scrap value of such buildings, machinery or plant which had been sold, discarded, demolished or destroyed.
All these clauses dealt with allowances in respect of assets of the specified description and used for the purpose of business, profession or vocation.
The depreciation allow ance permitted under the first paragraph of cl.
(vi) which may be called the normal allowance is in respect of all buildings, machinery, plant and furniture of the assessee used for the purpose of his business.
By the second paragraph of cl.
(vi) an initial allowance in the year in which buildings have been newly erected or the machinery or plant being new has been installed after March 31, 1945, is allowable.
Use of the definite article "the" in the second paragraph indicates that the buildings, machinery or plant referred to in that paragraph must also be used for the purpose of the business, profession or vocation of the assessee.
However to qualify for the initial allowance under paragraph two, the buildings must be newly erected or the machinery or plant being new must have been installed, after March 31, 1945.
Two rival views are pressed upon us in support of the respective cases of the Commissioner and the assessee as to the meaning of the second paragraph.
The Commissioner contends that the buildings, machinery or plant for which the initial allowance is admissible must be a self contained unit capable of being put to use in the business, profession or vocation for the benefit of which it is erected or installed.
It is submitted that the second paragraph of cl.
(vi) was en 855 acted with the object of giving a fillip to industry which had been starved during the war years of new machinery and building activity.
But the buildings, machinery, or plant to qualify for the initial allowances were not intended to be in the nature of replacement, addition, or repair to existing units: they had to be buildings newly erected or machinery or plant being new installed.
On behalf of the assessee it was contended that the Legislature has not put any restriction of the nature suggested on behalf of the Commissioner and, therefore, any building or a part thereof newly erected or any new machinery or plant or a part thereof installed,.
qualified for the benefit of the initial allowance.
The question to be decided is one about the intention of the Legislature.
Can it be said that when to an existing building a room even a floor is added, that the additional construction is a building newly erected? In my view, that does not appear to be the intention.
Such an addition to an existing structure, becomes a part of the structure, and cannot be said to be a building newly erected.
If every alteration or addition in an existing building is covered by the second paragraph of cl.
(vi) mere repairs falling within the words of cl.
(vi) may also qualify for initial allowance.
If a mere addition to a building cannot be regarded as such an erection as is contemplated by the second paragraph of cf.
(vi), it would be difficult to hold that the machinery or plant would include part of machinery or plant.
Counsel for the assessee concedes that replacement of a petrol engine by a diesel engine in a motor transport vehi cle is not installation of plant.
The question is whether it is installation of machine.
In my view replacement of a petrol engine by a new diesel engine in a motor car cannot be said to be installation of machinery within the meaning of the relevant clause.
To be installed the machinery being new must for the purpose of the business be brought into service as a self contained unit.
If the argument of the assessee is sound, every bolt, nut, rod or flywheel which constitute a part of machinery would qualify for the initial allowance and the difference between the allowance for repairs and initial allowance may be obliterated.
Counsel for the assessee also did not, as I understood him, contend that replacement of a mere part of machinery was installation of machinery within the meaning of the second paragraph of cl.
The Legislature has not given any definition for that expression, and the expression "machinery" is otherwise somewhat difficult to define.
The Judicial Committee in Corporation of Calcutta vs Cossipore and Chitpore Municipality(1) when it was called upon to consider whether a tank supported on (1) L. R. 48 I.A. 435.
856 columns, and which could be filled by pumping from a re servoir belonging to the Corporation could be regarded as machinery within the meaning of the Bengal Municipal Act, 1884, observed at p. 445: "If their Lordships were obliged to run the hazard of the attempt (to define machinery) they would be inclined to say that the word 'machinery ' when used in ordinary language, prima facie means some mechanical contrivances which, by themselves or in combination with one or more other mechanical contrivance, by the combined movement and inter dependent operation of their respective parts generate power, or evoke, modify, apply or direct natural forces with the object in each case of effecting so definite and specific a result.
" But we are not called upon in this case to decide whether a diesel engine is in the abstract machinery: the question is whether a diesel engine, which is used for replacing a pet rol engine, in a vehicle used by a transport operator for the purpose of his business is machinery installed within the meaning of section 10(2)(vi) paragraph 2.
Whether "machinery" is some contrivance for supplying motive power to another contrivance which directly produces an article or is a mechanical contrivance which produces or assists in the production of an article, it would be difficult to regard introduction of a mere part, which has no independent use in the business conducted by the assessee, as machinery installed for the purpose of the second paragraph of cl.
The Legislature has provided for the normal depreciation by paragraph 1 of cl.
(vi) and in respect of newly installed machinery it has provided for the initial allowance, the object being to induce industrialists to start new industries or to extend their existing industries by erecting new buildings, or installing new machinery or plant.
A diesel engine by itself may undoubtedly be used in a business other than that of a transport operator, for instance, for working a pump to draw underground water and may for that purpose be regarded as a self contained unit.
But that is not decisive of the question whether in the business of a transport operator a diesel engine used to replace a petrol engine may be regarded as machinery installed.
Machinery installed within the meaning of paragraph 2 of section 10(2)(vi) is qualified by the expression "used for the purposes of the business", and therefore unless as a self contained unit the machinery is used for the purposes of the business, initial depreciation would not be admissible in respect thereof.
That it may be capable of being used in another 857 business by the same or another assessee as a self contained unit is irrelevant in considering its admissibility for initial allowance in the business in which it is actually used.
It would be fruitless to refer to the schedule under rule 8 of the Income tax Rules for computing the allowance in res pect of the depreciation under section 10(2)(vi).
The schedule catalogues different items in respect of which depreciation is admissible at the rates prescribed.
But whether a particular item is admissible for initial allowance in the second paragraph must depend upon two factors (i) that it is in respect of the year of erection or installation that the initial allowance is permissible; and (ii) the building or the machinery is used for the purposes of the business.
If it is a predicate of admissibility to initial allowance that the machinery must be new and a self contained unit in the particular business in the carrying on of which the initial allowance is claimed, the fact that in certain conditions that machinery may be regarded as self contained for the purpose of another business in which it is used, would furnish no guide in ascertaining whether initial allowance is permissible as a deduction in the assessment of taxable income of the business in which it is actually used.
In my view the appeal should be allowed and the question referred for opinion should be answered in the negative.
ORDER In accordance with the opinion of the majority the appeal is dismissed with costs.
Appeal dismissed. | The assessee, who was the owner of a fleet of buses, rep laced the petrol engines in two of his buses by new Diesel engines incurring an expenditure of Rs. 18,544/ in this connection, during the year of account ending with March 31, 1950.
For the relevant assessment year he claimed deprecia tion allowance under the second para of cl.
(vi) and cl.
(via) of section 10(2) of the Indian Income tax Act, 1922, apart from the normal depreciation under the first para of cl.
(vi) but he was allowed only 25 per cent depreciation under the first para ,of cl.
(vi) on the ground that he was not entitled to extra depreciation under section 10(2)(vi).
or section 10(2)(via) because the ,engine was only part of an equipment and could not by itself become machinery and that when an engine was fixed in a motor vehicle it could not be said to be installed within the meaning of those sub sections.
Held: (per Subba Rao and Sikri, JJ.) (i) The assessee was entitled to extra depreciation under sections 10(2)(vi).
and 10(2) (via) of the Indian Income tax Act, 1922, in respect of the diesel oil engine fitted to the motor vehicles in replacement of the existing engines.
(ii)The definition of "machinery" given by the Privy Council in the case of Corporation of Calcutta vs Chairman, Cossipore and Chitpore Municipality (1922) L.R. 48 I.A. 435, is applicable, and according to that definition a diesel engine is clearly "machinery".
And when an engine is fixed in a vehicle it is installed within the meaning of the expression in cls.
(vi) and (via).
Per Shah, J. (dissenting) Replacement of a petrol engine by a new diesel engine in a motor car cannot be said to be installation of machinery.
To be installed, the machinery must for the purpose of the business be brought into service as a self contained unit, and it would be difficult to regard the introduction of a mere part, which has no independent use in the business conducted by the assesses, as machinery installed for the purpose of the second para of cl.
(vi) of section 10 (2). |
Appeal No. 226 of 1963.
95 Appeal from the judgment and order dated August 1, 1961, of the Calcutta High Court in Income tax Reference No. 75 of 1956.
section Chaudhuri, D. N. Mukherjee and D. N. Gupta, for the appellant.
K. N. Rajagopal Sastri and R. N. Sachthey, for the res pondent.
May 1, 1964.
The Judgment of the Court was delivered by SHAH J.
The appellant is a public limited company.
and has its registered office at Calcutta.
By an agreement dated May 1, 1925, the Fort William Jute Company Ltd. appointed the appellant its managing agent upon certain terms and conditions set out therein.
Under the agreement the appellant was to receive as managing agent remuneration at the rate of Rs. 3,000 per month, commission at the rate of ten per cent on the profits of the company 's working, additional commission at three per cent on the cost price of all new machinery and stores purchased by the managing agent outside India on account of the company, and interest on all advances made by the managing agent to the company on the security of the company 's stocks, raw materials and manufactured goods.
The appellant and its successors in business, whether under the same or any other style or firm, unless they resigned their office were entitled to continue as managing agent until they ceased to hold shares in the capital of the company of the aggregate nominal value of Rs. 1,00,000 and were on that account removed by a special resolution of the company passed at an Extraordinary meeting of the company, or until the managing agent 's tenure was determined by the winding up of the company.
In the event of termination of agency in the contingencies specified, the managing agent was to receive such reasonable compensation for deprivation of office, as may be agreed upon between the managing agent and the company and in case of dispute, as may be determined by two arbitrators.
By cl. 8, the managing agent was at liberty at any time to resign the office of managing agent by leaving at the registered office of the company previous notice in writing of its intention in that behalf.
The agreement did not specify any period for which the managing agency was to enure.
Since the successors of the appellant were also to continue as agents, unless they resigned or became disqualified, the duration was in a sense unlimited.
But by virtue of section 87 A(2) of the Indian Companies Act, 1913, the appointment of the appellant as managing agent would expire on January 14, 1957, i.e. on the expiry of twenty years from the date on which the Indian Companies (Amendment) Act, 1956, was brought into operation.
Section 87 A(2), however, did not prevent the managing agent from being re appointed after the expiry of that period.
Beside the managing agency of the Fort William Jute Co. Ltd. the appellant held at all material time managing agencies of five other limited companies, viz., Fort Closter Jute Manufacturing Co. Ltd., Bowreach Cotton Mills Co. Ltd., Dunbar Mills Ltd., Mothola Co. Ltd and Joonktollee Tea Co. Ltd. The appellant had advanced Rs. 12,50,000 to the Fort William Jute Co. Ltd. on the security of the stocks, raw materials and manufactured goods of that company.
The appellant held in 1952, 600 out of 14,000 ordinary shares of the face value of Rs. 100 each.
and 6,920 out of 10,000 preference shares also of the face value of Rs. 100 each.
On May 21, 1952, the appellant entered into an agreement with M/s Mugneeram Bangur & Co., the principal conditions of which were: (i) M/s Mugneeram Bangur & Co. to purchase the entire holding of shares of the appellant in the Fort William Jute Co. Ltd. ordinary shares at Rs. 400 each and preference ,hares at Rs. 185 each, and to make an offer to all holders of the company 's shares preference and ordinary to purchase their holdings at the same rates; (ii) M/s Mugneeram Bangur & Co. to procure repayment on or before June 30, 1952 of all loans 97 made by the appellant to the principal company; (iii) M/s Mugneeram Bangur & Co. to procure that the principal company will compensate the appellant for loss of office in the sum of Rs. 3,50,000, such sum being payable to the appellant after it submitted its resignation as managing agent; and (iv) M/s Mugneeram Bangur & Co. to reimburse the company the amount payable to the appellant.
The reasons for which the appellant agreed to relinquish the managing agency were set out in a letter dated May 28, 1952, addressed by the appellant to the members of the company intimating that M/s Mugneeram Bangur & Co. were willing to purchase the shares at the same rates at which they had agreed to purchase the share holding of the appellant.
It was recited in the letter that the installation of modern machinery in the company 's factory entailed heavy capital expenditure and it was necessary to obtain a loan secured by debentures charged on the company 's property; that large sums were required for renewals and replacements of machinery and it was not possible to obtain additional bank accommodation; that the appellant had maade large advances to the company exceeding Rs. 12,50,000 and, having regard to its other commitments, it was doubtful if it would be able to make available to the company addiional finance; that the arrangement with M/s Mugneeram Bangur & Co., by acceptance of the terms offered by them, was the most satisfactory method of solving the company 's difficulties; that it was in the best interests of the shareholders to terminate the appointment of the appellant which in the normal course would not fall due for renewal until January 14, 1957; that M/s Mugneeram Bangur & Co. had agreed to procure that the Fort William Jute Co. Ltd. will pay to the appellant Rs. 3,50,000 and that M/s Mugneeram Bangur & Co. will reimburse the company for the payment, it being anticipated that they will in Line course be appointed managing agents of the company.
98 The arrangement with M/s Mugneeram Bangur & Co. was carried out.
The appellant tendered its resignation with effect from July 1, 1952, in pursuance of the terms of the agreement and M/s Mungneeram Bangur & Co. were appointed as managing agent of the company.
The sum of Rs. 3,50,000 received by the appellant from the company which it is common ground was provided by M/s Mugneeram Bangur & Co. was credited in the profit and loss account of the appellant as received from the Fort William Jute Co. Ltd. on account of compensation for loss of office.
But in arriving at the net profit in the return for income tax for the year 1953 54 this amount was deleted.
In the proceedings for assessment for the year 1953 54 the Incometax Officer, Companies District 1V, Calcutta, included this amount in the appellant 's taxable income.
In appeal the Appellate Assistant Commissioner modified the assessment holding that the sum of Rs. 3,50,000 received by the appellant as compensation for surrendering the managing agency, which was to enure for five years more, and which in normal course might have continued for another term of twenty years, was a capital receipt.
The Appellate Tribunal confirmed the order of the Appellate Assistant Commissioner, observing that compensation received tinder an agreement for "an outright sale of such an agency to a third party", not being one which a businessman enters in the normal course of business, nor being one which amounts to modification, alteration or discharge of normal incidents of such a business, was not assessable to income tax as a revenue receipt.
At the instance of the Commissioner of Income tax, the Tribunal referred under section 66(1) of the Income tax Act, 1922, the following question to the High Court of Judicature at Calcutta: "Whether on the facts and in the circumstances of the case the sum of Rs. 3,50,000 received by the assessee to relinquish the managing agency was a revenue receipt assessable under the Indian Income tax Act?" 99 The High Court, for reasons which we will presently set out, answered the question in the affirmative.
With certificate granted by the High Court, this appeal is preferred by the appellant.
This case raises once again the question whether com pensation received by an agent for premature determination of the contract of agency is a capital or a revenue receipt.
The question is not capable of solution by the application of any single test: its solution must depend on a correct appraisal in their true perspective of all the relevant facts.
As observed in Commissioner of Income tax Nagpur vs Rai Bahadur Jairam Valji(1) by Venkatarama Aiyar, J.,: "The question whether a receipt is capital or income has frequently come up for determination before the courts.
Various rules have been enunciated as furnishing a key to the solution of the question, but as often observed by the highest authorities, it is not possible to Jay down any single test as infallible or any single criterion as decisive in the determination of the question, which must ultimately depend on the facts of the particular case, and the authorities bearing on the question are valuable only as indicating the matters that have to be taken into account in reaching a decision.
Vide, Van Den Berghs Ltd. vs Clark [(1935) 3 I.T.R. (Engl.
Cas.) 17].
That, however is not to say that the question is one of fact, for as observed in Davies (H. M. Inspector of Taxes) vs Shell Company of China Ltd. (1952) 22 I.T.R. (Suppl.) 1) these questions between capital and income, trading profit or no trading profit, are questions which, though they may depend no doubt to a very great extent on the particular facts of each case, do involve a conclusion of law to be drawn from those facts '.
" (1) [1959] SUPP.
1 S.C.R. 110, 113. 100 The interrelation of facts which have a bearing on the ques tion propounded must therefore first be determined.
The managing agency was not, except in the circumstances set out in cl. 2 of the agreement, liable to be determined at the instance of the company before January 14, 1957, unless the appellant by giving notice of three weeks voluntarily resigned the agency.
At the date of termination the agency had five more years to run, and the Campanies Act did not prohibit renewal of the agency in favour of the appellant, after the expiry of the initial period of twenty years.
The appellant company was formed for the object, amongst others, (vide cl.
3(2) of the Memorandum of Association of the appellant) of carrying on the business of managing agencies.
The appellant was entitled under the terms of the agreement to receive so long as the agency enured 'Len per cent of the profits of the company 's working, three per cent on all purchases of stores and machinery abroad, and a monthly remuneration of Rs. 3,000.
The appellant submitted its resignation in exercise of the power reserved under cl. 8 of the managing agency agreement, but that resignation was it is common ground part of the arrangement with M/s Mugneeram Bangur & Co. dated May 21, 1952.
Under the terms of the managing agency agreement, the principal company was not obliged to pay any compensation to the appellant for voluntary resignation of the agency, but in consideration of the appellant parting with its shareholding and submitting resignation of the managing agency so as to facilitate the appointment of M/s Mugneeram Bangur & Co. as managing agent, the latter purchased the shareholding of the appellant, undertook to make available Rs. 3,50,000 for payment to the appellant and to discharge the debt due by the company to the appellant.
Payment of Rs. 3,50,000 was therefore an integral part of an arrangement for transfer of the managing agency.
A managing agency of a company is in the nature of a capital asset: that is not denied.
It is true that it is not like an ordinary asset capable of being transferred from one person to another.
Theoretically the power to appoint or dismiss the managing agent may lie with the directors of the company, but in practice the power lies with the person or per 101 sons having a controlling interest in the share holding of the company.
M/s Mugneeram Bangur & Co. were anxious to be appointed managing agents of the principal company, and for the purpose the appellant had to be persuaded to agree to a premature termination of its agency.
This was secured for a triple consideration; sale of shares held by the appellant at an a reed price, stipulation to discharge the liability of the company to repay the loans due by the company, and payment of Rs. 3,50,000 as compensation for termination of the appellant 's agency.
The High Court summarised the effect of the agreement between the appellant and M/s Mugneeram Bangur & Co. as follows: The sum of Rs. 3,50,000 described as compensation for loss of office of the managing agent was part of the whole scheme incorporated in the agreement.
Each clause of the agreement was a consideration of the other clauses and payment of compensation for the alleged loss of office did not, being part of the total scheme, stand by itself.
Determination of the managing agency of the appellant was not compulsory cessation of business: it was a voluntary resignation for which under the agency agreement the appellant was not entitled to any compensation, but by the device of procuring a purchaser the appellant was doing "business of selling the managing agency and getting a profit and value for it which it otherwise could not have got".
The High Court stamped this transaction with the nature and character of a "trading or a business deal", because in their view the managing agency of a company an institution peculiar to Indian business conditions which creates a managing agent as an alter ego.
of the managed company with authority to utilise the existing structure of the company 's Organisation to carry on business, earn profits, and in fact, virtually to trade in every possible sphere open to the company, may.
be regarded as circulating capital, where several managing agencies are conducted by an assessee.
Therefore in the view of the High Court the compensation received for surrendering the agency was remuneration received on account of conducting the business, and was income.
The judgment of the High Court proceeded substantially upon the following two grounds: 102 (1) that on the facts of the case, the managing agency held by the appellant of the Fort William Jute Co. Ltd. was stock in trade; and (2) that the appellant was formed with the object of acquiring managing agencies, and in fact held managing agencies of as many as six com panies.
Earning profits by conducting the management of companies, being the business of the appellant, compensation received as consideration for surrendering the managing agency was a revenue receipt.
We are unable to agree with the High Court that the managing agency of the Fort William Jute Co. Ltd. was an asset of the character of stock in trade of the company.
The appellant was formed with the object, among others, of acquiring managing agencies of companies and to carry on the business and to take part in the management, supervision or control of the business or operations of any other company, association, firm or person and to make profit out of it.
That only authorised the appellant to acquire as a fixed asset, if a managing agency may be so described, and to exploit it for the purpose of profit.
But there is no evidence that the company was formed for the purpose of acquiring and selling managing agencies and making profit by those transactions of sale and purchase.
A managing agency is not an asset for which there is a market, for it depends upon the personal qualifications of the agent.
Counsel appearing on behalf of the Commissioner concedes that the case that the managing agency was of the nature of stock in trade was not set up before the Tribunal, and he does not rely upon this part of the reasoning of the High Court in support of the plea that the compensation received by the appellant is a revenue receipt.
He relies upon the alternative ground, and contends that the managing agency of the Fort William Jute Co. Ltd. was part of the framework of the business of earning profit by working as managing agent of different companies, and in the normal course, termination of employment by the principal companies of the appellant as managing agent being a normal incident of such business, compensation received by the appellant is 103 not for loss of capital, but must be regarded as a trading receipt especially when the termination of the agency does not impair the structure of the business of the appellant.
In the present case there is a special circumstance which must first be noticed.
In truth the amount of Rs. 3,50,000 was received by the appellant from M/s Mugneeram Bangur & Co. in consideration of the former agreeing to forego the agency which it held and which M/s Mugneeram Bangur & Co. were anxious to obtain.
It was in a business sense a sale of such rights as the appellant possessed in the agency to M/s Mugneeram Bangur & Co. This is supported by the recitals made in cl. 2 of the agreement that if at any time within six months after the completion of such sale, M/s Mugneeram Bangur & Co. were unable to exercise the voting rights attached to the shares purchased by them the appellant will appoint any person nominated by M/s Mugneeram Bangur & Co. to attend and vote for them at any meeting of the company or the holders of any class of shares to be held within such period in such manner as M/s. Mugneeram Bangur & Co. may decide.
The object underlying the agreement was therefore to transfer he managing agency to M/s Mugneeram Bangur & Co. or at least to effectuate their appointment in place of the appelant as managing agent of the Fort William Jute Co. Ltd. All the stipulations and the covenants of the agreement, viewed in the light of the surrounding circumstances, do stamp the transaction as one of surrender of the rights of the appellant in the managing agency so that corresponding rights may arise in favour of M/s. Mugneeram Bangur & Co. It would be irrelevant in considering the true nature of he transaction, to project the somewhat legalistic con sideration that a managing agency is not transferable.
It is because it is not directly transferable, that the arrangement incorporated in the agreement was effected.
It would be difficult to regard such a transaction relating to a managing agency as a trading transaction.
Counsel for the assessee contended that even assuming at the form of the transaction under which for loss of the managing agency the appellant received compensation from the principal company is decisive, or has even a dominant 104 impact, and the ultimate source from which the compensation was provided is to be ignored, the compensation received for loss of agency by the agent must always be regarded under the Indian Income tax Act as capital receipt.
In support of that contention counsel placed strong reliance upon the judgment of the Judicial Committee in Commissioner of Income tax vs Shaw Wallace and Co.( ').
In the alternative, counsel pleaded that even if the extreme proposition was not found acceptable, the right of the assessee in the managing agency of the principal company was to enure for another five years and which in the normal course would have continued for another twenty years was an enduring asset and consideration received by the appellant for extinction of that asset was a capital receipt.
On behalf of the Income tax Department it was contended that Shaw Wallace & Co 's case( ') does not lay down any proposition of general application to compensation paid for determination of all agency contracts.
It was further submitted that, having regard to the nature of the agreement and the voluntary resignation submitted by the assessee no enduring asset remained vested in the assessee, and none was attempted to be transferred: the compensation directly paid by the principal company (which compensation was under the terms of the contract not payable) was only a "measure of profit" which the appellant would, but for the resignation, have earned, and was therefore in the nature of revenue.
It was also urged that compensation was not payaable to the assessee when resignation of the mainaging agency was tendered under cl. 8 of the agreement, and therefore the amount sought to be brought to tax was received by the assesseein the course of a normal trading transaction ofthe assessee.
Finally, it was urged that in any event, bythe loss ofthe agency the framework of the business ofthe assessee was not at all impaired, and therefore also the compsensation received must be regarded as revenue and no capital.
Whether a particular receipt is capital or income from business, has frequently engaged the attention of the court It may be broadly stated that what is received for loss of cap (1) L. R. 59 I. A. 206 105 tal is a capital receipt: what is received as profit in trading transaction is taxable income.
But the difficulty arises in ascertaining whether what is received in a given case is compensation for loss of a source of income, or profit in a trading transaction.
Cases on the borderline give rise to vexing problems.
The Act contains no real definition of income; indeed it is a term not capable of a definition in terms of a general formula.
Section 2(6C) catalogues broadly certain categories of receipts which are included in income.
It need hardly be said that the form in which the transaction which gives rise, to income is clothed and the name which is given to it are irrelevant in assessing the exigibility of receipt arising from a transaction to tax.
It is again not predicated that the income must necessarily have a recurrent quality.
We are not called upon to enter upon an extensive area of enquiry as to what receipts may be regarded as income generally, but merely to consider in this case whether receipt of compensation for surrendering the managing agency may be regarded as capital or as revenue.
In the absence of a statutory rule, payment made by an employer in consideration of the employee releasing him from his obligations under a service or agency agreement or a payment made voluntarily as compensation for determination of right to office arises not out of employment, but from cessation of employment and may not generally constitute income chargeable under sections 10 and 12.
It may be mentioned that this rule has been altered by the legislature by the enactment of section 10(5A) by the Finnance Act of 1955, which provides that compensation or other payment due to or received by a managing agent of an Indian company at or in connection with the termination or modification of his managing agency agreement with the company, or by a manager of an Indian company at or in connection with the termination of his office or modification of the terms and conditions relating thereto, or by any person managing the whole or substantially the whole affairs of any other company in the taxable territories at or in connection with the termination of his office or the modification of the terms and conditions relating thereto, or by any person holding an agency in the taxable territories for any part of the 106 activities relating to the business of any other person, at or in connection with the termination of his agency or the modification of the terms and conditions relating thereto, shall be deemed to be profits and gains of a business carried on by the managing agent, manager or other person, as the case may be, and shall be liable to tax accordingly.
But this amendment was made under the Finance Act,, 1955, with effect from April 1, 1955, and has no application to the present case.
The Indian Income tax Act is not in pari materia with the English Income tax Statutes.
But the authorities under the English Law which deal not with the interpretation of any specific provision, but on the concept of income, may not be regarded as proceeding upon any special principles peculiar to the English Acts so as to render them inappli cable in considering problems arising under the Indian Income tax Act.
It is well settled in England that money paid to compensate for loss caused to an assessee 's trade is nor income.
In Short Bros. Ltd. vs The Commissioner of Inland Revenue(l) a sum received as compensation for loss resulting from cancellation of a contract was held to be revenue in the ordinary course of the assessee 's trade, and liable to excess profits duty.
Similarly in The Commissioners of Inland Revenue vs The North fleet Coal and Ballast Co. Ltd.( '), compensation paid by a person who had agreed to purchase a certain quantity of chalk yearly for ten years, from a company which was the owner of a quarry, in consideration of being relieved of his liability under the contract was held chargeable to excess profits duty as trading profit in the hands of the company.
In The Commissioners of Inland Revenue vs Newcastle Breweries Ltd.(3) compensation received under an order of the War Compensation Court, under the Indemnity Act, 1920, in addition to what was paid by the Admiralty for rum taken over in exercise of the power under the Defence of the Realm Regulations was held to be revenue.
(1) (3) (2) 107 In Ensign Shipping Co. Ltd. vs The Commissioner of Inland Revenue( ') an amount paid by the Government to a ship owner to compensate him for loss resulting from detention of his ships during a coal strike, and for wages etc.
was held liable to excess profits duty.
Again as held in Burma Steam Ship Co. Ltd. vs Commissioners of Inland Revenue( ') money received by a ship owner from a firm of ship builders to compensate for loss resulting from the failure by the latter to complete repairs to a ship within the stipulated period was regarded as revenue.
These cases illustrate the principle that compensation for injury to trading operations, arising from breach of contract or in consequence of exercise of sovereign rights, is revenue.
These cases must, however, be distinguished from another class of cases where compensation is paid as a solatium for loss of office.
Such compensation may be regarded as capital or revenue: it would be regarded as capital, if it is for loss of an asset of enduring value to the assessee, but not where payment is received in settlement of loss in a trading transaction.
In Chibbet vs Joseph Robinson & Sons 3) the assessees who were ship managers employed by a steamship company under a contract which provided that they should be paid a percentage of ,he company 's income, were paid compensation for loss of office in anticipation of liquidation of the steamship company.
It was held that payment to make up for loss resulting from cessation of profits from employment was not itself an annual profit, but was payment in respect of termination of employment and was not assessable to tax.
In Du Cros vs Ryall (4) the assessee settled a claim made by his employee for damages for wrongful dismissal and paid 57,250 as compensation for wrongful dimissal.
It was held that No. part could be apportioned to salary and commission and the whole escaped assessment.
In Duff vs Barlow( ') the managing director of the appellant company who was employed for a period of ten (1) i2 T. C. 1169.
(3) (2) (5) (4) 19 T. C 444.
108 years was asked by it to manage the business of one of its subsidiaries, and to receive a percentage of profits made by the subsidiary.
The employment was terminated by mutual agreement two years after its commencement and 4,000 were paid as compensation to the managing director for loss of his rights of future remuneration.
This was held not taxable.
because it was a sum paid as compensation for loss of a source of income and hence a capital asset.
This case was followed in Henley vs Murray( ') where the appellant employed as a managing director of a property company under a service agreement which was not determinable till March 31, 1944, was also appointed a director of a subsidiary company.
At the request of the Board of directors of the property company the appellant resigned his office in the property company as well as its subsidiary and received from the property company an amount equal to the remuneration which he would, under the agreement, have been entitled to, if his appointment had not been determined.
It was held by the Court of Appeal that the use of the expression "compensation for loss of office" ' was not the determining factor when the bargain itself stood cancelled, and the sum paid was in consideration of total abandonment of all contractual rights which the other party had.
The receipt was in the circumstances not taxable.
The payment was not voluntarily made; the bargain was that the appellant should resign and in consideration thereof, In Barr, Grombie and Co. Ltd. vs Commissioners of Inland Revenue( ') the appellant company managed the ships of another company under an agreement for a period of fifteen years.
The shipping company went into liquidation and a sum exceeding pound 16,000 was paid to the appellant company for the eight years which were still to run to the date of expiry of the agreement.
Over a period upwards of sixteen years only two per cent of the appellant company 's income was derived from other managements, and on the liquidation of the shipping company the appellant company lost its entire business except for some abnormal and temporary business.
It was held by the Court of Ses (1) (2) 109 sion in Scotland that the sum in question was not a trading receipt of the appellant company.
Lord President Normand observed: "In the present case virtually the whole assets of the Appellant Company consisted in this agreement.
When the agreement was surrendered or abandoned practically nothing remained of the Company 's business.
It was forced to reduce its staff and to transfer into other premises, and it really started a new trading life.
Its trading existence as practised up to that time had ceased with the liquidation of the shipping Company.
" These cases establish the distinction between compensation for loss of a trading contract and solatium for loss of the source of income of the assessee.
But payment Of compensation for loss of office is not always regarded as capital receipt.
Where compensation is payable under the terms of the contract, which is determined, payment is in the nature of revenue and therefore taxable.
For instance in Henry vs Foster( ') it was held that when compensation stipulated under a contract is paid for loss of office, it is taxable under Sch. 'E ', and it was also held in Dale vs De Soissons(2) that compensation paid under an agreement to an Assistant of the managing director for premature termination of employment was held to be income.
The principle on which these cases proceeded was also applied by the Court of Session in Scotland in Kessal Parsons and Co. vs Commissioners of Inland Revenue(3) to a case in which there was no express term for payment of compensation on termination of employment.
The appellants in that case carried on business as agents on a commission basis for sale in Scotland of the products of various manufacturers, and entered into agency agreements for that purpose.
At the instance of the manufacturer concerned, one of the agreements which was for a period of three years was terminated at the end of the (1) (3) ; , 520 (2) 110 second year in consideration of a payment of pouns_ 1,500.
It was held by the Court of Session that no capital asset of the assessee was depreciated in value, or became of less use for the purpose of the assessee 's business.
The sum paid was accordingly included in the calculation of the taxable profits for the year in which it was received.
Lord President Normand Observed.
"We are not embarrassed here by the kind of difficulties which arise when, by agreement, a benefit extending over a tract of future years is renounced for a payment made once and for all.
The sum paid in this case is really and substantially a surrogatum for one year 's profits.
" The foundation of the distinction made in Kelsall Parsons and Co. 's case( '): Henry vs Foster( '): and Dale vs De Soissons(3) is to be found in the observations made by Lord Macmillan in Van Den Berchs Ltd. vs Clark( ').
In that case two companies which were manufacturers of ,margarine an margarine and similar products entered into an agreement with a view to end competition between them and to work in friendly alliance and to share the profits and losses in accordance with an elaborate scheme.
This arrangement was terminated by mutual agreement in consideration of the payment by the Dutch company pound 450,000 to the appellant company as damages.
It was held by the House of Lords that the amount was received by the appellant as payment for cancellation of the appellant company 's future rights under the agreements, which constituted a capital asset of the company, and that it was a capital receipt.
lord Macmillan observed.
"Now what were the Appellants giving up? They gave up their whole rights under the agreements for thirteen years ahead.
These agreements are called in the States Case "pooling agreements", but that is a very inadequate description of them, for they did much more than (1) ; ,620 (2) [1931] 145 L.T.R. 225 (3) [I950] 2 All E.R. 460 (4) ; , 431 111 merely embody a system of pooling and sharing profits.
If the Appellants were merely.
receiving in one sum down the aggregate of profits which they would otherwise have receiv ed over a series of years, the lump sum might be regarded as of the same nature as the ingredients of which it was composed.
But even if a payment is measured by annual receipt, it is not necessarily in itself an item of income.
" Cases which have lately arisen before the Courts in the United Kingdom have elaborated this distinction.
In Commissioner of Inland Revenue vs Fleming and Co.( ') the Court, of Session held following Kelsall Parsons & Cos ' case( '), that compensation paid to the assessee who carried on business as manufacturers ' agent and general merchants and had acted as the sole agents since 1903 for certain products of the manufacturers for termination in 1948 of the agency at the instance of the manufacturers was regarded as revenue.
In the view of Lord President Cooper the cases relating to determination of agencies, broadly speaking, fell on two sides of the line drawn in the light of the varying circumstances: (a) "the cancellation of a contract which affects the profit making sructure of the recipient of compensation and involves the loss of an enduring trading asset"; and (b) "the cancellation of a contract which does not affect the recipient 's trading structure nor deprive him of any enduring trading asset, but leaves him free to devote his energies and Organisation released by the cancellation of the contract to replacing the contract which has been lost by other like contracts", and held that the case fell within the second class, and not the first.
In Wiseburgh vs Domville(3) the appellant had entered into an agreement in 1942 under which he acted (1) (3) 36 T. C. 527 (2) ; , (20 112 as sole agent for the manufacturer.
In 1948 when this agreement could have been determined by notice expiring in October 1949, the manufacturer dismissed him.
The appellant received pound 4,000 as damages for breach of agreement.
The appellant had several agencies from time to time as agents and it was one of the incidents of agency business that one agency may be stopped and another may come and it being a normal incident of the kind of business that the appellant was doing, that an agency should come to an end, compensation paid was regarded as income on the principle laid down in Kelsall Parsons and Co. 's case( ').
In another case which soon followed Anglo French Exploration Co. Ltd. vs Clayson(2) the appellant company carried on business, among others, is secretary and agent for a number of other companies.
A South African Company appointed the appellant company as its secretary and agent at a remuneration of pound 1,500 per annum tinder a contract terminable at six months ' notice.
Under an arrangement with the purchaser of the controlling interest of the shareholders under which the appellant company was to resign its office as secretary and agent of the South African Company, an amount of pound 20,000 received by the appellant company was held by the Court of Appeal in the nature of a trading receipt.
In Blackburn vs Close Bros. Ltd.( ') the respondent company carried on business of merchant bankers and of a finance and issuing house and derived income in the form of allowances for performing managerial and secretarial services.
Following a dispute with one 'S ' for which the respondent company had agreed to provide secretarial services for three years at a remuneration of pound 8,000 per annum, the agreement was terminated within about 2 1/2 months from the date of its commencement.
pound 15,000 received by the respondent company as compensation for termination of the agreement was held to be a trading receipt.
Pennycuick J., held that the contract was one of a number of ordinary commercial contracts for rendering (2) (1) ; , 620 113 services by the assessee in the course of carrying on its trade, and therefore the sum received on the cancellation of the agreement was a receipt of a revenue nature.
It is manifest that the principle broadly stated in the earlier cases, that compensation for loss of office, or agency, must be regarded as a capital receipt, has not been approved in later cases.
An exception has been engrafted upon that principle that where payment even if received for termination of an agency agreement, the agency is one of many which the assessee holds, and the termination of the agency does not impair the pofit making structure, but is within the framework of the assessee 's business, it being a necessary incident of the business that existing agencies may be terminated and fresh agencies may be taken, the receipt is revenue and not capital.
A case on the other side of the line may be noticed: Sabine vs Lookers Ltd.( ').
Under agreements, annually renewed with the manufacturers, the respondent company had acted for many years as their main distributors in the Manchester area of the manufacturers ' products, which it bought for resale.
The respondent had sunk considerable sums in fixtures and equipment specially designed for the trade of wholesale dealers and carried a large stock of spare parts mainly for wholesale sale.
The whole of the trade of the respondent was geared to the display, sale, service and repairs of the manufacturers ' products.
Upto 1952 inclusive,, the manufacturers had included in its agreements with distributors a standard "continuity clause, giving the distributors, on certain conditions, the option of renewal for a further year.
But in 1953, the manufacturers adopted a new standard agreement, containing a new continuity clause which the respondent company regarded as giving it less security than before.
As compensation for loss resulting from the alterations, the manufacturers paid to the respondent company, a sum calculated on sales to the trade during the contract period.
It was held that this was a capital receipt, because, by the, modification the framework of the respondent 's business was impaired.
(1) 114 Elaborate arguments were presented before us on the decision of the Judicial Committee in Shaw Wallace & Co. 's Case( ').
The appellant contended that Shaw, Wallace 's Case( ') laid down a principle of general application applicable to all cases of compensation received from the principal as solatium for determination of the contract of agency.
Counsel for the Revenue contended that the principle should be restricted to its special facts, and cannot be extended in view of the later decisions.
It is necessary to closely examine the facts which gave rise to that case.
Shaw Wallace & Company carried on business as merchants and agents of various companies and had branch offices in different paris of India.
For a number of years they acted as distributing agents in India for the Burma Oil Company and the Anglo Persian Oil Company, but without a formal agreement with either company.
The two Oil Companies having combined decided to make other arrangements for distributing their products.
Each Company terminated its contract with Shaw Wallace & Company and paid compensation to it, which aggregated to Rs. 15,25,000.
This amount, subject to certain allowances, was sought to he assessed to income tax under sections 10 and 12.
The High Court of Calcutta held that the compensation received by the assessee was a capital receipt.
In appeal to His Majesty in Council the decision of the High Court was affirmed.
The Judicial Committee declined to seek inspiration from the English decisions cited at the Bar.
The Board observed that the expression "income" which is not defined in the Act connotes a periodical monetary return coming in with some sort of regularity, or expected regularity, from definite sources: the source is not necessarily one which is expected to be continuously productive, but it must be one whose object is the production of a definite return, excluding anything in the nature of a mere windfall.
They further observed that the income chargeable under head (iv) of section 6 business" read with section 10 is to be in respect of the profits and gains of any business carried on by the assessee, and therefore the sums which the Income tax Department sought to charge could only be taxable if they were the pro (1) L.R. 59 I.A. 2o6.
115 duce or the result of carrying on the agencies of the Oil Companies in the year in which they were received by the assessee.
But when once it was admitted that they were sums received, not for carrying on this business, but as some sort of solatium for its compulsory cessation, the answer seemed fairly plain.
The Board observed that if compen sation received for sale of the business or its goodwill was capital, the same reasoning ought to apply when the sum received was in the nature of a solatium for cessation of a part of the business, and it was a matter of no consequence that the assessee continued to pursue its other independent commercial interests, and profits from which were taxed in the ordinary course, for the sums sought to be taxed had no connection with the continuance of the assessee 's other business: the profits earned by the assessee, it was observ ed, were "the fruit of a different tree, the crop of a different field", and if under section 10 the compensation was not taxable, it was not taxable under section 12 under the head " other sources" as well.
The judgment of the Board proceeds upon the ground that compensation received not for carrying on the business, but as solatium for its compulsory cessation, would be regarded as capital receipt, and for the application of this principle, existence of other independent commercial in terests out of which profits were earned by the assessee was irrelevant.
Two comments may be made at this stage.
It cannot be said as a general rule, that what is determinative of the nature of the receipt is extinction or compulsory cessation of an agency or office.
Nor can it be said that compensation received for extinction of an agency may always be equated with price received on sale of goodwill of a business.
The test, applicable to contracts for termination of agencies is: what has the assessee parted with in lieu of money or money 's worth received by him which is sought to be taxed? If compensation is paid for cancellation of a contract of agency, which does not affect the trading structure of the business of the recipient, or involve loss of an enduring asset, leaving the tax payer free to carry on his trade released from the contract which is cancelled, the receipt will be a trading receipt: where the cancellation 116 of a contract of agency impairs the trading structure, or involves loss of an enduring asset, the amount paid for compensating the loss is capital.
The view expressed by the Judicial Committee has not met with unqualified approval in later cases, Lord Wright in Raja Bahadur Kamakshya Narain Singh of Ramgarh vs Commissioner of Income tax.
Bihar and Orissa( ') observed that it is incorrect to limit the true character of income, by such picturesque similies like "fruit of a different tree, or crop of a different field".
Again it cannot be said generally that compensation for every transfer or determination of a contract of agency is capital receipt: Kelsall Parsons & Co. vs Commissioner of Inland Revenue( '): Commissioners of Inland Revenue vs Fleming & Co. (3): Wise burgh vs Domville(4) and Commisiosner of Income tax and Excess Profits Tax, Madras vs South India Pictures Ltd.( ').
Nor is it true to say that where an assessee holds several agency contracts, each agency contract cannot without more be regarded as independent of the other contracts, and income received from each contract cannot always be regarded as unrelated to the rest of the business continued by the assessee.
The decision in Shaw Wallace Co. 's case( ') cannot therefore be read to yield the principle that compensation for loss of an agency may in all cases be regarded as capital receipt.
Nor does it lay down that where the assessee has several lines of business each line must in ascertaining the character of compensation for loss of a line of business be deemed an independent source.
This view is exemplied by decisions of this Court and a decision of the Madras High Court.
In the South India Pictures Ltd. 's case(5) compensation received for determination of the distribution rights of films was held taxable.
After the assessee had exploited partially its right of distribution of cinematographic films to which it was entitled under the terms of agreement under which he had advanced money to the producers, the agreements were cancelled and the producers paid an aggregate sum of Rs. 26,000 to the assessee towards commission.
It was held by Das C. J., (1) L. R, 70 1.
A. 180 (2) ; , 620 (3) (4) (5) 29 (6) L.R. 59 I.A. 2o6 117 and Venkaterama Aiyar, J., (Bhagwati J., dissenting) that the sum paid to the assessee was not compensation for not carrying on its business, but was a sum paid in the ordinary course of business to adjust the relations between the assessee and the producers, and was taxable.
Similarly in Rai Bahadur Jairam Valji 's cave( ') a contract for the supply of limestone and dolomite was terminated when the purchaser the Bengal Iron Company Ltd. found the rates uneconomical.
A suit was then filed by the respondent for specific performance of the contract and for an injunction restraining the company from purchasing limestone and dolomite from any other person.
A fresh agreement made between the respondent and the company fell through because of circumstances over which the parties to the agreement had no control.
The company then agreed to pay Rs. 2,50,000 to the respondent as solatium, besides the monthly instalments of Rs. 4,000 remaining unpaid under the contract of 1940.
The Income tax Department sought to bring to tax the amount of Rs. 2,50,000 and the balance due towards the monthly instalments of Rs. 4,000.
It was held by this Court that the sum of Rs. 2,50,000 was not paid to the respondent as compensation for expenses laid out for works at the quarry of a capital nature and could not be held to be a capital receipt on that account, the agreements were merely adjustments made in the ordinary course of business.
There was in the view of the Court no profit making apparatus set up by the agreement of 1941, apart from the business which was to be carried on under it and there was at no time any agreement which operated as a bar to the carrying of the business of the respondent and therefore the receipt of Rs. 2,50,000 was chargeable to tax.
Venkatarama Aiyar, J., observed, in at,agency contract the actual business consists of dealings between the principal and his customers, and the work of the agent is only to bring about the business: what he does is not the business itself, but something which is intimately and directly linked up with it.
The agency may, therefore, be viewed as the apparatus which leads to the business rather than the business itself.
Considered in this light the (1) [1959] Supp.
1 S.C.R. 110 118 agency right can be held to be of the nature of a capital asset invested in business.
But this cannot be said of a contract entered into in the ordinary course of business.
Such a contract is part of the business itself, not some thing outside it, and any receipt on account of such a contract can only be a trading receipt.
Because compensation paid on the cancellation of a trading contract differs in character from compensation paid for cancellation of an agency contract, it should not be understood that the latter is always, and as a matter of law, to be held to be a capital receipt.
An "agency contract which has the character of a capital asset in the hands of one person may assume the character of a trading receipt asset in the hands of another, as for example, when the agent is found to make a trade of acquiring agencies and dealing with them.
" Therefore, when the question arises whether the payment of compensation for termination of an agency is a capital or a revenue receipt, it must be considered whether the agency was in the nature of a capital asset in the hands of the agent, or whether it was only part of his stock in trade.
The learned Judge also observed that payments made in settlement of rights under a trading contract are trading receipts and are assessable to revenue, but where a trader is prevented from doing so by external authority in exercise of a paramount power and is awarded compensation therefor, whether the receipt is a capital receipt or a revenue receipt will depend upon whether it is compensation for injury inflicted on a capital asset or on stock in trade.
In Pairce Leslie and Co. Ltd. vs Commissioner of Income tax, Madras( ') the assessee company took up managing agencies of several plantation companies.
The managing agencies were liable to termination, but the assessee was entitled to compensation by the terms of the agreement.
The Talliar Estates Ltd. was one of the companies managed by the assessee.
The agreement was a composite agreement about the managing agency rights and certain other rights.
When the Talliar Estates Ltd. went into liquidation the assessee received Rs. 60,000 by way of compensation for loss of office and the question arose (1) 119 whether that amount was income in the hands of the assessee.
The Madras High Court held that the loss of one of several managing agencies had little effect on the structure of the assessee 's business even in tea or on its profit earning apparatus as a whole and the termination of the agreement with the Talhar Estates could well be said to have been brought about in the ordinary course of business of the assessee and therefore the amount received was a trading receipt.
In the South India Picture Ltd. 's case(): Rai Bahadur Jairam Valji 's case( ') and Peirce Leslia Company 's case( ') it was held that the receipt of compensation for loss of agency was in the nature of revenue.
In the South India Pictures Ltd. 's case( ') the amount received was not compensation for not carrying on its business, but was a sum paid in the ordinary course of business to adjust the relations between the assessee and the producers; the termination of the agreements did not radically or at all affect or alter the structure of the assessee 's business, and the amount received by the assessee was only so received towards commission i.e. as compensation for the loss of commission which it would have earned, had the agreements not been terminated.
Therefore, the amount was not received by the assessee as the price of any capital assets sold or surrendered or destroyed, but the amount was simply received by the assessee in the course of its going distributing agency business and therefore it was an income receipt.
In that case the majority of the Court held on three distinct grounds, viz., (i) that the assessee did not part with any capital asset; (ii) that the amount was received in the course of the distributing agency business which was continued, and (iii) that the termination of the agreements did not radically or at all affect or alter the structure of the assessee 's business, that the sum received was revenue.
Rai Bahadur Jairam Valji 's case( ') was one of compensation received for termination of a trading contract.
In Peirce Leslie and Company 's case( ') there was termination of office, but it was held to be brought about in the ordinary course of the trading operations of the assessee.
(i) (2) [1959] Supp.
I S.C.R. iio (3 120 On the other side of the line are cases of Commissioner of Income tax, Hyderabad Deccan vs Vazir Sultan and Sons( ') and Godrej and Co. vs Commissioner of Incometax, Bombay City (2).
In Vazir Sultan and Son 's case( ') the majority of the Court held that compensation paid for restricting the area in which a previous agency agreement operated was a capital receipt, not assessable to incometax.
It was held that the agency agreements were not entered into by the assessee in the carrying on of their business, but formed the capital asset of the assessee 's business which was exploited 'by the assessee by entering into contracts with various customers and dealers in the respective territories; it formed part of the fixed capital of the assesssee 's business and was not circulating capital or stockin trade of their business and therefore payment made by the company for determination of the contract or cancellation of the agreement was a capital receipt in the hands of the assessee.
In Godrej and Co. 's case( ') the managing agency agreement in favour of the assessee of a limited company which was originally for a period of thirty years and under which the assessee was entitled to a commission at certain rates was modified and remuneration payable to the managing agents was reduced.
As compensation for agreeing to this reduction, the assessee received Rs. 7,50,000 which was sought to be taxed as income in the hands of the assessee.
This Court held, having regard to all the attending circumstances, that the amount was paid not to make up the difference between the higher remuneration and the reduced remuneration, but in truth as compensation for releasing the company from the onerous terms as to remuneration as it was in terms expressed to be; so far as the assessee firm was concerned it was received as compensation for the deterioration or injury to the managing agency, by reason of the release of its rights to get higher remuneration and, therefore, a capital receipts.
On an analysis of these cases which fall on two sides of the dividing line, a satisfactory measure of consistency (1) 36 (3) (2) 37 r.
T.R. 381 121 in principle is disclosed.
Where on a consideration of the circumstances, payment is made to compensate a person for cancellation of a contract which does not affect the trading structure of his business, nor deprive him of what in substance is his source of income, termination of the ,contract being a normal incident of the business, and such cancellation leaves him free to carry on his trade (freed from the contract terminated the receipt is revenue: Where by the cancellation of an agency the trading structure of the assessee is impaired, or such cancellation results in loss ,of what may be regarded as the source of the assessee 's income, the payment made to compensate for cancellation of the agency agreement is normally a capital receipt.
In the present case, on a review of all the circumstances, we have no doubt that what the assessee was paid was to compensate him for loss of a capital asset.
It matters little whether the assessee did continue after the determination of its agency with the Fort William Jute Co. Ltd to conduct the remaining agencies.
The transaction was not in the nature of a trading transaction, but was one in which the assessee parted with an asset of an enduring value.
We are, therefore, unable to agree with the High Court that the amount received by the appellant was in the nature of a revenue receipt.
We accordingly record the answer on the question submitted by the Tribunal in the negative.
The appellant would be entitled to its costs in this Court. | By an agreement with the Fort William Jute Company in 1925 the appellant company became its Managing Agent.
The terms, inter alia, were that the appellant or its successors, unless they chose to resign, were to continue as Managing Agent until they ceased to hold certain shares in the capital of the company and were on that account removed by a resolution of the company or their tenure of office was determined by the winding up of the company.
On termination of the agency, the Managing Agent was to get such reasonable compensation as was agreed upon between the Managing Agent and the company.
Besides this managing agency the appellant held five other managing agencies.
In 1952, the appellant by in agreement with M/s. Mugneeram Bangur & Co., agreed to relinquished the managing agency of the Fort William Jute Co., Ltd., in their favour in consideration of M/s. Mugneeram Bangur and Co. taking over the shares held by the appellant, procuring repayment of loans advanced by the appellant to the Fort William Jute Company and further procuring that the Fort William Jute Company.
will pay com pensation to the appellant.
The appellant intimated the members of the latter company that it would be in the best interest of the share holders to terminate the appellant 's agency which would otherwise continue till 1957 and that M/S. Mugneeram Bengur & Co. had agreed to reimburse the Fort William Jute Co. Ltd. for payment of Rs. 3,50,000 as compensation to the appellant.
The arrangement with M/s. Mugneeram Bangur & Co. was accepted by the Fort William Jute Co. and the appellant tendered resignation.
M/s. Mugneeram Bangur and Co. 94 became the Managing agent.
The appellant received the sum of Rs. 3,50,000 and credited the sum in its profit and loss account as having been received from the Fort William Jute Co. Ltd. on account of compensation for loss of office and in calculating the net profit for the purpose of income tax for the year 1953 54 did not include this amount in the return.
The Income tax Officer in assessment included the amount in the appellant 's taxable income.
The Assistant Appellate Commissioner on appeal modified the assessment holding that the sum received by the appellant as compensation for surrendering the managing agency, which was to enure for five years more and might have continued for another twenty years, was a capital receipt.
The Appellate Tribunal confirmed the order of the Appellate Assistant Commissioner.
At the instance of the Commissioner of Income tax the following question was referred to the High Court: Whether on the facts and circumstances of the case the sum of Rs. 3,50,000 received by the assessee to relinquish the managing agency was a revenue receipt assessable under the Indian Income tax Act?.
The High Court answered the question in the affirmative.
HELD: that the answer should be in the negative.
The transaction in question was not a trading transaction, but one in which the assessee parted with an asset of enduring value.
The compensation received was compensation for loss of capital.
It was inconsequential whether the appellant conducted the remaining agencies after the determination of the one in question.
Where payment is made as compensation for cancellation of a contract which does not affect the trading structure of the business, nor causes 'deprivation of what in substance is source of income, and is a normal incident of the business, the compensation is revenue.
But where the cancellation impairs the trading structure or results in loss of the source of income, the compensation paid for the cancellation of the agreement is normally capital receipt.
Commissioner of Income tax Nagpur vs Rai Bahadur Jairam Yalji, , referred to.
Commissioner of Income tax vs Shaw Wallace and Co. L.R. 59 I.A. 206, explained.
Raja Bahadur Kamakshaya Narain Singh of Ramgarh vs Commissioner of Income tax, Bihar and Orissa, L.R. 70 I.A. 180, Commissioner of Income tax and Excess Profits Tax Madras vs South India Pictures, , Peirce Leslie and Co. Ltd. vs Commissioner of Income tax, Madras, , Commissioner of Income tax, Hyderabad Deccan vs Vazir Sultan and Sons.
and Godrej & Co. vs Commissioner of Income tax, Bombay City, , discussed. |
l Appeal No.
1072 of 1963.
Appeal from the judgment and order dated April 10.
1963 of the Andhra Pradesh High Court in Special Appeal No. 52 of 1962.
K. R. Chaudhuri, for the appellant.
A. V. Viswanatha Sastri and T. V. R. Tatachari, for the respondent.
May 4, 1964.
The Judgment of the Court was delivered by HIDAYATULLAH J.
The respondent Dentu Bhaskara Rao was returned to the Andhra Pradesh Legislative Assembly from Kakinada constituency at the last general election.
The appellant C. V. K. Rao was his closest competitor.
There were two other candidates but they obtained very few votes and they have not shown any further interest.
The appellant filed an election petition to question the election of the respondent on many grounds: one such ground was that the respondent was disqualified 154 under section 7 (d) of the Representation of the People Act, 1951 (43 of 1951).
The respondent had obtained a mining lease from the State of Andhra Pradesh on April 13, 1960, though on the date he filed his nomination paper he had not begun operations under that lease.
The appellant took objection to the nomination of the respondent on the ground that he held a contract from the Andhra Pradesh Government within the prohibition of section 7(d) of the Act, but the Returning Officer over ruled his objection.
The Election Tribunal later held that he was disqualified under section 7(d) of Act 43 of 1951 and declared the election void.
On appeal, the High Court of Andhra Pradesh reversed the decision and the present appeal has been filed on a certificate granted by the High Court.
Section 7(d) reads as follows: "7.
A person shall be disqualified for being chosen as, and for being, a member of either House of Parliament or the Legislative Assembly or Legislative Council of a State (a) (b) (c) (d) if there subsists a contract entered into in the course of his trade or business by him with the appropriate Goverment for the supply of goods to, or for the execution of any works undertaken by, that Government;" The mining lease was in the standard form and after setting out the consideration for the lease, it described in Parts I to III, the area of the lease, the description of the area, liberties, powers and privileges to be exercised and enjoyed by the lessee and the restrictions and conditions as to their exercise.
In Part IV it described the liberties, powers and privileges reserved to the State Government and in Parts V and VI the rents and royalties reserved by the lease and certain other provisions relating to them.
Part VII then dealt with the covenants of the lessee in respect of payment 155 of rents, royalties, taxes etc.
One such covenant was in clause 21 and was headed "Right of Pre emption" and it conferred on the State Government a right of pre emption of the minerals lying in or upon the land demised or elsewhere under the control of the lessee.
That clause was interpreted by the Tribunal as a contract entered in the course of ' trade or business by the respondent with the State Government for the supply of goods to that Government.
The High Court held that there was no such contract.
The disqualification which results from section 7(d) is condi tioned by a number of circumstances.
First, there must be a subsisting contract (this is to say in actual existence) between the appropriate Government and the candidate.
Then the contract must be in the Course of the trade or business of the candidate and, finally, it must be inter alia for the supply of goods to such Government The appropriate Government according to the definition of the expression is the Government of Andhra Pradesh.
Tile High Court in reaching its conclusion interpreted cl. 21 of Part VII of the lease and held that the mining lease was not a contract, that clause 21 did not amount to a contract and that cl. 21 even if a contract was not a contract for the supply of goods to the Government.
This conclusion is assailed by the appellant.
It is convenient.
to quote the clause at this stage: "21.
(a) The State Government shall from time to time and at all times during the said term have the right (to be exercised by notice in writing to the lessee) of pre emption of the said minerals (and all products thereof) lying in or upon the said lands hereby demised or elsewhere under the control of the lessee and the lessee shall with all possible, expedition deliver all minerals of products or minerals purchased by the State Government under the power conferred by this provision in the quantities, at the times in the manner and at the plate specified in the notice exercising the said right.
156 (b) Should the right to pre emption conferred by this present provision be exercised and a vessel chartered to carry the minerals or products thereof procured on behalf of the State Government or the Central Government be detained on demurrage at the port of loading the lessee shall pay the amount due for demurrage according to the terms of the charter party of such vessel unless the State Government shall be satisfied that the delay is due to causes beyond the control of the lessee.
(c) The price to be Paid for all minerals or products of minerals taken in pre emption by the State Government in exercise of the right hereby conferred shall be the fair market price prevailing at the time of pre emption provided that in order to assist in arriving at the said fair market price the lessee shall, if so required, furnish to the State Government for the confidential information of the Government particulars of quantities, descriptions and prices of the said minerals or products for carriage of the same and shall produce to such officer or officers as may be directed by the State Government original or authenticated copies of contracts and charter parties entered into for the sale of freightage of such minerals or products.
(d) Mr. K. R. Chaudhury contended that under this clause there was a standing contract for the supply of goods and all that Government had to do was to send a notice to the respondent and he was compelled to supply the goods to Government.
He pointed out that from the time the lease was granted Government was asking the respondent to commence operations to raise the minerals but the respondent avoided working the mine probably to save himself from the disqualification.
According to Mr. Chaudhury, it mattered not whether the mine was worked or not, but 157 what mattered was that there was a subsisting contract for the supply of mineral, to the appropriate Government.
Mr. A. Vishwanatha Sastri, in reply, contended that the mining lease could not be regarded as a contract and further that it was not in the course of ' the trade or business of the respondent, and finally that, in any event, it was not a contract for the supply of goods.
That it was in the course of business of the respondent almost goes without saying.
It is not necessary, as Mr. Sastri suggested, that a course of business based upon other transactions must first exist before the offending contract can be said to be in the course of business.
That contract may itself be the start of the business and the words 'in the course of the business ' would still be apt.
As the mining lease was subsisting, the con tract, if any there be, was also subsisting and there is no doubt on that aspect of the matter.
The question is whether the provisions of cl. 21 bring about a contract for the supply of goods.
This question can be broken into two which are: (a) whether cl. 21 can be regarded as a contract and (b) whether it can be regarded as a contract for supply of goods.
Clause 21 is invariably inserted in every mining lease.
It reserves to the Government the right to the minerals which vest in Government but which are allowed to be raised by the lessee holding the lease.
The lease is, in one sense, a contract between the Government and the lessee because there is consideration on both sides and an offer and acceptance.
There are obligations created by it.
some of which are contractual even though some may be regarded as arising from the conditions of the rant.
The mining lease without cl. 21 cannot possibly be described as a contract for the supply of goods.
Without that clause there would neither be a mention of goods nor of their supply.
If the lease is to be read as satisfying the disqualification in section 7(d), cl. 21 alone can satisfy it.
Clause 21 speaks of a right of the Government to pre empt the minerals and all products thereof lying in or around the land demised or elsewhere under the control of the lessee.
There is, however, no concluded contract in respect of any goods because it hardly needs to be said that relying upon this clause the lessee cannot begin delivery of the ore to the Government.
He can do so only if the Government 158 serves a notice on him stating the quantity pre empted and the time within which the supply is to be made.
The clause, however, does not make it obligatory on Government to pre empt any quantity of mineral or at all.
There is no obligation to buy nor is there any compulsion on the part of the lessee to sell unless asked.
In these circumstances, the clause does no more than to keep intact a right of the Government to obtain the minerals or their products as and when Government requires in preference to others.
Till Government makes up its mind and serves a notice there is no obligation to make any deliveries and even though the word ',subsists ' is a word of wide import, it cannot be said that a contract for the sale of goods subsists because a contract requires an offer and its acceptance and is not a mere reservation of a right.
Taking the most liberal view of the matter it is clear that cl. 21 did not bring into being a contract for the supply of goods.
AR that it did was to reserve to the Government the right to prior purchase of the minerals raised by the respondent.
The reservation of such rights does not amount to a contract for the supply of goods which can be said to subsist between the parties.
The High Court was, therefore, right in reversing the decision of the Election Tribunal.
The appeal fails and is dismissed with costs.
Appeal dismissed. | The respondent obtained a mining lease from the State Government.
Clause 21 of the lease reserved to the Government the right to prior purchase of the minerals raised by the lessee.
While the lease was subsisting, the, respondent stood for election to the state Legislative Assembly and was elected.
The appellant, his closest competitor, challenged the election by an election petition on the ground, inter alia, that the respondent was disqualified under section 7(d) of the Representation of People Act (XLIII of 1951), because he had a contract with the Government for supply of goods.
153 HELD:the petition must be dismissed.
The disqualification which results from the section is conditioned by three circumstances.
First, there must be a subsisting contract between the appropriate Government and the candidate.
Then the contract must be in the course of the trade or business of the candidate and, finally it must be inter alia for the supply of goods to such Government.
Held in the case that as the mining lease was subsisting, the contract if any, was also subsisting.
Further that the mining lease, if it was a contract, was in the course of the business of the respondent.
It was not necessary that a course of business based upon other transactions must have first existed before the offending contract could be said to be in the course of business.
The contract itself could be the start of the business.
Held therefore that the mining lease was not a contract to supply goods to the Government.
There was only a right in the Government to pre empt the minerals and lessee could not begin delivery to the Government until Government served a notice on him stating the quantity preempted and the time within which the supply should be made.
This was only a reservation of a right of pre emption which did not amount to a contract for the supply of goods which could be said to subsist between the parties. |
Appeal No. 244 of 1964.
Appeal from the judgment and order dated September 21, 1962 of the Mysore High Court in Civil Revision Petition No. 929 of 1958.
G. section Pathak and R. Gopalakrishnan, for the appellants.
section G. Patwardhan, V. Kumar and Naunit Lal, for the respondent No. 1.
235 May, 8, 1964.
The Judgment of the Court was delivered by SUBBA RAO, J.
This appeal by certificate raies the question whether a minor who was admitted to the benefits of a partnership can be adjudicated insolvent on the basis of debt or debts of the firm after the partnership was dis solved, on the ground that he attained majority subsequent to the said dissolution, but did not exercise his option to become a partner or cease to be one of the said firm.
The facts are not in dispute and may be briefly stated.
Mallappa Mahalingappa Sadalge and Appasaheb Mahalingappa Sadalge, respondents 2 and 3 in the appeal, were carrying on the business of commission agents and manufacturing and selling partnership under the names of two firms "M. B. Sadalge" and "C. N. Sadalge".
The partnership deed between them was executed on October 25, 1946.
At that time Chandrakant Nilakanth Sadalge, respondent 1 herein, was a minor and he was admitted to the benefits of the partnership.
The partnership had dealings with the appellants and it had become indebted to them to the extent of Rs. 1,72,484.
The partnership was dissolved on April 18, 1951.
The first respondent became a major subsequently and he did not exercise the option not to become a partner of the firm under section 30(5) of the .
When the appellants demanded their dues, the respondents 2 and 3 informed them that they were unable to pay their dues and that they had suspended payment of the debts.
On August 2, 1954, the appellants filed an application in the Court of the Civil Judge, Senior Division, Belgam, for adjudicating the three respondents as insolvents on the basis of the said debts.
The 1st respondent opposed the application.
The learned Civil Judge found that respondents 2 and 3 committed acts of insolvency and that the 1st respondent had also become partner as he did not exercise his option under section 30(5) of the Partnership Act and, therefore, he was also liable to be adjudicated along with them.
The first respondent preferred an appeal to the District Judge, but the appeal was dismissed.
On second appeal, the High Court held that the 1st respondent was not a partner of the 236 firm and, therefore, he could not be adjudicated insolvent for the debts of the firm.
The creditors have preferred the present appeal against the said decision of the High Court.
Learned counsel for the appellants, Mr. Pathak, contends that the 1st respondent had become a partner of the firm by reason of the fact that he had not elected not to become a partner of the firm under section 30(5) of the Patnership Act and, therefore, he was liable to be adjudicated insolvent along with his other partners.
The question turns upon the relevant provisions of the, (5 of 1920) and the .
Under the provisions of the , a person can only be adjudicated insolvent if he is a debtor and has committed an act of insolvency as defined in the Act: see sections 6 and 9.
In the instant case respondents 2 and 3 were partners of the firm and they be came indebted to the appellants and they committed an act of insolvency by declaring their inability to pay the debts .and they were, therefore, rightly adjudicated insolvents But the question is whether the first respondent could also be adjudicated insolvent on the basis of thE said acts of insolvency committed by respondents 2 and 3.
He could be, if he had become a partner of the firm.
It is contended that he had become a partner of the firm, because lie did not exercise his option not to become a partner thereof under section 30(5) of the Partnership Act.
Under section 30(1) of the Partnership Act a minor cannot become a partner of a firm but he may be admitted to the benefits of a partnership.
Under sub sections
(2) and (3) thereof he will be entitled only to have a right to such share of the properties and of the profits of the firm as may be agreed upon, but he has no personal liability for any acts of the firm, though his share is liable for the same.
The legal position of a minor who is admitted to a partnership has been succinctly stated by the Privy Council in Sanyasi Charan Mandal vs Krishnadhan Banerji(1) after considering the material provisions of the Contract Act, (1)[1922] I.L.R. , 570. 237 which at that time contained the provisions relevant to the law of partnership, thus : "A person under the age of majority cannot become a partner by contract. . . . and so according to the definition he cannot be one of that group of persons called a firm.
It would seem, therefore, that the share of which section 247 speaks is no more than a right to participate in the property of the firm after its obligations have been satisfied.
" It follows that if during minority of the 1st respondent the partners of the firm committed an act of insolvency, the minor could not have been adjudicated insolvent on the basis of the said act of insolvency for the simple reason that he was not a partner of the firm.
But it is said that sub section
(5) of section 30 of the Partnership Act made all the difference in the case.
Under that sub section the quondam minor at any time within six months of his attaining majority, or of his obtaining knowledge that he had been admitted to the benefits of partnership, whichever date is later, may give public notice that he has elected to become or that he has elected not to become a partner in the firm and such notice shall determine his position as regards the firm.
If he failed to give such a notice, he would become a partner in the said firm after the expiry of the said period of six months.
Under sub section
(7) thereof where such person becomes a partner, his rights and liabilities as a minor continue up to the date on which he becomes a partner, but he also becomes personally liable to third parties for all acts of the firm done since he was admitted to the benefits of partnership and his share in the property and profits of the firm shall be the share to which he was entitled as a minor.
Under the said two sub sections, if during the continuance of the partnership a person, who was admitted at the time when he was a minor to the benefits of the partnership, did not within six months of his attaining majority elect not to become a partner, he would become a partner after the expiry of the said period and thereafter his rights and liabilities would be the same as those of the other partners as from the date he was admitted to the partnership.
238 It would follow from this that the said minor would there after be liable to the debts of the firm and could be adjudicated insolvent for the acts of insolvency committed by the partners.
But in the present case the partnership was dissolved before the first respondent became a major; from the date of the dissolution of the partnership, the firm ceased to exist, though under section 45 of the Act, the partners continued to be liable as such to third parties for the acts done by any of them which would have been the acts of the firm if done before the dissolution until public notice was given of the dissolution.
Section 45 proprio vigore applies only to partners of the firm.
When the partnership itself was dissolved before the first respondent became a major, it is legally impossible to hold that he had become a partner of the dissolved firm by reason of his inaction after he became a major within the time prescribed under section 30(5) of the Partnership Act.
Section 30 of the said Act presupposes the existence of a partnership.
Sub sections (1), (2) and (3) thereof describe the rights and liabilities of a minor admitted to the benefits of partnership in respect of acts committed by the partners; sub section
(4) thereof imposes a disability on the minor to sue the partners for an account or payment of his share of the property or profits of the firm, save when severing his connection with the firm.
This sub section also assumes the existence of a firm from which the minor seeks to sever his connection by filing a suit.
It is implicit in the terms of sub section
(5) of section 30 of the Partnership Act that the partnership is in existence.
A minor after attaining majority cannot elect to become a partner of a firm which ceased to exist.
The notice issued by him also determines his position as regards the firm.
Sub section
(7) which describes the rights and liabilities of a person who exercises his option under sub section
(5) to become a partner also indicates that he is inducted from that date as a partner of an existing firm with co equal rights and liabilities along with other partners.
The entire scheme of section 30 of the Partnership Act posits the existence of a firm and negatives any theory of its application to a stage when the firm ceased to exist.
One cannot become or remain a partner of a firm that does not exist.
It is common case that the first respondent became a major only after the firm was dissolved.
Section 30 of the 239 Partnership Act, therefore, does not apply to him.
He is not a partner of the firm and, therefore, he cannot be adjudicated insolvent for the acts of insolvency committed by respondents 2 and 3, the partners of the firm.
The order of the High Court is correct.
In the result, the appeal fails and is dismissed with costs.
Appeal dismissed. | The respondent No. 1 while he was a minor was admitted to the benefits of a partnership constituted of respondents 2 and 3.
The partnership owed a certain amount to the appellants.
The partnership was dissolved and subsequently respondent No. 1 became a major but he did not exercise the option not to become a partner under section 30(5) of the .
Respondents 2 and 3 committed acts of insolvency and the appellants filed an application for adjudicating the three respondents as insolvents.
The first respondent resisted the application without success but on second appeal the High Court held that he was not a partner of the firm and hence he could not be adjudicated an insolvent for the debts of the firm.
The present appeal was filed on a certificate granted by the High Court.
The appellant contended before this Court that the 1st respondent had become a partner of the firm by reason of the fact that he had not elected to become a partner under a. 30(5) of the Partnership Act and therefore he was liable to be adjudicated an insolvent.
Held:(i) A person under the age of majority cannot become a partner by contract and he cannot be one of that group of persons called a firm.
It therefore follows that if during minority of the 1st respondent the partners of the firm committed an act of insolvency, the minor could not have been adjudicated insolvent on the basis of the said act of insolvency for the simple reason that he was not a partner of the firm.
Sanyasi Charan Mandal vs Krishnadhan Banerji, (1922) I.L.R. , relied on.
(ii)It is implicit in the terms of sub section
(5) of section 30 of the Partnership Act that the partnership is in existence,.
A minor, after attaining majority, cannot elect to become a partner of a firm which ceased to exist.
The entire scheme of section 30 of the Partnership Act posits the existence of a firm and negatives any theory of its application to a stage when the firms ceased to exist.
(iii)Since the 1st respondent became a major after the partnersship was dissolved section 30 of the Partnership Act does not apply to him.
He is not a partner of the firm and therefore he cannot be adjudicated insolvent for the acts of insolvency committed by respondents 2 and 3, the partners of the firm. |
minal Appeal Nos.
87 91 of 1964.
Appeal by special leave from the judgment and order dated January 18, 1964, of the Judicial Commissioner 's Court for Tripura in Criminal Misc.
(Habeas Corpus) Petitions Nos. 15, 20, 25, 26 and 28 of 1963, and Habeas Corpus Petitions Nos. 24 and 27 of 1963.
AND Writ Petitions Nos. 43, 42, 40, 41, 65 and 80 of 1964.
Petition Under article 32 of the Constitution of India for the enforcement of the fundamental rights.
R. K. Garg, section C. Agarwala, D. P. Singh and M. K. Ramamurthi, for the appellants and petitioners in all.
H. N. Sanyal, Solicitor General, D. R. Prem and R. H. Dhebar, for the respondents (Except Respondent No. 2 in W.P. 43 of 1964).
D. Goburdhun, for respondent No. 2 (in W.P. 43 of 1 964).
July 23, 1964, The Judgment of the Court was delivered by GAJENDRAGADKAR C. J.
These Criminal Appeals and Writ Petitions have been placed for hearing together in a group because they raise common questions of law.
As is well known, after the Chinese attacked the northern border of India on the 8th September, 1962, the President issued a Proclamation under article 352 of the Constitution on the 26th October, 1962.
This proclamation declared that a grave emergency existed which posed a threat to the security of India.
On the same day, an Ordi 297 nance was promulgated by the President.
This Ordinance was subsequently modified by Ordinance No. 6 of 1962 on the 3rd of November, 1962.
The President also issued an Order tinder article 359(1) suspending the rights of citizens to move any court for the enforcement of the rights conferred by Articles 21 and 22 during the pendency of the emergency proclamation.
On the 26th October, 1962, the Rules framed by the Central Government under the Defence of India Act (hereinafter called 'the Rules ') were published.
Rule 30 of the Rules as originally framed was subsequently modified on the 6th December, 1962 and Rule 30 A was added.
Later, an Act was passed on the 12th December, 1962, and section 48(1) of this Act provided for the repeal of the earlier Ordinances.
Even so, section 48(2) provided for the continuance of the Rules framed under the Ordinances, so that the relevant Rules framed under the Ordinances have to be taken as Rules framed under the latter Act.
It appears that Mr. Mukerjee who was the Administrator of the Union Territory of Tripura at the relevant time, considered the material placed before him as such Administrator and was satisfied that a group of Communists had been agitating amongst the tribals residing in the area and inciting them against the Government, and he came to the conclusion that their activities were likely to endanger the security of the State.
Acting on this view, he directed that 68 persons should be detained under Rule 30(1)(b) and passed appropriate orders in that behalf.
Later, lie was satisfied that 45 out of these 68 persons need not be detained any longer; and so, he ordered their release from time to time.
That left 23 persons under detention and it is with the cases of these 23 persons that we are concerned in the present group if criminal appeals and writ petitions.
12 out of these 23 persons moved the Judicial Commissioner of Tripura under article 226 of the Constitution and prayed that the orders of detention under which they continued to be detained at the time of their petitions were illegal and should be set aside and they should be ordered to be released forthwith.
These applications were heard 298 together by the learned Judicial Commisioner and were ultimately dismissed.
Against his decision, Criminal Appeals Nos. 87 91 of 1964, and 106 and 107 of 1964 have been filed by the detenues, with special leave granted to them by this Court on petitions made by them in that behalf.
It appears that the detenues Mohan Chaudhury and Jagabrata Sen Gupta who have joined in Cr.
Nos. 87 91/1964, have also preferred separate criminal appeals Nos. 106 and 107/1964 individually.
That is how this group of appeals is concerned with the cases of 12 detenues who had moved the Judicial Commissioner under article 226; and their grievance is that the view taken by the Judicial Commissioner in regard to the points of law raised by them before him, is not correct.
The Writ Petitions deal with cases of 11 remaining detenues and they joined the detenues who have preferred appeals before us by special leave in contending that the continuance of their detention is invalid and that a similar plea raised by the appellants before the Judicial Commis sioner should have been upheld by him.
That is how the criminal appeals and the writ petitions between them raise common questions of law.
Mr. Garg who appeared for the appellants and the petitioners, as well as the learned Solicitor General who appeared for the respondent, the Chief Commissioner of Tripura, agreed that it would not be necessary to consider the facts in each individual case for the purpose of decid ing the common questions of law raised by them.
It would be enough if we refer to the facts in one case, because facts in other cases are exactly similar and there would be no point of distinction on facts as such.
We would, therefore, refer to the facts relevant to the case of the detenu Biren Dutta.
Biren Dutta was detained on the 25th December, 1962, and an order issued in that behalf was duly served on him.
On the 26th December, 1962, he was transferred to the Hazaribagh Jail.
The respondent 's case is that on the 15th February, 1963, the case of Biren Dutta was reviewed under R. 30A(8) and it was decided to continue his deten 299 tion.
Subsequently, his case was reviewed on the 3rd July, 1963, 5th September, 1963, and 11th March, 1964, and on each occasion, it was decided to continue his detention.
On the other hand, Biren Dutta 's contention before the Judicial Commissioner was that an order of review had not been passed as required by R. 30A(8) and had not been communicated to him.
It was urged on his behalf that Rule 30A(8) requires that the decision to continue the detention of a detenu must be reduced to writing and must be communicated to the detenu, and the argument was that since these two conditions prescribed by the relevant Rule had not been complied with, the continuance of the detenu 's detention was invalid in law.
The Judicial Commissioner has negatived the contentions thus raised by the detenu.
He has found that the decision to continue the detenu 's detention reached by the respondent under R. 30A(8) had in fact been reduced to writing, and in support of this contention, he has referred to the fact that the original file containing a record of the decision had been produced on behalf of the respondent before the Judicial Commissioner, but since the respondent 's learned Advocate was apparently not prepared to allow the lawyer of the detenu inspection of the said record, the court did not consider the evidence supplied by it.
The argument urged by the detenu that the said record may have been subsequently manufactured was rejected by the Judicial Commissioner.
The Judicial Commissioner also considered the fact that the affidavit made on behalf of the respondent showed that when the cases of the detenues were considered by him from time to time, he actually ordered the release of some of them.
This fact, according to the Judicial Commissioner, showed that the respondent had applied his mind to the cases of all the detenues and since he released some of them, it followed that in regard to the rest he was satisfied that their detention should be continued.
The Judicial Commissioner was apparently inclined to take the view that the relevant Rule did not seem clearly to require that the decision reached by the appropriate authority under R. 30A(8) should be reduced to writing, but he thought it unnecessary to make a definite finding 300 on this issue, because he was satisfied that in the case of Biren Dutta, the decision in question had been reduced to writing.
The argument that R. 30A(8) requires that the said decision should be communicated to the detenu was rejected by the learned Judicial Commissioner.
It is on these findings that he rejected the petition filed by Biren Dutta and 11 other detenues and held that the continuance of their detention was justified in law.
When these matters were argued before this Court on the 6th May, 1964, an interim order was passed directing that the Chief Secretary to the Tripura Administration should forthwith transmit to this Court the original files in respect of the detenues concerned and that the Minister, or the Secretary or the Administrator who reviewed the cases of the detenues and had arrived at a decision that their detention should be continued, should file an affidavit in this Court on or before the 8th June, 1964, and that the affidavit should state all material facts and should indicate whether the decision arrived at was duly communicated to the detenues or not.
Accordingly, the original files have been produced before us and additional affidavits have been filed.
The learned Solicitor General fairly conceded that he would allow Mr. Garg for the appellants an opportunity to inspect the files inasmuch as he was not going to raise any question of privilege in respect of theme.
It is in the light of the minutes made on these files that the principal points raised before us now fall to be considered.
Mr. Garg contends that the scheme of the Rules clearly shows that the original order of detention passed under R. 30(1)(b), as well as the decision to continue the detention of the detenues reached by the appropriate authority under R. 30A(8) must be recorded in writing and must comply with the provisions of article 166 of the Constitution.
He also urges that R. 30A(8) further requires that the relevant decision reached by the appropriate authority must be communicated to the detenu.
In support of his argument that the relevant decision under R 30A(8) must comply with article 166 and must be communicated to the detenu, Mr. Garg has relied on the ,decision of this Court in Dattatreya Moreshwar Pangarkar 301 vs The State of Bombay(1), and Bachhittar Singh vs State of Punjab(1).
He has also invited our attention to the observations made by Raghubar Dayal J. in section Partap vs State of Punjab(1).
The learned Solicitor General has conceded that the order directing the detention of a citizen under R. 30(1) (b), as well as the order incorporating the decision to continue the detention under R. 30A(8) must be in writing.
He, however, challenges the correctness of Mr. Garg 's contention that these orders must comply with article 166, and he disputes his case that the decision reached under R. 30A (8) must be communicated to the detenu.
In support of his case he has referred us to the decision of this Court in Mohammad Afzal Khan vs State of Jammu and Kashmir(4), as well as the decision of the Bombay High Court in Pralhad Krishna Kurne vs The State of Bombay(1) and that of the Allahabad High Court in Nandan Singh Bhist vs State of U.P.(6).
We do not think it necessary to consider the question as to whether the orders passed under R. 30(1) (b) and the record of the decision reached under R.30A(8) should comply with article 166 of the Constitution or not.
It also appears to us to be unnecessary to decide in the present group of cases whether the decision recorded under R. 30A(8) should be communicated to the detenu.
We are satisfied that the decision to continue the detention of the detenues which, it is urged on behalf of the respondent, was reached by him under R. 30A(8), has not been recorded in writing as required by the said Rule; and there is no other evidence on record to show that such a decision had then been reached and reduced to writing.
It will be recalled that in the present proceedings, it is common ground between the parties that there has to be an order in writing indicating the decision of the appropriate authority reached by him after reviewing the case of the detenu that the continuance of his detention should be ordered.
Rule 30A(8) provides that every detention order made by an (1) ; ,(2) [1962] SUPP.
3 S.C.R. 713 (3) ; (5) I.L.R. 1952 Bom.
134(6) A.I.R. 1964 All. 327 302 officer empowered by the Administrator and confirmed by him under clause (b) of the sub rule (6) and every detention order made by the Administrator himself shall be reviewed at intervals of not more than six months by the Administrator who shall decide upon such review whether the order should be continued or cancelled.
The question which we have to decide is whether it is shown by the minutes made on the file produced before us by the respondent that he did decide that it was necessary to continue the detention of the detenues before us.
The minutes made on the file are no doubt a written record of his decision, and so, the requirement that whatever is decided under R. 30A(8) should be reduced to writing is satisfied; but the question is do these minutes show that the cases of the detenues before us were considered and a decision to continue their detention was reached by the respondent on the relevant occasion, and that presents a very narrow problem for our decision in relation to the construction of the said minutes.
The first occasion on which the respondent claims to have reviewed the cases of the detenues before us was on the 15th February, 1963.
On that date, he made the following order: "On review of the detention order in respect of all detenus CC decided to cancel detention orders in respect of detenues at section No. 1, 3, 4, 5, 6, 7, 8, 9, 12 and 13.
" It is urged by the learned Solicitor General that this order shows that the appropriate authority considered the cases of all the detenues and decided to cancel the detention of some of them, and that, he suggests, should be construed to mean that he decided to continue the detention of detenues other than those whose release he ordered.
There is no doubt that this order makes a reference to the review of all detenues and, prima facie, it would be open to the Solicitor General to contend that this part of the order shows that the cases of all the 68 detenues must have been considered by the appropriate authority.
In this connection.
we would like to emphasise the fact that in exercising its power under 303 R. 30A(8), the appropriate ' authority should record its decision clearly and unambiguously.
After all, the liberty of the citizen is in question and if the detention of the detenue is intended to be continued as a result of the decision reached by the appropriate authority, it should say so in clear and unambiguous terms.
But assuming that an ,order passed by the appropriate authority under R. 30A(8) can in a proper case be construed to mean his implied decision to continue the detention of some detenues, while releasing some others, we find it difficult to hold that such an implied decision can be inferred from the present order.
It is relevant to remember that this order was passed on the 15th February, 1963, and the six months ' period within which review had to be made under R. 30A(8) would have expired on the 25th June, 1963.
It is quite likely that even before the six months period expired, the authority considered the matter and came to the conclusion that any further detention of the detenues specified in the order was not justified, and so, even before the, six months ' period expired, he directed that they should be released.
That undoubtedly shows that the authority was considering the question very carefully and as soon as he felt satisfied that further detention of the said detenues would be unnecessary, he ordered their release forthwith; but this very consideration suggests that he may have considered the cases of only such detenues as should be released forthwith.
Besides, there is nothing to show that after the 15th February, 1963, and before the 25th June, 1963, he considered the matter in respect of the detenues before us and held that the continuance of their detention was justified after the expiration of six months.
It is necessary to emphasise that the decision recorded under R. 30A(8) is in the nature of an independent decision which authorises the further detention of the detenu for a period of six months.
In other words, the initial order of detention is valid for six months and the detention of the detenu thereafter can be justified only if a decision is recorded under R. 30A(8).
That being the nature of the decision which is required to be recorded under R. 30A(8), we are unable to hold that the memorandum in question can be reasonably said to include a decision that the continuance of the detention of the 304 detenues before us was thought to be necessary by the appro priate authority after the expiry of the period of six months.
It is true that in the additional affidavit filed by the respondent it has been stated as a submission by him that as a result of the said review (15/2/63) the detention of Biren Dutta as well as others whose detention orders were not cancelled, continued.
" This undoubtedly is a matter of argument; it being the respondent 's contention that since the order detaining some detenues was cancelled, logically it follows that the detention of the others was ordered to continue.
But even assuming that the respondent had stated in his additional affidavit clearly and unambiguously that he had decided on the 15th February, 1963, that the detention of the detenues before us should be continued, we would not have attached much significance to such a state ment, because what we have to consider is the order passed on the 15th February, 1963, and not what the authority making the order thought it meant or intended it to mean; and so, it comes back to the question of the construction of the order itself.
We have carefully considered the argu ments urged before us by the Solicitor General, but we are unable to hold that this order can be said to satisfy the requirements of R. 30A(8) at all.
We are satisfied that this order cannot be construed to contain a written record of the decision of the respondent that the detention of the detenues before us should be continued after the expiry of six months from the date of the original order of detention.
Then as to the next order passed on the 3rd July, 1963, the position is still worse.
It appears that on the 15th May, 1963, the Superintendent of Police, Tripura recommended that some of the detenues should be released, because he thought there was no longer any justification for their continued detention.
This matter was discussed between the Superintendent of Police and the Chief Secretary on the 6th June, 1963, and eventually as a result of the conference held between the Chief Minister and the Chief Commissioner an order was passed on the 3rd July, 1963.
This order shows that the cases of the persons whose release had been recommended by the Superintendent of Police were considered.
These detenues were 25 in 305 number.
During the course of the discussion between the Chief Minister and the Chief Commissioner, the Chief Minister appears to have suggested that instead of releasing all the aforesaid 25 detenues together it would be better if they were released in batches, but ultimately, the order passed by the Chief Minister which was assented to by the Chief Commissioner was that all of them may be released at the same time on the 6th July, 1963.
In other words, reading the letter written by the Superintendent of Police to the Chief Commissioner on the 15th May, 1963, and the record of the discussion that took place between the Chief Secretary, the Chief Minister and the Chief Commissioner on the 3rd July, 1963, it is clear that the only cases which the authorities considered were the cases of 25 detenues whose release had been recommended by the Superintendent of Police.
It is common ground that the detenues before us were not included in the said list of 25 detenues, and so, there is no scope for suggesting that at this time the cases of the detenues other than those who were released were concerned.
That being so, we must hold that like the earlier order passed on the 15th February, 1963, the order passed on the 3rd July, 1963, is also of no assistance to the respondent, because neither order can be reasonably construed as containing a decision of the appropriate authority reached under R. 30A(8) to continue the detention of the detenues before us.
This conclusion necessarily means that the requirement of R. 30A(8) has not been complied with and that inevitably makes the continuance of the detention of the detenues before invalid in law.
The fact that those cases were reviewed subsequently on the 25th September, 1963 and 11th March.
1964, and the decision of the authority was in fact communicated to them would not validate the illegal continuance of the detention of the detenues after six months had expired from the date of their original detention.
We have already indicated that we do not propose to consider in these proceedings the two other points of law urged by Mr. Garg but before we part with these matters, we would like to emphasise that even assuming that the decision recorded by the appropriate authority under 51 S.C.20.
306 R. 30A(8) is not, as a matter of law, required to be com municated to the detenu, it is desirable and it would be fair and just that such a decision should in every case be communicated to the detenu.
If the appropriate authority considers the question about the continuance of the deten tion of a particular detenu and decides that such continu ance is justified, we see no justification for failing to communicate the said decision to the detenu concerned.
If the requirement as to such communication were held to be necessary as a matter of law, non communication would render the continuance of the detention invalid; but that is a matter which we are not deciding in these cases.
We are only emphasising the fact that it would be fair that such a decision should be communicated to the detenu.
In the result, the appeals and writ petitions are allowed and the detenues concerned ordered to be set at liberty at once.
Appeals and Writ Petitions allowed. | The Administrator of the Union Territory of Tripura passed orders detaining 68 persons, including the appellants and the petitioners, under R. 30(1)(b) of the Defence of India Rules, 1962.
While gradually releasing 45 of them he purported to detain the appellants and the petitioners under R. 30A(8) of the said Rules.
The appellants moved the Judicial Commissioner under article 226 of the Constitution and their case was that the decision to continue them in detention was not recorded in writing nor was it communicated to them and was, therefore, invalid in law.
The Judicial Commissioner dismissed the said applications.
The petitioners moved this Court under article 32 of the Constitution and their case was also the same.
The first review held on February 15, 1963, in respect of all the 68 detenus was recorded as follows, "On review of the detention order in respect of all the detenus CC.
decided to cancel orders in respect of detenus at section Nos. 1, 3, 4, 5, 6, 7, 8, 9, 12 and 13.
" It was urged on behalf of the respondent that the order by implication continued the detention of the appellants and the petitioners and such detention was confirmed by subsequent orders.
Held: (i) The order did not comply with the provisions of R. 30A(8) of the Defence of India Rules and the detenus before this Court must be set at liberty.
Decision to continue a detenu in detention must not only be recorded in writing but such writing must clearly and unambiguously indicate that decision.
Subsequent reviews under the Rule could not validate the illegal continuance of the detention after the expiry of six months from the date of the original order of detention.
Decision recorded under R. 30A(8) is in the nature of an independent decision and further detention can be justified only if the decision is recorded as required by it.
296 Even assuming that an order passed under R. 30A(8) could in a proper case imply the decision to continue the detention of some of the detenus, the present case could not be said to be one such.
(ii) Assuming, though not deciding, that a decision recorded under R. 30A(8) of the Rules was not in law required to be communicated to the detenue, it was just and proper that the decision should in every case be communicated to the detenu. |
ivil Appeal No. 3129of 1988 From the Judgment and Order dated 7.7.1987 of the Patna High Court in Civil Revision No. 128 of 1987 (R).
R.K. Jain, Rakesh K. Khanna and R.P. Singh for the Appellant.
R.N. Sachthey and Anip Sachthey for the Respondents.
The following Order of the Court was delivered: ORDER Special leave granted.
The appellant is an employee in the Balihari Colliery of the Respondent No. 1 and in 1986 was working as an electrical helper.
On the allegation that he physically assaulted a supervising officer by name S.K. Mandal, he was subjected to disciplinary proceedings as also a criminal prosecution.
Since the disciplinary proceeding as also the criminal trial were taken simultaneously, the appellant filed a civil action in the court of Munsif at Dhanbad asking for injunction against the disciplinary action PG NO 823 pending criminal trial.
On 6.12.1986, the Munsif made an order staying further proceedings in the disciplinary action till disposal of the criminal case.
The appeal of the Respondent No. 1 against the order of learned Munsif was dismissed on 31st March, 1987, by the appellate court.
Thereupon the Respondent No. 1 moved the High Court in its revisional jurisdiction.
The High Court by its order dated 7.7.1987 held: "First information report was lodged against the opposite party (appellant) and the same was pending before the competent court.
Meanwhile the petitioners (respondents) started departmental proceeding against the opposite party.
The opposite party filed a suit before the trial court for declaration that appointment of the Enquiry Officer was illegal and for restraining the petitioners permanently from continuing with the departmental proceeding during the pendency of the criminal case.
That was allowed by the trial court and confirmed by the lower court.
There is no bar for an employer to proceed with the departmental proceeding with regard to the same allegation for which a criminal case is pending.
I am, therefore, of the opinion that the courts below were wrong in granting injunction in favour of the opposite party.
In the result, this application is allowed and the order impugned is set aside.
" According to Mr. Jain for the appellant, the legal position settled by this Court supported the stand that the disciplinary action had to be stayed till the criminal case was over.
He relied upon the decisions in The Delhi Cloth and General Mills Ltd. vs Kushal Bhan, ; and Tata Oil Mills Co. Ltd. vs Its Workmen, ; He also referred in the course of his submission to the decisions of different High Courts in support of his propositions.
Two cases out of the several ones of the High Courts he relied upon are Khusi Ram vs Union of India, and Project Manager, ONGC vs Lal Chand Wazir Chand Chandna, Pathak CJ., as he then was, In the Himachal case indicated that fair play required the postponing of the criminal trial and Thakkar J. as our learned brother then was in the Gujarat case had also taken a similar view.
PG NO 824 We would like to point out that there are also authorities in support of the position that there is nothing wrong in parallel proceedings being taken one by way of the disciplinary proceeding and the other in the criminal court.
Reference may be made to decision of this Court in Jang Bahadur Singh vs Baij Nath Tiwari, [1969] I SCR 134 and some decisions of High Courts such as Rama P.C. vs Superintendent of Police, Kolar & Anr., AIR ; Ali Mohd. & Ors.
vs Chairman T.A. & C. Udhampur, ; Moulindra Singh vs The Deputy Commissioner & Ors., l564 and Shaikh Kasim vs Superintendent of Police Office, Chingletut, Mr. Jain contended that we should settle the law in a straight jacket formula as judicial opinion appeared to be conflicting.
We do not propose to hazard such a step as that would create greater hardship and individual situations may not be available to be met and thereby injustice is likely to ensue.
In the Delhi Cloth & General Mills ' case (supra), it was pointed out by this Court: "It is true that very often employers stay enquiries pending the decision of the criminal trial courts and that is fair; but we cannot say that principles of natural justice require that an employer must wait for the decision at least of the criminal trial court before taking action against an employee.
In Shri Bimal Kanta Mukherjee vs M/s. News man`s Printing Works, [l956l LAC 188, this was the view taken by the Labour Appellate Tribunal.
We may, however, add that if the case is of a grave nature or involves questions of fact or law, which are not simple, it would be advisable for the employer to await the decision of the trial court, so that the defence of the employee in the criminal case may not be prejudiced . " .
In Tata Oil Mills ' case (supra), Gajendragadkar, CJ, spoke for a three Judge Bench thus: "There is yet another point which remains to be considered.
The Industrial Tribunal appears to have taken the view that since criminal proceedings had been started against Raghavan, the domestic enquiry should have been stayed pending the final disposal of the said criminal PG NO 825 proceedings.
As this Court has held in the Delhi Cloth and General Mills Ltd. vs Kushal Bhan, it is desirable that if the incident giving rise to a charge framed against a workman in a domestic enquiry is being tried in a criminal court, the employer, should stay the domestic enquiry pending the final disposal of the criminal case . .".
In Jang Bahadur 's case (supra) this Court said: "The issue in the disciplinary proceedings is whether the employee is guilty of the charges on which it is proposed to take action against him.
The same issue may arise for decision in a civil or criminal proceeding pending in a court.
But the pendency of the court proceeding does not bar the taking of disciplinary action.
The power of taking such action is vested in the disciplinary authority.
The civil or criminal court has no such power.
The initiation and continuation of disciplinary proceedings in good faith is not calculated to obstruct or interfere with the course of justice in the pending court proceeding.
The employee is free to move the court for an order restraining the continuance of the disciplinary proceedings.
If he obtains a stay order, a wilful violation of the order would of course amount to contempt of court.
In the absence of a stay order the disciplinary authority is free to exercise its lawful powers.
The view expressed in the three cases of this Court seem to support the position that while there could be no legal bar for simultaneous proceedings being taken.
yet, there may be cases where it would be appropriate to defer disciplinary proceedings awaiting disposal of the criminal case In the latter class of cases it would be open to the delinquent employee to seek such an order of stay or injunction from the Court.
Whether in the facts and circumstances of a particular case there should or should not be such simultaneity of the proceedings would then receive judicial consideration and the Court will decide in the given circumstances of a particular case as to whether the disciplinary proceedings should be interdicted, pending criminal trial As we have already stated that it is neither possible nor advisable to evolve a hard and fast, straight jacket formula valid for all cases and of general application without regard to the particularities of the individual situation.
For the disposal of the present case, we do not think it necessary to say, anything more, particularly when we do not intend to lay down any general guideline.
PG NO 826 In the instant case, the criminal action and the disciplinary proceedings are grounded upon the same set of facts.
We are of the view that the disciplinary proceedings should have been stayed and the High Court was not right in interfering with the trial court 's order of injunction which had been affirmed in appeal.
The appeal is allowed and the order of the High Court is vacated and that of the trial court as affirmed in appeal is restored.
The appellant shall be entitled to costs.
Hearing fee is assessed at Rs.2,000.
We would like to point out that for the first time in this Court, the enquiry report in the disciplinary proceedings was produced.
We express no view about it.
M.L.A. Appeal allowed. | The appellant, an employee of Respondent No. 1, was subjected to disciplinary proceedings as also a criminal prosecution simultaneously on the allegation that he physically assaulted a supervising officer.
He filed a civil action in the trial court asking for injunction against the disciplinary action pending criminal trial.
The trial court stayed further proceedings in the disciplinary action till disposal of the criminal case.
In appeal, the appellate court affirmed the aforesaid order.
However, the High Court allowed the Revision Application of the Respondent and set aside the impugned order on the ground that there is no bar for an employer to proceed with the departmental proceeding with regard to the same allegation for which a criminal case is pending.
Allowing the appeal to this Court, HELD: l.
The order of the High Court is vacated and that of the trial court as affirmed in appeal is restored.
The criminal action and the disciplinary proceedings were grounded upon the same set of facts.
The disciplinary proceedings should have been stayed and the High Court was not right in interfering with the trial court 's order of injunction which had been affirmed in appeal.
[826A B] 2(i) While there could be no legal bar for simultaneous proceedings being taken, yet, there may be cases where it would be appropriate to defer disciplinary proceedings awaiting disposal of the criminal case.
In the latter class of cases it would be open to the delinquent employee to seek such an order of stay or injunction from the court.
[825E F] 2(ii) Whether, in the facts and circumstances of a particular case, there should or should not be such simultaneity of the proceedings would then receive judicial consideration and the Court will decide in the given circumstances of a particular case as to whether the PG NO 821 PG NO 822 disciplinary proceedings should be interdicted, pending criminal trial.
[825F G] The Delhi Cloth and General Mills Ltd. vs Kushal Bhan, ; ; Tata Oil Mills Co. Ltd. vs Its Workmen, ; and Jung Bahadur Singh vs Baij Nath Tiwari, ; , relied upon.
Rama P. C. vs Superintendent of Police, Kolar & Anr., AIR ; Ali Mohd. & Ors.
vs Chairman T.A. & C. Udhampur, ; Moulindra Singh vs The Deputy Commissioner & Ors., 1564; Shaikh Kasim vs Superintendent of Post Office, Chingletut, AIR 1965 Mad. 502; Khusi Ram vs Union of India, and Project Manager, ONGC vs Lal Chand Wazir Chand Chandna, , referred to.
It is neither possible nor advisable to evolve a hard and fast, straight jacket formula valid for all cases and of general application without regard to the particularities of the individual situation. |
Appeal No. 216 of 1956.
Appeal by special leave from the judgment and decree dated August 28, 1950, of the Punjab High Court in Civil Regular First Appeal No. 343 of 1944.
L.K. Jha, K. P. Bhandari and Harbans Singh, for the appellants.
Darya Datt Chawla for respondent Nos.
1(i) to (iii).
February 9.
The Judgment of the Court was delivered by GAJENDRAGADKAR, J.
This appeal by special leave arises from a partition suit filed by Baij Nath against his other coparceners.
Baij Nath is the son of Behari Lal and he had four brothers Kidar Nath, Raghunath Sahai, Jagan Nath and Badri Nath.
Kidar Nath was dead at the time of the suit, and his branch was represented by his five sons Ghansham Lal, Shri Ram, Hari Ram, Tirath Ram and Murari Lal, who were impleaded as defendants 1 to 5 respectively.
On the death of Ghansham Lal pending the Suit his two minor sons Jai Pal and Chandar Mohan were brought on the record as his legal representatives and their mother Mst.
Kaushalya was appointed guardian ad item.
The two minors are the appellants before us.
Chuni Lal, the son of Raghunath Sahai was defendant 6, Bal Kishan and Hari Kishan the two sons of Jagan Nath were defendants 7 and 8, and Badri Nath was defend.
ant 9.
Baij Nath 's case was that the family was undivided and he wanted a partition of his share in the family properties, and so in his plaint he claimed appropriate reliefs in that behalf.
The several defendants made out pleas in respect of the claims made by Baij Nath, but for the purpose of this appeal it is unnecessary to refer to the said pleas.
The suit wail instituted on Juno 11, 1941, 771 It appears that by consent of parties a preliminary decree was drawn by the trial court on October 30, 1941, but the validity of this decree was successfully challenged by an appeal to the Lahore High Court.
It was held by the High Court that all parties had not joined in the compromise and so the preliminary decree could not be sustained.
In the result the said decree was set aside and the case was remanded for trial.
It further appears that after remand parties again came together and by consent requested the court to pass a preliminary decree once again.
This was done on October 15, 1943.
This preliminary decree specified the shares of the respective parties and left three outstanding issues to be determined by Chuni Lal, defendant 6, who it was agreed should be appointed Commissioner in that behalf.
Pursuant to this preliminary decree the Commissioner submitted his interim report on November 19,1943, and his final report on November 29, 1943.
On receipt of the reports the trial court gave time to the parties to consider the said report which had been explained to them.
Parties wanted time and so the case was adjourned.
Since the property in dispute was valuable and the parties were unable to make up their minds about the said reports further time was granted to them by the court to consider the matter.
Ultimately, when parties did not appear to come to any settlement about the reports the case was adjourned to December 17, 1943, for objections to be filed by the parties.
Tirath Ram, defend ant 4 alone filed objections; nobody else did.
The said objections were considered by the court in the light of the evidence which had been led and a final decree was drawn on June 21, 1944.
Against this decree an appeal was preferred by the appellants before the High Court of Punjab, and it was urged on their behalf that the preliminary decree was invalid in that at the time of passing the said decree the court had failed to comply with the mandatory provisions of 0. 32, r. 7 of the Code of Civil Procedure.
The High Court did not allow the appellants to raise, this point because it held that their 99 772 failure to make an appeal against the preliminary decree precluded them from challenging its correctness or validity under section 97 of the Code.
Certain other minor objections were raised by the appellants on the merits but they were also rejected.
In the result the appeal failed and was dismissed, but in view of the circumstances of the case the parties were directed to bear their own costs.
It is this decree that is challenged by the appellants in their present appeal by special leave; and the only point which has been urged by Mr. Jha on their behalf is that the High Court was in error in disallowing the appellants to challenge the validity of the preliminary decree in their appeal before it.
Mr. Jha contends that in dealing with the question about the competence of the plea raised by the appellants the High Court has misjudged the effect of the provisions of 0. 32, r. 7.
It is common ground that at the time when the preliminary decree was passed by consent and the appellants ' guardian Kaushalya Devi agreed to the passing of such a preliminary decree and to the appointment of Chuni Lal as Commissioner the appellants were minors and that leave had not been obtained as required by 0. 32, r. 7.
Order 32, r. 7(1) provides that no next friend or guardian for the suit shall without the leave of the court expressly recorded in the proceedings enter into any agreement or compromise on behalf of the minor with reference to the suit in which he acts as next friend or guardian.
It is also not disputed that the agreement which resulted in the drawing up of the preliminary decree and the appointment of Chuni Lal as Commissioner fell within the scope of this rule and that sanction required by the rule had not been recorded in the proceedings.
The argument is that the failure to comply with this mandatory provision of the rule makes the agreement and the preliminary decree void, and if that is so section 97 of the Code of Civil Procedure would be no bar in the way of the appellants challenging the validity of the decree at the appellate stage.
The effect of the failure to comply with 0. 32, r. 7(1) is specifically provided by 0, 32, r. 7(2) which says 773 that any such agreement or compromise entered into without the leave of the court so recorded shall be voidable against all parties other than the minor.
Mr. Jha reads this provision as meaning that the impugned agreement is voidable against the parties to it who are major and is void in respect of the minor; in other words, he contends that the effect of this provision is that the major parties to it can avoid it and the minor need not avoid it at all because it is a nullity so far as he is concerned.
In our opinion this contention is clearly inconsistent with the plain meaning of the rule.
What the rule really means is that the impugned agreement can be avoided by the minor against the parties who are major, and that it cannot be avoided by the parties who are major against the minor.
It is voidable and not void.
It is voidable at the instance of the minor and not at the instance of any other party.
It is voidable against the parties that are major but not against a minor.
This provision has been made for the protection of minors, and it means nothing more than this that the failure to comply with the requirements of 0. 32, r. 7(1) will entitle a minor to avoid the agreement and its consequences.
If he avoids the said agreement it would be set aside but in no case can the infirmity in the agreement be used by other parties for the purpose of avoiding it in their own interest.
The protection of the minors ' interest requires that he should be given liberty to avoid it.
No such consideration arises in respect of the other parties to the agreement and they can make no grievance or complaint against the agreement on the ground that it has not complied with 0. 32, r. 7(1).
The non observance of the condition laid down by r. 1 does not make the agreement or decree void for it does not affect the jurisdiction of the court at all.
The non observance of the said condition makes the agreement or decree only voidable at the instance of the minor.
That, in our opinion, is the effect of the provision of 0. 32, r. 7(1) and (2).
The question as to the procedure which the minor should adopt in avoiding such an agreement or decree has been the subject matter of several decisions, and 774 it has been held that a compromise decree may be avoided by the minor either by a regular suit or by an application for review by the court which passed the said decree.
The decision in Manohar Lal vs Jadu Nath Singh (1), is an illustration of a suit filed by the minor for declaration that the impugned decree did not bind him.
It is, however, not necessary for us to deal with this aspect of the matter in the present appeal any further.
In support of his argument that the failure to comply with the requirements of 0. 32, r. 7(1) makes the decree a nullity Mr. Jha has very strongly relied on the decision of the Privy Council in Chhabba Lal vs Kallu Lal (2).
In that case an objection to the validity of a reference to arbitration was taken by a party in an appeal against the decree passed on an award; and one of the points raised for the decision before the Privy Council was whether an appeal lay against the decree in question.
Under Schedule 2, paragraph 16(2) of the Code which was then in force it was provided that upon the judgment pronounced according to the award a decree shall follow and no appeal shall lie from such decree except in so far as it is in excess of or not in accordance with the award.
The argument urged against the competence of the appeal was that the objection against the validity of the reference and the award could and should have been raised under paragraph 15(1)(c) of the said Sche dule, and since such an objection had not been so raised and a decree was drawn in accordance with the award under paragraph 16, r. 1 no contention could be raised against the validity of the decree outside the terms of paragraph 16(2).
This argument was repelled by the Privy Council.
It was held that the objection against the validity of the reference based on the ground that the requirements of 0. 32, r. 7(1) had not been complied with did not fall within the purview of paragraph 15(1)(c).
The said paragraph specified the grounds on which an award could be challenged.
It provided that the award could be set aside if it was made after the issue of an order by the (1) (1906) L.R. 33 I A. 128.
(2) (1946) L.R. 73 I.A. 52.
775 court superseding arbitration and proceeding with the suit or if it was made after the expiration of the period allowed by the court, or if it was otherwise invalid.
It is on the last clause in paragraph 15(1)(c) that reliance was placed in support of the contention that the challenge to the validity of the reference should have been made under the said clause.
The Privy Council did not uphold this argument.
" In their opinion," observed Sir John Beaumont, who spoke for the Board, " all the powers conferred on the court in relation to an award on a reference made in a suit presuppose a valid reference on which an award has been made which may be open to question.
If there is no valid reference the purported award is a nullity, and can be challenged in any appropriate proceeding.
" It is on this last observation that Mr. Jha has naturally relied; but, in our opinion, the observation in question does not purport to be a decision on the interpretation of 0. 32, r. 7(2).
The context shows that the said observation was made in support of the decision that the challenge to the validity of the arbitration and the award could not have been made under paragraph 15(1)(c) and nothing more.
We are not prepared to extend this observation to cases like the present where the point in dispute is in regard to the interpretation of 0. 32, r. 7.
It is significant that while describing the award as a nullity the Privy Council has also added that it can be challenged in any appropriate proceeding which postulates the adoption of necessary proceedings to avoid the award.
The point for consideration by the Privy Council was whether a proceeding under paragraph 15(1)(c) was indicated or whether an appeal could be regarded as an appropriate proceeding; but it was assumed that a proceeding had to be adopted to challenge the award.
The decision of the Privy Council was that the validity of the award could be challenged by an appeal because it could not have been challenged under paragraph 15(1)(c).
Since it could not be challenged under paragraph 15(1)(c), according to the Privy Council paragraph 16(2) could not be invoked against the competence of the appeal.
It is unnecessary 776 for us to examine the merits of the said decision in the present appeal.
All that we are concerned to point out is that the observation in the judgment on which Mr. Jha relies cannot be treated as a decision on the interpretation of 0. 32, r. 7(2).
That question did not directly arise before the Privy Council and should not be treated as concluded by the observation in question.
As we have already pointed out, the words used in 0. 32, r. 7(2) are plain and unambiguous and they do not lend any support to the argument that non compliance with 0. 32, r. 7(1) would make the impugned decree a nullity.
Mr. Jha has also relied upon another decision of the Privy Council in Jamna Bai vs Vasanta Rao (1).
In that case two defendants of whom one was a minor compromised a suit pending against them, and in doing so entered into a bond by which they jointly agreed to pay a certain sum to the plaintiff at a future date.
The leave of the court was Dot obtained on behalf of the minor as required by section 462 of the Code of Civil Procedure, 1882, which was then in force.
When a claim was made on the said bond it was held that the bond was not enforceable against the minor but it was enforceable for the full amount against the joint contractor.
We do not see how this case assists the appellants.
It appears that Jamna Bai who was the joint contractor on the bond advanced the plea that one of the two promisers can plead the minority and consequent immunity of the other as a bar to the promise 's claim against him.
This plea was rejected by the Privy Council, and that would show that the bond which was executed in pursuance of a compro mise agreement was not treated as null and void but as being unenforceable against the minor ' alone.
In ,that connection the Privy Council observed that the minor 's liability could not be enforced in view of the fact that the requirements of section 462 of the Code had not been complied with.
Indeed, in the judgment an observation has been made that the Privy Council was not expressing any opinion as to whether the bond could be enforceable against a minor even if section 462 had (1) (1916) L.R.43 I.A.99. 777 been complied with.
Thus this decision is of no assistance to the appellants.
Similarly, the decision of the Privy Council in Khiarajmal vs Daim (1), can also be of no help to the appellants, because in that case all that the Privy Council decided was that a court has no jurisdiction to sell an equity of redemption unless the mortgagors are parties to the decree or the proceedings which lead to it, or are properly represented on the record.
In other words, if a minor is not properly represented on the record no order passed in the proceedings can bind him.
We are unable to see how this proposition has any relevance to the point which we are called upon to decide in the present appeal.
If the preliminary decree passed in the present proceedings without Complying with the provisions of 0.32, r. 7(1) is not a nullity but is only voidable at the instance of the appellants, the question is: can they seek to avoid it by preferring an appeal against the final decree ? It is in dealing with this point that the bar of section 97 of the Code is urged against the appellants.
Section 97, which has been added in the Code of Civil Procedure, 1908, for the first time provides that where any party aggrieved by a preliminary decree passed after the commencement of the Code does not appeal from such decree he shall be precluded from disputing its correctness in any appeal which may be preferred from the final decree.
It is urged for the appellants that an appeal is a continuation of the suit and so the appellants would be entitled to challenge the impugned preliminary decree as much by an application made in the suit itself as by an appeal preferred against the final decree passed in the said suit.
It is true that the proceedings in appeal can be regarded as a continuation of the proceedings in suit; but the decision of the question as to whether the appellants can challenge the said preliminary decree in their appeal against the final decree must in the present case be governed by the provisions of section 97 of the Code.
The whole object of enacting section 97 was to make it clear that any party (1) (1904) L.R. 32 I.A. 23. 778 feeling aggrieved by a preliminary decree must appeal against that decree; if he fails to appeal against such a decree the correctness of such a decree cannot be challenged by way of an appeal against the final decree, which means that the preliminary decree would be taken to have been correctly passed.
When section 97 provides that the correctness of the preliminary decree cannot be challenged if no appeal is preferred against it, it clearly provides that if it is not challenged in appeal it would be treated as correct and binding on the parties.
In such a case an appeal against the final decree would inevitably be limited to the points arising from proceedings taken subsequent to the preliminary decree and the same would be dealt with on the basis that the preliminary decree was correct and is beyond challenge.
It would be idle to contend that what is prohibited is a challenge to the factual correctness of the decree on the merits, because if the said decree is voidable, as in the present case, the very point as to its voidable character is a part of the merits of the dispute between the parties.
Whether or not 0. 32, r. 7(1) applies to the case would certainly be a matter of dispute in such a case and the object of section 97 is precisely to disallow any such dispute being raised if the preliminary decree is not challenged by appeal.
The whole object which section 97 intends to achieve would be frustrated if it is held that only the factual correctness of the decree cannot be challenged but its legal validity can be even though an appeal against the preliminary decree has not been filed.
Therefore, in our opinion, the High Court was right in coming to the conclusion that it was not open to the appellants to challenge the validity of the preliminary decree in the appeal which they had preferred against the final decree before the said High Court. | Order 32, r. 7(2) of the Code of Civil Procedure, which is intended to protect the interest of the minor, really means that an agreement or compromise entered into on behalf of the minor in contravention of 0. 32, r. 7(1) is voidable only at the instance of the minor and not at the instance of any other party to it.
Such contravention does not render the agreement or decree a nullity and the same has to be avoided in an appropriate proceeding.
Manohar Lal vs jadu Nath Singh (1906) L.R. 33 I.A. 128, referred to.
Chhabba Lal vs Kallu Lal (1946) L.R. 73 I.A. 52, jamna Bai vs Vasanta Rao (1916) L.R. 43 I.A. 99 and Khiarajmal vs Daim (1904) L.R. 32 I.A. 23, held inapplicable.
Where a preliminary decree is passed in non compliance with the provision of 0. 32, r. 7(1), the remedy of the minor is by way of an appeal against that decree and not against the final decree since section 97 of the Code is a bar to the challenging of the preliminary decree in an appeal against the final decree.
Consequently, in a suit for the partition where preliminary decree by consent was passed against the minor in contravention of 0. 32, r. 7(i) and that decree having been sought to be set aside in an appeal from the final decree the High Court held that section 97 of the Code precluded the appellant from doing so.
Held, that the decision of the High Court was correct and must be ashamed, 770 Held, further, that the object section 97 of the Code was intended to achieve would be wholly frustrated if it were to be held that the section merely prohibited a challenge to the factual correctness of the decree and not its legal validity. |
Appeal Nos. 887 and 888 of 1963.
Appeals by special leave from the judgment and order dated October 23, 1961, of the Allahabad High Court in Special Appeals Nos.
483 and 484 of 1961.
section K. Kapur, B. L. Khanna, section Murty and K. K. Jain, for the appellants.
C. B. Agarwala and C. P. Lal, for the respondent.
July 27, 1964.
The Judgment of the Court was delivered by : RAGHUBAR DAYAL, J.
The appellant, Amrit Banaspati Co. Ltd., hereinafter called the company, a joint stock company, and section P. Bhasin.
a shareholder of the company, filed writ petition No. 1003 of 1961 in the High Court of Judicature at Allahabad, challenging the validity of the U.P. Sales Tax Validation Act, 1958 (Act XV of 1958), hereinafter called the Validation Act, and praying for the quashing of the assessment order dated October 15, 1960 and the order dated February 1, 1961, of the Sales Tax Judge (Appeals), Meerut, in connection with the assessment of tax on the sale of vanaspati and other articles both on the ground that the sales tax was assessed at a higher rate than was permissible under a valid law and that the tax had been assessed at the rate of 1 anna and not at 6 naye paise per rupee.
The learned Single Judge of the High Court dismissed the writ petition as the Validation Act validating the relevant provision of the U. P. Sales Tax Act and the notification enhancing the rate of tax had been held valid by this Court in J. K. Jute Mills Co. Ltd. vs State of Uttar Pradesh( ) and as the contention about the calculation of tax to be at the rate of 6 naye paise per rupee and not at the rate of 1 anna had been repelled in earlier decisions of the Allahabad High Court, one such decision being Ram Kishan Sunder Lal vs State of Uttar Pradesh(1).
A special appeal to a Division Bench of the High Court was dismissed (1) ; (2) 13 S.T. C. 92 316 in view of the decision of this Court in the Jute Mills ' Case(1).
It appears that the second question about the alleged error in calculating the tax at the rate of I anna instead of 6 naye paise per rupee, was not raised before the Division Bench.
Civil Appeal No. 887 of 1963 has been filed by special leave against this order of the High Court.
The other appeal No. 888 of 1963 is filed against the order of the Division Bench confirming the order of the Single Judge dismissing the writ petition by the appellant company against the assessment order for the years 1955 56, 1956 57 and 1957 58.
The only point urged for the appellant in this writ petition had been that the Validation Act was invalid.
The orders of the two Courts below repelled the contention, in view of the decision of this Court.
in the Jute Mills Case(1).
We did not allow the apellant to urge the grounds attacking the validity of the Validation Act in view of the decision of this Court in the lute Mills ' Case(1).
The ,only point which is urged before us now is that the tax should have been calculated at the rate of 6 naye paise per rupee and not at the rate of 1 anna per rupee, as laid down in the relevant provisions of the U.P. Sales Tax Act and the notification issued under its provisions.
The contention is based on the provisions of the Indian (Act III of 1906), hereinafter called the .
as amended by Act XXXI of 1955.
It is urged that in view of the provisions of sub sections
(2) and (3) of section 14 of the Coin age Act, as amended reference to 1 anna in the relevant Act and notification issued thereunder should be construed to be reference to 6 naye paise and that the wrong calculation by the Sales Tax Authority has resulted in over assessment of tax.
To appreciate the real contention urged.
it is neces sary to refer to the relevant provisions of the .
Section 13 ' provides the extent up to which the tender ,of the various coins would be considered legal tender.
Its relevant portions read: "13.
(1) The coins issued under the authority of section 6 shall be a legal tender in payment or (1) ; 317 on account. (a) in the case of a rupee coin, for any sum.
(b) in the case of a half rupee coin, for any sum not exceeding ten rupees: (c) in the case of any other coin, for any sum R not exceeding one rupee: Porvided that the coin has not been defaced and has not lost weight so as to be less than such weight as may be pres cribed in its case.
(3) All nickel, copper and bronze coins which may have been issued under this Act before the 24th day of January, 1942 shall continue as before to be a legal tender in payment or on account for any sum not exceeding one rupee.
" Section 14, after the amendment introducing the decimal system of coinage, reads: "14.
(1) The rupee shall be divided into one hundred units and the new coin representing such unit may be designated by the Central Government, by notification in the Official Gazette, under such name as it thinks fit, and the rupee, half rupee and quarter rupee shall be respectively equivalent to one hundred, fifty and twenty five such new coins and shall, subject to, the provisions of sub section (1 ) andsub section (2) of section 13 and to theextent specified therein.
be a legal tender inpayment or on account accordingly.
(2) All coins issued under the authority of this Act in denominations of annas, pice and pies shall, to the extent specified in section 13, be a legal tender in payment or on account at the rate of sixteen annas, sixty four pice or one hundred and ninety two pies to one hundred new coins.
referred to in sub section (1), calculated in respect of any such single coin or number of such coins, tendered at one transaction, to the 318 nearest new coin, or where the new coin above and the new coin below are equally near, to the new coin below.
(3) All references in any enactment or in any notification, rule or order under any enactment or in any contract, deed or other instrument to any value expressed in annas, pice and pies shall be construed as references to that value expressed in new coins referred to in sub section (1) converted theret o at the rate specified in subsection (2).
" The various factors determining the application of the provisions of sub section
(2) for the purposes of calculating the equivalent value of annas, pice and pies tendered at one transaction are several.
The first requisite is that the amount taken into consideration is the amount which is ten dered at one transaction.
The other is that the amount tendered in any of those coins should be within the extent of legal tender mentioned in section 13.
When these two condi tions are present, those coins would be legal tender in pay ment or on account at the rate of 16 annas, 64 pice or 192 pies to 100 naye paise which is the new coin referred to in sub section
(1) of section 14.
This means that the number of annas, or pice or pies tendered have to be multiplied by 100/, 100/64 and 100/192 respectively, to get the equivalent number of new coins.
In such arithmetical calculation there is the possibility that the equivalent number of naye paise be not an exact number and be a mixed number consisting of a whole number and a fraction.
There is no coin of the equivalent to a fraction of a naya paisa in value.
In such cases, there is not going to be payment of the amount due in full, if for the amount tendered in payment or on account there is no full equivalent of naye paises at the rate specified in sub section
It is for such contingency of a payment being not a full payment that sub section
(2) further provides that the coins tendered will be legal payment at the specified rate calculated to the nearest new coin or where the new coin above or new coin below are equally near, to the new coin below.
The significance of this specified mode of calculation would be apparent from a concrete example.
319 7 annas, 6 annas and 5 annas, calculated at the specified rate, would be equal to 43 3/4, 37 1/2 and 31 1/2 naye paise.
According to the artificial calculation, they will however be ,,deemed to be legal tender for 44, 37 and 31 naye paise s respectively, as 44 and 31 naye paise are nearest to the calculated equivalent of 7 annas and 5 annas and 37 naye paise is the next coin below 37 1/2 naye paise which are equally 'below 38 naye paise and above 37 naye paise and the artificial mode of calculation directs the equivalents to be fixed, in such circumstances, to the new coins below.
It is to be noted that each coin of one kind, tendered, is not considered as a unit for the purposes of calculation, but all the Coins of the denomination are to be treated as one unit for this purpose.
This is to ensure payment of the amounts due as fully as possible.
This will again be clear on a concrete example.
Seven one anna pieces are tendered, say, at one payment.
If each separate piece be taken to be valid payment for 6 naye paise, the seven one anna pieces will be good payment for 42 naye paise only, but if taken as a whole, they would be good payment for 44 naye paise.
Similarly, five one pice pieces will be good payment for 8 naye paise only and not for 10 naye paise which would be the case if each one pice piece was treated as good payment for 2 naye paise, its equivalent, if it be converted singly to naye poise.
It is therefore clear that the provisions of sub s.(2) provide for the conversion of old coins into new at the time of payment or of accounting, and then too for the conversion of the old coins within the limit of the extent to which they are legal tender, which means that one cannot insist on paying a total sum of several rupees in naye paise calcula ted in the manner laid down in sub section
(2) of section 14 and that two factors affect the determination of the number of nave paise equivalent in value to the value of the old coin of annas, pice or pies tendered, the two factors being the rate specified and the artificial way of calculation.
The result of the artificial way of calculation is that sometimes equivalent number of naye paise is less than the actual value of the old coins at the specified rate and sometimes it is higher, the difference being, however, very small.
320 Sub section (3), however, deals with a different matter.
It has nothing to do with the actual payment of any amount.
It provides a rule for construing values expressed in old coins as values expressed in new coins or naye paise, and to achieve this object, the only factor necessary to specify is the rate at which the value of the old coins is to be converted into the value of the new coins.
The object of the provision is to provide a measure for arriving at the equivalent value in terms of new coins and not to provide how any amount due in terms of old coins is to be paid in terms.
of new coins.
Sub section (3) therefore simply provide& that references, in any of the documents referred to in that sub section, to any value expressed in annas, pice and pies shall be construed as references to that value expressed in new coins converted thereto at the rate specified in sub section
Sub section
(2) specifies the rate.
The rate specified in sub section
(2) is 16 annas, 64 pice or 192 pies to 100 new coins or naye paise.
It is this rate which is referred to in sub section
There is nothing in sub section
(3) which can be taken to refer o that part of sub s.(2) which relates to the actual calculation for arriving at the number of new coins deemed equivalent in value to a certain number of annas, pice or pies, coins tendered within the limits of legal tender.
The provisions of sub section
(3) of section 14 provide for the conversion of the value of old coins into that of new coins at the rate specified in sub section
(2) and do not provide for conversion to be in accordance with the provisions of sub section
The other expression would have been preferable if the legislature had intended that the references of values expressed in old coins be construed as references to values in new coins according to the mode of artificial calculation mentioned in sub s.(2).
The provisions deal with the method of construction of the expression of the value in documents, be the private documents or be they enactments or notifications, or rules or orders.
The object was to determine the equivalent value which may be taken to replace the value as expressed in old coins.
If the contention urged for the appellant be accepted, the values expressed in annas, pice or pies will not, on conversion, be precisely equivalent but could be very much divergent and would adversely, affect 321 the interests of the persons to whom money be due or in certain circumstances, the interests of the person from whom it be due.
This could not have been contemplated by the legislature.
The futility of the appellants ' contention that the provisions of sub section
(3) not only refer to the rate specified in sub section
(2) but also to the method of calculation mentioned in that sub section, is apparent from the anomalies which would arise if it be accepted.
This can be illustrated from the various facts of these appeals.
It is the appellants ' contention in writ petition No. 1003 of 1961 that the sales tax calculated at the rate of 6 naye paise and not at I anna per rupee on the whole turnover of Rs. 1,40,18,170.84 would reduce the tax demanded by the Sales Tax Officer by Rs. 34,355.
This means that if the tax is calculated at the rate of 1 anna per rupee, as expressed in the relevant provision of law or at 6.25 naye paise per rupee, the amount of tax due from the appellant would be Rs. 34,355 more than the amount of of the same tax on the same turnover calculated at an equivalent value of 6 naye paise per rupee.
In the other writ petition, no reference was made by the appellants to the manner of calculating the tax, the manner of calculation adopted by the taxing authority being the same as in the other writ petition, as the appellants ' claim for refund, if determined at the values of one anna and nine pies calculated in accordance with sub section (2) of section 14, would have been much reduced.
It will be sufficient to state that in clause (e) of para 16 of the writ petition, the figures for the years 1956 57 for the amount paid at one anna per rupee and the amount payable at 9 pies per rupee would then vary the amount refundable to the appellant in a way as to make it much less.
The figures would stand thus : RS.a.
P. Total amount paid at I anna per rupee 8,05,726106 Amount payable at 9 pies 6,03,16753 Amount refundable, and therefore which the petitioner company could detain 2,00,559 53 If the amount payable be calculated at the rate of five naye poise in place of 9 pies, the amount refundable would be 51 S.C. 21.
322 much less as shown below Rs.
Total amount paid at anna per rupee 8,05,726 65 Amount payable at 5 naya paise 6,44,661 32 Amount refundable 1,61,065 33 The appellant stood to lose by calculating the tax payable in terms of naye paise and therefore made up an account at the old coin rates.
The legislature could not have intended, by the provisions of sub section (3), that a mere provision for working out the value in old coins into values in new coins should provide scope for such huge variations in the actual amounts to be paid or received.
The process of conversion is not meant or designed to be a process for gaining more or less than what is rightfully due under a provision of law or under any contractual term.
The conversion is a simple process necessitated by the exigency of payment to be in currency different from the one in which the payment was to be.
We are therefore of opinion that what sub section (2) of section 14 requires is that references to any value expressed in annas, pice and pies will be construed to such values ,expressed in new coins which would be absolutely equivalent to the value of the old coins when their value is converted at the rate of 16 annas, 64 pice and 192 pies to 100 naye paise.
Great reliance is placed for the appellants on the decisions of this Court in M. G. Beedi Works vs State of Mysore(1).
Apparently some observations of this Court in that case support the appellants ' contention.
But, when they are considered in the context of that case, they do not support the contention as the Court had not to deal in that case with the actual contention now raised before us.
In the Beedi Works Case the sales tax was to be levied at the rate of 3 pies for every rupee of turnover.
The (1) [1963] Supp. 1 S.C.R., 275.
323 amount of tax calculated at 3 pies per rupee worked out to Rs. 91,690 and, calculated at the rate of two naye paise the equivalent value of 3 pies, when calculated in the manner laid down in sub section (2) of section 14, worked out to a figure higher by Rs. 25,038.
The tax was assessed at two naye paise per rupee in view of the provisions of.
, the Mysore Existing Laws (Construction of References to Values) Act, 1957 (Mysore Act XII of 1957).
Section 3 of that Act said : "3.
Construction of references to certain values in existing laws.
In every existing law, all references to any value expressed in annas, pice and pies, shall be construed at references to that value ex pressed in new coins referred to in subsection (1) of section 14 of the Indian (Central Act III of 1906), converted thereto at the rate specified in sub section (2) of section 14 of the said Act.
" The assessee, by his writ petition, questioned the validity of the enactment which led to such a result in the amount of tax assessed.
The contention raised was not that the rate of calculation was wrong, but was that the law providing for the assessing of tax at the rate of 2 naye paise instead of 3 pies per rupee was invalid as it amounted to enhancing the tax by an Act which was not enacted in accordance with the procedure laid down in the Constitution.
This is clear from what was stated at p. 277, it being "The grievance of the appellant was that according to the Mysore Sales Tax Act he was liable to sales tax at the rate of 3 pies for every rupee on the turnover and calculated on that basis the amount of tax would be Rs. 91,690, but after the amendment of the Indian (Act 3 of 1906) by the Amending Act 31 of 1955 the rate of sales tax which was levied on the appellant 's Bee" was 02 nPs.
per rupee 324 and thus the appellant was called upon to pay Rs. 25,038, more than he would have paid if he had been charged at the rate, of 3 pi Is per rupee.
It was contended on behalf of the appellant in the High Court and before us that this amounted to enhancement of tax which was illegal because the tax had not been increased in the manner provided under the Constitution and thus it was a breach of Article 265 of the Constitution and was therefore void and ille gal.
" This Court further said, at p. 279: "Two objections were, taken to the validity of the tax : Firstly it was argued that by the substitution of 2 naye paise in place 3 pies there was a change in the tax exigible by the Mysore Sales Tax Act and this could only be done if that enactment had been passed according to the procedure for Money Bills in the manner provided by Articles 198, 199 and 207 of the Constitution and as no such Money Bill was introduced or passed for the enhancement of the tax, the tax was illegal and invalid.".
It is clear that the contention was not that the tax should be calculated at a rate equivalent to 300/192 naye paise i.e., 19/16 naye paise and not at 2 naye paise.
It was not urged that the assessment could not have been at 2 naye paise in view of the provisions of section 3 of the Mysore Act of 1957.
What was contended was that the assessment at the rate of 2 naye paise per rupee, instead of 3 pies per rupee, amounted to assessment of tax at an enhanced rate and that the Mysore Act, due to procedural defect, was not valid law.
This Court dealt with these two objections and simply said with respect to the contention about the provision of law amounting to a provision enhancing the rate to tax (p. 279) : "In our opinion by substitution of new coinage i.e., naye paise in place of annas, pice and pies no enhancement of tax was enacted but it was 325 merely a substitution of one coinage by another of equivalent value.
" This Court expressed the opinion that a law providing for substitution of new coinage in place of old coinage in the expression of values does not amount to a provision of enhancing the tax.
The pith and substance of the Act was substitution in terms of new coinage and not varying the rate of tax.
On p. 278, however, this Court, after referring to the provisions of sub sections (1) and (2) of section 14 of the Indian about the division of a rupee into 100 naye paise and the old legal tender in annas, Vice and pies remaining legal tender in naye paise and referring to the mode of calculation specified in sub section (2) of section 14, said: "Sub section (3) provides that all references under any enactment to annas, pice or pies have to be construed as references to the new coin referred to in sub section (1).
In other wards wherever the old legal tender, i.e., annas, pice and pies is mentioned in an enactment it is to be converted into naya paisas and the naya paisas are to be substituted in place of the old legal tender calculated in the manner laid down in sub section (2).
" Stress is placed on the last sentence but this cannot be taken as the decision of the Court on the question that sub section (3) of section 14 made reference not only to the rate of conversion but also to the mode of calculation, as that question had not been considered in any manner.
The last sentence was a sort of a paraphrase of what had been said earlier in the quotation with respect to the provisions of sub section (3).
This is clear from the facts that the provisions of subsection (3) have not been stated in full, and have been referred to upto the stage of reference to the new coin referred to in subsection (1) and that the last portion of the provisions of sub section (3), i.e., 'converted thereto at the rate specified in sub section (2) has not been mentioned.
It is thus that the latter part of the observa 326 tions happened to refer to the method of calculation and not to the rate specified in subsection (2).
The Court was, at the time, thinking of the value of 3 pies in terms of naye paise as calculated according to the provisions of sub section (2), there being no contest before it that the value substituted to the equivalent of 3 pies for assessing the tax was not a correct value for substitution in place of 3 pies.
We therefore do not construe the expression relied upon by learned counsel for the appellant to be a decision of the Court on the construction of the provisions of sub section (3) of section 14 and are therefore of opinion that the observations in that case cannot be taken to be a decision of this Court on the actual point for determination now before us.
We therefore hold that the High Court is right in construing the provisions of sub section (13) of section 14 of the Indian to mean that references to values in any enactment, notification, rule or order under any enactment or in any contract, deed or instrument, expressed in old coins should be construed to be references to values expres sed in new coins by converting, the old values at the rate of 16 annas, 64 pice and 192 pies to 1 00 naye paise.
We accordingly dismiss the appeals with costs.
SHAH, J.I am unable to agree with the view expressed by my learned brother Raghubar Dayal, J., about the interpretation of section 14 which was incorporated by Act 31 of 1955 in the III of 1906.
For the assessment years 1956 57 and 1957 58 the appellant was assessed to sales tax in respect of "Vanaspati" and "oil" under the U.P. Sales Tax Act XV of 1948, as amended by the U.P. Act XXV of 1948.
By a notification issued on March 31, 1956 under section 3 A(2) the rate of tax an "Vanaspati" was fixed at one anna per rupee, at the point of sale by the manufacturer.
Validity of that imposition was challenged by the appellant, but the question is not now open to be canvassed in view of the decision of this Court in J. K. Jute Mills Co. Ltd. vs State of Uttar Pradesh(1).
The only question which survives is about the (1) ; 327 quantum of liability of the appellant under the notification, in terms of the new decimal coinage introduced by Act 31 of 1955.
The appellant has claimed that its liability computed in the light of section 14(3) of the would be Rs. 34,385, less than the amount demanded by the Taxing Authorities.
Section 13 of the III of 1906 (which was substituted by Act 28 of 1947 for the original sections 13 and 14) in so far as it is material provides: "(1) The coins issued under the authority of section 6 shall be a legal tender in payment or on account, (a) in the case of a rupee coin, for any sum; (b) in the case of a half rupee coin, for any sum not exceeding ten rupees; (c) in the case of any other coin, for any sum not exceeding one rupee: (2) * * *" Section 14 which added by Act 31 of 1955 provides: "(1) The rupee shall be divided into one hundred units and the new coin representing such unit may be designated by the Central Government, by notification in the Official Gazette, under such name as it thinks fit, and the rupee, halfrupee and quarter rupee shall be respectively equivalent to one hundred, fifty and twenty five such new coins and shall, subject to the provisions of sub section (1) and sub section (2) of section 13 and to the extent specified the rein, be a legal tender in payment or on account accordingly.
(2) All coins issued under the authority of the Act in any denominations of annas, pice and pies shall to the "tent specified in section 13, be 328 a legal tender in payment or on account at the rate of sixteen annas, sixty four pice or one hundred and ninety two pies to one hundred new coins referred to in sub section (1) cal culated in respect of any such single coin or number of such coins, tendered at one transac tion, to the nearest new coin, or where the new coin above and the new coin below are equally near to the new coin below.
(3) All references in any enactment or in any notification, rule or order under any enactment or in any contract, deed or other instrument to any value expressed in annas, pice and pies shall be construed as references to that value expressed in new coins referred to in sub section (1) converted thereto at the rate specified in sub section (2).
" Sub section (1) of section 14 declares a rupee as equivalent to a hundred new coins, and a half rupee and a quarterrupee as equivalent to fifty new coins and twenty five new coins respectively.
These new coins are made legal tender in payment or on account as provided in section 13 of the Act.
By sub section (2) all coins issued under the authority of the Act in denominations of annas, pice and pies also remain legal tender in payment or oil account at the rate of sixteen annas, sixty four pice or one hundred and ninetytwo pies to one hundred new coins.
An anna is therefore made legal tender for 2514, a pice for 25116, and a pie for 25148 new coins.
But this involves adjustment of fractions of new coins, and the Legislature has, instead of issuing fractions of new coins a step which would have involved the issue of coins of insignificant value provided for rounding off fractions of new coins, when to discharge an ascertained liability in a single transaction payment is made in annas, pice or pies.
This table of equivalence prescribed by sub section (2), however, applies only when payment is made in old coins to discharge liability under a single transaction.
Sub section (3) is an interpretation clause.
Where under any law, contract or instrument, reference is made 329 to annas, pice or pies, liability arising in any transaction governed thereby will be construed in terms of new coins converted at the rate specified in sub section (2).
This conversion involves two steps: substitution of the value in terms of new coins by the application of rates mentioned in sub section (2), and rounding off the fractions, if any, resulting from such application.
When there is in any law, ,contract or instrument a reference to any value expressed in terms of annas, pice or pies, by sub section (3) the reference has to be construed as if the value is expressed in terms of new coins at the rates specified in sub section (2).
Liability to pay an amount in one transaction ascertained in terms of new coins may be discharged under subsection (2) by tender of annas, pice or pies according to the table of equivalence and the fractions may be rounded off.
But in the ascertainment of liability under a transaction, sub section (2) does not come into play.
Liability under a transaction is ascertained under the general law, and sub section (3) comes in aid as an interpretation clause when the value is expressed in some law, contract or instrument governing a transaction not in terms of new coins, but of annas, pice or pies.
Sub section (3) does not attract the rule of rounding off at the stage of discharge of liability under any concrete transaction: it merely prescribes the value which shall be deemed to be substituted in any law, contract or instrument when the value is specified therein in terms of annas, pice or pies.
It is attracted when liability declared in annas, pice or pies is to be ascertained in terms of new coins whereas sub section (2) operates in considering whether a certain payment in annas, pice or pices discharges an ascertained liability.
There is nothing in the statute which supports the view that what the Legislature intended by enacting sub section (3) was computation of liability in terms of old coins and then conversion and rounding off of the total liability in terms of new coins.
To interpret clause (3) in that manner would be to denude it of its true purpose as an interpretation clause, and to render it practically nugatory.
If sub section (3) is merely intended to serve as determinative of 330 total liability under a transaction, the purpose is amply served by sub section (2).
The view I have expressed also finds support from a judgment of this Court in M/s. Mangalore Ganesh Beedi Works vs The State of Mysore and another(1).
In that case, sales tax was imposed under the Mysore Sales Tax Act 6 of 1948 at the rate of three pies for every rupee of the turnover ' On the application of section 14 of the Indian , sales tax leviable under the Mysore Sales Tax Act was computed at the rate of two new coins per rupee of the turnover, and a demand for RS.
1,16,72 44 was made.
The tax payer contended that he was liable to pay Rs. 91,690 only being the amount of total tax liability computed at the rate of 3 pies per rupee of turnover.
He challenged the additional demand by a petition in the High Court of Mysore on the plea that the Act which altered the incidence was a taxing measure and could only be enacted after complying with the provisions of articles 198, 199 and 207 of the Constitution relating to money bills, and the Mysore Existing Laws (Construction of Reference to Values) Act 12 of 1957 which gave effect to the amendment made by Act 31 of 1955.
dealt with "coinage and legal tender", and was not within the competence of the State Legislature.
In dealing with these contentions, this Court summarised the scheme of clauses (1),(2) and (3) of section 14 and observed: "Sub section (3) provides that all references under any enactment to annas, pice or pies have to be construed as reference to the new coin referred to in sub section (1).
In other words, wherever the old legal tender, i.e., annas, pice and pies is mentioned in an enactment it is to be converted into naya Paisas and the naya Paisas are to be substituted in place of the old legal tender calculated in the manner laid down in sub section (2).
" The Court rejected the claim of the tax payer that he was liable to pay tax computed at the rate of three pies per (1) [1963] Supp. 1 S.C.R 275.
331 rupee only.
If sub section (3) of section 14 was susceptible of the interpretation submitted on behalf of the State of Uttar Pradesh, it was wholly unnecessary to enter upon the question of the vires of the provisions, because between the computation of sales tax on a total turnover of Rs. 58,36,422.25 nPs at 2 naye Paise, and at the rate of 3 pies per rupee in the manner suggested, there would have resulted no discrepancy at all, and the contention of the tax payer that he was liable to pay Rs. 91,690 had to be accepted.
But this Court upheld the claim of the Sales Tax Department that the computation had to be made by substituting two naye Paise in the section of the Mysore Sales Tax Act, which imposed liability for payment of tax, and the total demand for tax computed on the footing of that substitution was properly made.
If the interpretation which is now suggested on behalf of the State be accepted, the assessee in Mangalore Ganesh Beddi Works ' Case(1) was bound to succeed.
In the present case by the notification issued on March 31, 1956, the liability for payment of sales tax was to be computed at the rate of one anna in a rupee of the turnover.
By virtue of section 14(3) of the Indian , for an anna mentioned in the notification 61 now coins will be substituted.
But as the substituted rate involved a frac tion by the process of rounding off at the rate specified in sub section (2), the fraction of new coins will be omitted and the nearest new coins i.e., six new coins will be deemed to be substituted in the statute.
Liability for sales tax after the amendment of the will, therefore, be at the rate of 6 new coins for every rupee of sale price.
ORDER BY COURT In view of the judgment of the majority, the appeals we dismissed with costs.
(1) [1963] SUPP.
1 S.C.R. 275. | For the assessment years 1956 57 and 1957 58, the appellant was, assessed to sales tax in respect of Vanaspati and oil under the U.P. Sales Tax Act, 1948.
By a notification issued on March 31, 1956 under section 3 A(2), the rate of tax on Vanaspati was fixed at one anna per rupee at the point of sale by the manufacturer.
The appellant and section P. Bhasin, a shareholder of the company, filed a writ petition in the High Court challenging the validity of the U.P. Sales Tax Validation Act, 1958 and also prayed for the quashing of the assessment order dated October 15, 1960 and the order dated February 1, 1961, of the Sales Tax Judge (Appeals), Meerut, in connection with the assessment of tax on the sale of Vanaspati and other articles both on the ground that the sale tax was assessed at a higher rate than was permissible under a valid law and that the tax had been assessed at the rate of one anna and not at 6 Naya Paisa per rupee.
The writ petition was dismissed by a single Judge of the High Court and the Letters Patent Appeal was also dismissed by High Court.
The appellant came to this Court by special leave.
The only point urged before this Court was that the tax should have been calculated at the rate of 6 Naya Paisa per rupee and not at the rate of one anna per rupee as laid down in the relevant provisions of the U.P. Sales Tax Act and the notice issued under its provisions.
Dismissing the appeal, Held (per P, B. Gajendragadkar, C.J., M. Hidayatullah, K. C. Das Gupta and Raghubar Dayal, JJ.): The High Court was right in construing the provisions of sub section
(3) of section 14 of Indian to mean that references to values in any enactment, notification, rule or order under any enactment or in any contract, deed or instrument, expressed in old coins should be construed to be references to values expressed in new coins by converting the old values at the rate of16 annas, 64 pice and 192 pies to 100 Naya Paisa.
The values expressed in new coins must be absolutely equivalent to the value of the, old coins.
Per Shah, J.
The liability for sales tax after the amendment of the will be at the rate of 6 new coins for every rupee of sale price and not one anna.
By the notification issued on March 31, 1956, the liability for payment of sales tax was to be computed at the rate of one anna in a rupee of the turnover.
By virtue of section 14(3), for an anna mentioned in the notification, 6 1/4 new coins are to be substituted.
As the substituted rate involves a fraction, by the process of rounding off at the rate specified in section 14(2), the fraction of new coins has to be omitted and the nearest new coins, i.e., 6 new coins are to be deemed to be substituted in the statute.
J. K. Jute Mills Co. Ltd. vs State of Uttar Pradesh, ; , Ram Kishan Sunder Lal vs State of Uttar Pradesh, 13 S.T.C. 923, 315 M/s. Mangalore Ganesh Beedi Works vs State of Mysore, [1963] Supp. 1 S.C.R. 275, referred to. |
Appeal No. 484 of 1961.
Appeal by special leave from the judgment and decree dated March 28, 1958 of the Rajasthan High Court (Jaipur Bench) at Jaipur in D. B. Civil First Appeal No. 64 of 1951.
Sarjoo Prasad and Harbans Singh, for the appellants.
B. P. Sinha and Naunit Lal, for the respondents.
May 8, 1964.
The Judgment of the Court was delivered by GAJENDRAGADKAR, C.J.
This appeal by special leave arises out of a redemption suit filed by the respondent Dev Karan against the appellant Murarilal.
The mortgage sought to be redeemed was executed on the 19th March, 1919 for a sum of Rs. 6,500.
The mortgaged property consisted of a shop which was delivered over in the possession of the mortgagee after the execution of the mortgage deed.
The mortgage deed had provided that the amount due under the mortgage should be repaid to the mortgagee within 15 years, whereupon the property would be redeemed.
It had also stipulated that if the payment was not made within 15 years, the mortgagee would become the owner of the property.
The mortgagor was Mangal 241 Ram who died and the respondent claims to be the heir and legal representative of the said deceased mortgagor.
In the plaint filed by the respondent, it was averred that the transaction was, in substance, a mortgage and the mortgagor 's right to redeem was alive even though the stipulated period of 15 years for the repayment of the loan had passed.
On these allegations, the respondent claimed a decree for redemption of the suit mortgage on payment of Rs. 6,500.
It appears that the original mortgagee Gangadhar had also died before the institution of the suit, and so, the appellant Murarilal was impleaded as the defendant on the basis that he was the only heir and legal representative of the deceased mortgagee Gangadhar.
The claim for redemption thus made by the respondent was resisted by the appellant on several grounds.
It was alleged that after the expiry of the stipulated period of 15 years, the property had become the absolute property of the mortgagee and it was urged that the original transaction was, in substance, and in reality, not a mortgage but a sale.
Several other pleas were also raised by the appellant in resisting the respondent 's claim, but it is unnecessary to refer to them.
The learned trial Judge framed appropriate issues which arose on the pleading of the parties.
In substance, he field that the claim for redemption made long after the 15 years ' period had expired could not be sustained.
Findings were made on other issues also and they were against the respondent.
In the result, the respondent 's suit was dismissed.
The respondent then took the matter in appeal before the Rajasthan High Court.
He urged that the view taken by the trial Court that the stipulation as to the mortgagor 's liability to re pay the loan within 15 years did not bar his present suit for redemption, because the said stipulation amounted to a clog on the equity of redemption and as such, could not affect the mortgagor 's right to redeem, and he added that the transaction, in substance, was a mortgage and not a sale, and so, his right to redeem was alive and could be effectively enforced by the present suit.
The High Court has upheld his first contention that the relevant 51 S.C. 16.
242 provision as to the period within which the mortgage amount had to be repaid amounted to a clog on the equity of redemption and could not be pleaded as a bar to the present suit.
But on the question about the character of the origi nal transaction itself, the High Court appears to have been inclined to take the view that the relevant clause on which the plea about the bar was raised did not really support the said plea, because it was by no means clear that even after the expiration of 15 years, the mortgagee was intended to be the absolute owner of the property.
On these findings, the decree passed by the trial Court dismissing the respondent 's suit has been reversed and the suit has been remanded to the trial Court to be disposed of in accordance with law.
It is against this order that the appellant has come to this Court by special leave.
Pending the appeal before this Court, both the appellant and the respondent have died, and their respective heirs have been brought on the record.
The first question which calls for our decision is whether the relevant clause on which the appellant relies makes the mortgagee the owner of the property at the end of the sti pulated period of 15 years.
The mortgage provides, inter alia, that after the house which was the mortgage property was delivered over to the mortgagee, it was open to him either to live in it, or to let it out to tenants.
The mortgagee was further given liberty to spend up to Rs. 35 for repairing the house and if more expenses were intended to be incurred, the &aid expenditure would be incurred through the mortgagor.
On the expenditure thus incurred the mortgagor was liable to pay interest at the rate of As. 0 6 0 per cent per month.
Then the document proceeded to add that the mortgagor would get the property redeemed on payment of the mortgage amount as well as the cost of Patta which may have been incurred by the mortgagee and the repairing expenses within a period of 15 years.
Then, occurs the relevant clause: "After the expiry of the stipulated period of 15 years, this shop would be deemed as an absolute transfer "Mala Kalam" for this very amount.
Till the mortgage money is paid, I shall have no concern with the shop.
" The High Court appears to have taken the view that the words "Mala Kalam" which occur at 243 the end of the relevant clause do not necessarily import the notion that the mortgage property would be the absolute property of the mortgagee.
According to the High Court, the said words literally mean "where there is no scope for having any say".
If that is the meaning of the relevant words, it seems difficult to accept the view that the document did not intend to make the mortgagee the owner of the property at the end of 15 years if the debt due was not paid within that period.
When the document says that there would be no scope for the mortgagor to say anything, it necessarily means, in the context, that the mortgagor would, in that case, have lost his title to the property, and that means the mortgagee would become the absolute owner of the property.
Therefore, we feel no difficulty in holding that if the terms of the document were to prevail, the appel lant 's contention that the present suit for redemption is barred, must succeed.
It is common ground that the amount due under the mortgage deed was not paid by the mortgagor or his heir within the stipulated period and that would extinguish the title of the mortgagor and make the mortgagee to be the owner of the property.
But the question is whether such a stipulation can be allowed to be pleaded as a bar to the respondent 's claim for redemption.
Just as it is common ground that if the terms of the document were to prevail, the suit would be barred, it is also common ground that if the doctrine that the clog on the equity of redemption cannot be enforced is to prevail in the present proceedings, the respondent 's action for redemption must succeed.
The fact that a stipulation of the kind with which we are concerned in the present case amounts to a clog on the equity of redemption, is not and cannot be disputed.
Therefore, the main question which arises in the present appeal is: does the equitable doctrine ensuring the mortgagor 's equity of redemption in spite of a clog created on such equity by stipulations in the mortgage deed apply to the present case? This question arises in this form, because the Transfer of Property Act did not apply to Alwar at the time when the mortgage was executed nor at the time when the 15 years ' stipulated period expired.
244 Mr. Sarjoo Prasad for the appellant contends that the High Court was in error in applying the equitable principle, because the said principle cannot be invoked in cases where the Transfer of Property Act does not apply.
In support of this argument, he has very strongly relied on an early decision of the Privy Council pronounced in 1870, in the case of Pattabhiramier vs Vencatarow Naicken and Narasimha Naicken(1).
In that case, the Privy Council was dealing with a Bye bil wuffa, or mortgage and conditional sale usufructuary executed in 1806 under which the mortgagees were put in possession.
The deed contained a condition that if the mortgagor failed to redeem within five years, the conditional sale was to be absolute.
The mortgagor failed to redeem within the stipulated period, and the mortgagee, without foreclosing the mortgage, sold the mortgaged pro perty.
Thereafter, the mortgagor 's representative sued to redeem the mortgage under section 8 of the Madras Regulation XXXIV of 1802.
The Privy Council held that the interest of the mortgagee after the expiry of the stipulated period had become absolute.
In dealing with this question, Lord Chelmsford who delivered the opinion of the Board observed that the form of security with which the Board was concerned had long been common in India, and he added that the sti pulations in such contracts were recognised and enforced according to their letter by the ancient Hindu law as well as under Mohammedan law; and in support of this statement, reference was made to certain passages from Colebrooke 's Digest on Hindu Law and Baillie 's introduction to his book on Mohammedan Law of Sale.
If the ancient law of the country, observed Lord Chelmsford, has been modified by any later rule, having the force of law, that rule must be founded either on positive legislation, or on established practice; and since neither any specific statutory provision had been cited before the Board, nor established practice in that behalf had been proved, the Privy Council upheld the mortgagee 's plea that he became the absolute owner of the property at the expiration of the stipulated period.
While pronouncing this decision, Lord Chelmsford, however, took the precaution of adding that while the Board was allowing (1) [1890] 13 Moore 's I.A. 560 245 the appeal, "it must not be supposed that their Lordships design to disturb any rule of property established by judicial decisions so as to form part of the Law of the Forum wherever such may prevail, or to affect any title founded thereon.
" As we will presently point out, the appeal of Pattabhiramier was pending before the Privy Council for as many as 10 years.
Meanwhile, Indian High Courts were enforcing the equitable principle that stipulations contained in mortgage deeds which amounted to clog on the equity of redemption could not be enforced.
In other words, the jurisdiction which courts of equity exercised in England by refusing to enforce clogs on the equity of redemption, was being exercised by High Courts in India.
However, before we refer to those decisions, it would be convenient to cite another decision of the Privy Council pronounced in Thumbusawmy Moodelly vs Hossain Rowthen & Ors(1).
In that case, the Privy Council held that the con tract of mortgage by conditional sale is a form of security known throughout India, and by the ancient law of India, it must be taken to prevail in every part of India, where it has not been modified by actual legislation or established practice, and so, must be enforced according to its letter.
In this case, Sir James W. Colvile who delivered the opinion of the Board, referred to the earlier decision of the Privy Council in Pattabhiramiers case(1), noticed the trend of judicial pronouncements made by the High Courts in India while Pattabhiramier 's case was pending before the Privy Council, and strongly reiterated the view that the said decisions of the High Courts were radically unsound.
He referred to the fact that unfortunately, Pattabhiramier 's case " slept for nine years, and that in the interval the Sudar Court, and afterwards the High Court which succeeded it, continued the course of decision which the former had given in 1858".
Then he mentioned the relevant decisions of the Madras and the Bombay High Courts and expressed the opinion that in trying to enforce principles of equity in dealing with stipulations contained in mortgage documents, the High Courts were really assuming the functions of Legislature.
So, it is clear that the Privy Council emphatically (1) I.L.R. (2) [1870] 13 M.I.A. 246 declared in 1875 that unless there is a legislative enactment or established practice to the contrary, terms in the contract of mortgage by conditional sale must be taken to prevail in every part of India and must be strictly enforced according to their letter.
Mr. Sarjoo Prasad naturally relies on these decisions and contends that so far as the State of Alwar is concerned, there is no legislative enactment to the contrary, nor is there any established practice on which the equitable doctrine could be pleaded by the respondent in support of his case that though 15 years have elapsed, his right to redeem still survives.
There are two other decisions of the Privy Council to which we may refer at this stage.
In Kader Moideen V. Nepean(1), the Privy Council was dealing with a case from Burma, and it observed that the Burmese Courts are directed, in the absence of any statutory law applicable to accounts against a mortgagee in possession, to follow the guidance of justice, equity, and good conscience.
Acting on this principle, the Privy Council accepted Mr. Haldane 's contention that there was no rule of abstract justice in taking the accounts of a mortgagee in possession, and that the Indian rule, which was embodied in section 76 of the Transfer of Property Act, should, though the Act had not been extended to Burma, be followed there in preference to the English practice.
It would thus be seen that the equitable principle underlying the provisions of section 76 was extended to the case on the specific ground that the Burmese Courts had been directed by the relevant statutory provision to follow the guidance of justice, equity and good conscience in the absence of any statutory law applicable to accounts against a mortgagee in possession.
This decision, therefore, is in line with the two earlier decisions of the Privy Council.
Similarly, in Mehrban Khan vs Makhna(2), where the Privy Council was dealing with the provisions in a mortgage deed conferring on the mortgagee upon redemption an interest in the mortgaged property, it was held that the said provisions amounted to a clog or fetter on the equity of redemption and as such, were void not only against the mortgagor, but also against the purchaser of his interest, (1) 25 I.A. 241 (2) 57 I.A. 168 247 since they were inconsistent with the very nature and essence of a mortgage.
In this case, again, section 28 of Regulation No. VII which was applicable to the North West Frontier Province, had expressly provided that in cases not otherwise specially provided for, the Judges shall decide according, to justice, equity and good conscience; and so, recourse to the equitable doctrine was permissible because there was the statutory mandate requiring the Judges to apply the said doctrine where there was no specific legislative provision in relation to the matter with which they were dealing.
Though the position of the Privy Council decisions is thus clear and consistent, the trend of the decisions of the High Courts in India continued to conform to the same pattern which was set up by the decision of the Madras High Court in the case of Venkata Reddi vs Parvati Ammal(1) and adopted by the Bombay High Court in Ramji bin Tukaram vs Chinto Sakharam (2).
The question was elaborately argued on several occasions before the said High Courts and the two earlier decisions of the Privy Council in the case of Pattabhiramier(3) as well as in the case of Thumbuswamy Moodelly(4) were cited and yet, the High Courts have con sistently adhered to the view that in dealing with mortgage transactions which contain unfair, unjust or oppressive stipulations unreasonably restricting the mortgagor 's right to redeem, the Court would be justified in refusing to enforce such stipulations and recognising the paramount character of the equity of redemption.
In Bapuji Apaji vs Sonavaraji Marvati(5), Westropp, C.J., has elaborately considered the relevant aspects of this question.
He referred to the two Privy Council 's decisions and observed that the doctrine of Ramji vs Chinto(2) had been uniformly followed in the Bombay Presidency in a multitude of cases, and he saw no reason to depart from that decision.
In expressing his firm adherence to the pattern of the law prescribed by the decision of the Bombay High Court in Ramji vs Chinto, the learned Chief Justice elaborately considered all the precedents on the point, trend of authorities bearing on the question, the opinion of scholars, and held that he was inclined (1)1 Mad.
H.C. Rep. 460 (2) 1 Bom.
H.C.Rep.
199 [1864] (3) [1870] 13 M.I.A. 560 (4) I.L.R. (5) I.L.R. 248 to take the law to be that which was settled in Ramji vs Chinto(1) and gave effect to it.
So far as the Bombay High Court is concerned, the practice consistently had been to follow the decision of Westropp, C.J. till the Transfer of Property Act was extended to Bombay.
In Madras, we find that same position.
In Ramasami Sastrigal vs Samivappanayakan(2), the majority view of the Full Bench was that in the Madras Presidency, where con tracts of mortgage by way of conditional sale have been entered into subsequent to the year 1858, redemption after the expiry of the term limited by the contract must be allowed.
The, point with which we are dealing in the present appeal was elaborately argued before the Madras High Court; the opinion expressed emphatically by the Privy Council was cited, but Turner, C.J., with whose opinion Muttusami Ayyar, J., agreed made a very significant observation after elaborately examining the merits of the questions "For these reasons," said the learned C.J., "we conceive that we shall not be wanting in due respect for the distinguished tribunal by whose decisions we are bound, if we follow the course they have pronounced there were strong reasons for adopting and apply the rules introduced, however erroneously, by judicial decisions in these provinces.
" That view has prevailed in the Madras High Court ever since.
These decisions show that the High Courts in India conformed to the view that whether or not there is a statutory provision directing the Judges to give effect to the principles of justice, equity and good conscience, it is their duty to enforce that principle where they are dealing with stipulations introduced in mortgage transactions which ' appear to them to be unreasonable, oppresive or unjust.
It is true that according to the strict letter of the ancient Hindu Law, a stipulation that the mortgagor shall pay the amount advanced to him by the mortgage within a specified period, was intended to be enforced.
The ancient Hindu law texts use the word "Adhi" to denote pledge of a movable or mortgage of immovable property.
IV 124 divides Adhi into two sorts, viz., one that is to be redeemed within (1) 1 Bom.
H.C. Rep. 199 Mad. 179 at P. 190 249 a certain time fixed (by agreement at the time of contracting the debt) or to be retained till the debt is paid off.
In regard to the first category of mortgages, if the money is not paid at the time fixed, the thing pledged or mortgaged would belong to the creditor (vide Yaj.
58 and as explained by Mitakshara) (1).
It also appears that if the mortgage is not redeemed even when the debt has grown to double of the principal by non payment of the interest agreed upon, the mortgagor lost his title over the mortgaged property; so that it must be conceded that under the strict letter of the Hindu law texts, if a mortgage deed contains a stipulation for the repayment of the mortgage amount within a specified period, at the expiration of the said period the mortgagor may lose his title over the mortgaged property.
The principle underlying this provision appears to be that Hindu law as enunciated by the ancient texts, attached considerable importance to a person keeping his promise.
Though that is so, we ought also to add that according to Sir R. B. Ghose, ordinarily, time was not of the essence of the contract of mortgage in Hindu law(1), and in support of this opinion the learned author quotes with approval Colebrooke 's opinion.
Basing himself on this position of the Hindu law, Mr. Sarjoo Prasad contends that we ought to assume that Hindu Law which was applicable to Alwar recognised the importance of compelling the mortgagor to perform his promise that he would repay the debt within a specified time and if he tailed to do so, he would lose his title over the mortgaged property.
He urged that the dispute between the parties in the present appeal should be decided in the light of this position of the Hindu law as well as the principles enunciated by the Privy Council in the cases of Pattabhiramier(3) and Thumbusawmy Moodelly (4).
In dealing with this argument, it would be relevant to observe that traditionally, courts in India have been con sistently enforcing the principles of equity which prevent the enforcement of stipulations in mortgage deeds which un reasonably restrain or restrict the mortgagor 's right to (1) Dr. Kane 's History of Dharmasastra Vol.
,128 (1) Ghose on 'The Law of Mortgage in India ' Tagore Law Lectures 1875 6, 5th Ed.
I. p. 56.
(3) [1870] 13 M.I.A. 560 (4) I.L.R. 250 redeem.
We may, in this connection, refer to some of the statutes which were in force in India.
The old Bengal Regulation III of 1793 by section 21 directed the Judges of the District and City Courts in cases where no specific rule existed to act according to justice, equity and good con science.
Similar provision occurs in section 17 of the Madras Regulation II of 1802.
The Bengal Civil Courts Act, 1887, and the Madras Civil Courts Act, 1873, contain similar pro visions in sections 37 and 16 respectively.
Likewise, in regard to Courts in the Mufassal of Bombay, Bombay Regulation IV of 1827 by section 26 provides that the law to be observed in the trial of suits shall be Acts of Parliament and Regulations of Government applicable to the case; in the absence of such Acts and Regulations, the usage of the country in which the suit arose; if none such appears, the law of the defendant, and in the absence of specific law and usage, equity `and good conscience.
In fact, in Namdeo Lokman Lodhi vs Narmadabai(1), this Court has emphatically observed that it is axiomatic that the courts must apply the principles of justice, equity and good conscience to transactions which come before them for determination even though the statutory provisions of the Transfer of Property Act are not made applicable to these transactions.
These observations, in substance, represent the same traditional judicial approach in dealing with oppressive, unjust and unreasonable restric tions imposed by the mortgagees on needy mortgagors when mortgage documents are executed.
There is one other circumstance to which we ought to refer.
We do not know what the true position of the Hindu law was in the State of Alwar at the relevant time.
In fact, we do not know what the provisions of the Contract Act were in the State of Alwar.
Even so, we think it would be reasonable to assume that civil courts established in the State of Alwar were like civil courts all over the country, required to administer justice and equity where there was no specific statutory provision to deal with the question raised before them.
Whether or not the Hindu law which prevailed in Alwar was similar to that prescribed by ancient Hindu Sanskrit texts, is a point on which no material is produced (1) ; 251 before us.
It may well be that just as in Bombay and Madras, notwithstanding the ancient provisions of Hindu Law which seem to entitle the mortgagee to insist upon the performance of a stipulation as to time within which the mortgage debt has to be paid, the High Courts had con sistently refused to enforce such stipulations, the Courts in the State of Alwar also may have adopted the same approach.
In the absence of any material on the record on the point, we are reluctant to accept Mr. Sarjoo Prasad 's argument that the doctrine of equity and justice should be treated as irrelevant in dealing with the present dispute.
In this connection, it is material to refer to the recent decisions pronounced by the Rajasthan High Court in which this position has been upheld either because it was conceded, or because the High Court took the view that the principles of equity were enforceable in dealing with mortgage transactions in Rajasthan.
In Amba Lal vs Amba Lal(1), the Rajasthan High Court held that section 60 and its proviso contained a general principle of law applicable to mortgages in this country, which should be applicable even in those places where the Transfer of Property Act may not be in force as such, but where its principles may be in force.
The property in question which was the subject matter of the mortgage was situated in the State of Udaipur.
Similarly, in the case of Seleh Raj vs Chandan Mal(2) , the Rajasthan High Court held that the principle underlying section 60 may well be regarded to be a salutary one and in accordance with the principles of equity, justice ,and good conscience.
Accordingly it took the view that though the Transfer of Property Act may not be in force in the territory in question, it would not be unreasonable to decide a case in accordance with the principles underlying the said section.
The property with which the Court was concerned in this case was situated in the State of Jodhpur.
The same principle has been applied in Himachal Pradesh (vide Nainu vs Kishan Singh)(").
(1) I.L.R. r957 Raj.
(2) I.L.R. (3) A.I.R. T957 H.P. 46. 252 Thus, it is clear that the equitable principle of justice, equity and good conscience has been consistently applied by Civil Courts in dealing with mortgages in a substantial part of Rajasthan and that lends support to the contention of the respondent that it was recognised even in Alwar that if a mortgage deed contains a stipulation which unreasonably restrains or restricts the mortgagor 's equity of redemption, courts were empowered to ignore that stipulation and enforce the mortgagor 's right to redeem, subject, of course, to the general law of limitation prescribed in that behalf.
We are, therefore, satisfied that no case has been made out by the appellant to justify our interference with the conclusion of the Rajasthan High Court that the relevant stipulation on which the appellant relies ought to be enforced even though it creates a clog on the equity of redemption.
In the result, the appeal fails and is dismissed with costs. | The respondent sought to redeem a mortgage executed in the State of Alwar in 1919.
By a stipulation in the mortgage deed the mortgagor agreed that if the debt was not paid within 15 years the mortgagee would become the owner of the property.
The respondent 's case was that the transaction was a mortgage and that he could redeem the mortgage even though the stipulated period was over.
The appellant resisted the suit on the ground that the transaction amounted to a sale and not a mortgage.
The trial Judge dismissed the suit holding that the claim for redemption was not maintainable after the expiry of the stipulated period.
The Rajasthan High Court on appeal reversed the decision of the trial Judge holding that the stipulation was a clog on the equity of redemption and remanded the suit.
The stipulation in question I was as follows, "After the expiry of the stipulated period of 15 years this shop would be deemed as an absolute transfer 'Mala Kalam ' for this amount.
Till the mortgage money is paid, I shall have no concern with the shop.
" Held:If the stipulation were to prevail, the use of the words 'mala kalam ', which meant that there would be no scope for the mortgagor to say anything, would indicate that the mortgagee became the absolute owner of the property.
But the stipulation, which was undoubtedly a clog on the equity of redemption, must fail and the suit for redemption must succeed.
240 The equitable principle of justice, equity and good conscience, long and consistently applied by Civil Courts in lndia, could be applied in the State of Alwar even though the Transfer of Property Act had no application there at the time when the mortgage document was executed or its period expired.
The strict provisions of the texts of Hindu Law in this regard would be of no avail.
Namdeo Lokman Lodhi vs Narmadabai, ; , applied.
Pattabhiramier vs Vencatarow Naicken and Narasimha Naicken, (1870) 13 M.I.A. 560 and Thumbusaway Moodelly vs Hossain Rowthen,I.L.R. I Mad. 1, considered.
, Venkata Reddy vs Parvati Ammal, I Mad.
H.C. Rep. 460, Ramji bin Tukaram vs Chinto Sakharam, I Bom.
H.C. Rep. 199 (1864), Bapuji Apaji vs Senavaraji Marvadi, I.L.R. 11 Bom.
231, Ramasami Sastrigal V. Samiyappanayakan, I.L.R. 4 Mad. 179, Amba Lal vs Amba Lal, I.L.R. , Seleh Raj vs Chandan Mal, I.L.R. and Nainu vs Kishan Singh, A.I.R. 1957 H.P. 46, referred to. |
Criminal Appeal No. 191 of 1962.
Appeal by special leave from the judgment and order dated April 9, 10 and 12 of 1962 of the Gujarat High Court in Criminal Appeal No. 426 of 1961.
A. section R. Chari, and R. A. Gagrat, for the appellants.
H. R. Khanna, R. H. Dhebar and B. R. G. K. Achar, for the respondent.
The Judgment of the Court was delivered by Subba Rao J.
This appeal by special leave raises an interesting question involving the construction of section 34, read with section 301 of the Indian Penal Code.
The appellants who are 11 in number were accused Nos. 1 to 10 and 12 in the Sessions Court, Mehsana.
The case of the prosecution may be stated thus : In the village of Aithor there are about 300 houses of Kadva Patidars and about 15 to 20 houses of Leva Patidars.
On January 16, 1961, at about 8 P.m. seven persons, who are Leva Patidars, came to the chowk where there is a pan shop cabin of Girdhar Shanker.
These seven persons were, Rama Bhupta, Lakha Madha, Hira Punja, Jetha Nagar, Parshottam Prabhuva, Manor Madha and Gova Shiva.
At the same time the 12 accused also came to that place.
Accused 1 to 6 were each armed with a muzzle loading gun; accused 7, 288 8, 11 and 12 were armed with sticks; accused 9 and 10 were armed with dharias.
Accused I to 4 fired their guns and Rama Bhupta fell down and died near the door of the cabin of Girdhar.
Accused 5 and 6 fired their guns and Lakha Madha was injured.
Accused I fired his gun again and Jetha Nagar received injuries.
Accused 5 and 6 fired again and Hira Punja was injured.
Accused 7 to 12 were inciting accused 1 to 6 to kill all these persons.
Other specific acts were attributed to some of the accused.
The learned Sessions Judge held that Rama Bhupta was killed as a result of the firing by accused 1 to 4, that Lakha Madha was injured by the firing by accused 5 and 6, that Jetha Nagar was injured by the firing by accused 1, that Hira Punja was injured by the firing by accused 5 and 6, that accused 12 caused stick injuries to Lakha and that accused 8 caused injury on the tongue of Parshottam Prabhuva.
The Sessions Judge also held that the 12 accused constituted an unlawful assembly, but their common intention was not to kill Rama Bhupta but only Madha who was not present in the chowk.
He acquitted all the accused under section 302, read with section 149, of the Indian Penal Code, but convicted accused I to 4 under section 302, read with section 34, of the Indian Penal Code and sentenced them to imprisonment for life and to a fine of Rs. 2,000 each; lie convicted all the accused under section 324, read with section 149, of the Indian Penal Code for causing injuries to Hira Punja and others.
Accused 5 to 12 were also convicted under section 326, read with section 34, and section 324, read with section 149 and section 148, of the Indian Penal Code and they were sentenced to various periods of imprisonment and fine.
The accused preferred different appeals against their convictions and sentences and the State of Gujarat filed appeals against the acquittal of accused 5 to 12 under section 302, read with section 149, of the Indian Penal Code.
The State of Gujarat also filed a criminal revision for enhancing sentences passed against all the accused, but it did not file any appeal against the acquittal of accused I to 4 on the charge under section 302, read with section 149, of the Indian Penal Code.
The High Court convicted accused I to 4 under section 302, read with sections 301 and 34, of the Indian Penal Code and confirmed the sentence of life imprisonment passed on them, but set aside the fine imposed on them.
So far as the other accused i.e., accused 5 to 12, are concerned, they were convicted under section 302, read with sections 301 and 34, of the Indian Penal Code and also under section 302, read with section 149, of the said Code.
In the result, the High Court sentenced all the accused to imprisonment for life for the said offences.
289 It is common case that if the conviction of accused 1 to 4 tinder section 302, read with section 34 and section 301, of the Indian Penal Code, was set aside, all the accused would have to be acquitted in regard to the major offences.
It is also not disputed that if the conviction of accused I to 4 under the said sections was confirmed, the appeal filed by the other accused would fail.
The only question, therefore, is whether the conviction of accused I to 4 under section 302, read with sections 34 and 301, of the Indian Penal Code, was correct.
In the appeal Mr. Chari, learned counsel for the appellants, contends that accused I to 4 could not be convicted under section 302, read with section 34, of the Indian Penal Code, as there was no common intention to kill Rama, but Rama was killed under the mistake that he was Madba.
l A mistake by one or other of the accused, the argument proceeds, cannot possibly be "in furtherance of the common intention" of the accused.
He further argues that the provisions of section 301 of the Indian Penal Code cannot be invoked in the circumstances of the case.
To appreciate the argument of the learned counsel it would be convenient at this stage to note exactly the finding given by the High Court.
The High Court found that the common intention of the accused was to kill Madha, that accused 1 to 4 shot at Rama mistaking him for Madha, as Rama had dressed himself in the habiliments similar to those in which Madha used to dress himself and, therefore, the accused shot at Rama under the mistaken belief that be was Madha.
Section 34 of the Indian Penal Code reads "When a criminal act is done by several persons, in furtherance of the common intention of all, each of such persons is liable for that act in the same manner as if it were done by him alone." Section 34 was subject of judicial scrutiny in innumerable cases.
The expression "in furtherance of the common intention of all" was not in the original section, but was inserted in the section by section 1 of Act XXVII of 1870.
The Judicial Committee in Barendra Kumar Ghosh vs Emperor(1) defined the expression "criminal act" in the said section thus: "A criminal act means that united criminal behaviour which results in something for which an individual (1) Cal.
197 (P.C.) : L.R. 52 I.A. 40 290 would be punishable if it were all done by himself alone,that is, in a criminal offence.
" The Judicial Committee in Mahbub Shah vs King Emperor(1) laid down the following 'conditions for its application: "To invoke the aid of section 34 successfully, it must be shown that the criminal act complained against was done by one of the accused persons in the furtherance of the common intention of all; if this is shown, then liability for the crime may be imposed on any one of the persons in the same manner as if the act were done by him alone.
This being the principle, it is clear to their Lordships that common intention within the meaning of the section implies a pre arranged plan, and to convict the accused of an offence applying the section it should be proved that the criminal act was done in concert pursuant to the pre arranged plan.
As has been often observed, it is difficult, if not impossible, to procure direct evidence to prove the intention of an individual; in most cases it has to be inferred from his act or conduct or other relevant circumstances of the case.
" It is, therefore, clear that the criminal act mentioned in section 34 of the Indian Penal Code is the result of the concerted action of more than one person; if the said result was reached in furtherance of the common intention, each person is liable for the result as if he had done it himself.
The question is what is the meaning of the expression "in furtherance, of the common intention".
The dictionary meaning of the word "furtherance" is "advancement or promotion".
If four persons have a common intention to kill A, they will have to do many acts in promotion or prosecution of that design in order to fulfill it.
Some illustrations will clarify the point.
Four persons intend to kill A, who is expected to be found in a house.
All of them participate in different ways.
One of them attempts to enter the house, but is stopped by the sentry and he shoots the sentry.
Though the common intention was to kill A, the shooting of the sentry is in furtherance of the said common intention.
So section 34 applies.
Take another illustration.
If one of the said accused enters the room where the intended victim usually sleeps, but somebody other than the intended victim is sleeping in the room, and on a mistaken impression he shoots him.
The shooting of the wrong man is in furtherance of the common intention and so section 34 applies.
Take (1) L.R. 72 I.A. 148, 153.
291 a third variation of the illustration.
The intended victim has a twin brother who exactly resembles him and the accused who is entrusted with the part of shooting the intended victim, on a mistaken impression, shoots the twin brother.
The shooting of the twin brother is also in furtherance of the common intention.
Here also section 34 applies.
If that much is conceded we do not see any justification why the killing of another under a mistaken impression of identity is not in furtherance of the common intention to kill the intended victim.
When the accused were shooting at Rama believing him to be Madha, they were certainly doing a criminal act in furtherance of the common intention which was to kill Madha.
They killed Rama because they believed that they were shooting at Madha.
Mr. Chari argues, how can a mistake committed by one of the accused be in furtherance of a common intention ? For it is said that to commit a mistake was not a part of the common intention of the accused.
But the question is not, as we have pointed out, whether the committing of a mistake was a part of the common intention, but whether it was done in furtherance of the common intention.
If the common intention was to kill A and if one of the accused kills B to wreak out his private vengeance, it cannot possibly be in furtherance of the common intention for which others can be constructively made liable.
But, on the other hand if he kills B bona fide believing that he is A, we do not see any incongruity in holding that the killing of B is in furtherance of the common intention.
We, therefore, hold that without the aid of section 301 of the Indian Penal Code it can be held that when accused I to 4 shot at Rama they shot at him in furtherance of their common intention to kill Madha.
Now let us see the impact of section 301 of the Indian Penal Code on section 34 thereof.
Section 301 reads: "If a person, by doing anything which he intends or knows to be likely to cause death, commits culpable homicide by causing the death of any person, whose death he neither intends nor knows himself to be likely to cause, the culpable homicide committed by the offender is of the description of which it would have been if he had caused the death of the person whose death he intended or knew himself to be likely to cause.
" This section deals with a different situation.
It embodies what the English authors describe as the doctrine of transfer of malice or the transmigration of motive.
Under the section if A intends to kill B, but kills C whose death he neither intends nor knows himself to be likely to cause, the intention to kill C is by law 292 attributed to him.
If A aims his shot at B, but it misses B either because B moves out of the range of the shot or because the shot misses the mark and hits some other person C, whether within sight or out of sight, under section 301, A is deemed to have hit C with the intention to kill him.
What is to be noticed is that to invoke section 301 of the Indian Penal Code A shall not have any intention to cause the death or the knowledge that he is likely to cause the death of C.
In the instant case this condition is not complied with.
The accused shot at a particular person with the intention of killing him though under a misapprehension of his identity.
In that case, all the ingredients of sections 299 and 300 of the Indian Penal Code are complied with.
The aid of section 301 of the Indian Penal Code is not called for.
We are, therefore, of the opinion that section 301 of the Indian Penal Code has no application to the present case.
For the foregoing reasons we hold that all the accused are liable under section 302, read with section 34, of the Indian Penal Code.
If we reach this conclusion, it is conceded that no other point arises in this appeal.
The appeal fails and is dismissed.
Appeal dismissed. | Where four persons shot at the deceased with the intention of killing him but under a misapprehension that he was some one else they could be found guilty of an offence under section 302 of the Indian Penal Code, read with section 34 of the Code.
It would be a case of killing the deceased in furtherance of their common intention to kill the other, and there would not be any necessity to invoke section 301 of the Code to find them guilty.
In fact that section would apply only to cases where there was, no intention to cause the death, or knowledge that death was likely to be caused, of the deceased.
[291D E, H; 292A B].
Barendra Kumar Ghosh vs Emperor, L.R. 52 I.A. 40 and Mahbub Shah vs King Emperor, L.R. 72 I.A. 148 referred to. |
vil Appeal No. 938 of 1963.
Appeal from the judgment and decree dated December 19, 1960 of the Allahabad High Court in Income tax Reference No. 1588 of 1956.
K. N. Rajagopala Sastri, R. H. Dhebar and R. N. Sachthey, for the appellant.
A. V. Viswanatha Sastri and Naunit Lal, for the respondent.
The Judgment of the Court was delivered by Subba Rao J.
This appeal by certificate raises the question whether loss of cash by dacoity is an admissible deduction under section 10(1) of the Indian Income tax Act, 1922, hereinafter called the Act, in computing the assessee 's income in a banking business.
The facts relevant to the question raised may be briefly state .
The assessee is the Nainital Bank Limited.
It is a puplic limited company which carries on the business of banking.
It has various branches and one of them is situated at Ramnagar.
In the usual course of its business large amounts were kept in various safes in the premises of the Bank.
On June 11, 1951, at about 7 P.m.
there was a dacoity in the Bank and the dacoits carried away the cash amounting to Rs. 1,06,000 and some ornaments etc.
pledged with the Bank.
For the assessment year 1952 53 the Bank claimed the said amount as a deduction in computing its income from the banking business on the ground that it was a trading loss.
The Income tax Officer disallowed the claim on the ground that it was not a loss incidental to the banking business.
On appeal, the Appellate Assistant Commissioner of Income tax, and on further appeal, the Income tax Appellate Tribunal, confirmed that finding.
On a reference to the High Court of Judicature at Allababad, a Division Bench of that Court held that the loss by dacoity was incidental to the banking business and was, therefore, a trading, loss and that the assessee was entitled to a deduction of the same under section 10 (1 ) of the Act.
Hence the appeal.
Mr. Rajagopala Sastri, learned counsel for the appellant, argued that the Bank lost the money by burglary not in its capacity as a bank but only just like any other citizen, that the risk of L2Sup./64 9 342 burglary was not incidental to the business of banking and that, therefore, the amount burgled could not be deducted as a trading loss.
Mr. A. V. Viswanatha Sastri, on the other hand, contended that the money lost by burglary was the stock in trade of the banking business, that it was kept in the Bank in the usual course of its business and that the risk of its loss was incidental to the carrying on of the said business and, therefore, the amount lost was a trading loss liable to be deducted under section 10(1) of the Act.
Before we consider the law on the subject, it would be con venient at the outset to notice briefly the scope of the activities of banking business.
Under section 5 (1 ) (b) of the Banking Companies Act, 1949, "banking" is defined to mean "the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or Otherwise"; and under section 5 (1) (c), "banking company" means any company which transacts the business of banking in India; under section 5(1) (cc), " 'branch ' or 'branch office in relation to a banking company, means any branch or branch office, whether called a pay office or sub pay office or by any other name, at which deposits are received, cheques cashed or money lent, and for the purposes of section 35 includes any place of business where any other form of business referred to in subsection (1) of section 6 is transacted," Therefore, a banking business consists mainly in receiving deposits, making advances, realizing them and making fresh advances.
It is a continuous process which requires maintenance of ready cash in the bank premises.
The Nainital Bank Ltd., is a public limited company incorporated for carrying on such banking business and Ramnagar branch is one of its branches doing such business.
Unlike an individual, a limited company like a banking company comes into existence for the purpose of carrying on only the banking business and ordinarily there cannot be any scope for attributing different characters to that business.
We therefore, start with the fact that the Ramnagar branch of the Bank had kept large amounts in the Bank premises in the usual course of its business in order to meet the demands of its constituents.
It is settled law, and indeed it is not disputed, that cash is the stock in trade of a banking company.
In Arunachalam Chettiar vs Commissioner of Income tax Madras(1), the Judicial Committee was considering the basis of the right of an assessee to ((1) , 83 (P.C.).
343 deduct irrecoverable loans before arriving at the profits of moneylending, and in that context stated: "The basis of the right to deduct irrecoverable loans before arriving at the profit of money lending is that to the money lender, as to the banker, money is his stock in trade or circulating capital; he is dealing in money." In Commissioner of Income tax, Madras vs Subramanya Pillai(1) a Division Bench of the Madras High Court, in explaining the principle why in money lending business allowances for bad debts were given, observed: "In the case of banking or money lending business . allowance for bad and doubtful debts was given for the reason that all the moneys embarked in the moneylending business and lent out for interest were in the nature of stock in trade of the banker or money lender and the bad and doubtful debts represented so much loss of the stock in trade.
Losses in respect of the stock intrade have always been regarded as trade losses and allowed to be set off against the receipts.
" The same view was expressed by the Full Bench of the Madras High Court in Ramaswami Chettiar vs Commissioner of Income tax, Madras (2 ) and by the Patna High Court in Motipur Sugar Factory, Ltd. vs Commissioner of Income tax, Bihar & Orissa(3).
Under section 10(1) of the Act loss of stock in trade is certainly an admissible deduction in computing the profits.
Payment received from an insurance company for stock destroyed by fire was taken into account as a trading receipt in computing the profits assessable to income tax; see Green (H. M. Inspector of Taxes) vs J. Gliksten and Son, Ltd. (4) ; and Raghuvanshi Mills Ltd. vs Commissioner of Income tax, Bombay City(5).
If receipt from an insurance company towards loss of stock was a trading receipt, conversely to the extent of the loss not so recouped it should be trading loss.
Loss sustained by an assessee owing to destruction of the stock in trade by enemy invasion was held to be a trading loss which the assessee was entitled to claim as a deduction: see Pohoomal Bros. vs Commissioner of Income tax, Bombay City(6).
Loss incurred in stock in trade by ravages of white ants was allowed as trading loss in computing the profit of a business; see Hira Lal Phoolchand vs Commissioner of Income (1) , 92.
(3) (5) ; (2) I.L.R. (4) (6) 344 tax, C.P., U.P. and Berar(1).
We, therefore, reach the position that cash is a stock in trade of a banking business and its loss in the course of its business under varying circumstances is deductible as a trading loss in computing the total income of the business.
But it is said that every loss of a stock in trade in whatsoever way it is caused is not a trading loss, but the said loss should have been caused not only in the course of the business but also should have been incidental to it.
The leading case on the subject is that of this Court in Badridas Daga vs Commissioner of Income tax(2).
There, the appellant was the sole proprietor of a firm which carried on the business of money lending.
The agent of the firm withdrew large amounts from the firm 's bank account and applied them in satisfaction of his personal debts.
In the firm 's account the balance of the amount not recovered from the agent was written off at the end of the accounting year as irrecoverable.
This Court held that the loss sustained by the appellant therein as a result of I misappropriation by the agent was one which was incidental to the carrying on of the business and should therefore, be deducted in computing the profits under section 10 (1) of the Act.
Venkatarama Ayyar J., speaking for the Court, observed: ,,The result is that when a claim is made for a deduction for which there is no specific provision in section 10(2), whether it is admissible or not will depend on whether, having regard to accepted commercial practice and trading principles, it can be said to arise out of the carrying on of the business and to be incidental to it.
If that is established, then the deduction must be allowed, provided of course there is no prohibition against it, express or implied, in the Act.
" Applying the principle to the facts of the case before the Court, the learned Judge proceeded to state: "If employment of agents is incidental to the carrying on of business, it must logically follow that losses which are incidental to such employment are also incidental to the carrying on of the business.
" The principle was clearly laid down and was, if we may say so, correctly applied to the facts before the Court.
But there is a (1) (2) ; 345 passage in the judgment on which strong reliance was placed by the learned counsel for the appellant and it was contended that the instant case clearly fell under the illustration contained in the passage.
It reads: "At the same time, it should be empbasised that the loss for which a deduction could be made under section 10(1) must be one that springs directly from the carrying on of the business and is incidental to it and not, any loss sustained by the assessee, even if it has some connection with his business.
If, for example, a thief were to break overnight into the premises of a money lender and run away with funds secured therein, that must result in the depletion of the resources; available to him for lending and the loss must, in that sense, be a business loss, but it is not one incurred in the running of the business, but is one to which all owners of properties are exposed whether they do business or not.
The loss in such a case may be said to fall on the assessee not as a person carrying on business but as owner of funds.
This distinction, though fine, is very material as on it will depend whether deduction could be made under section 10(1) or not.
" It was said that the loss in the present case fell on the assessee not as a person carrying on the business of banking but as owner of funds.
That passage in terms refers to a money lender and does not deal with a public company carrying on banking business.
In the case of a money lender the profits he made may form part of the private funds kept in his house which he may or may not invest in his business.
It is indistinguishable from his other moneys.
But in the case of a bank the deposits received by it form part of its circulating capital and at the time of the theft formed part of its stock in trade.
In one case it cannot be posited that the amount robbed is part of the stock in trade of the trader till he invests it in his business; in the other it forms part of the stock in trade without depending on the intention of the banking company.
There lies the distinction between the instant case and the illustration visualized by this Court.
We have only suggested a distinction, but we are not expressing any definite opinion on the question whether the loss incurred in the case illustrated is or is not a trading loss.
The correctness or otherwise of the said observation may fall to be considered when such a case directly arises for decision.
346 Before parting with this decision, it may be noticed that this Court agreed with the decisions in Venkatachalapathy lyer vs Commissioner of Income tax(1), Lord 's Dairy Farm Ltd. vs Commissioner of Income tax(2) , and Motipur Sugar Factory Ltd. vs Commissioner of Income tax( 3 ).
The decision in Motipur Sugar Factory case(3), which was accepted by this Court to be correct, takes us a step further in the development of law.
There, the assessee company was carrying on business in the manufacture of sugar and molasses out of sugarcane.
It deputed an employee,in compliance with the statutory rules, with cash for disburse ment to sugarcane cultivators at the spot of purchase.
The cash was robbed on the way.
The Division Bench of the Patna High Court held that the loss of money was loss arising out of the business of the assessee and sprang from the statutory necessity of sending money to various purchasing centres for disbursement and, therefore, the assessee was entitled to deduct the loss in computing its taxable income under section 10(1) of the Act.
It will be noticed that this is not a case of misappropriation by a servant of the company, but a case of loss to the company by reason of its cash being robbed from its servant.
In that case, cash was entrusted to the employee under statutory rules.
But there may be cases where such entrustment may be made by custom or practice.
What is important to notice is that robbery of cash from the hands of an employee is held to be incidental to the business of the assessee.
If that be so, why should a different principle be adopted if the loss was not caused by robbery from the hands of the employee on his way to a particular place in discharge of his duty, but it was a loss caused by dacoity from the premises of the bank itself.
In one case, the employee carried cash for disbursement to sugarcane cultivators, and in the other, funds were lodged in the Bank with reasonable safeguards for disbursement of the same to its constituents.
If the loss was incidental to the business in one case, it should equally be so in the other case.
The judgment of the Special Bench of the Madras High Court in Ramaswami Chettiar vs The Commissioner of Income tax, Madras(4) supports the case of the Revenue.
There, the loss was incurred by theft of money used in moneylending business and kept in the business premises.
The Full Bench by majority held that the loss incurred thereby should not be allowed in computing the income tax, as the theft was committed by persons who were not at the time of commission employed as clerks or servants by the assessee.
This judgment, (1) (3) (2) (4) Mad.
347 if we may say so with respect, takes a narrow view of the problem.
Indeed in Motipur Sugar Factory case(1), which was approved by this Court, the theft was committed not by the employee of the company but by robbers.
To that extent the correctness of the Madras decision is shaken.
That apart the judgment of Anantakrishna Ayyar J., who recorded a dissent, contains a constructive criticism of the majority view.
We prefer the view of Anantakrishna Ayyar J., to that of the majority.
The decision of the High Court of Australia in Charles Moore and Co. (W. A.) Pvt. Ltd. vs Federal Commissioner of Taxa tion(2) throws considerable light on the subject.
In that case the assessee was carrying on business of a departmental store and he banked the takings thereof daily.
It was the practice every business morning for the cashier accompanied by another employee to take the previous day 's takings to the bank some two hundred yards away and pay them to the credit of the assessee.
One day, while on their way to the bank the two employees were held up at gun point and robbed of a large amount which formed part of the receipts of the assessee for the previous day.
The Court held that the loss was incurred in gaining or producing the assessable income of the year in question within the meaning of section 5 1 (I) of the Income Tax and Social Services Contribution Assessment Act, 1936 52 and was not a loss or outgoing of capital or of a capital nature, and was consequently a deduction from assessable income in such year.
It was pointed out therein: "Banking the takings is a necessary part of the operations that are directed to the gaining or producing day by day of what will form at the end of the accounting period the assessable income.
Without this, or some equivalent financial procedure, hitherto undevised, the replenishment of stock in trade and the payment of wages and other essential outgoings would stop and that would mean that the gaining or producing of the assessable income would be suspended.
" Then the Court proceeded to state "The 'occasion of the loss ' in the present case was the pursued in banking the money .
There Is no difficulty in understanding the view that involuntary outgoings and unforeseen or unavoidable losses should be allowed as deductions when they represent that kind of casualty, mischance or misfortune which is a natural or recognized incident of a particular trade or (1) (2) ; , 350.
348 business the profits of which are in question.
These are characteristic incidents of the systematic exercise of a trade or the pursuit of a vocation.(1) Even if armed robbery of employees carrying money through the streets had become an anachronism which we no longer knew, these words would apply.
For it would remain a risk to which of its very nature the procedure gives rise.
But unfortunately it is still a familiar and recognized hazard and there could be little doubt that if it had been insured against the premium would have formed an allowable deduction.
Phrases like the foregoing or the phrase 'incidental and relevant ' when used in relation to the allowability of losses as deductions do not refer to the frequency, expectedness or likelihood of their occurrence or the antecedent risk of their being incurred, but to their nature or character.
What matters is their connection with the operations which more directly gain or produce the assessable income.
" This decision laid down the following principles: (i) banking the takings was a necessary part of the operations of the business with which the court was dealing in that case; (ii) the loss to the business caused by robbery was incidental and relevant to that business as the procedure involved in carrying on of the business carried with it the risk of the cash being robbed on the way; (iii) the expressions "incidental" and "relevant" in relation to losses did not relate to the frequency of the happening of the risk but to their nature and character, that is to say, the loss must be connected with the operation to produce income.
The judgment of the Supreme Court of Newzealand in Gold Band Services Limited vs Commissioner of Inland Revenue ( 2 ) applied the decision of the Australian High Court cited above to a situation which comes very near to our case.
The appellant therein owned and operated a petrol service station which was kept open continuously.
It was held up by an armed robber and a substantial sum of money was stolen.
The Court held that the sum lost as a result of the robbery was a loss exclusively incurred in gaining or producing the assessable income of the appellant and was deductible from its ' gross income.
Adverting to the argu ment very often advanced in courts based upon the robbery being committed in the premises and that committed on the way to a bank, Haslain J. observed (1) Rich J. in Commissioner of Taxation (N.S.W.) vs Ash at 277.
(2) ,470. 349 .lm15
I can see no valid distinction to be drawn in principle between the robbery of trade receipts on the appellant 's premises at an hour before banking was possible (but intended to be banked at a time when the banks were open) and the robbery of the same money when in the custody of the employee on the way to the bank.
In my opinion, the occasion for the loss of the present appellant was the operation of its business in the normal way, with the result that the cash stolen was on the premises at that particular time and that the possibility of such plunder constituted an attraction to a certain type of criminal, including both the safe blower and the armed burglar.
" The present case is a stronger one, for the money was kept in the Bank as it was absolutely necessary to carry on the operation of the banking business.
We may now summarize the legal position thus.
Under section 1O (I ) of the Act the trading loss of a business is deductible for computing the profit earned by the business.
But every loss is not so deductible unless it is incurred in carrying out the operation of the business and is incidental to the operation.
Whether loss is incidental to the operation of a business is a question of fact to be decided on the facts of each case, having regard to the nature of the operations carried on and the nature of the risk involved in carrying them out.
The degree of the risk or its frequency is not of much relevance but its nexus to the nature of the business is material.
In the present case the respondent was carrying on the busi ness of banking.
It is an integral part of the process of banking that sufficient moneys should be kept in the bank duly guarded to meet the demands of the constituents.
The retention of the money in the bank is a part of the operation of banking.
The retention of money in the bank premises carries with it the ordinary risk of its being subject of embezzlement, theft, dacoity or destruction by fire and such other things.
Such risk of loss is incidental to the carrying on of the operations of the business of banking.
In this view, we are clearly of the opinion that the loss incurred by dacoity in the present case is incidental to the carrying on of the business of banking.
In the result, the order of the High Court is correct and the appeal fails and is dismissed with costs.
Appeal dismissed. | Cash and ornaments worth Rs. 1,06,000 were robbed by dacoits from the Ramnagar branch of the Nainital Bank Ltd., a public limited company carrying on the business of banking.
The loss was claimed by the bank as a trading loss for the assessment year 1952 53.
The claim was disallowed by the Income tax Officer on the ground that the loss was not incidental to the business.
The finding being confirmed by the Appellate Assistant Commissioner and the Incom tax Appellate Tribunal, a reference was made to the High Court of Judicature at Allahabad which held that the loss by dacoity was incidental to the banking business and was, therefore a trading loss which the assessee could claim as a deduction under section 10(1) of the Indian Income tax Act, 1922.
Appeal to this Court on behalf of the Revenue, came by way of a certificate under article 133 of the Constitution of India.
It was contended on behalf of the appellant that the risk of burglary was not incidental to the business of banking, and the loss in the present case fell on the assessee not as a person carrying on the business of banking but as an owner of funds.
HELD : Cash is the stock in trade of a banking company.
and its loss is therefore a trading loss.
But every loss is not deductible in computing the income of a business unless it is incurred in the carrying out of the operation of the business and is incidental to the operation.
Whether in a particular case an item of loss claimed as a deduction under section 10(1) of the Act is incidental to the operation of the assessee 's business or not is a question of fact to be decided on the facts of that case, having regard to the nature of the operations carried on and the nature of the risk involved in carrying them out.
The degree of risk or its frequency is not of much relevance but its nexus to the nature of the business is material.
[344 A; 349 D E].
It is an integral part of the business of banking that sufficient moneys should be kept in the bank duly guarded to meet the demands of the constituents.
Retention of the money in the bank is part of the operation of banking.
Retention of money in the bank carries with it the ordinary risk of its being the subject of embezzlement, theft, dacoity or destruction by fire and such other things.
Such risk of loss is incidental to the carrying on of the operation of the business of banking.
Loss incurred by dacoity in the present case is incidental to the carrying on of the business of banking.
[349 F G].
Case law discussed.
Motipur Sugar Factory Ltd. vs Commissioner of Income tax, Bihar and Orissa, Charles Moore & Co. (W.A.) Pvt. Ltd. vs Federal Commissioner of Taxation, ; and Gold Band Services Ltd. vs Commissioner of Inland Revenue, , relied on.
341 Badridas Daga vs Commissioner of Income tax [1959] S.C.R. 690 distinguished.
Ramaswamy Chettiar vs Commissioner of Income tax, Madras I.L.R. (1930)53 Mad. 904, disapproved. |
ence No. 1 of 1964.
Special Reference under article 143 of the Constitution of India.
C.K. Dhaphtary, Attorney General, H.N. Sanyal, Solicitor General, section V. Gupte, Addl.
Solicitor General, D. R. L. lyengar and R. H. Dhebar, for Union of India.
M.C. Setalvad, G.S. Pathak, Jagadish Swaroop, S.N. Andley, P.L. Vohra, Rameshwar Nath, Mahinder Ndrain, Harish K. Puri and Suresh Vohra, for Hon 'ble the Chief Justice and other Judges of the Allahabad High Court.
G. section Pathak, Jagdish Swaroop, Bishun Singh, Gopal Behari, J.S. Trivedi, S.N. Pawnikar, S.N. Andley, P.L. Vohra and Rameshwar Nath, for Hon 'ble Mr. Justice N.U. Beg.
N.C. Chatterjee, Asif Ansari, M.K. Ramamurthi, and R.K. Garg for Hon 'ble Mr. Justice G.D. Sehgal.
H. M. Seervai, Advocate General,41, Mahashtra, T. )Z. Andhyarujina and S.P. Varma, for U.P. Vidhan Sabha.
N.A. Palkhivala, J.B. Dadachanji, O.C. Mathur and Ravinder Narain, for Hon 'ble the Chief Justice, Maharashtra High Court.
J. M. Thakore, Advocate General, Gujarat, J. B. Dadachanji, O. C. Mathur and Revinder Jain, for Hon 'ble the Chief Justice, Gujarat High Court.
D. Narsaraju, N. R Ramdar, O.P. Malhotra, B. Parthasarthy, J.B. Dadachanji, O.C. Mathur, and Ravinder Narain, for Hon 'ble the Chief Justice, Orissa High Court.
Murli Manohar Vyas, section Murti, B.N. Kirpal, B.L. Khanna, K. K. Jain, Chitale and M. section Gupta, for Hon 'ble the Chief Justice, Rajasthan High Court.
Murli Manohar, section Murti, B. N. Kirpal, B. L. Khanna,, K. K. jain, chitle and M. section Gupta, for Hon 'ble the Chief Justice, Madhya Pradesh High Court.
D.P. Singh, section Balkrishnan, Shanti Bhatnagar and Lai Narain Singh, for Hon 'ble the Chief Justice, Patna High Court.
C.1.165 2 424 A.C. Mitra and D.N. Mukherjee, for Hon 'ble Speker, West Bengal Legislative Assembly.
section section Sanyal, section K. Acharyya and D. N. Mukheriee, for Hon 'ble Chairman, W.B.L.C. H.M. Seervai, Advocate General, Maharashtra, T.R. Anand yarujina, R.A. Gagrat and V.J. Merchant, for Hon 'ble the Speaker/Chairman Maharashtra L.A. & L.C. G.N. loshi, Atiqur Rehman and K.L. Hathi, for Hon 'ble the Speaker, Gujarat L.A. Atiqur Rehman and K.L. Hathi, for Hon 'ble the Speaker, Himachal Pradesh Vidhan Sabha.
B.C. Barua, Advocate General, Assam and Naunit Lal, for Hon 'ble the Speaker, Assam Legislative Assembly.
D.M. Sen, Advocate General, Nagaland and Naunit Lal, for Nagaland Legislative Assembly.
B.P. Jha, for Hon 'ble the Chairman, Bihar Legislative Council and Hon 'ble the Speaker Bihar Legislative Assembly.
K.L. Misra, Advocate General, Uttar Pradesh, B.C. Misra, D.D. Chaudhury and C.P. Lal, for the Advocate General for the State of U.P. M. Adhikari, Advocate General, Madhya Pradesh and I.N. Shroff, for the Advocate General for the State of Madhya Pradesh.
N. Krishnaswamy Reddy, Advocate General, Madras, V. Ramaswamy and A.V. Rangam, for the Advocate General for State of Madras.
B.V. Subrahamanyam, Advocate General, State of Andhra Pradesh, M. Jaganadha Rao and T.V.R. Tatachari, for the Advocate General for the State of Andhra Pradesh.
B. Sen, S.C. Bose and P.K. Bose, for the Advocate General for the State of West Bengal.
G.C. Kasliwal, Advocate General, State of Rajasthan, M. V. Goswami, for the State of Rajasthan.
S.P. Varma, for the Advocate for the State of Bihar.
J.P. Goyal, for M/s. Keshav Singh and B. Soloman.
M. K. Nambyar and N. N. Keswani, for Bar Council of India.
M. K. Nambyar, Chaudhury Hyder Hussain, B. K. Dhawan, Bishun Singh, Shiv Sastri and section section Shukla, for Oudh Bar Association.
425 R. Jethmalni, P.K. Kapila and A. K. Nag, for Western India Advocates Association (Intervener).
section N. Kakar, C. section Saran, G. P. Gupta, and section C. Agarwal, for Allahabad High Court Bar Association (Intervener).
M.K. Nambyar and V.A. Seyid Muhammad, for Bar Association of India (Intervener).
R. V. section Mani, Shaukat Husain, E. C. Agarwala, Shahzadi Mohiuddin and O. C. Agarwal, for Applicants Interveners: (a) Lok Raksha Samaj (Sewak), (b) All India Civil Liberties Council (c) Sapru Law Society.
M. K. Rama murthi, R. K. Garg, D. P. Singh and section C. Agar wal for Applicant Intervener Delhi Union of Journalists.
K. Rajendra Chaudhury and K. R. Chaudhury, for Applicant Intervener, Bihar Working Journalists Union.
Chinta Subba Rao, for Applicant Intervener, Institute of Public Opinion.
GAJENDRAGADKAR C.J. delivered the Opinion on behalf of SUBBA RAO, WANCHOO, HIDAYATULLAH, SHAH AND RAJGOPALA AYYANGAR JJ.
and himself.
SARKAR J. delivered a separate Opinion.
Gajendragadkar C.J. This is Special Reference No. 1 of 1964 by which the President has formulated five questions for the opinion of this Court under Article 143(1) of the Constitution.
The Article authorises the President to refer to this Court questions of law or fact which appear to him to have arisen or are likely to arise and which are of such a nature and of such public importance that it is expedient to obtain the opinion of the Supreme Court upon them.
Article 143(1) provides that when such questions are referred to this Court by the President, the Court may, after such hearing as it thinks fit, report to the President its opinion thereon.
In his Order of Reference made on March 26, 1964, the President has expressed his conclusion that the questions of law set out in the Order of Reference are of such a nature and of such public importance that it is expedient that the opinion of the Supreme Court of India should be obtained thereon.
It appears that on March 14, 1964, the Speaker of the Legislative Assembly of Uttar Pradesh administered, in the name of and under the orders of the Legislative Assembly (hereinafter referred to as "the House"), a reprimand to Keshav Singh, who is a resident of Gorakhpur, for having committed contempt of the House and also for having committed a breach of the privileges of Narsingh Narain Pandey, a member of the House.
The contempt and 426 the breach of privileges in question arose because, of a pamphlet which was printed and published and which bore the signature of Keshav Singh along with the signatures of other persons.
In pursuance of the decision taken by the House later on the same, day, the Speaker directed that Keshav Singh be committed to prison for committing another contempt of the House by his conduct in the House when he was summoned to receive the aforesaid reprimand and for writing a disrespectful fetter to the Speaker of the House earlier.
According to this order, a warrant was issued over the signature of the Speaker of the House, Mr. Verma, directing that Keshav Singh be detained in the District Jail, Lucknow, for a Period of seven days, and in execution of the warrant Keshav Singh was detained in the Jail.
On March 19, 1964, Mr. B. Solomon, an Advocate practising before the Lucknow Bench of the Allahabad High Court, presented a petition to the High Court on behalf of Keshav Singh under section 491 of the Code of Criminal Procedure, 1898, as well as under Article 226 of the Constitution.
To this petition were implemented the speaker of the House, the House, the Chief Minister of Uttar Pradesh and the Superintendent of the District Jail, Lucknow, where Keshav Singh was serving the sentence of improvement imposed on him by the House, as respondents 1 to 4 respectively.
The petition thus presented on behalf of Keshav Singh alleged that his detention in jail was illegal on several grounds.
According to the petition, Keshav Singh had been ordered to be imprisoned after the reprimand had been administered to him, and that made the order of imprisonment illegal and without authority. 'Me petition further alleged that Keshav Singh had not been given an opportunity to defend himself and that his detention was mala fide and was against the principles of natural justice.
It was also his case that respondents 1 to 3 had no authority to send him to the District Jail, Lucknow, and that made his detention in jail illegal.
After the said petition was filed before the Lucknow Bench of the Allahabad High Court, the learned Advocates for both the parties appeared before Beg and Sahgal JJ.
at 2 P.m.
and agreed that the petition should be taken up At 3 P.M. the same day.
Mr. Solomon represented keshav Singh and Mr. K. N. Kapur, Assistant Government Advocate, appeared for all the respondents.
Accordingly, the petition was taken up before the Court at 3 P.m.
On this occasion, Mr. Solomon appeared for the petitioner but Mr. Kapur did not appear in Court.
The Court then passed an Order that the applicant should be released on bail 427 on furnishing two sureties in a sum of Rs. 1,000 each and a personal bond in the like amount to the satisfaction of the District Magistrate, Lucknow.
The Deputy Registrar of the Court was asked to take necessary action in connection with the Order.
The Court also directed that the applicant shall remain present in Court at every hearing of the case in future.
Thus, the petition was admitted and notice was ordered to be issued to the respondents with the additional direction that the case should be set down for hearing as early as possible.
This happened on March .19, at 3 P.m.
On March 20, 1964, Mr. Shri Rama, the Government Advocate, wrote to Mr. Nigam, Secretary to Government U.P. Judicial Department, Lucknow, giving him information about the Order passed by the High Court on Keshav Singh 's application.
In this communication, Mr. Shri Rama has stated that after the matter was mentioned to the Court at 2 P.m. it was adjourned to 3 P.m. at the request of the parties; soon thereafter Mr. Kapur contacted Mr. Nigam on the phone, but while the conversation was going on, the Court took up the matter at 3 P.m. and passed the Order directing the release of Keshav Singh on terms and conditions which have already been mentioned.
Mr. Shri Rama sent to Mr. Nigam three copies of the application made by Keshav Singh and suggested that arrangement should be made for making an appropriate affidavit of the persons concerned.
He also told Mr. Nigam that the application was likely to be listed for hearing at a very early date.
Instead of complying with the request made by the Government Advocate and instructing him to file a return in the application made by Keshav Sin , the House proceeded to take action against the two learned Judes why passed the order on Keshav Singh 's application, as well as Keshav Singh and his Advocate, on March 21, 1964.
It appears that two Members of the House brought to the notice of the Speaker of the House on the 20th March what had happened before the Court in regard to the application made by Keshav Singh.
Taking notice of the order passed by the High Court on Keshav Singh 's petition, the House proceeded to pass a resolution on March 21, 1964.
This resolution said that the.
House Was of the denote view at M/s. G. D. Sahgal, N. U. Beg.
Keshav Singh and P. Solomon had committed contempt of the House and therefore, it was ordered that Keshav Singh Should immediately be taken into custody and kept confined in the District Jail, Lucknow, for the remaining term of his impri sonment and M/s. N. U. Beg, D. Sahgal and B. Solomon should 428 be brought in custody before the House.
The resolution further added that after Keshav Singh completed the term of his imprisonment, he should be brought before the House for having again committed contempt of the House on March 19, 1964.
The two learned Judges heard about this resolution on the radio on the evening of March 21, and read about it in the morning edition of the Northern India Patrika published on March 22, 1964.
That is why they rushed to the Allahabad High Court with separate petitions under article 226 of the Constitution.
petitions alleged that the impugned Resolution passed by the House was wholly unconstitutional and violated the provisions of article 211 of the Constitution.
According to the petitions, the application made by Keshav Singh under article 226 was competent and in making an order releasing Keshav Singh, the Judges were exercising their jurisdiction and authority as Judges of the High Court under article 226.
Their contention was that the resolution passed by the House amounted to contempt of Court, and since it was wholly without jurisdiction, it should be set aside and by an interim order its implementation should be stayed.
To these petitions were impleaded as respondents Mr. Verma, the Speaker, Vidhan Sabha, Lucknow, the State of Uttar Pradesh and the Marshal, Vidhan Sabha.
These petitions were filed on March 23, 1964.
Apprehending that these developments had given rise to a very serious problem, a Full Bench of the Allahabad High Court consisting of 28 Judges took up on the same day the petitions presented before them by their two colleagues at Lucknow, directed that the said petitions should be admitted and ordered the issue of notices against the respondents restraining the Speaker from issuing the warrant in pursuance of the direction of the House given to him on March 21, 1964, and from securing execution of the warrant if already issued, and restraining the Government of U.P. and the Marshal of the House from executing the warrant.
Meanwhile, on March 25, 1964, Mr. Solomon, the learned Advocate of Keshav Singh, presented a similar petition to the High Court under article 226.
He prayed for a writ of mandamus on the same lines as the petitions filed by the two learned Judges, and he urged that suitable order should be passed against the House, because it had committed contempt of Court.
To his petition Mr. Solomon had impleaded seven respondents; they were: the Speaker of the House, Mr. Verma: the Legislative Assembly, U.P.; the Marshal of the U.P. Legislative Assembly; 429 Mr. Saran and Mr. Ahmad, Members of the Legislative Assembly, U.P., who brought to the notice of the House the orders passed by the two learned Judges of the High Court; and the State of Uttar Pradesh.
This application again was heard by a Full Bench of 28 Judges of the Allahabad High Court on March 25, and after admitting the petition, an interim order was passed prohibiting the implementation of the resolution the validity of which was challenged by the petitioner.
At the preliminary hearing of this petition, notice had been served on the Senior Standing Counsel who was present in Court.
He stated to the Court that he had no instructions at that stage to oppose the application.
That is why the Court issued notice of the application and passed what it thought would be appropriate orders.
On the same day, the House passed a clarificatory resolution.
This resolution began with the statement that a misgiving was being expressed with regard to the motion passed by the House in that it could be construed as depriving the persons concerned of an opportunity of explanation, and it added that it was never the intention of the House that a charge against a High Court Judge for committing breach of privilege or contempt of the House, should be disposed of in a manner different from that governing breach of privilege or contempt committed by any other person.
The House, therefore, resolved that the question of contempt may be decided after giving an opportunity of explanation to the persons named in the original resolution of March 20, 1964 according to rules.
As a result of this resolution, the warrants issued for the arrest of the two learned Judges and Mr. Solomon were with drawn, with the result that the two learned Judges and Mr. Solomon were placed under an obligation to appear before the House and offer their explanations as to why the House should not proceed against them for their alleged contempt of the House.
When the incidents which happened in such quick succession from March 19 to March 25, 1964, had reached this stage, the President decided to exercise his power to make a reference to this Court under article 143(1) of the Constitution on March 26, 1964.
The Order of Reference shows that it appeared to the President that the incidents in question had given rise to a serious conflict between a High Court and a State Legislature which involved important and complicated questions of law regarding the powers and jurisdiction of the High Court and its Judges in relation to the State Legislature and its officers and regarding the 430 powers, privileges and immunities of the, State Legislature and its members in relation to the High Court and its Judges in the discharge of their duties.
The President was also satisfied that the questions of law set out in his Order of Reference were of such a nature and of such public importance that it was expedient to obtain the opinion of this Court on them.
That is the genesis of the present reference.
The questions referred to this Court under this Reference read as follows : (1) Whether, on the facts and circumstances of the case, it was competent for the Lucknow Bench of the High Court of Uttar Pradesh consisting of the Hon 'ble, Mr. Justice N. U., Beg and the Hon 'ble Mr Justice G. D. Sahgal, to entertain and deal with the petition of Mr. Keshav Singh challenging the legality of the sentence of imprisonment imposed upon him by the Legislative Assembly of Uttar Predesh for its contempt and for infringement of its privileges and to pass orders releasing Mr. Keshav Singh on bail pending the disposal of his said petition; (2) Whether, on the facts and circumstances of the case, Mr. Keshav Singh, by causing the petition to be presented on his behalf to the High Court of Uttar Pradesh as aforesaid, Mr. B. Solomon, Advocate, by presenting the said petition and the said two Hon 'ble ' Judges by entertaining and dealing with the said peti tion and ordering the release of Shri Keshav Singh on bail pending disposal of the said petition committed contempt of the Legislative Assembly of Uttar Pradesh; (3) Whether, on the facts and circumstances of the case, it was competent for the Legislative Assembly of Uttar Pradesh to direct the production of the said two Hon 'ble Judges and Mr. B. Solomon, Advocate, before it in custody or to call for their explanation for its contempt; (4) Whether, on the facts and circumstances of the case, it was competent for the Full Bench of the High Court of Uttar Pradesh to entertain and deal with the petitions of the said two Hon 'ble Judges and Mr. B. Solomon, Advocate, and to pass interim orders restraining the Speker of the Legislative Assembly 431 of Uttar Pradesh and other respondents to the said petitions from implementing the aforesaid direction of the said Legislative Assembly; and (5) Whether a Judge of a High Court who entertains or deals with a petition challenging any order or decision of a Legislature imposing any penalty on the petitioner or issuing any process against the petitioner for its contempt or for infringement of its privileges and immunities or who passes any order on such petition commits contempt of the said Legislature and whether the said Legislature is competent to take proceedings against such a Judge in the exercise and enforcement of its powers, privileges and immunities.
At the hearing of this Reference, Mr. Varma has raised a preliminary objection on behalf of the Advocate General of Bihar.
He contends that the present Reference is invalid under article 143(1) because the questions referred to this Court are not related to any of the entries in Lists 1 and III and as such, they cannot be said to be concerned with any of the powers, duties or functions conferred on the President by the relevant articles of the Constitution.
The argument appears to be that it is only in respect of matters failing within the powers, functions and duties of the President that it would be competent to him to frame questions for the advisory opinion of this Court under article 143(1).
In our opinion, this contention is wholly misconceived.
The words of article 143(1) are wide enough to empower the President to forward to this Court for its advisory opinion any question of law or fact which has arisen or which is likely to arise, provided it appears to the President that such a question is of such a nature or of such public importance that it is expedient to obtain the opinion of this Court upon it.
It is quite true that under article 143(1) even if questions are referred to this Court for its advisory opinion, this Court is not bound to give such advisory opinion in every case.
article 143(1) provides that after the questions formulated by the President are received by this Court, it may, after such hearing as it thinking fit, report to 'the, President its opinion thereon.
The use of the word "may" in contrast with the use of the word "shall" in the provision prescribed by article 143 (2) clearly brings opt the fact that in a given case this Court may respectfully refuse, to express its advisory opinion if it is satisfied that it should not express its opinion having regard to the nature of the questions forwarded to it and having regard to other relevant facts and circumstances.
article 143 (2) 432 deals with cases in which the President may refer a dispute to this Court notwithstanding the prohibition prescribed by the proviso to article 131, and it adds that when such a reference is made, the Court shall, after such hearing as it thinks fit, report to the President its opinion thereon.
In other words, whereas in the case of reference made under article 143(2) it is the constitutional obligation of this Court to make a report on that reference embodying its advisory opinion, in a reference made under article 143(1) there is no such obligation.
In dealing with this latter class of reference, it is open to this Court to consider whether it should make a report to the President giving its advisory opinion on the questions under reference.
This position, however, has no bearing on the question raised by Mr. Varma.
The validity of the objection raised by Mr. Varma must be judged in the light of the words of article 143(1) themselves and these words are of such wide amplitude that it would be impossible to accede to the argument that the narrow test suggested by Mr. Varma has to be applied in determining the validity of the reference itself.
What article 143(1) requires is that the President should be satisfied that a question of law or fact has arisen or is likely to arise.
He should also be satisfied that such a question is of such a nature and of such public importance that it is expedient to obtain the opinion of this Court on it.
Prima facie, the satisfaction of the President on both these counts would justify the reference, and it is only where this Court feels that it would be inadvisable for it to express its advisory opinion on it that it may respectfully refuse to express any opinion.
But there can be no doubt that in the present case it would be impossible to suggest that questions of fact and law which have been referred to this Court, have not arisen and they are not of considerable public importance.
Therefore, we do not think there is any substance in the preliminary objection raised by Mr. Varma.
The references made to this Court since the Constitution was adopted in 1950 illustrate how ' it would be inappropriate to apply the narrow test suggested by Mr. Varma in determining the competence or validity of the reference.
The first Special Reference No. 1 of 1951 was made to this Court to obtain the advisory opinion of this Court on the question about the validity and constitutionality of the material provisions of the , the Ajmer Merwara (Extension of Laws) Act, 1947, and the Part C States (Laws) Act, 1951(1).
The second Special (1) In re: the ; , 433 Reference(1) was made in 1958.
This had reference to the validity of certain provisions of the Kerala Education Bill, 1957, which had been passed by the Kerala Legislative Assembly, but had been reserved by the Governor for the consideration of the President.
The third Special Reference(1) was made in 1959, and it invited the advisory opinion of this Court in regard to the validity of the material provisions of an agreement between the Prime Ministers of India and Pakistan which was described as the Indo Pakistan Agreement.
The fourth Special Reference(2) was made in 1962.
By this reference, the President forwarded for the advisory opinion of this Court questions in regard to the validity of the relevant provisions of a draft Bill which was intended to be moved in the Parliament with a view to amend certain provisions of the and the .
It would thus be seen that the questions so far referred by the President for the advisory opinion of this Court under article 143 (1) do not disclose a uniform pattern and that is quite clearly consistent with the broad and wide words used in article 143(1).
It is hardly necessary to emphasise that the questions of law which have been forwarded to this Court on the present occasion are of very great constitutional importance.
The incidents which have given rise to this Reference posed a very difficult problem and unless further developments in pursuance of the orders passed by the two august bodies were arrested, they were likely to lead to a very serious and difficult situation.
That is why the President took the view that a case for reference for the advisory opinion of this Court had been established and he accordingly formulated, five questions and has forwarded the same to us for our advisory opinion.
Under article 143(1) it may be competent to the President to formulate for the advisory opinion of this Court questions of fact and law relating to the validity of the impinged provisions of existing laws; it may be open to him to formulate questions in regard to the validity of provisions proposed to be included in the Bills which would come before the Legislatures; it may also be open to him to formulate for the advisory opinion of this Court questions of constitutional importance like the present; and it may be that the President may, on receiving our answers consider whether the Union Government or the State Government should be requested to take any, suitable or appropriate action, either legislative or executive in (1) In re the Kerala Education Bill, 1957, [1959] S.C.R. 995.
(2) In re: the Berubari Union, , (3) In re: the Bill to Amend etc. ; 434 accordance with the opinion expressed by this Court.
That is why we feel no difficulty in holding that the present Reference is competent.
As we have already indicated, when a Reference is received by this Court under article 143(1), this Court may, in a given case, for sufficient and satisfactory reasons, respectfully refuse to make a report containing its answers on the questions framed by the President; such a situation may perhaps arise if the questions formulated for the advisory opinion of this Court are purely socioeconomic or political questions which have no relation whatever with any of the provisions of the Constitution, or have otherwise no constitutional significance.
It is with a view to confer jurisdiction on this Court to decline to answer questions for such strong and compelling reasons that the Constitution, or have used the word 'may ' in article 143 (1) as distinct from article 143 (2) "are the word used is 'shall '.
In the present case, we are clearly of opinion that the questions formulated for our advisory opinion are questions of grave constitutional importance and significance and it is our duty to make a report to the President embodying our answers to the questions formulated by him.
That takes us to the merits of the controversy disclosed by the questions formulated by the President for our advisory opinion.
This Reference has been elaborately argued before us.
The learned Attorney General opened the proceedings before us and stated the relevant facts leading to the Reference, and indicated broadly the rival contentions which the House and the High Court sought to raise before us by the statements of the case filed on their behalf.
Mr. Seers, the learned Advocate General of Maharashtra, appeared for the House and presented before the Court a very learned, impressive and exhaustive argument.
He, was followed by several learned counsel who broadly supported the stand taken by the House.
Mr. Setalvad who appeared for the Judges of the Allahabad High Court, addressed to us a very able argument With his characteristic brevity and lucidity; and he was, in turn, followed by several learned counsel who appeared to support the stand taken by the Judges.
Durng the course of the debate several propositions were canvassed before us and a very large area of constitutional law was covered.
We ,ought, therefore to make it clear at the outset that in formulating our answers to the questions framed by the President in the present Reference, we propose to deal with only such points as, in our opinion, have a direct and material bearing on the problems posed by the said questions.
It is hardly necessary to emphasise that in dealing With constitutional matters, the Court 435 should be slow to deal with questions which do not strictly arise.
This precaution is all the more ' necessary in dealing with a reference made to this Court under article 143(1).
Let us then begin by stating broadly the main contentions urged on behalf of the House and on behalf of the Judges and the Advocate.
Mr. Seervai began his arguments by pointing out the fact that in dealing with reference under article 143(1), the Court is not exercising what may be described as its judicial function.
There are no parties before the Court in such a reference and there is no his.
The opinion expressed by the Court on the reference is, therefore, advisory; and so, he contends that though ha appears before us in the present reference on behalf ' of the House, he wants to make it clear that the House does not submit to the jurisdiction of this Court in any manner in respect of the area of controversy covered by the questions.
In other words, he stated that his appearance before us was without prejudice to his main contention that the question about the existence and extent of the powers, privileges and immunities of the House, as well as the question about the exercise of the powers and privileges were entirely and exclusively within the jurisdiction of the House; and whatever this Court may say will not preclude the House from deciding for itself the points referred to us under this Reference.
This stand was based on the ground that the opinion "pressed by us is advisory and not in the nature of a judicial adjudication between the parties before the Court as such The same stand was taken by Mr. Seervai in regard to article 194(3) of the Constitution.
article 194(3) deals with the question about the powers, privileges and immunities of the Legislatures and of the Members and Committees thereof.
We will have occasion to deal with the provisions of this Article later on.
For the present, it is enough to state that according to Mr. Seervai, it is the privilege of the House to construe the relevant provisions of ' article 194(3) and determine for itself what its powers, privileges and immunities are, and that being so, the opinion expressed by this Court on the questions relating to the existence and extent of its powers and privileges will not preclude the House from, determining the same questions for itself unfettered by the views of this Court.
Having, thus made his position clear in regard to the claim which the House proposes to make in respect of its powers and Privileges, Mr. Seervai contended that even in England this dualism between the two rival jurisdictions claimed by the Judicature and the Parliament has always existed and it still continue& 436 to be unresolved.
On some occasions, the dispute between the Judicature and the House of Commons has assumed a very bitter form and it has disclosed a complete antinomy or contradiction in the attitudes adopted by the two respective august bodies.
The courts claimed that they had a right to decide the question about the existence and extent of powers and privileges in question and the Parliament consistently refused to recognise the jurisdiction of the courts in that behalf during the 17th, 18th and 19th centuries.
The Parliament conceded that it could not create any new privileges, but it insisted on treating itself as the sole and exclusive judge of the existing privileges and was not prepared to part with its authority to determine what they were, or to deal with their breach, and how to punish the delinquent citizens.
On the other hand, the courts insisted on examining the validity of the orders passed by the Parliament on the ground of breach of privilege, and the dualism thus disclosed persisted for many years.
Mr. Seervai 'argues that the House for which he appears adheres to the stand which the House of Commons took in similar controversies which led to a conflict between the Judicature and itself on several occasions in the past.
Consistently with this attitude, be denies the jurisdiction of the Allahabad High Court to deal with the points raised by Keshav Singh in his writ petition.
Logically, his argument is that the presentation of the petition by Keshav Singh and his Advocate amounted to contempt of the House, and when the learned Judges entertained the petition and passed an interim order on it, they committed contempt of the House.
That is the view taken by the House, and the propriety, correctness, or validity of this view is not examinable by the Judicature in this country.
Alternatively, Mr. Seervai put his argument on a slightly different basis.
He conceded that for over a century past, in England, this controversy can be taken to have been settled to a large extent by agreement between the Judicature and the House of Commons.
It now appears to be recognised by the House of Commons that the existence and extent of privilege can be examined by the courts.
It also appears to be recognised by the House of Commons that if in exercise of its power to punish a person for its contempt, it issues a speaking warrant, it would be open to the court to consider whether the reasons set out in the warrant amount to contempt or not.
To this limited extent, the jurisdiction of the Judicature is recognised and consistently, for the last century, whenever it became necessary to justify the orders passed by it for its contempt, a return has always been 437 filed in courts.
Mr. Seervai, however, emphasises the fact that even as a result of this large measure of agreement between the Judicature and the House of Commons on the question about the nature and extent of privilege, it appears to be taken.
as settled that if an unspeaking or general warrant is issued by the House of Commons to punish a person who is guilty of its contempt, the courts would invariably treat the said general warrant as conclusive and would not examine the validity of the order passed by the House.
In the present case, according to Mr. Seervai, the resolution which has been passed by the House against the two learned Judges as well as against Mr. Solomon is in the nature of a general resolution and though the warrants issued against the Judges have been withdrawn, it is clear that the decision of the House and the warrants which were initially ordered to be issued in pursuance of the said resolution, were in the nature of general resolution and general warrants, and so, it would not be open to this Court to enquire the reasons for which the said warrants were issued.
The resolution in question and the warrants issued pursuant to it are conclusive and must be treated as such.
The argument, therefore, is that in answering the question formulated under the present Reference, we should give effect to this position which appears to have been evolved by some sort of implied agreement between the Judicature and the House of Commons.
This agreement shows that the right to determine questions of contempt and to decide adequacy of punishment for the said contempt belong exclusively to the House, and if in pursuance of the said exclusive power, a general warrant is issued, the House can never be called upon to explain the genesis or the reasons for the said warrant.
This itself is an integral part of the privileges and powers of the House, and this integral part, according to the House, has been brought into India as a result of article 194(3) of the Constitution.
In other words, the argument is that even if this Court has jurisdiction to determine the scope and effect of article 194(3), it should bear in mind the fact that this particular Power to issue an unspeaking general warrant and to insist upon the Judicature treating the said warrant as conclusive, is a part of the privileges to which the latter part of article 194(3) refers.
It is on this broad ground that Mr. Seervai wanted us to frame our answers to the questions which are the subject matter of the Reference.
On the other hand, Mr. Setalvad, for the Judges, contends that there is no scope for importing into our Constitution the dualism which existed in England between the Judicature and the House of Commons.
He contends that there can be no doubt 438 that the question of construing article 194(3) falls within the exclusive jurisdiction of this Court and the High Courts and that the construction which this Court would place upon the relevant words used in the latter part of article 194(3) would finally determine the scope, extent and character of the privileges in question.
According to Mr. Setalvad, article 194(3) cannot be read in isolation, but must be read in its context and in the light of other important constitutional provisions, such as articles 32, 211 and 226.
When the material portion of article 194(3) is thus read, it would appear that there is no scope for introducing any antinomy or conflict or dualism between the powers of the High Court and those of the House in relation to matters which have given rise to the present 'questions.
He further urges that it would be idle for the House to adopt an attitude which the House of Commons in England appears to have adopted in the 17th, 18th and 19th centuries when conflicts arose between the said House and the Judicature.
For more than a century no attempt has been made by the House of Commons, says Mr. Setalvad, to contend that if a citizen who is punished by the House for its alleged contempt committed by him would be guilty of another contempt if he moved the Court in its habeas corpus jurisdiction, nor has Any attempt been made during this period by the House of Commons to proceed against a lawyer Who presents an application for habeas corpus or against Judas who entertain such applications; and so, the argument is that we ought 'to deal with the present dispute on the basis of the common agreement which has, by convention, been evolved between the two august and powerful institutions, the Judicature and the Legislature.
Mr. Setalvad conceded that there appears to be some conven tion recognised by the English courts by which they treat a general or unspeaking warrant issued by the House as usually conclusive; but this aspect of the matter, according to him, is the result of convention or comity and cannot be treated as an integral part of the, privilege of the House itself.
The basis for evolving this con I mention is rooted in the history of England, because the Parliament was the highest Court of Justice at one time and it is because of this history that the House of Commons came also to be regarded as a superior Court of Record.
Such 'at assumption cannot be made in respect of the House in the present proceedings.
Besides, in dealing with the question about the effect of a general warrant, the Court cannot ignore the significance of articles 32, 211 and 226 of the Constitution.
Basing himself broadly on these arguments, Mr. Setalvad contends that the Constitution has resolved the problem of dualism in our country by 439 conferring on the High Courts and this Court the jurisdiction to deal with claims made by the citizens whose fundamental rights have been invaded, and that means that in this country, if an application for habeas corpus is made, it would be competent to.
this Court or the High Courts to examine the validity of the order passed by any authority including the Legislature, and that must necessarily involve the consequence that an unspeaking warrant cannot claim the privilege of conclusiveness.
That, in brief, in its broad features, is the approach adopted by Mr. Setalvad before us.
It will thus be seen that the main controversy disclosed by the five questions formulated by the President ultimately lies within a very narrow compass.
Is the House the sole and exclusive judge of the issue as to whether its contempt has been committed where the alleged contempt has taken place outside the four walls of ' the House ? Is the House the sole and exclusive judge of the punishment which should be imposed on the party whom it has found to be guilty of its contempt ? And, if in enforcement of its decision the House issues a general or unspeaking warrant, is the High Court entitled to entertain a habeas corpus petition challenging the validity of the detention of the person sentenced by the House ? The, argument urged by Mr. Seervai on behalf of the House is that in the case of a general warrant, the High Court has no jurisdiction to go behind the warrant; and in the present case, since it has entertained the petition and passed an order releasing Keshav Singh on bail without examining the warrant, and even before a return was filed by the respondents, it has acted illegally and without jurisdiction, and so, the learned Judges, of the High Court, the Counsel, and the party are all guilty of contempt of the House.
Mr. Seervai urges that in any case, in habeas corpus proceedings of this character, the High Court had no jurisdiction to grant interim bail.
It is not seriously disputed by Mr. Setalvad that the House has the power to inquire whether its contempt has been committed by anyone even outside its four walls and has the power to impose punishment for such contempt; but his argument is that having regard to the material provisions of our Constitution, it would not be open to the House to make a claim that its general warrant should be treated as conclusive.
In every case where a party has been Sentenced by the House for contempt and detained, it would be open to him to move the High Court for appropriate relief under article 226 and the High Court would be entitled to examine the merits of his pleas, even though the warrant may be general P.C.I./65 3 440 or unspeaking.
According to Mr. Setalvad, since the High Court has jurisdiction to entertain a Writ Petition for habeas corpus under article 226, it has also the power to pass an order of interim bail.
Thus, the dispute really centers round the jurisdiction of the High Court to entertain a habeas corpus petition even in cases where a general or unspeaking warrant has been issued by the House directing the detention of the party in contempt.
Though the ultimate solution of the problem posed by the questions before us would thus he within a very narrow compass, it is necessary to deal with some wider aspects of the problem which incidentally arise and the decision of which will assist us in rendering our answers to the questions framed in the present Reference.
The whole of the problem thus presented before us has to be decided in the light of the provisions contained in article 194 (3 ) of the Constitution, and in that sense, the interpretation of article 194(3) is really the crux of the matter.
At this stage, it is necessary to read Article 194 : "194.
(1) Subject to the provisions of this Constitution and to the rules and standing orders regulating the procedure of the Legislature, there shall be freedom of speech in the Legislature of every State.
(2) No member of the Legislature of a State shall be liable to any proceedings in any court in respect of anything said or any vote given by him in the Legislature or any committee thereof, and no person shall be so liable in respect of the publication by or under the authority of a House of such a Legislature of any report, paper, votes, or proceedings.
(3) In other respects, the powers, privileges and immunities of a House of the Legislature of a State, and of the members and the committees of a House of such Legislature shall be such as may from time to time be defined by the Legislature by law, and, until so defined, shall be those of the House of Commons of Parliament of the United Kingdom, and of its members and committees, at the commencement of this Constitution.
(4) The provisions of clauses (1), (2) and (3) shall apply in relation to persons who by virtue of this Constitution have the right to speak in, and otherwise to take part in the proceedings of, a House of the Legislature of a State or any committee thereof as they apply in relation to members of that Legislature." ' 441 It will be noticed that the first three material clauses of article 194 deal with three different topics.
Clause (1) makes it clear that the freedom of speech in the Legislature of every State which it prescribes, is subject to the provisions of the Constitution, and to the rules and standing orders, regulating the procedure of the Legislature.
While interpreting this clause, it is necessary to emphasis that the provisions of the Constitution subject to which freedom of speech has been conferred on the legislators, are not the general provisions of the Constitution but only such of them as relate to the regulation of the procedure of the Legislature.
The rules and standing orders may regulate the procedure of the Legislature and some of the provisions of the Constitution may also purport to regulate it; these are, for instance, Articles 208 and 211.
The adjectival clause "regulating the procedure of the Legislature" governs both the preceding clauses relating to "the provisions of the Constitution" and "the rules and standing orders." Therefore, clause (1) confers on the legislators specifically the right of freedom of speech subject to the limitation prescribed by its first part.
It would thus appear that by making this clause subject only to the specified provisions of the Constitution, the Constitution makers wanted to make it clear that they thought it necessary to confer on the legislators freedom of speech separately and, in a sense, independently of article 19(1)(a).
If all that the legislators were entitled to claim was the freedom of speech and expression enshrined in article 19(1)(a), it would have been unnecessary to confer the same right specifically in the manner adopted by article 194(1); and so, it would be legi timate to conclude that article 19(1)(a) is not one of the provisions of the Constitution which controls the first part of clause (1) of article 194.
Having conferred freedom of speech on the legislators, clause (2) emphasises the fact that the said freedom is intended to be absolute and unfettered.
Similar freedom is guaranteed to the legislators in respect of the votes they may give in the Legislature or any committee thereof.
In other words, even if a legislator exercises his right of freedom of speech in violation, say, of article 21 1, he would not be liable for any action in any court.
Similarly, of the legislator by his speech or vote, is alleged to have violated any of the fundamental rights guaranteed by Part III of the Constitution in the Legislative Assembly, he would not be answerable for the said contravention in any court.
If the impugned speech amounts to libel or becomes actionable or indictable under any other provision of the law, immunity has been conferred on him from any action in any court by this clause.
He 442 may be answerable to the House for such a speech and the Speaker may take appropriate action against him in respect of it; but that is another matter.
It is plain that the Constitution makers attached so much importance to the necessity of absolute freedom in debates within the legislative chambers that they thought it necessary to confer complete immunity on the legislators from any action in any court in respect of their speeches in the legislative chambers in the wide terms prescribed by clause (2).
Thus, clause (1) confers freedom of speech on the legislators within the legislative chamber and clause (2) makes it plain that the freedom is literally absolute and unfettered.
That takes us to clause (3).
The first part of this clause empowers the Legislatures of States to make laws prescribing their powers, privileges and immunities; the latter part provides that until such laws are made, the Legislatures in question shall enjoy the same powers, privileges and immunities which the House of Commons enjoyed at the commencement of the Constitution.
The Constitution makers must have thought that the Legislatures would take some time to make laws in respect of their powers, privileges and immunities.
During the interval, it was clearly necessary to confer on them the necessary powers, privileges and immunities.
There can be little doubt that the powers, privileges and immunities which are contemplated by cl.
(3), are incidental powers, privileges and immunities which every Legislature must possess in order that it may be able to function effectively, and that explains the purpose of the latter part of clause (3).
This clause requires that the powers, privileges and immuni ties which are claimed by the House must be shown to have subsisted at the commencement of the Constitution, i.e., on January 26, 1950.
It is well known that out of a large number of privileges and powers which the House of Commons claimed during the days of its bitter struggle for recognition, some were given up in course of time, and some virtually faded out by desuetude; and so, in every case where a power is claimed, it is necessary to enquire whether it was an existing power at the relevant time.
It must also appear that the said power was not only claimed by the House of Commons, but was recognised by the English Courts.
It would obviously be idle to contend that if a particular power which is claimed by the House was claimed by the House of Commons but was not recognised by the English courts, it would still be upheld under the latter part of clause (3) only on the ground that it was in fact claimed by the House of Commons.
In other words, the inquiry which is prescribed by this clause is : is 443 the power in question shown or proved to have subsisted in the House of Commons at the relevant time ? Clause (4) extends the provisions prescribed by the three preceding clauses to certain persons therein described.
It will thus be seen that all the four clauses of article 194 are not in terms made subject to the provisions contained in Part In.
In fact, clause (2) is couched in such wide terms that in exercising the rights conferred on them by cl.
(1), if the legislators by their speeches contravene any of the fundamental rights guaranteed by Part III, they would not be liable for any action in any court.
Nevertheless, if for other valid considerations, it appears that the contents of cl.
(3) may not exclude the applicability of certain relevant provisions of the Constitution, it would not be reasonable to suggest that those provisions must be ignored just because the said clause does not open with the words "subject to the other provisions of the Constitution." In dealing with the effect of the provisions contained in cl.
(3) of article 194, wherever it appears that there is a conflict between the said provisions and the provisions pertaining to fundamental rights, an attempt win have to be made to resolve the said conflict by the adoption of the rule of harmonious construction.
What would be the result of the adoption of such a rule we need not stop to consider, at this stage.
We will refer to it later when we deal with the decision of this Court in Pandit M. section M. Sharma vs Shri Sri Krishna Sinha & Others(1).
The implications of the first part of clause (3)may, however, be examined at this stage.
The question is, if the Legislature of a State makes a law which prescribes its powers, privileges and immunities, would this law be subject to article 13 or not ? It may be recalled that article 13 provides that laws inconsistent with or in derogation of the fundamental rights would be void.
Clause (1) of article 13 refers in that connection to the laws in force in the territory of India immediately before the commencement of the Constitution, and clause (2) refers to laws that the State shall make in future.
Prima facie, if the legislature of a State were to make a law in pursuance of the authority conferred on it by clause (3), it would be law within the meaning of article 13 and clause (2) of article 13 would render it void if it contravenes or abridges the fundamental rights guaranteed,by Part M.
As we will presently point out, that is the effect of the decision of this Court in Pandit Sharma 's(1) case.
In other words, it must now be taken as settled (1) [1959] Supp. 1 S.C.R. 806.
444 that if a law is made under the purported exercise of the power conferred by the first part of clause (3), it will have to satisfy the test prescribed by the fundamental rights guaranteed by the Constitution.
If that be so, it becomes at once material to enquire whether the Constitution makers had really intended that the limitations prescribed by the fundamental rights subject to which alone a law can be made by the Legislature of a State prescribing its powers, privileges and immunities, should be treated as irrelevant in construing the latter part of the said clause.
The same point may conveniently be put in another form.
If it appears that any of the powers, privileges and immunities claimed by the House are inconsistent with the fundamental rights guaranteed by the Constitution, how is the conflict going to be resolved.
Was it the intention of the Constitution to place the powers, privileges and immunities specified in the latter part of cl.
(3) on a much higher pedestal than the law which the Legislature of a State may make in that behalf on a future date ? As a matter of construction of clause (3), the fact that the first part of the said clause refers to future laws which would be subject to fundamental rights, may assume significance in interpreting the latter part of clause (3).
That, in brief, is the position of the first three material provisions of article 194.
The next question which faces us arises from the preliminary contention raised by Mr. Seervai that by his appearance before us on behalf of the House, the House should not be taken to have conceded to the Court the jurisdiction to construe article 194(3) so as to bind it.
As we have already indicated, his stand is that in the matter of privileges, the House is the sole and exclusive judge at all stages.
It may be that technically, the advisory opinion rendered by this Court on the Reference made to it by the President may not amount to judicial adjudication properly so called and since there are no parties as such before the Court in the Reference, nobody would be bound by our answers.
But apart from this technical aspect of the matter, it is necessary that we should determine the basic question as to whether even in the matter of privileges, the Constitution confers on the House sole and exclusive jurisdiction as claimed by Mr. Seervai.
It is common ground that the powers have to be found in article 194(3).
That provision is the sole foundation of the powers, and no power which is not included in it can be claimed by the House; and so, at the very 'threshold of our discussion, we must decide this question.
In dealing with this question, it is necessary to bear in mind one fundamental feature of a federal constitution.
In England, 445 Parliament is sovereign; and in the words of Dicey, the three distinguishing features of the principle of Parliamentary Sovereignty are that Parliament has the right to make or unmake any law whatever; that no person or body is recognised by the law of England is having a right to override or set aside the legislation of Parliament; and that the right or power of Parliament extends to every part of the Queen 's dominions(1).
On the other hand, the essen tial characteristic of federalism is 'the distribution of limited executive, legislative and judicial authority among bodies which are co ordinate with and independent of each others.
The supremacy of the constitution is fundamental to the existence of a federal State in order to prevent either the legislature of the federal unit or those of the member States from destroying or impairing that delicate balance of power which satisfies the particular requirements of States which are desirous of union, but not prepared to merge their individuality in a unity.
This supremacy of the con stitution is protected by the authority of an independent judicial body to act as the interpreter of a scheme of distribution of powers.
Nor is any, change possible in the constitution by the ordinary process of federal or State legislation(2).
Thus the dominant characteristic of the British Constitution cannot be claimed by a federal constitution like ours.
Our Legislatures have undoubtedly plenary powers, but these powers are controlled by the basic concepts of the written Constitution itself and can be exercised within the legislative fields allotted to their jurisdiction by the three Lists under the Seventh Schedule; but beyond the Lists, the Legislatures cannot travel.
They can no doubt exercise their plenary legislative authority and discharge their legislative functions by virtue of the powers con ferred on them by the relevant provisions of the Constitution; but the basis of the power is the Constitution itself.
Besides, the legislative supremacy of our Legislatures including the Parliament is normally controlled by the provisions contained in Part III of the Constitution.
If the Legislatures step beyond the legislative fields assigned to them, or acting within their respective fields, they trespass on the fundamental rights of the citizens in a manner not justified by the relevant articles dealing with the said fundamental rights, their legislative actions are liable to be struck down by courts in India.
Therefore, it is necessary to remember that though our Legislatures have plenary powers, they function within the limits prescribed by the material and relevant provisions of the Constitution.
(1) Dicey, The Law of the Constitution 10th ed.
xxxiv, xxxv.
(2) Ibid p. Ixxvii.
446 In a democratic country governed by a written Constitution, it is the Constitution which is supreme and sovereign.
It is no doubt true that the Constitution itself can be amended by the Parliament, but that is possible because article 368 of the Constitution itself makes a provision in that behalf, and the amendment of the Constitution can be validly made only by following the procedure prescribed by the said article.
That shows that even when the Parliament purports to amend the Constitution, it has to comply with the relevant mandate of the Constitution itself.
Legislators, Ministers, and Judges all take oath of allegiance to the Constitution, for it is by the relevant provisions of the Constitution that they derive their authority and jurisdiction and it is to the provisions of the Constitution that they owe allegiance.
Therefore, there can be no doubt that the sovereignty which can be claimed by the Parliament in England, cannot be claimed by any Legislature in India in the literal absolute sense.
There is another aspect of this matter which must also be mentioned; whether or not there is distinct and rigid separation of powers under the Indian Constitution, there is no doubt that the Constitution has entrusted to the Judicature in this country the task of construing the provisions of the Constitution and of safeguarding the fundamental rights of the citizens.
When a statute is challenged on the ground that it has been passed by a Legislature without authority, or has otherwise unconstitutionally trespassed on fundamental rights, it is for the courts to determine the dispute and decide whether the law passed by the legislature is valid or not.
Just as the legislatures are conferred legislative authority and their functions are normally confined to legislative functions, and the functions and authority of the executive lie within the domain of executive authority, so the jurisdiction and authority of the Judicature in this country lie within the domain of adjudication.
If the validity of any law is challenged before the courts, it is never suggested that the material question as to whether legislative authority has been exceeded or fundamental rights have been contravened, can be decided by the legislatures themselves.
Adjudication of such a dispute is entrusted solely and exclusively to the Judicature of this country; and so, we feel no difficulty in holding that the decision about the construction of article 194(3) must ultimately rest exclusively with the,Judicature of this country.
That is why we must over rule Mr. Seervai 's argument that the question of determining the nature, scope and effect of the powers of the House cannot be said to lie exclusively within the jurisdiction of this Court.
This conclusion, however, would not impair the validity of Mr. Seervai 's contention that the advisory opinion 447 rendered by us in the present Reference proceedings is not adjudication properly so called and would bind no parties as such.
In coming to the conclusion that the content of article 194(3) must ultimately be determined by courts and not by the legislatures, we are not unmindful of the grandeur and majesty of the task which has been assigned to the Legislatures under the Constitution.
Speaking broadly, all the legislative chambers in our country today are playing a significant role in the pursuit of the ideal of a Welfare State which has been placed by the Constitution before our country, and that naturally gives the legislative chambers a high place in the making of history today.
The High Courts also have to play an equally significant role in the development of the rule of law and there can be little doubt that the successful working of the rule of law is the basic foundation of the democratic way of life.
In this connection it is necessary to remember that the status, dignity and importance of these two respective institutions, the Legislatures and the Judicature, are derived primarily from 'the status dignity and importance of the respective causes that are assigned to their charge by the Constitution.
These two august bodies as well as the Executive which is another important constituent of a democratic State, must function not in antinovel nor in a spirit of hostility, but rationally, harmoniously and in a spirit of understanding within their respective spheres, for such harmonious working of the three constituents of the democratic State alone will help the peaceful development, growth and stabilization of the democratic way of life in this country.
But when, as in the present case, a controversy arises between the House and the High Court, we must deal with the problem objectively and impersonally.
There is no occasion to import heat into the debate or discussion and no justification for the use of strong language.
The problem presented to us by the present reference is one of construing the relevant provisions of +,he Constitution and though its consideration may present some difficult aspects, we must attempt to find the answers as best we can.
In dealing with a dispute like the present which concerns the jurisdiction, the dignity and the independence of two august bodies in a State, we must remember that the objectivity of our approach itself may incidentally be on trial.
It is, therefore, in a spirit of detached objective enquiry which is the distinguishing feature of judicial process that we propose to find solutions to the questions framed for our advisory opinion.
If ultimately we come to the conclusion that the view pressed before us by Mr. Setalvad for the High Court Is erroneous, we would not hesitate to pronounce ' our verdict 448 against that view.
On the other hand, if we ultimately come to the conclusion that the claim made by Mr. Seervai for the House cannot, be sustained, we would not falter to pronounce our verdict accordingly.
In dealing with problems of this importance and significance, it is essential that we should proceed to discharge our duty without fear or favour, affection or ill will and with the full consciousness that it is our solemn obligation to uphold the Constitution and the laws.
It would be recalled that article 194(3) consists of two parts.
The first part empowers the Legislature to define by law from time to time its powers, privileges and immunities, whereas the Second part provides that until the legislature chooses so to define its powers, privileges and immunities, its powers, privileges and immunities would be those of the House of Commons of the Parliament of the United Kingdom and of its members and committees, at the commencement of the Constitution.
Mr. Seervai 's argument is that the latter part of article 194(3) expressly provides that all the powers which vested in the House of Commons at the relevant time, vest in the House.
This broad claim, however, cannot be accepted in its entirety, because there are some powers which cannot obviously be claimed by the House.
Take the privilege of freedom of access which is exercised by the House of Commons as a body and through its Speaker "to have at all times the right to petition, counsel, or remonstrate with their Sovereign through their chosen representative and have a favorable construction placed on his words was justly regarded by the Commons as fundamental privilege(1)".
It is hardly necessary to point out that the House cannot claim this privilege.
Similarly, the privilege to pass acts of attainder and the privilege of impeachment cannot be claimed by the House.
The House of Commons also claims the privilege in regard to its own Constitution.
This privilege is expressed in three ways, first by the order of new writs to fill vacancies that arise in the Commons in the course of a parliament; secondly, by the trial of controverted elections; and thirdly, by determining the qualifications of its members in cases of doubt(1).
This privilege again, admittedly, cannot be claimed by the House.
Therefore, it would not be correct to say that an powers and privileges which were possessed by the House of Commons at the relevant time can be claimed by the House.
In construing the relevant provision of article 194(3), we must deal with the question in the light of the previous decision of this (1) Sir T. Erskine May 's Parliamentary Practice(16th ed.) p. 86.
(2) lbid, p. 175.
449 Court in Pandit Sharma 's(1) case.
It is, therefore, necessary to recall what according to the majority decision in that case, is the position of the provision contained in article 194(3).
In that case.
the Editor of the English daily newspaper, Search Light of Patna, had been called upon by the Secretary of the Patna Legislative Assembly to show cause before the Committee of Privileges why appropriate action should not be taken against him for the breach of privileges of the Speaker and the Assembly in that he had published in its entirety the speech delivered in the Assembly by a Member, portions of which had been directed to be expunged by the Speaker.
The Editor who moved this Court under article 32, contended that the said notice and the action proposed to be taken by the Committee contravened his fundamental right of freedom of speech and expression under article 19 (1) (a), and also trespassed upon the protection of his personal liberty guaranteed under article 21.
It is on these two grounds that the validity of the notice was impeached by him.
This claim was resisted by the House by relying on article 194(3).
Two questions arose, one was whether the privilege claimed by the House was a subsisting privilege in England at the relevant time; and the other was, what was the result of the impact of Articles 19 (1) (a) and 21 on the provisions contained in the latter part of Article 194(3)? The majority decision was that the privilege in question was subsisting at the relevant time and must, therefore, be deemed to be included under the latter part of article 194 (3).
It also held that article 19 (1 )(a) did not apply, because under the rule of harmonious construction, in a case like the present where article 19 (1) (a) was in direct conflict with article 194(3), the particular provision in the latter article would prevail over the general provision contained in the former; it further, held that though article 21 applied, it had not been contravened.
The minority view, on the other hand, was that the privilege in question had not been established in fact, and that alternatively, if it be assumed that such privilege was established and was, therefore, included under the latter part of article 194(3), it must be controlled by article 19(1)(a) on the ground that fundamental rights guaranteed by Part III of the Constitution were of paramount importance and must prevail over a provision like that contained in article 194(3) which may be inconsistent with them.
At this stage, it would be useful to indicate broadly the points decided both by the majority and minority decisions in that case.
Before the Court, it was urged by the petitioner that though article (1) [1959] Supp. 1 S.C.R. 806.
450 194(3) had not been made subject to the provisions of the Constitution, it does not necessarily mean that it is not so subject, and that the several clauses of article 194 should not be treated as distinct ,and separate provisions but should be read as a whole and that, so read, all the clauses should be taken as subject to the provisions of the Constitution which, of course, would include article 19(1)(a).
This argument was rejected both by the majority and the minority views.
The next argument urged in that case was that article 194(1) in reality operates as an abridgement of the fundamental right of freedom of speech conferred by article 19(1)(a) when exercised in the State Legislatures, but article 194(3) does not, in terms, purport to be an exception to article 19(1)(a).
This argument was also rejected by both the majority and the ' minority views.
It was ,pointed out by the majority decision that clause (1) of article 194 no doubt makes a substantive provision of the said clause subject to the provisions of the Constitution; but in the context, those provisions cannot take in article 19 (1) (a), because this latter article does not purport to regulate the procedure of the legislature and it is only such provisions of the Constitution which regulate the procedure of the legislature which.
are included in the first part of article 194(1).
The third argument urged by the petitioner was that article 19 enunciates a transcendental principle and should prevail over the provisions of article 194(3), particularly because these latter provisions were of a transitory character.
This contention was rejected by the majority view, but was upheld by the minority view.
The fourth argument urged was that if a law is made by the legislature prescribing 'its powers, privileges and immunities, it would be subject to article 13 of the Constitution and would become void to the extent it contravenes the fundamental rights enshrined in Part III.
This contention was accepted by both the majority and the minority decisions.
That left one more point to be considered and it had reference to the observations made in an earlier decision of this Court in Gunupati Keshavram Reddy vs Nafisul Hasan and the State of U.P. (1).
The majority decision has commented on this earlier decision and has observed that the said decision was based entirely on a concession and cannot, therefore, be deemed to be a considered decision of this Court.
As we will presently point out, (1) A.I.R. 1954 S.C. 636.
451 the said decision dealt with the applicability of article 22(2) to a case falling under the latter part of article 194(3).
The minority opinion, however, treated the said decision as a considered decision which was binding on the Court.
We ought to add that the majority decision, in terms, held that article 21 applied, but, on the merits, it came to the conclusion that its alleged contravention had not been proved.
On the minority view it was unnecessary to consider whether article 21 as such applied, because the said view treated all the fundamental rights guaranteed by Part III as paramount and, therefore, each one of them would control the provisions of article 194(3).
It would thus be seen that in the case of Pandit Sharma(1), contentions urged by the petitioner did not raise a general issue as to the relevance and applicability of all the fundamental rights guaranteed by Part HI at all.
The contravention of only two articles was pleaded and they were Articles 19(1)(a) and 21.
Strictly speaking, it was, therefore, unnecessary to consider the larger issue as to whether the latter part of article 194(3) was subject to the fundamental rights in general, and indeed, even on the majority view it could not be said that the said view excluded the application of all fundamental rights, for the obvious and simple reason that article 21 was held to be applicable and the merits of the petitioner 's argument about its alleged contravention in his case were examined and rejected.
Therefore, we do not think it would be right to read the majority decision as laying down a general proposition that whenever there is a conflict between the provisions of the latter part of Article 194(3) and any of the provisions of the fundamental rights guaranteed by Part III, the latter must always yield to the former.
The majority decision, therefore, must be taken to have settled that article 19(1)(a) would not apply, and article 21 would.
Having reached this conclusion, the majority decision has incidentally commented on the decision in Gunupati Keshavram Reddy 's(2) case.
Apart from the fact that there was no contro versy about the applicability of article 22 in that case, we ought to point out, with respect, that the comment made by the majority judgment on the earlier decision is partly not accurate.
In that case, a Constitution Bench of this Court was concerned with the detention of Mr. Mistry under an order passed by the Speaker of the Uttar Pradesh Legislative Assembly for breach of privilege of the said Assembly.
The validity of Mr. Mistry 's detention was challenged on the ground that it had contravened article 22(2) of (1) (1959] Supp. 1 S.C.R. 806.
(2) A.I.R. 1954 S.C. 636.
452 the Constitution.
The facts alleged in support of this plea were admitted to be correct by the Attorney General, and on those admitted facts, the Court held that Mr. Mistry 's detention was clearly invalid.
Referring to this decision, the majority judgment has observed that it "proceeded entirely on a concession of counsel and cannot be regarded as a considered opinion on the subject.
" There is no doubt that the first part of this comment is not accurate.
A concession was made by the Attorney General not on a point of law which was decided by the Court, but on a point of fact; and so, this part of the comment cannot strictly be said to be justified.
It is, however, true that there is no discussion about the merits of the contention raised on behalf of Mr. Mistry and to that extent, it may have been permissible to the majority judgment to say that it was not a considered opinion of the Court.
But, as we have already pointed out, it was hardly necessary for the majority decision to deal with the point pertaining to the applicability of article 22(2), because that point did not arise in the proceedings before the Court in Pandit Sharma 's(1) case.
That is why we wish to make it clear that the orbiter observations made in the majority judgment about the validity or correctness ,of the earlier decision of this Court in Gunther Keshavram Reddy 's(1) case should not be taken as having decided the point in question.
In other words, the question as to whether article 22(2) would apply to such a case may have to be considered by this Court if and when it becomes necessary to do so.
Before we part with the decision of this Court in Pandit Sharma 's(1) case, it is necessary to refer to another point.
We have already observed that the majority decision has accepted the, contention raised by the petitioner in that case that of a law were passed by the Legislature of a State prescribing its powers, privileges and immunities as authorised by the first part of article 194(3), it would be subject to article 13.
Mr. Seervai has attempted to challenge the correctness of this conclusion.
He contends that the power conferred on the legislatures by the first part of article 194(3) is a constitutional power, and so, if a law is passed in exercise of the said power, it will be outside the scope of article 13.
We are unable to accept this contention.
It is true that the power to make such a law has been conferred on the legislatures by the first part of article 194(3); but when the State Legislatures purport to exercise this power, they will undoubtedly be acting under article 246 read with Entry 39 of List IT.
The enactment of such a law cannot be said to be in exercise of a constituent power, and so, such a law will have to be treated as a law within the meaning (1) [1959] Supp. 1 S.C.R. 806.
(2) A.I.R. 1954 section C. 636. 453 of article 13.
That is the view which the majority decision expressed in the case of Pandit Sharma(1), and we are in respectful agreement with that view.
Mr. Seervai attempted to support his contention by referring to some observations made by Venkatarama Aiyar J. in Ananthakrishnan vs State of Madras(1).
In that case, the learned Judge has observed that "[Art. 131 applies in terms only to laws in force before the commencement of the Constitution and to laws to be enacted by the States, that is, in future.
It is only those two classes of laws that are declared void as against the provisions of Part III.
It does not apply to the Constitution itself.
It does not enact that the other portions of the Constitution should be void as against the provisions in Part III and it would be surprising if it did, seeing that all of them are parts of one organic whole.
" This principle is obviously unexceptionable.
This principle could have been invoked if it had been urged before us that either the first or the second part of article 194(3) itself is invalid because it is inconsistent with the relevant provisions in Part III which provides for fundamental rights.
That, however, is not the argument of Mr. Setalvad, nor was it the argument urged before this Court in the case of Pandit Sharma(1).
The argument was and is that if in pursuance of the power conferred by the first part of article 194(3) a law is made by the legislature, it is a law within the meaning of article 13, and this argument proceeds on the words of article 13 (2), itself.
article 13 (2) provides that the State shall not make any law which takes away or abridges the rights conferred by Part III and any law made in contravention of this clause shall, to the extent of the contravention, be void.
The law with which we are dealing does not purport to amend the Constitution and would not, therefore, form part of the Constitution when it is passed; like other laws passed by the Legislatures in exercise of the legislative powers conferred on them, this law would also be law within the meaning of article 13, and so, it is unreasonable to contend that the view taken by this Court in the case of Pandit Sharma(,,) that such a law would be subject to the fundamental rights and would fall within the mischief of article 13(2), requires reconsideration.
The position, therefore, is that,in dealing with the present dispute we ought to proceed on the basis that the latter part of article 194(3) is not subject to article 19(1) (a), but is subject to article 21.
The next question which we ought to consider is : was it the intention of the Constitution to perpetuate the dualism which (1) [1959] Supp. 1 section C. R. 806.
(2) I.L.R. (1952] Mad. 933, 951.
454 rudely disturbed public life in England in the 17th, 18th and 19th centuries ? The Constitution makers were aware of several unhappy situations which arose as a result of the conflict between the Judicature and the Houses of Parliament and they knew that these situations threatened to create a deadlock in the public life of England.
When they enacted article 194(3), was it their intention to leave this conflict at large, or have they adopted a scheme of constitutional provisions to resolve that conflict ? The answer to this question would obviously depend upon a harmonious construction of the relevant provisions of the Constitution itself.
Let us first take article 226.
This Article confers very wide powers on every High Court throughout the territories in relation to which it exercises jurisdiction, to issue to any person or authority, including in appropriate cases any Government, within those territories directions, orders or writs, including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto, certiorari, or any of them for the enforcement of any of the rights conferred by Part HI and for any other purpose.
It is hardly necessary to emphasis that the language used by article 226 in conferring power on the High Courts is very wide.
article 12 defines the "State" as including the Legislature of such State, and so, prima facie, the power conferred on the High Court under article 226(1) can, in a proper case, be exercised even against the Legislature.
If an application is made to the High Court for the issue of a writ of habeas corpus, it would not be competent to the House to raise a preliminary objection that the High Court has no jurisdiction to entertain the application because the detention is by an order of the House.
article 226(1) read by itself, does not seem to permit such a plea to be raised.
article 32 which deals with the power of this Court, puts the matter on a still higher pedestal; the right to move this Court by appropriate proceedings for the :enforcement of the fundamental rights is itself a guaranteed fundamental right, and so, what we have said about article 226(1) is still more true about article 32(1).
Whilst we are considering this aspect of the matter, it is relevant to emphasise that the conflict which has arisen between the High Court and the House is, strictly speaking, not a conflict between the High Court and the House as such, but between the House and a citizen of this country.
Keshav Singh claims certain fundamental rights which are guaranteed by the Constitution and he seeks to move the High Court under article 226 on the ground that his fundamental rights have been contravened illegally.
The High Court purporting to exercise its power under article 226(1), 455 seeks to examine the merits of the claims made by Keshav Singh and issues an interim order.
It is this interim order which has led to the present unfortunate controversy.
No doubt, by virtue of the resolution passed by the House requiring the Judges to appear before the Bar of the House to explain their conduct, the controversy has developed into one between the High Court and the House; but it is because the High Court in the discharge of its duties as such Court intervened to enquire into the allegations made by a citizen that the Judges have been compelled to enter the arena.
Basically and fundamentally, the controversy is between a citizen of Uttar Pradesh and the Uttar Pradesh Legislative Assembly.
That is why in dealing with the question about the extent of the powers of the House in.
dealing, with cases of contempt committed outside its four walls, the provisions of article 226 and article 32 assume significance.
We have already pointed out that in Pandit Sharma(1) this Court has held that article 21 applies where powers are exercised by the legislature under the latter part of article 194(3).
If a citizen moves the High Court on the ground that his fundamental right under article 21 has been contravened, the High Court would be entitled to examine his claim, and that itself would introduce some limitation on the extent of the powers claimed by the House in the present proceedings.
There are two other articles to which reference must be made.
article 208(1) provides that a House of the Legislature of a State may make rules for regulating, subject to the provisions of this Constitution, its procedure and the conduct of its business.
This provision makes it perfectly clear that if the House were to make any rules as prescribed by it, those rules would be subject to the fundamental rights guaranteed by Part M.
In other words, where the House makes rules for exercising its powers under the latter part of article 194(3), those rules must be subject to the fundamen tal rights of the citizens.
Similarly, article 212(1) makes a provision which is relevant.
It lays down that the validity of any proceedings in the Legislature of a State shall not be called in question on the ground of any alleged irregularity of procedure.
article 212(2) confers immunity on the officers and members of the Legislature in whom powers are vested by or under the Constitution for regulating procedure or the conduct of business, or for maintaining order, in the Legislature from being subject to the jurisdiction of any court in respect of the exercise by him of those powers.
article 212(1) (1) [1959] pp.
1 S.C.R. 806.
C.I.165 4 456 seems to make it possible for a citizen to call in question in the appropriate court of law the validity of any proceedings inside the legislative chamber if his case is that the said proceedings suffer not from mere irregularity of procedure, but from an illegality.
If the impugned procedure is illegal and unconstitutional, it would be open to be scrutinised in a court of law, though such scrutiny is prohibited if the complaint against the procedure is no more than this that the procedure was irregular.
That again is another indication which may afford some assistance in construing the scope and extent of the powers conferred on the House by article 194(3).
That takes us to article 211.
This article provides that no discussion shall take place in the Legislature of a State with respect to the conduct of any Judge of the Supreme Court or of a High Court in the discharge of his duties.
This provision amounts to an absolute constitutional prohibition against any discussion in the Legislature of a State in respect of the judicial conduct of a Judge of this Court or of the High Court.
Mr. Setalvad who appeared for the Judges has, based his argunent substantially on the provisions of this article.
He contends that the unqualified and absolute terms in which the constitutional prohibition is couched in article 211 unambiguously indicate that the conduct of a Judge in the discharge of his duties can never become the subjectmatter of any action taken by the House in exercise of its powers or privileges conferred by the latter part of article 194(3).
If a Judge in the discharge of his duties commits contempt of the House, the only step that can be taken against him is prescribed by article 121.
article 121 provides that no discussion shall take place in Parliament with respect to the conduct of any Judge of the Supreme Court or of a High Court in the discharge of his duties except upon a motion for presenting an address to the President praying for the removal of the Judge as hereinafter provided.
Reading Articles 121 and 211 together, two points clearly emerge.
The judicial conduct of the Judge cannot be discussed in the State Legislature.
It can be discussed in the Parliament only upon a motion for presenting an address to the President praying for the removal of the Judge.
The Constitution makers attached so much importance to the independence of the Judicature in this country that they thought it necessary to place them beyond any controversy, except in the manner provided by article 121.
If the judicial conduct of a Judge cannot be dis cussed in the House, it is inconceivable that the same conduct can be legitimately made the subject matter of action by the House 457 in exercise of its powers under article 194(3).
That, in substance, is the principal argument which has been urged before us by Mr. Setalvad.
On the other hand, Mr. Seervai has argued that the effect of the provisions contained in article 211 should not be exaggerated.
He points out that article 211 appears in Chapter HI which deals with the State Legislature and occurs under the topic "General Procedure", and so, the only object which it is intended to serve is the regulation of the procedure inside the chamber of the Legislature.
He has also relied on the provisions of article 194(2) which expressly prohibit any action against a member of the Legislature for anything said or any vote given by him in the Legislature.
In other words, if a member of the Legislature contravenes the absolute prohibition prescribed by article 21 1, no action can be taken against him in a court of law and that, says Mr. Seervai, shows that the significance of the prohibition contained in article 211 should not be overrated.
Besides, as a matter of construction, Mr. Seervai suggests that the failure to comply with the prohibition contained in article 211 cannot lead to any constitutional consequence, and in support of this argument, he has relied on a decision of this Court in State of U.P. vs Manbodhan Lal Srivastava(1).
In that cases, this Court was dealing with the effect of the provisions contained in article 320 of the Constitution.
article 320 prescribes the functions of the Public Service Commis sions, and by clause 3(c) it has provided that the Union Public Service Commission or the State Public Service Commission, as the case may be, shall be consulted on all disciplinary matters affecting a person serving under the Government of India or the Government of a State in a civil capacity, including memorials or petitions relating to such matters.
It was held that the provisions of this clause were not mandatory and did not confer any right on a public servant, so that the absence of consultation or any irregu larity in consultation did not afford him a cause of action in a court of law.
Mr. Seervai 's argument is that the words used in article 211 should be similarly construed and the prohibition on which Mr. Setalvad relies should be deemed to be merely directory and not mandatory.
We are not impressed by Mr. Seervai 's arguments.
The fact that article 21 1 appears under a topic dealing with "Procedure Generally", cannot mean that the prohibition prescribed by it is not mandatory.
As we have already indicated, in trying to appreciate the full significance of this prohibition, we must read Articles 211 (1) ; 458 and 121 together.
It is true that article 194(2) in terms provides for immunity of action in any court in respect of a speech made by a member or a vote given by him in the legislative Assembly.
But this provision itself emphatically brings out the fact that the Constitution was anxious to protect full freedom of speech and expression inside the legislative chamber, and so, it took the pre caution of making a specific provision to safeguard this freedom of speech and expression by saying that even the breach of the constitutional prohibition prescribed by article 211 should not give rise to any action.
Undoubtedly, the Speaker would not permit a member to contravene article 21 1; but if, inadvertently, or otherwise, a speech is made within the legislative chamber which contravences article 21 1, the Constitution makers have given protection to such speech from action in any court.
The House itself may and would, no doubt, take action against him.
It is also true that if a question arises as to whether a speech contravenes article 21 1 or not, it would be for the Speaker to give his ruling on the point.
In dealing with such a question, the Speaker may have to consider whether the observations which a member wants to make are in relation to the conduct of a Judge in discharge of his duties, and in that sense, that is a matter for the Speaker to decide.
But the significant fact still remains that the Constitution makers thought it necessary to make a specific provision by article 194(2) and that is the limit to which the Constitution has gone in its objective of securing complete freedom of speech and expression within the four walls of the legislative chamber.
The latter part of article 194(3) makes no such exception, and so, it would be logical to hold that whereas a speech made in contravention of article 211 is protected from action in a court by article 194(2), no such exception or protection is provided in prescribing the powers and privileges of the House under the latter part of article 194(3).
If a Judge in the discharge of his duties passes an order or makes observations which in the opinion of the House amount to contempt, and the House proceeds to take action against the Judge in that behalf, such action on the part of the House cannot be protected or justified by any specific provision made by the latter part of article 194(3).
In our opinion, the omission to make any such provision when contrasted with the actual provision made by article 194(2) is riot without significance.
In other words, this contrast leads to the inference that the Constitution makers took the view that the utmost that can be done to assure absolute freedom of speech and expression inside the legislative 459 chamber, would be to make a provision in article 194(2); and that is about all.
The conduct of a Judge in relation to the discharge of his duties cannot be the subject matter of action in exercise of the powers and privileges of the House.
Therefore, the position is that the conduct of a Judge in relation to the discharge of his duties cannot legitimately be discussed inside the, House, though if it is, no remedy lies in a court of law.
But such conduct cannot be made the subject matter of any proceedings under the latter part of article 194(3).
If this were not the true position, article 211 would amount to a meaningless declaration and that clearly could not have been the intention of the Constitution.
Then, as regards the construction of article 21 1 itself, Mr. Seervai is no doubt in a position to rely upon the decision of this Court in State of U.P. vs Manbodhan Lal Srivastava(1).
But it would be noticed that in coming to the conclusion that the provision contained in article 320(3)(c) was not mandatory, this Court has referred to certain other facts which determined the said construction.
Even so, this Court has accepted the principle laid down by the Privy Council in Montreal Street Railway Company vs Normandin(1) wherein the Privy Council observed that "the question whether provisions in a statute are directory or imperative has very frequently arisen in this country, but it has been said that no general rule can be laid down, and that in every case the object of the statute must be looked at.
" question as to whether a statute is mandatory or directory depends upon the intent of the legislature and not upon the language in which the intent is clothed.
The meaning and intention of the legislature must govern, and these are to be ascertained, not only from the phraseology of the provision, but also by consider in its nature, its design, and the consequences which would follow from construing it the one way or the other.
"(1) These principles would clearly negative the construction for which Mr. Seervai contends.
It is hardly necessary to refer to other provisions of the Constitution which are intended to safeguard the independence of the Judicature in this country.
The existence of a fearless and independent judiciary can be said to be the very basic foundation of the constitutional structure in India, and so, it would be idle, we think, to contend that the absolute prohibition prescribed by article 21 1 should be read as merely directory and should be allowed to be reduced to a meaningless declaration by permitting the House to take action against a Judge in respect of his conduct in the discharge of his (1) ; (2) ; (3) People vs De Renna (2 N.Y.S.) (2) 694,166 Misc.
(582) cited in Crawford, Statutory Construction p. 516. 460 duties.
Therefore, we are satisfied that Mr. Setalvad is right when he contends that whatever may be the extent of the powers and privileges conferred on the House by the latter part of article 194(3), the power to take action against a Judge for contempt alleged to have been committed by him, by his act in the discharge of his duties cannot be included in them.
Thus, Mr. Setalvad 's case is that so far as the Judges are concerned, the position is quite clear that as a result of the impact of the provisions contained in Articles 226 and 211, judicial conduct can never become the subject matter of contempt proceedings under the latter part of article 194(3), even if it is assumed that such conduct can become the subjectmatter of contempt proceedings under the powers and privileges possessed by the House of Commons in England.
On the other hand, Mr. Seervai disputes Mr. Setalvad 's contention as to the impact of articles 226 and 211 on the latter part of article 194(3) and further urges that even if Mr. Setalvad be right in respect of that contention, he would not be entitled to dispute the validity of the power and privilege claimed by the House of Commons which can, therefore, be claimed by the House in the present proceedings that no court can go behind a general or unspeaking warrant.
In order to determine the validity of these rival contentions, it is now necessary to consider very briefly what was the position of this particular power and privilege at the commencement of the Constitution.
In dealing with this question, we will also very broadly refer to the wider aspect of the powers, privileges and immunities which vest in both the Houses of Parliament in England.
While considering the question of the powers, privileges and immunities of the English Parliament it would, we think, be quite safe to base ourselves on the relevant statements which have been made in May 's Parliamentary Practice.
This work has assumed the status of a classic on the subject and is usually regarded as an authoritative exposition of parliamentary practice; and so, we think it would be an exercise in futility to attempt to deal with this question otherwise than by reference to May. Parliamentary privilege, according to May, is the sum of the peculiar rights enjoyed by each House collectively as a constituent part of the High Court of Parliament, and by members of each House individually, without which they could not discharge their functions, and which exceed those possessed by other bodies or individuals.
Thus, privilege, though part of the law of the land, is to a certain extent an exemption from the ordinary law.
The particular privileges of the House of Commons have been defined as "the sum of the fundamental 461 rights of the House and of its individual Members as against the prerogatives of the Crown; the authority of the ordinary courts of law and the special rights of the House, of Lords".
There is a distinction between privilege and function, though it is not always apparent.
On the whole, however, it is more convenient to reserve the term "privilege" to certain fundamental rights of each House which are generally accepted as necessary for the exercise of its constitutional functions.
The distinctive mark of a privilege is its ancillary character.
The privileges of Parliament are rights which are "absolutely necessary for the due execution of its powers".
They are enjoyed by individual Members, because the House cannot perform its functions without unimpeded use of the services of its Members; and by each House for the protection of its Members and the vindication of its own authority and dignity(1).
May points out that except in one respect, the surviving privileges of the House of Lords and the House of Commons are justifiable on the same ground of necessity as the privileges enjoyed by legislative assemblies of the self governing Dominions and certain British colonies, under the common law as a legal incident of their legislative authority.
This exception is the power to punish for contempt.
Since the decision of the Privy Council in Kielley vs Carson(1) it has been held that this power is inherent in the House of Lords and the House of Commons, not as a body with legislative functions, but as a descendant of the High Court of Parliament and by virtue of the lex et consuetudo parliamenti(1).
Historically as originally the weaker body, the Commons had a fiercer and more prolonged struggle for the assertion of their own privileges, not only against the Crown and the courts, but also against the Lords.
Thus the concept of privilege which originated in the special protection against the King began to be claimed by the Commons as customary rights, and some of these claims in the course of repeated efforts to assert them hardened into legally recognised "privileges".
In regard to the fierce struggle by the House of Commons to assert its privileges in a militant way, May has made the significant comment that these claims to privilege were established in the late fifteenth and in the sixteenth centuries and were used by the House of Commons against the King in the seventeenth and arbitrarily against the people in the eighteenth century.
Not until the nineteenth century was equilibrium reached and the limits of privilege prescribed and accepted by Parliament, the Crown and the Courts(3).
The two Houses are thus of equal authority in the (1) May 's Parliamentary Practice pp.
42 43.
(2) ; (3) May 's Parliamentary Practice, p. 44. 462 administration of a common body of privileges.
Each House, as a constituent part of Parliament, exercised its own privileges independently of the other.
They are enjoyed, however, not by any separate right peculiar to each, but solely by virtue of the law and custom of Parliament.
Generally speaking, all privileges properly so called, appertain equally to both Houses.
They are declared and expounded by each House.
and breaches of privilege are adjudged and censured by each; but essentially, it is still the law of Parliament that is thus administered.
It is significant that although either House may expound the law of Parliament, and vindicate its own privileges, it is agreed that no new privilege can be created.
This position emerged as a result of the historic resolution passed by the House of Lords in 1.704.
This resolution declared "that neither House of Parliament have power, by any vote or declaration, to create to themselves new privileges, not warranted by the known laws and customs of Parliament. ' This resolution was communicated by the House of Lords to Commons and assented to by them(1).
Thus, there can be no doubt that by its resolutions, the House of Commons cannot add to the list of its privileges and powers.
It would be relevant at this stage to mention broadly the main privileges which are claimed by the House of Commons.
Freedom of speech is a privilege essential to every free council or legislature, and that is claimed by both the Houses as a basic privilege.
This privilege was from 1541 included by established practice in the petition of the Commons to the King at the commencement of the Parliament.
It is remarkable that notwithstanding the repeated recognition of this privilege, the Crown and the, Commons were not always agreed upon its limits.
This privilege received final statutory recognition after the Revolution of 1688.
By the 9th Article of the Bill of Rights, it was declared "that the freedom of speech, and debates or proceedings in Parliament, ought not to be impeached or questioned in any court or place out of Parliament"(2).
Amongst the other privileges are : the right to exclude strangers, the right to control publication of debates and proceedings, the right to exclusive cognizance of proceedings in Parliament, the right of each House to be the sole judge of the lawfulness of its own proceedings, and the right implied to punish its own Members for their conduct in Parliament(1).
Besides these privileges, both Houses of Parliament were possessed of the privilege of freedom from arrest or molestation, (1) May 's Parliamentary Practice, p. 47.
(2) Ibid., p. 52.
(3) Ibid., pp. 52 53.
463 and from being impleaded, which was claimed by the Commons on ground of prescription.
Although this privilege was given royal and statutory recognition at an early date, ironically enough the enforcement of the privilege was dependent on the Lords and King, who were not always willing to protect the Commons.
In this connection, May refers to the case of Thorpe who was the Speaker of the House of Commons and was imprisoned in 1452, under execution from the Court of Exchequer, at the suit of the Duke of York.
It is an eloquent testimony to the dominance of the House of Lords and the weakness of the House of Commons which was struggling to assert its freedom and its rights that when the House of Lords in response to the application of the Commons adjudged that Thorpe should remain in prison, the Commons so easily acquiesced in this decision that they, immediately proceeded to the election of another Speaker(1).
May points out that certain privileges have in course of time, been discontinued.
Amongst them may be mentioned the freedom from being impleaded.
Similarly, by the Parliamentary Privilege Act, 1770 a very important limitation of the freedom from arrest was affected.
A somewhat similar position arises in respect of the privilege of exemption from jury service (2).
In fact.
the list of privileges claimed by the House of Commons in early days was a long and formidable list and it showed how the House of Commons was then inclined to claim all kinds of privileges for itself and its members.
In course of time, however, many of these privileges fell into disuse and faded out of existence, some were controlled by legislation while the major privileges which can be properly described as privileges essential for the efficient functioning of the House, still continued in force.
In considering the nature of these privileges generally, and particularly the nature of the privilege claimed by the House to punish for contempt, it is necessary to remember the historical origin of this doctrine of privileges.
In this connection, May has emphasised that the original of the modern Parliament consisted in its judicial functions.
"One of the principal lines of recent research", says May, "has revealed the importance of the judicial elements in the origins of Parliament.
Maitland, in his introduction to the Parliament Roll of 1305, was the first to emphasise the importance of the fact that Parliament at that time was the King 's " great court" and was thereby (among other things) the highest court of royal justice.
There is now general agreement in recognising the strongly judicial streak in the character of the earliest (1) May 's Parliamentary Practice, p. 70.
(2) Ibid.
pp., 75 77.
464 Parliaments and the fact that, even under Edward 111, although Parliaments devoted a considerable part of their time to political and economic business, the dispensation of justice remained one of their chief functions in the eyes of the King 's subjects"(1).
As is well known, the Parliament of the United Kingdom is composed of the Sovereign, the House of Lords, and the House of Commons.
These several powers collectively form the Legislature; and, as distinct members of the constitution, they exercise functions and enjoy privileges peculiar to each.
The House of Lords, Spiritual and Temporal, sit together, and jointly constitute the House of Lords(2).
The exact date of the admission of the Commons to a distinct place in the legislature has always been a subject of controversy; but as it is admitted that they often sat apart for deliberation, particular instances in which they met in different places will not determine whether their sepa ration, at those times, was temporary or permanent.
When the Commons deliberated apart, they sat in the chapter house or the refectory of the abbot of Westminster; and they continued their sittings in that place after their final separation(3).
The House of Lords always was and continues to be today a Court of Judicature.
According to May, the most distinguishing characteristic of the Lords is their judicature, of which they exercise several kinds.
They have the power to sit as a court during prorogation and dis solution; a Court of Appeal is constituted by the House of Lords and final appellate jurisdiction vests in them(4).
May has also referred to the power claimed by the Parliament in respect of acts of attainder and impeachments, and he has described how this privilege was exercised by the House of Lords and the House of Commons(1).
"In impeachments", says May, "the Commons are but accusers and advocates; while the Lords alone are judges of the crime.
On the other hand, in passing bills of attainder, the Commons commit themselves by no accusation, nor are their powers directed against the offender; but they are judges of equal jurisdiction, and with the same responsibility, as the Lords; and the accused can only be condemned by the united judgment of the Crown, the Lords, and the Commons(6).
" This aspect of the privilege is one of the typical features of the historical development of the constitutional law in England.
It would thus be seen that a part of the jurisdiction claimed by the House of Lords as well as the House of Commons can be distinctly traced to the historical origin of the modem Parliament which, as we have just indicated, consisted in the judicial functions of Parliament.
(1) May 's Parliamentary Practice, pp.
3 4.(2) Ibid., pp.8 9.
(3) lbid.
, p.12.
(4) Ibid., pp.
38 39.
(5) Ibid., p. 40.
(6) Ibid., p. 41.
465 The differences in punishments inflicted by Lords and Commons is also of some significance in this context.
"While both Houses agree in regarding the same offences as breaches of privilege", says May, "in several important particulars there is a difference in their modes of punishment.
The Lords have claimed to be a court of record and, as such, not only to imprison, but to impose fines.
They also imprison for a fixed time, and order security to be given for good conduct; and their customary form of commitment is by attachment.
The Commons, on the other hand, commit for no specified period, and during the last two centuries have not imposed fines.
There can be no question that the House of Lords, in its judicial capacity, is a court of record; but, according to Lord Kenyon, 'when exercising a legislative capacity, it is not a court of record '.
Whether the House of Commons be, in law, a court of record, it would be difficult to determine; for this claiming, once firmly maintained, has latterly been virtually abandoned, although never distinctly renounced"(1).
This last comment made by May would be of decisive significance when we later have occasion to deal with the question as to whether the privilege claimed by Mr. Seervai that a general warrant cannot be examined by courts is a part of the privilege itself, or is the result of convention established between the courts and the House of Commons.
Let us then briefly indicate, in the words of May, the general features of the power of commitment possessed by the House of Commons.
"The power of commitment", says May, "is truly described as the keystone of parliamentary privilege".
As was said in the Commons in 1593, "This court for its dignity and highness hath privilege, as all other courts have.
And, as it is above all other courts, so it hath privilege above all other courts; and as it hath privilege and jurisdiction too, so hath it also Coercion and Compulsion; otherwise the jurisdiction is nothing in a court, if it hath no Coercion" (2).
The comment made by May on this power of commitment is very instructive.
The origin of this power which is judicial in its nature is to be found naturally in the medieval conception of Parliament as primarily a court of justice the "High Court of Parliament".
As a court functioning judicially, the House of Lords undoubtedly possessed the power of commitment by at least as good a title as any court of Westminster Hall.
But the Commons, "new comers to Parliament" within the time of judicial memory, could not claim the power on grounds (1) May 's Parliamentary Practice, p. 90.
(2) Ibid., p. 90.
466 of immemorial antiquity.
As late as 1399 they had record& their protest that they were not sharers in the judgments of Parliament, but only petitioners.
The possession of the right by the Commons was challenged on this ground, and was defended by arguments which confounded legislative with judicial jurisdiction.
It was probably owing to the medieval inability to conceive of a constitutional authority otherwise than as in some sense a court of justice that the Commons succeeded in asserting their right to commit offenders on the same terms as the Lords(1).
That is the genesis of the privilege claimed by the House of Commons in the matter of commitment.
As the history of England shows, the House of Commons had to engage in a fierce struggle in order to arrest recognition for this right from the King, the House of Lords, and in many cases the people themselves.
This power was distinctly admitted by the Lords at the conference between the two Houses, in the case of Ashby vs White(2), in 1704, and it has been repeatedly recognized by courts of law.
In fact this power is also virtually admitted by the statute, I James 1, c. 13, section 3, which provides that nothing therein shall "extend to the diminishing of any punishment to, be hereafter, by censure in Parliament, inflicted upon any person(3).
" Now we will refer to the statement of the law in May 's book on the vexed question about the jurisdiction of courts of law in matters of privilege.
May says, it would require a separate treatise to deal adequately with a subject which raises incidentally such important questions of constitutional law.
According to him, in cases affecting parliamentary privilege the tracing of a boundary between the competence of the courts and the exclusive jurisdiction of either House is a difficult question of constitutional law which has provided many puzzling cases, particularly from the seventeenth to the nineteenth centuries.
It has been common ground between the Houses and the courts that privilege depends on the "known laws and customs of Parliament", and not on the ipse dixit of either House.
The question in dispute was whether the law of Parliament was a "particular" law or part of the common law in its wide and extended sense, and in the former case whether it was a superior law which overrode the common law.
Arising out of this question another item of controversy arose between the courts and the Parliament and that was whether a matter of privilege should be judged solely (1) May 's Parliamentary Practice, p. 91.
(2) L.J. (1701 05),714.
(3) May 's Parliamentary Practice, p. 92.
467 by the House which it concerned, even when the rights of third parties were involved, or whether it might in certain cases be decided in the courts, and, if so, in what sort of cases (1).
The points of view adopted by the Parliament and the courts appeared to be irreconcilable.
The courts claimed the right to decide or themselves when it became necessary to do so in proceedings brought before them, questions in relation to the existence or extent of these privileges, whereas both the Houses claimed to be exclusive judges of their own privileges.
Ultimately, the two points of view were reconciled in practice and a solution acceptable to both he parties was gradually evolved.
This solution which is marked but by the courts is to insist on their right in principle to decide ill questions of privilege arising in litigation before them, with certain large exceptions in favour of parliamentary jurisdiction.
Two of these are the exclusive jurisdiction of each House over its own internal proceedings, and the right of either House to commit and punish for contempt.
May adds that while it cannot be claimed that either House has formally acquiesced in this assumption of jurisdiction by the courts, the absence of any conflict for over a century may indicate a certain measure of tacit acceptance(2).
In other words, 'the question about the existence and extent of privilege is generally treated as justiciable in courts where it becomes relevant for adjudication of any dispute brought before the courts.
In regard to punishment for contempt, a similar process of give and take by convention has been in operation and gradually a large area of agreement has, in practice, been evolved.
Theoretically, the House of Commons claims that its admitted right to adjudicate on breaches of privilege implies in theory the right to determine the existence and extent of the privileges themselves.
It has never expressly abandoned this claim.
On the other hand, the courts regard the privileges of Parliament as part of the law of the land, of which they are bound to take judicial notice They consider it their duty to decide any question of privilege arising directly or indirectly in a case which falls within their jurisdiction, and to decide it according to their own interpretation of the law(3).
Naturally, as a result of this dualism the decisions of the courts are not accepted as binding by the House In matters of privilege, nor the decision of the House by the courts; and as May points out, on the theoretical plane, the old dualism remains unresolved.
In practice, however, "there is (1) May 's Parliamentary Practice, p. 150.
(2) Ibid., p. 152.
(3) Ibid., p. 172.
468 much more agreement on the nature and principles of privilege than the deadlock on the question of jurisdiction would lead one to expect" and May describes these general conclusions in the following words : (1) It seems to be recognized that, for the purpose of adjudicating on questions of privilege, neither House is by itself entitled to claim the supremacy over the ordinary courts of justice which was enjoyed by the undivided High Court of Parliament.
The supremacy of Parliament, consisting of the King and the two Houses, is a legislative supremacy which has nothing to do with the privilege jurisdiction of either House acting singly.
(2) It is admitted by both Houses that, since neither House can by itself add to the law, neither House can by its own declaration create a new privilege.
This implies that privilege is objective and its extent ascer tainable, and reinforces the doctrine that it is known by the courts.
On the other hand, the courts admit (3) That the control of each House over its internal proceedings is absolute and cannot be interfered with by the courts.
(4) That a committal for contempt by either House is in practice within its exclusive jurisdiction, since the facts constituting the alleged contempt need not be stated on the warrant of committal(.).
It is a tribute to the remarkable English genius for finding pragmatic ad hoc solutions to problems which appear to be irreconcilable by adopting the conventional method of give and take.
The result of this process has been, in the words of May, that the House of Commons has not for a hundred years refused to submit its privileges to the decision of the courts, and so, it may be said to have given practical recognition to the jurisdiction of the courts over the existence and extent of its privileges.
On the other hand, the courts have always, at any rate in the last resort, refused to interfere in the application by the House of any of its recognized privileges(1).
That broadly stated, is, the position of powers and privileges claimed by the House of Commons.
(1) May 's Parliamentary Practice, p. 173.
(2) Ibid., pp.
173 74.
469 What now remains to consider is the position in regard to the special privilege with which we are concerned, viz., the privilege to determine whether its contempt has been committed and to punish for such contempt, and to claim that a general order or warrant sentencing a person for its contempt is not examinable in a court of law.
Is this last right claimed by Mr. Seervai on behalf of the House a part of the privilege vesting in the House of Commons, or is it the result of an agreement evolved between the courts and the House by convention, or by the doctrine of comity, or as a matter of legal presumption ? It is to this question that we must now turn.
Even while dealing with this narrow question, it is necessary, we think, to refer broadly to the somewhat tortuous course through which the law on this question has been gradually evolved by judicial decisions in England.
Just as in dealing with the question of privileges, on principle we have mainly based ourselves on the statements of May, so in dealing with the evolution of the law on this question, we will mainly rely on the decisions themselves.
Both Mr. Seervai and Mr. Setalvad have referred us to a large number of English decisions while urging their respective contentions before us and in fairness, we think we ought to mention some of the important representative decisions to indicate how this doctrine of privilege and its accompaniments has been gradual`y developed in England.
For our purpose, the story can be said to begin in the year 1677 when the Court of King 's Bench had occasion to deal with a part of this problem in The Earl of Shaftesbury 's case(1); it develops from time to time when some aspect or the other of this problem of parliamentary privileges came before the courts at Westminster until we reach 1884 when the case of Bradlaugh vs Gossett(1) was decided.
Let us then begin with Shaftesbury 's case.
In that case, the Earl of Shaftesbury was committed to the Tower of London under an order of the House of Lords which directed the constable of the Tower of London to receive him and keep him in safe custody during the pleasure of the House "for high contempts committed against this House; and this shall be a sufficient warrant on that behalf.
" The Earl of Shaftesbury took the matter before the Court of Kings ' Bench on a writ of habeas corpus and urged that the committal of the Earl was unjustified in law, because the general allegation of "high contempts" was (1) (2) L.R. 12 Q.B.D. 721.
470 too uncertain for the Court to sustain.
It was also argued or his behalf that in respect of the jurisdiction exercised by the Lords the boundaries of the said jurisdiction were limited by common law and its exercise was examinable in the courts.
This plea was unanimously rejected by the Court which held that the Court could not question the judgment of the House of Lords as a superior court.
Rainford C.J. held "that this Court hath no jurisdiction of the cause, and therefore, the form of the return: is not considerable".
According to the learned Chief Justice, the impugned commitment was in execution of the judgment given by the Lords for the contempt; and therefore, if the Earl be bailed, he would be delivered out of execution; because for a contempt in facie curiae, there is no other judgment for execution.
This case, therefore, accepted the principle that the House of Lords had jurisdiction to issue a warrant for contempt and that since the commitment of the person thus committed was in execution of the judgment given by the House of Lords, the general warrant issued in that behalf was not examinable by the King 's Bench Division.
Five years thereafter, Jay moved the King 's Bench Division for release from arrest and brought an action against Topham, the serjeant at Arms, for arresting and detaining him.
Topham pleaded to the jurisdiction of the court, but the court rejected his plea and judgment was given in favour of Jay.
Seven years thereafter, the House of Commons declared that the said judgment was "illegal, a violation of the privileges of Parliament, and pernicious to the rights of Parliament".
Acting on this view the two Judges were called at the Bar of the House and asked to explain their conduct.
Appearing before the Bar, Sir Francis Pemberton mentioned to the House that he had been out of the Court for more than six years and did not exactly remember what had happened in the case.
He expressed surprise that he was called to the Bar without giving him enough notice as to what was the charge against him.
He also urged that if the defendant should plead he did arrest him by the command of this House, and should plead that to the jurisdiction of the Court of King 's Bench, he would satisfy the House that such a plea ought to be overruled.
That is why he asked for time to look into the records of the court to make his further pleas.
Eventually, the two Judges were ordered to be imprisoned(1).
This incident has been severely criticised by all prominent writers on constitutional law in England and it would be fairly accurate to state (1) 471 that it has been regarded as an unfortunate and regrettable episode in the history of the House of Commons.
It is somewhat ironical that what happened as long ago as 1689 is attempted to be done by the House in the present proceedings 14 years after this country has been used to a democratic way of life under a written Constitution Before we part with this case, however, it would be material to indicate briefly how succeeding Judges have looked at this conduct of the House of Commons.
In Sir Francis Burdett vs Abbot(1), Lord Ellenborough C.J., observed : "It is surprising upon looking at the record in that case how a Judge should have been questioned, and committed to prison by the House of Commons, for having given a judgment, which no Judge whoever sat in this place could differ from" and he added that the AttorneyGeneral who had appeared in Burdett had conceded that probably the matter was not so well understood at that time, whereupon Lord Ellenborough observed that it was after the Revolution, which makes such a commitment for such a cause a little alarming; and he pointed out that it must be recollected that Lord C.J., Pemberton stood under the disadvantage at that period of having been one of the Judges who had sat on the trial of Lord Russel, and therefore did not stand high in popularity after the Revolution, when the judgment and attainder in his case had been recently reversed by Parliament.
Similarly, in Stockdale vs Hansard(2), referring to this incident, Lord Denman C.J. declared : "Our respect and gratitude to the Convention Parliament ought not to blind us to the fact that this sentence of imprisonment was as unjust and tyrannical as any of those acts of arbitrary power for which they deprived King James of his Crown".
The next case to which reference may be made is Ashby vs White(").
In that case, the plaintiff was a burgess of Aylesbuy, and as such entitled to vote for two Members of Parliament.
On the day of the election he requested the defendants, who were the Returning Officers of the borough, to receive his vote.
This the defendants refused to do, and the plaintiff was not allowed to vote.
That led to an action against the Returning Officers for fraudulently and maliciously refusing his vote, and it ended in an award for damages by the jury.
In an action before the Queen 's Bench in arrest of judgment, it was urged that (1) ; , 541.
(3) ; (2) 12, 1163.
472 the claim made by the plaintiff was not maintainable.
This action succeeded according to the majority decision Holt C.J., dissenting.
Justice Gould held that he was of opinion that the action brought against the defendants was not maintainable, and in support of his conclusion he gave four reasons; first, because the defendants are judges of the, and act herein as judges; secondly, because it is a Parliamentary matter, with which we have nothing to do; thirdly, the plaintiff 's privilege of voting is not a matter of property or profit, so that the hindrance of it is merely damnum sine injuria; and fourthly, it relates to the pub lick, and is a popular offence(1).
Holt C.J., however, dissented from the majority opinion and expressed his views in somewhat strong language.
Referring to the opinion expressed by his colleagues that the Court cannot judge of the matter because it was a Parliamentary thing, he exclaimed : "O by all means be very tender of that.
Besides, it is intricate, and there may be contrariety of opinions.
But this matter can never come in question in Parliament; for it is agreed that the persons for whom the plaintiff voted were elected; so that the action is brought for being deprived of his vote.
"(1) He conceded that the court ought not to encroach or enlarge its jurisdiction; but he thought that the court must determine on a charter granted by the King, or on a matter of custom or prescription, when it comes before the court without encroaching on the Parliament.
His conclusion was that if it be a matter with the jurisdiction of the Court, "we are bound by our oaths to judge of it"(3 ) .
This decision, however, has nothing to do with the question of contempt.
The next case which deals with the question of contempt of the House of Commons, is R. vs Paty(4).
In that case, Paty and four others were committed to Newgate by warrant issued by the Speaker of the House.
The warrant was a speaking warrant and showed that the persons detained had committed contempt of the jurisdiction of the House and open breach of its known privileges.
The validity of this warrant was challenged by the said persons on the ground that it suffered from many infirmities.
The majority decision in the case, however, was that the warrant was not reversible for the alleged infirmities and that the court had no jurisdiction to deal with the matter, because the House of Commons were the proper judges of their own privileges.
Justice Powys referred to the earlier decision in The (1) ; , 129.
(3) Ibid., 138.
(2) Ibid., 137.
(4) ; 473 Earl of Shaftesbury 's case(1) and observed all commitments for contempts, even those by this Court, should come to be scanned, they would not hold water.
Our warrants here in such cases are short, as for a contempt, or for a contempt in such a cause.
So in Chancery the commitments for contempts are for a contempt in not fully answering, etc., and would not this commitment be sufficient ?" He held that "the House of Commons is a great Court, and all things done by them are to be intended to have been rite acta, and the matter need not be so specially recited in their warrants; by the same reason as we commit people by a rule of Court of two lines, and such commitments are held good, because it is to be intended, that we understand what we do.
"(1) It would thus be seen that the majority decision in that case proceeded on the basis that the House of Commons was a great Court and like the superior courts at Westminster, it was entitled to issue a short general warrant for committing persons for its contempt.
If such a general warrant was issued and it was challenged before the courts at Westmins ter, it should be treated with the same respect as is accorded to similar warrants issued by the superior courts.
Holt C.J., however, was not persuaded to take the view that the impugned imprisonment was such "as the freeman of England ought to be bound by"; and he added, "for that this, which was only doing a legal act, could not be made illegal by the vote of the House of Commons; for that neither House of Parliament, nor both Houses jointly, could dispose of the liberty or property of the subject; for to this purpose the Queen must join : and that it was in the necessity of their several concurrences to such acts, that the great security of the liberty of the subject consisted." ' (p. 236).
This case, therefore, seems to recognise that it would be inappropriate for the courts at Westminster to examine the validity of a general warrant issued by the House of Commons.
That takes us to the decision in Murray 's case(3) .
Murray was committed to prison by the House of Commons for refusal to kneel, when brought up to the bar of the House.
It was declared by the House that the refusal of Murray to kneel was "a most dangerous contempt of privilege".
When a petition for habeas corpus was moved before the Court, it was rejected on the ground that "the House of Commons was undoubtedly a High Court and that it was agreed on all hands that they have power to judge of their own privileges, and it need not appear (1) (3) ; (2) ; , 234.
474 to us what the contempt was, for if it did appear, we could not judge thereof.
" That is the view expressed by Justice Wright.
The learned Judge also added that the House of Commons was superior to his own Court, and that his Court could not admit to bail a person committed for a contempt in any other Court in Westminster Hall.
Dennison J. agreed and expressed his opinion that the Court at Westminster Hall was inferior to the House of Commons with respect to judging of their privileges and contempts against them.
This case again proceeds on the basis that the House of Commons is a superior court, and as such its warrants cannot be examined.
The next relevant case in point of time is Brass Crosby(1).
Brass Crosby was Lord Mayor of London and a Member of the House of Commons, and as Magistrate he had admitted to bail a person who had been committed to prison under a warrant issued by the Speaker of the House under the orders of the House itself.
The House held that Lord Mayor was guilty of breach of privilege of the House, and as such he was committed to the Tower of London.
The validity of this order was challenged by Brass Crosby.
The challenge, however, failed on the ground that when the House of Commons adjudges anything to be a contempt or a breach of privilege, their adjudication is a conviction, and their commitment in consequence is in execution.
As Lord C.J. de Grey observed, "no court can discharge or bail a person that is in execution by the judgment of any other court," and so, he came to the conclusion that "the House of Commons having authority to commit, and that commitment being an execution, the question is what can this Court do ? He gave the answer with the remark that "it can do nothing when a person is in execution, by the judgment of a court having a competent jurisdiction; in such case, this Court is not a court of appeal.
"(2) Concurring with this view, Blackstone J. observed that the House of Commons is a Supreme Court and he was impressed by the argument that "it would occasion the utmost confusion, if every Court of this Hall should have power to examine the commitments of the other Courts of the Hall, for contempts; so that the judgment and commitment of each respective Court, as to contempts, must be final, and without control.
"(1) It would thus be seen that this decision proceeded on the same ground which had by then been recognised that the House of Commons was a superior ,court and as such had jurisdiction to punish persons adjudged (1) ; (3) Ibld., 1014.
(2) Ibid., 1011.
475 by it to be guilty of contempt.
A general warrant issued by the House in respect of such a contempt was treated as of the same status as a similar warrant issued by other superior courts at Westminster Hall.
Before parting with this case, we may incidentally advert to the comment made by Lord Denman C.J. on this decision.
Said Lord Denman : "We know now, as a matter of history, that the House of Commons was at that time engaged, in unison with the Crown, in assailing the just rights of the people.
Yet that learned Judge [Blackstone J.] proclaimed his unqualified resolution to uphold the House of Commons, even though it should have abused its power(1).
" The next important decision on this topic is Sir Francis Burdett 's case(1).
This case arose out of an action of trespass which Sir Francis Burdett commenced against the Speaker of the House of Commons for breaking and entering his house, and imprisoning him in the Tower.
The plea raised in defence was that the conduct of the defendant was justified by an order of the House for Burdett 's committal after the House had adjudicated that he had been guilty of a contempt of the House by publishing a libellous and scandalous paper reflecting on the just rights and privileges of the House.
The case was elaborately argued and as May points out : "This case provides one of the principal authorities for the Commons ' power (as Lord Shaftesbury 's case does for the Lords ') to commit for contempt(, ').
" The warrant in this case was a speaking warrant and the contempt was the contempt of the House of Commons.
The plea made by Burdett was rejected, but the reasons given for rejecting the plea are significant.
Lord Ellenborough C.J. has considered the question exhaustively.
He has observed that upon the authority of precedents in Parliament, upon the recognition by statute, and upon the continued recognition of all Judges, he should have thought that there was a quantity of authority enough to have put the question to rest, that is, whether the House of Commons has the power of commitment for a contempt of their privileges ? The House undoubtedly had that power.
Proceeding to deal with the matter on that basis, Lord Ellenborough held that the House was competent to decide both as to the fact and the effect of the publication which was held by it to be libellous, and he added that by analogy to the judgment of a Court of law, (and the judgments of either House of Parliament cannot with propriety (1) Stockdale vs Hansard, 112 E.R. 1112,1158.
(2) ; (3) May 's Parliamentary Practice, p. 159.
476 be put upon a footing less authoritative than those of the ordinary Courts of Law), the House must be considered as having decided both, as far as respects any question thereupon which may arise in other Courts.
The next question which Lord Ellenborough considered was if the warrant itself disclosed a sufficient ground for commit ment, and an order to the officers of the House to execute it, then the justification for the persons acting under it is made out, " unless any justifiable means appear to have been afterwards used to carry the warrant into execution.
" It appears that in that case it was urged before the Court that if the warrant issued appeared to be on the face of it unjustified, illegal or extravagant, the Court would be entitled to entertain the petition for a writ of habeas corpus and grant relief to the petitioner. ,Lord Ellenborough dealt with this argument and expressed the opinion that if a commitment appeared to be for a contempt of the House of Commons generally, he would neither in the case of that Court, nor of any other of the Superior Courts, inquire further; but if it did not profess to commit for a contempt, but for some matter appearing on the return, which could by no reasonable intendment be considered as a contempt of the Court committing, but a ground of commitment palpably and evidently arbitrary, unjust, and contrary to every principle of positive law, or national justice, in such a case the Court must look at it and act upon it as justice may require from whatever Court it may profess to have proceeded (pp.
558 60).
It is thus clear that even while recognising that it would be inappropriate or improper to examine a general warrant issued by the House of Commons, Lord Ellenborough made it clear that this convention would be subject to the exception that wherever it appeared from the return or otherwise that the commitment was palpably unjust, the court would not be powerless to give relief to the party.
This case went in appeal before the Court of Exchequer and the decision under appeal was confirmed.
It appears that before the appellate decision was pronounced, Lord Eldon proposed to their Lordships that the counsel for the defendants should not be heard until they received the advice of the Judges on the question which he formulated.
This question was : "Whether, if the Court of Common Pleas, having adjudged an act to be a contempt of Court, had committed for the contempt under a warrant, stating such adjudication generally without the particular circumstances, and the matter were brought before the Court of King 's 477 Bench, by return to a writ of habeas corpus, the return setting forth the warrant, stating such adjudication of contempt generally; whether in that case the Court of King 's Bench would discharge the prisoner, because the particular facts and circumstances, out of which the contempt arose, were not set forth in the warrant." After this question was handed to the Judges and they consulted among themselves for a few minutes, Lord Ch.
Baron Richards delivered their unanimous opinion that in such a case the Court of King 's Bench would not liberate.( ') This opinion was accepted and Burdett 's appeal was dismissed without calling on the respondent.
In this case, Lord Erskine observed that "the House of Commons, whether a Court or not, must like every other tribunal, have the power to protect itself from obstruction and insult, and to maintain its dignity and character.
If the dignity of the law is not sustained, its sun is set, never to be lighted up again.
So much I thought it necessary to say, feeling strongly for the dignity of the law; and have only to add that I fully concur in the opinion delivered by the Judges.
" This case seems to establish the position that a warrant issued by the House of Commons was treated as a warrant issued by a superior Court and as such, the courts in Westminster Hall could not go behind it.
In 1836 37 began a series of cases in which John Joseph Stockdale was concerned.
This series of cases ultimately led to the arrest and imprisonment of the Sheriffs of Middlesex.
It appears that in one of the reports published by the inspectors of prisons under the order of the House of Commons Stockdale was described in a libellous manner, and so, he brought an action against Messrs. Hansard in 1836.
In defence, Hansard pleaded privilege and urged that the reports in question had been published under the orders of the House.
The Court held that the order of the House supplied no defence to the action.
Even so, the verdict of the jury went against Stockdale on a plea of justification on the merits, the jury having apparently held that the alleged libellous description of Stockdale was accurate.
At the time when this case was tried, Lord Chief Justice Denman made certain observations which were adverse to the privileges of the House claimed by Hansard.
He observed "that the fact of the House of Commons having directed Messrs. Hansard to publish all their parliamentary reports is no justification for them, or for any book seller who publishes a parliamentary report containing a libel against any man(2).
" Incidentally, it may be added that as a (1) ; ,1301.
(2) May 's Parliamentary Practice, p. 159.
478 result of this controversy, the Parliament ultimately passed the Parliamentary Papers Act, 1840, which overruled this view.
Not deterred by the adverse verdict of the jury on the merits, Stockdale began another action.
Before this action was commenced, the House of Commons had passed a resolution in 1837 reaffirming its privileges, and expressing its deliberate view that for any court to assume to decide upon matters of privilege inconsistent with the determination of either House of Parliament was contrary to the law of Parliament.
Nevertheless, in this second action brought by Stockdale, the House decided to put in a defence of privilege.
This defence was rejected and a decree was passed for payment of damages and costs.
Even so, the House of Commons did not act upon its resolutions and refrained from punishing Stockdale and his legal advisers for having taken the matter to a court of law; instead, it decided that the damages and costs be paid under the special circumstances of the case.
Encouraged by this result Stockdale brought a third action for another publication of the said report.
This time Messrs. Hansard did not plead; in consequence, the judgment went against them in default, and the damages were assessed by a jury, in the Sheriff 's Court, at pound 600.
The Sheriffs of Middlesex levied for that amount, but were served with the copies of the resolutions passed by the House; and that naturally made them cautious in the matter.
They, therefore, delayed the payment of the money to Stockdale as long as possible, but ultimately the money was paid by them to Stockdale under an attachment.
At this stage, the House of Commons entered the arena and committed Stockdale to the custody of the Serjeant.
It called upon the Sheriffs to refund the money and on their refusal, they were also committed for contempt.
That led to proceedings taken by the Sheriffs for their release on a writ of habeas corpus.
These proceedings, however, failed and that is the effect of the decision in the Case of the Sheriff of Middlesex(1).
Naturally, Mr. Seervai has laid considerable emphasis on this decision.
He has pointedly drawn our attention to the fact that the Court found itself powerless to protect the Sheriffs of Middlesex against their imprisonment, though the conduct which gave rise to contempt of the House was, in terms, the result of an order passed by the Court.
Lord Denman C.J., who had himself elaborately discussed the question and disputed the validity of the claim made by the House of Commons in regard to its privi (1) ; 479 leges in the case of Stockdale vs Hansard(1), was a party to this decision.
He began his judgment by declaring that his earlier judgment delivered in the case of Stockdale vs Hansard(1) was correct in all respects.
Even so, the plea raised by the Sheriffs had to be answered against them, because their commitment was sustained by a legal warrant.
Lord Denman then examined the three grounds on which the validity of the warrant was impeached and he found that there was no substance in those pleas.
The learned Chief Justice considered the previous decisions bearing on the point and observed that the test prescribed by Lord Eldon in the case of Burdett vs Abbot (2) was relevant; and this test, as we have already seen, proceeds on the assumption that like the general warrants for commitment issued by the superior courts, the general warrants issued by the House of Commons on the ground of contempt should not be examined in proceedings for habeas corpus.
Littledale J. concurring with, Lord Denman C.J. said : "if the warant declares the grounds of adjudication, this Court, in many cases, will examine into their validity; but, if it does not, we cannot go into such an inquiry.
Here we must suppose that the House adjudicated with sufficient reason; and they were the proper judges".
Justice Williams, who also concurred with Lord Denman, thought it necessary to add ' that "if the return, in a case like this, shewed a frivolous cause of commitment, as for wearing a particular dress, I should agree in the opinion expressed by Lord Ellenborough in Burdett vs Abbot(1), where he distinguishes between a commitment stating a contempt generally, and one appearing by the return to be made on grounds palpably unjust and absurd.
Coleridge J. preferred ' to put his conclusion on the ground that "[the right of the House of Commons] to adjudicate in this general form in cases of contempt is not founded on privilege, but rests upon the same grounds on which this Court or the Court of Common Pleas might commit for a contempt without stating a cause in the commitment.
" It is remarkable that Justice Coleridge thought it necessary to make it clear that the right to require a general warrant to be respected ' when its validity is challenged in habeas corpus proceedings, is now ,a part of the privilege itself; it is the result of a convention by which such warrants issued by superior courts of record are usually respected.
This decision was pronounced in 1840, and ' can be said to constitute a landmark in the development of the law on this topic.
Thus, this decision also does not assist Mr. Seervai in contending that it is a part of the privilege of the" (1) 11 12.
(2) ; 480 House to insist that a general warrant issued by it must be treated as conclusive and is not examinable in courts of law.
The next case is Howard vs Sir William Gosset(1).
In that case, by a majority decision a warrant issued by the Speaker of the House against Howard was held to be invalid as a result of certain infirmities discovered in the warrant.
Williams J. alone dissented.
The warrant in this case was a general warrant and Williams J. held that the technical objections raised against the validity of the warrant could not be entertained, because a general warrant should be treated as conclusive of the fact that the party against whom the warrant had been issued had been properly adjudged to be guilty of contempt.
Since the judgment was pronounced in favour of the plaintiff Howard, the matter was taken in appeal, and the majority decision was reversed by the Court of Exchequer.
Parke B. considered the several arguments urged against the validity of the warrant and rejected them.
The general ground for the decision of the Court of Exchequer was expressed in these words : "We are clearly of opinion that at least as much respect is to be shewn, and as much authority to be attributed, to these mandates of the House as to those of the highest Courts in the country; and, if the officers of the ordinary Courts are bound to obey the process delivered to them, and are therefore protected by it, the officer of the House of Commons is as much bound and equally protected.
The House of Commons is a part of the High Court of Parliament, which is without question not merely a Superior but the Supreme Court in this country, and higher than the ordinary courts of law(1)".
Thus, the result of this decision is that the House of Commons being part of the High Court of Parliament is a superior Court and the general warrants issued by it cannot be subjected to the close scrutiny, just as similar warrants issued by other superior courts of record are held to be exempt from such scrutiny.
It would be noticed that the Court of Exchequer has observed in this case that the House of Commons as a part of the High Court of Parliament, is a Supreme Court in this country and is higher than the ordinary courts of law; and this recalls the original judicial character of the House of Parliament in its early career and emphasises the fact that the House of Lords which is a part of the House of Parliament still continues to be the highest court of law in England.
The last case in this series to which we ought to refer is the decision of the Queen 's Bench Division in Bradlaugh vs (1) ; (2) 1bid.
, at 174.
481 Gossett(1).
This decision is not directly relevant or material but since Mr. Seervai appeared to rely on certain statements of law enunciated by Stephen J., we think it necessary to refer to it very briefly.
In the case of Bradlaugh the Court was called upon to consider whether an action could lie against the Serjeantat Arms of the House of Commons for excluding a member from the House in obedience to a resolution of the House directing him to do so; and the answer was in the negative.
It appears that the material resolution of the House of Commons was challenged as being contrary to law, and in fact the Queen 's Bench Division proceeded to deal with the claim of Bradlaugh on the footing that the said resolution may strictly not be in accordance with the true effect of the relevant provision of the law; and yet it was held that the matter in dispute related to the internal management of the procedure of the House of Commons, and so, the Court of Queen 's Bench had no power to interfere.
It was pressed before the Court that the resolution was plainly opposed to the relevant provision of the law.
In repelling the validity of this argument, Stephen J., observed that in relation to the rights and resolutions concerning its internal management, the House stood precisely in the same relation "as we the judges of this Court stand in to the laws which regulate the rights of which we are the guardians, and to the judgments which apply them to particular cases; that is to say, they are bound by the most solemn obligations which can bind men to any course of conduct whatever, to guide their conduct by the law as they understand it".
The learned Judge then proceeded to add "If they misunderstand it, or (I apologize for the supposition) wilfully disregard it, they resemble mistaken or unjust judges; but in either case, there is in my judgment no appeal from their decision.
The law of the land gives no such appeal; no precedent has been or can be produced in which any Court has ever interfered with the internal affairs of either House of Parliament, though the cases are no doubt numerous in which the Courts have declared the limits of their powers outside of their respective Houses".
That, said the learned Judge, was enough to justify the conclusion which he had arrived at(1).
Mr. Seervai 's argument was that though the resolution appeared to constitute an infringement of the Parliamentary Oaths Act, the Court refused to give any relief to Brad laugh, and he suggested that a similar approach should be adopted in dealing with the present dispute before us.
The obvious answer to this contention is that we are not dealing with any matter relating to the internal management of the House in the L. R. (2) lbid., 286.
482 present proceedings.
We are dealing with the power of the House to punish citizens for contempt alleged to have been committed by them outside the fourwalls of the House, and that essentially raises different considerations.
Having examined the relevant decisions bearing on the point, it would, we think, not be inaccurate to observe that the right claimed by the House of Commons not to have its general warrants examined in habeas corpus proceedings has been based more on the consideration that the House of Commons is in the position of a superior court of record and has the right like other superior courts of record to issue a general warrant for commitment of persons found guilty of contempt.
Like the general warrant issued by superior courts of record in respect of such contempt, the general warrants issued by the House of Commons in similar situations should be similarly treated.
It is on that ground that the general warrants issued by the House of Commons were treated beyond the scrutiny of the courts in habeas corpus proceedings.
In this connection, we ought to add that even while recognising the validity of such general warrants, Judges have frequently observed that if they were satisfied upon the return that such general warrants were issued for frivolous or extravagant reasons, it would be open to them to examine their validity.
Realizing that the position disclosed by the decisions so far examined by us was not very favourable to the claim made by him that the conclusive character of the general warrants is a part of the privilege itself, Mr. Seervai has very strongly relied on the decisions of the Privy Council which seem to support his contention, and so, it is now necessary to turn to these decisions.
The first decision in this series is in the case of the Speaker of the Legislative Assembly of Victoria vs Hugh Glass(1).
In that case by the Constitution Act for the Colony of Victoria power had been given to the Legislative Assembly of Victoria to commit by a general warrant for contempt and breach of privilege of that Assembly.
In exercise of that power, Glass was declared by the House to have committed contempt and under the Speaker 's warrant, which was in general terms, he was committed to jail.
A habeas corpus petition was then moved on his behalf and this petition was allowed by the Chief Justice of the Supreme Court in the Colony, on the ground that the Constitution Statute and the Colonial Act did not confer upon the Legislative Assembly the same powers, privileges and immunities as were possessed by 1) 483 Assembly, the decision of the Supreme Court in the Colony was reversed and it was held that the relevant Statute and the Act gave to the Legislative Assembly the same powers and privileges as the House of Commons had at the time of the passing of the said Acts.
Having held that the Legislative Assembly had the same powers as the House of Commons, the Privy Council proceeded to consider the nature and extent of these powers.
Lord Cairns who delivered the judgment of the Privy Council observed that "[b]eyond all doubt, one of the privileges and one of the most important privileges of the House of Commons is the privilege of committing for contempt; and incidental to that privilege, it has . been well established in this country that the House of Commons have the right to be the judges themselves of what is contempt, and to commit for that contempt by a Warrant, stating that the commitment is for contempt of the House generally, without specifying what the character of the contempt is. ' Then he considered the merits of the argument that the relevant Constitution Act did not confer on the Legislative Assembly of Victoria the incidental power of issuing a general warrant, and rejected it. "[Their Lordships] consider", said Lord Cairns, "that there is an essential difference between a privilege of committing for contempt such as would be enjoyed by an inferior Court, namely, privilege of first determining for itself what is contempt, then of stating the character of the contempt upon a Warrant, and then of having that Warrant subjected to review by some superior Tribunal, and running the chance whether that superior Tribunal will agree or disagree with the determination of the inferior Court, and the privilege of a body which determines for itself, without review, what is contempt, and acting upon the determination, commits for that contempt, without specifying upon the Warrant the character or the nature of the contempt." According to Lord Cairns, the latter of the two privileges is a higher and more important one than the former, and he added that it would be strange indeed if, under a power to transfer the whole of the privileges and powers of the House of Commons, that which would only be a part, and a comparatively insignificant part, of this privilege and power were transferred(1).
In other words, this decision shows that the Privy Council took the view that the power to issue a general warrant and to insist upon the conclusive character of the said warrant it itself (1) , 573.
484 a part of the power and privilege of the House.
Even so, it is significant that the distinction is drawn between the power and privilege of an inferior Court and the power and privilege of a superior Court; and so, the conferment of the larger power is deemed to have been intended by the relevant provision of the Constitution Act, because the status intended to be conferred on the Legislative Assembly of Victoria was that of the superior Court.
In other words, the Legislative Assembly was treated as a superior Court and the power and privilege conferred on it was deemed to include both aspects of the power.
Incidentally, it may be pointed out, with respect, that in considering the question, Lord Cairns did not apparently think it necessary to refer to the earlier English decisions in which the question about the extent of this power and its nature had been elaborately considered from time to time.
The next Privy Council decision on which Mr. Seervai relied is Fielding and Others vs Thomas(1).
In that case, the question about the extent of the power conferred on the Nova Scotia House of Assembly fell to be considered, and it was held by the Privy Council that the said Assembly had statutory power to adjudicate that wilful disobedience to its order to attend in reference to a libel reflecting on its members is a breach of privilege and contempt, and to punish that breach by imprisonment.
For our present purpose, it is not necessary to refer to the relevant provisions of the statute on which the argument proceeded, or the facts which gave rise to the action.
It is only one observation made by Lord Halsbury which must be quoted.
Said Lord Halsbury in that case : "The authorities summed up in Burdett vs Abbot(1), and followed in the Case of The Sheriff of Middlesex(1), establish beyond all possibility of controversy the right of the House of Commons of the United Kingdom to protect itself against insult and violence by its own process without appealing to the ordinary courts of law and without having its process interfered with by those courts." (4 ) It is the last part of this observation which lends some support to Mr. Seervai 's case.
All that we need say about this observation is that it purports to be based on two earlier decisions which we have already examined, and that it is not easily reconcilable with the reservations made by some of the Judges who had occasion to deal with this point in regard to their jurisdiction to examine the validity of the imprisonment of a petitioner where it appeared that the warrant issued by the House (1) (2) ; (3) 113 E.R.419.
(4) [18961 L.R.A.C. 600, 609.
485 of Commons appeared on a return made by the House to be palpably frivolous or based on extravagant or fantastic reasons.
The last decision on which Mr. Seervai relies is the case of The Queen vs Richards(1).
In that case, the High Court of Australia was called upon to construe the provisions of section 49 which are similar to the provisions of article 194(3) of our Constitution.
Section 49 reads thus : "The powers, privileges, and immunities of the Senate and of the House of Representatives, and of the members and the committees of each House, shall be such as are declared by the Parliament, and until declared shall be those of the Commons House of Parliament of the United Kingdom, and of its members and committees, at the establishment of the Commonwealth.
" One of the points which fell to be considered was what was the nature and extent of the powers, privileges and immunities conferred by section 49 of the Constitution on the Senate and the House of Representatives in Australia ? It appears that in that case Fitzpatrick and Browne were taken into custody by Edward Richards in pursuance of warrants issued by the Speaker of the House of Representatives of the Parliament of the Commonwealth.
These warrants were general in character and they commanded Richards to receive the said two persons into his custody.
On June 10, 1955, on the application of Fitzpatrick and Browne as prosecutors, the Supreme Court of the Australian Capital Territory (Simpson J.) granted an order nisi for two writs of habeas corpus directed to the said Edward Richards.
On June 15, 1955, Simpson J. acting under section 13 of the Australian Capital Territory Supreme Court Act directed that the case be argued before a Full Court of the High Court of Australia.
That is how the matter went before the said High Court.
The High Court decided that section 49 operated independently of section 50 and was not to be read down by implications derived from the general structure of the Constitution and the separation of powers thereunder.
Construing section 49 independently of section 50, the High Court held that the powers, privileges and immunities of the House of Commons at the establishment of the Commonwealth were conferred on the Parliament and since Parliament had made no declaration within the meaning of the said section, it was necessary to consider what the powers of the House of Commons were at the relevant time in order to determine the (1) ; 486 question as to whether a general warrant could be issued by Parliament or not, and the High Court held that under section 49 the Australian Parliament could claim the privilege of judging what is contempt and of committing therefor.
It was also held that if the Speaker 's warrant is upon its face consistent with the breach of an acknowledged privilege, it is conclusive notwithstanding that the breach of privilege is stated in general terms.
In other words, this decision undoubtedly supports Mr. Seervai 's contention that a general warrant issued by the House in the present case is not ,examinable by the High Court.
In appreciating the effect of this decision it is necessary to point out that so far as Australia was concerned, the point in issue had been already established authoritatively by the decisions of the Privy Council in Dill vs Murphy (1) as well as in Hugh Glass(2).
In fact, fact, Dixon C.J. has expressly referred to this "aspect of the matter.
Naturally, he has relied on the observations made by Lord Cairns in Hugh Glass and has followed the said observations in deciding the point raised before the High Court ,of Australia.
That is the basis which was adopted by Dixon C.J. in dealing with the question.
Having adopted this approach, the learned Chief Justice thought it unnecessary to discuss at length the situation in England, because what the situation in England was, had been conclusively determined for the guidance of the Australian courts by the observations made by Lord Cairns in Hugh Glass(1).
Even so, he has observed that the question about the powers, privileges and immunities of the House of Commons is one which the courts of law in England have treated as a matter for their decision, though he has added that "the courts in England arrived at that position after a long course of judicial decision not unaccompanied by political controversy.
The law in England was finally settled about 1840.
" This observation obviously refers to the Case of the Sheriff of Middlesex(").
To quote the words of the learned Chief Justice : "Stated shortly, it is this : it is for the courts to judge of the existence in either House of Parliament of a privilege, but, given an undoubted privilege, it is for the House to judge of the occasion and of the manner ,of its exercise.
The judgment of the House is expressed by its resolution and by the warrant of the Speaker.
If the warrant specifies the ground of the commitment the court may, it would seem, determine whether it is sufficient in law as a ground to amount to a breach of privilege, but if the warrant is upon its (1)15 E.R. 784:(1864)1 Moo P.C.(N.S.)487.
(2)[1869 71] 3L.R.P.C.560.
(3) ; 487 face consistent with a breach of an acknowledged privilege it is conclusive and it is no objection that the breach of privilege is stated in general terms.
This statement of law appears to be in accordance with cases by which it was finally established, namely, the Case of the Sheriff of Middlesex"(1).
Thus, even according to Chief Justice Dixon, the existence and extent of privilege is a justiciable matter and can be adjudicated upon by the High Court.
If the warrant is a speaking warrant, the Court can determine whether it is sufficient in law as a ground to amount to breach of privilege, though, if the warrant is unspeaking or general, the court cannot go behind it.
In our opinion, it would not be reasonable to treat this decision as supporting the claim made by the House that the conclusive character of its general warrant is a part and parcel of its privilege.
The learned Chief Justice in fact did not consider the question on the merits for himself.
He felt that he was bound by the observations made by Lord Cairns and he has merely purported to state what in his opinion is the effect of the decision in the Case of the Sheriff of Middlesex(1).
Besides, there is another aspect of this matter which cannot be ignored.
The learned C.J. Dixon was dealing with the construction of section 49 of the Australian Constitution, and as GwyerC.J. has observed in In re The Central Provinces and Berar Act No. XIV of 1938 (2), "there are few subjects on which the decisions of other Courts require to be treated with greater caution than that of federal and provincial powers, for in the last analysis the decision must depend upon the words of the Constitution which the Court is interpreting; and since no two Constitutions are in identical terms, it is extremely unsafe to assume that a decision on one of them can be applied without qualification to another.
" The learned Chief Justice has significantly added that this may be so even where the words or expressions used are the same in both cases for a word or a phrase may take a colour from its context and bear different senses accordingly (p. 38).
These observations are particularly relevant and appropriate in the context of the point which we are discussing.
Though the words used in section 49 of the Australian Constitution are substantially similar to the words used in article 194(3), there are obvious points on which the relevant provisions of our Constitution differ from those of the Australian Constitution.
Take, for instance, article 32 of our Constitution.
As we have already noticed, article 32 confers on the citizens of India the fundamental right to move (1) ; 1 Sup.
C.I./65 6 (2) 488 this Court.
In other words, the right to move this Court for breach of their fundamental rights is itself a fundamental right.
The impact of this provision as well as of the provisions contained in article 226 on the construction of the latter part of Article 194(3) has already been examined by us, it may be that there are some provisions in the Australian Constitution which may take in some of the rights which are safeguarded under article 226 of our Cons titution.
article 32 finds no counter part in the Australian Constitution.
Likewise, there is no provision in the Australian Constitution corresponding to article 211 of ours : and the presence of these distinctive features contributes to make a substantial difference in the meaning and denotation of similar words used in the two respective provisions.
viz., section 49 of the Australian Constitution and article 194(3) of ours.
Besides, the declaration to which section 49 refers may not necessarily suffer to the same extent from the limitation which would govern a law when it is made by the Indian Legislatures under the first part of article 194(3).
These distinctive features of the relevant and material provisions of our Constitution would make it necessary to bear in mind the words of caution and warning which Gwyer C.J., uttered as early as 1938.
Therefore, we think that it would not be safe or reasonable to rely too much on the observations made by Dixon C.J. in dealing with the question of privileges in the case of Richards(1).
Before we part with this topic, however, we may incidentally point out that the recent observations made by Lord Parker C.J. in In re Hunt(1) indicate that even in regard to a commitment for contempt by the superior court of record, the court exercising its jurisdiction over a petition filed for habeas corpus would be ,competent to consider the legality of the said contempt notwithstanding the fact that the warrant of commitment is general or unspeaking.
Dealing with the arguments urged by Kenneth Douglas Hunt who had been committed for contempt by WynnParry J., Parker C.J. observed : "It may be that the true view is, and I think the cases support it, that though this Court always has power to inquire into the legality of the committal, it will not inquire whether the power has been properly exercised." He, however, added that in the case before him, he was quite satisfied that the application ought to fail on the merits.
These observations tend to show that in exercising habeas corpus jurisdiction, a court at Westminster has jurisdiction to inquire into the legality of the commitment even though the commitment has been ordered (1) 92 C.L.R.157.
(2) 489 by another superior court of record.
If that be the true position, it cannot be assumed with certainty that Courts at Westminster would today concede to the House of Commons the right to claim that its general warrants are unexaminable by them.
Even so, let us proceed on the basis that the relevant right Claimed by the House, of Commons is based either on the ground that as a part of the High Court of Parliament, the House of Commons is a superior court of record and as such, a general Warrant for commitment issued by it for contempt is treated as ,conclusive by courts at Westminster Hall; or in course of time the right to claim a conclusive character for such a general warrant became an incidental and integral part of the privilege itself.
The question which immediately arises is: can this right be deemed to have been conferred on the House in the present proceedings under the latter part of article 194(3) ? Let us first take the basis relating to the status of the House of Commons as a Superior Court of Record.
Can the House claim such a status by any legal fiction introduced by article 194(3) ? In our opinion, the answer to this question cannot be in the affirmative.
The previous legislative history in this matter does not support the idea that our State Legislatures were superior Courts of Record under the Constitution Act of 1935.
Section 28 of the said Act which dealt with the privileges of the Federal Legislature is relevant on this point.
section 28(1) corresponds to article 194(3) of the present Constitution.
Section 28(2) provides that in other respects, the privileges of members of the Chambers shall be such as may from time to time be defined by Act of the Federal Legislature and, until so defined, shall be such as were immediately before the establishment of the Federation enjoyed by members of the Indian Legislature.
it is not disputed that the members of the Indian Legislature could not have claimed the status of being members of a superior Court of Record prior to the Act of 1935.
Section 28(3) prescribes that nothing in any existing Indian Act, and, notwithstanding anything in the foregoing provisions of this section, nothing in this Act, shall be construed as conferring, or empowering the Federal Legislature to confer, on either Chamber or on both Chambers sitting together, or on any committee or officer of the Legislature, the status of a Court, or any punitive or disciplinary powers other than a power to remove or exclude persons infringing the rules or standing orders, or otherwise behaving in a disorderly manner.
Section 28 (4) is also relevant for our purpose.
It provides that provision may be made by an Act of the Federal Legislature for the punish 490 ment, on conviction before a Court, of persons who refuse to give evidence r produce documents before a committee of a Chamber when duly required by the Chairman of the committee so to do There can be no doubt that these provisions clearly indicate that the Indian Legislature could not have claimed the power to punish for contempt committed outside the four walls of its Legislative Chamber.
Section 71 of the same Act deals with the Pro vincial Legislatures and contains similar provisions in its clauses (2), (3) and (4).
After the Indian Independence Act, 1947 (1 0 & 11 Geo.
VI c. 20) was passed, this position was altered by the amendments made in the Government of India Act, 1935 by various amendment orders.
The result of the amendment orders including Third Amendment Order, 1948 was that sub sections (3) and (4) of section 28 of the said Act were deleted and sub section (2) was amended.
The effect of this amendment was that the members of the Federal Chambers of Legislature could until their privileges were defined by Act of Federal Legislature claim the privileges enjoyed by the members of the House of Commons which were in existence immediately before the establishment of the Federation.
It is, however, remarkable that the corresponding subsections (3) and (4) of section 71 were retained.
The question as to whether the result of the deletion of sub sections (3) and (4) and the amendment of sub section (2) of section 28 was to confer on the Federal Legislature the same status as that of the House of Commons, does not call for our decision in the present Reference.
Prima facie, it may conceivably appear that the conferment of the privileges of the members of the House of Commons on the members of the Federal Legislature could not necessarily make the Federal Legislature the House of Commons for all purposes; but that is a matter which we need not discuss and decide in the present proceedings.
The position with regard to the Provincial Legislatures at the relevant time is, however, absolutely clear and there would obviously be no scope for the argument that at the time when the Constitution was passed the Provincial Legislatures could claim the status of the House of Commons and as such of a superior Court of Record.
That is the constitutional background of article 194(3) insofar as the Provincial Legislatures are concerned.
Considered in the light of this background, it is difficult to accept the argument that the result of the provisions contained in the latter part of article 194(3) was intended to be to confer on the State Legislatures in India the status of a superior Court of Record. 491 In this connection, it is essential to bear in mind the fact that the status of a superior Court of Record which was accorded to the House of Commons, is based on historical facts to which we have already referred.
It is a fact of English history that the parliament was discharging judicial functions in its early career.
It is a fact of both historical and constitutional history in England that the House of Lords still continues to be the highest Court of law in the country.
It is a fact of constitutional history even today that both the Houses possess powers of impeachment and attainder.
It is obvious, we think, that these historical facts cannot be introduced in India by any legal fiction.
Appropriate legislative provisions do occasionally introduce legal fictions, but there is a limit to the power of law to introduce such fictions.
Law can introduce fictions as to legal rights and obligations and as to the retrospective operation of provisions made in that behalf; but legal fiction can hardly introduce historical facts from one country to another.
Besides, in regard to the status of the superior Court of Record which has been accorded to the House of Commons, there is another part of English history which it is necessary to remember.
The House of Commons had to fight for its existence against the King and the House of Lords, and the Judicature was regarded by the House of Commons as a creature of the King and the Judicature was obviously subordinate to the House of Lords which was the main opponent of the House of Commons.
This led to fierce struggle between the House of Commons on the one hand, and the King and the House of Lords on the other.
There is no such historical background in India and there can be no historical justification for the basis on which the House of Commons struggled to deny the jurisdiction of the Court; that is another aspect of the matter which is relevant in considering the question as to whether the House in the present case can claim the status of a superior Court of Record.
There is no doubt that the House has the power to punish for contempt committed outside its chamber, and from that point of view it may claim one of the rights possessed by a Court of Record.
A Court of Record, according to Jowitt 's Dictionary of English Law, is a court whereof the acts and judicial proceedings are enrolled for a perpetual memory and testimony, and which has power to fine and imprison for contempt of its authority.
The House, and indeed all the Legislative Assemblies in India never discharged any judicial functions and their historical and constitutional background does not support the claim that they can be 492 regarded as Courts of Record in any sense.
If that be so, the very basis on which the English Courts agreed to treat a general warrant issued by the House of Commons on the footing that it was a warrant issued by a superior Court of Record, is absent in the present case, and so, it would be unreasonable to contend that the relevant power to claim a conclusive character for the general warrant which the House of Commons, by agreement, is deemed to possess, is vested in the House.
On this view of the matter, the claim made by the House must be rejected.
Assuming, however, that the right claimed by the House can be treated as an integral part of the privileges of the House of Commons, the question to consider would be whether such a right has been conferred on the House by the latter part of article 194(3).
On this alternative hypothesis, it is necessary to consider whether this part of the privilege is consistent with the material provisions of our Constitution.
We have already referred to Articles 32 and 226.
Let us take article 32 because it emphatically brings out the significance of the fundamental right conferred on the citizens of India to move this Court if their fundamental rights are contravened either by the Legislature or the Executive.
Now, article 32 makes no exception in regard to any encroachment at all, and it would appear illogical to contend that even if the right claimed by the House may contravene the fundamental rights of the citizen, the aggrieved citizen cannot successfully move this Court under article 32.
To the absolute constitutional right conferred on the citizens by article 32 no exception can be made and no exception is intended to be made by the Constitution by reference to any power or privilege vesting in the Legislatures of this country.
As we have already indicated we do not propose to enter into a general discussion as to the applicability of all the fundamental rights to the cases where legislative powers and privileges can be exercised against any individual citizen of this country, and that we are dealing with this matter on the footing that article 19 (1) (a) does not apply and article 21 does.
If an occasion arises, it may become necessary to consider whether article 22 can be contravened by the exercise of the power or privilege under article 194(3).
But, for the moment, we may consider article 20.
If article 21 applies, article 20 may conceivably apply, and the question may arise, if a citizen complains that his fundamental right had been contravened either under article 20 or article 21, can he or can he not move this Court under article 32 ? For the purpose of making the point which we are discussing, the applicability of article 21 itself would 493 be enough.
If a citizen moves this Court and complains that his fundamental right under article 21 had been contravened, it would plainly be the duty of this Court to examine the merits of the said contention, and that inevitably raises the question as to whether the personal liberty of the citizen has been taken away according to the procedure established by law.
In fact, this question was actually considered by this Court in the case of Pandit Sharma(").
It is true that the answer was made in favour of the legislature; but that is wholly immaterial for the purpose of the present discussion.
If in a given case, the allegation made by the citizen is that he has been deprived of his liberty not in accordance with law, but for capricious or mala fide reasons, this Court will have to examine the validity of the said contention, and it would be no answer in such a case to say that the warrant issued against the citizen is a general warrant and a general warrant must stop all further judicial inquiry and scrutiny.
In our opinion, therefore, the impact of the fundamental constitutional right conferred on Indian citizens by article 32 on the construction of the latter part of article 194(3) is decisively against the view that a power or privilege can be claimed by the House though it may be inconsistent with article 21.
In this connection, it may be relevant to recall that the rules which the House has to make for regulating its procedure and the conduct of its business have to be subject to the provisions of the Constitution under article 208(1).
Then, take the case of article 211 and see what its impact would be on the claim of the House with which we are dealing.
If the claim of the House is upheld, it means that the House can issue a general warrant against a Judge and no judicial scrutiny can be held in respect of the validity of such a warrant.
It would indeed be strange that the Judicature should be authorised to consider the validity of the legislative acts of our Legislatures, but should be prevented from scrutinising the validity of the action of the legislatures trespassing on the fundamental rights conferred on the citizens.
If the theory that the general warrant should be treated as conclusive is accepted, then, as we have already indicated, the basic concept of judicial independence would be exposed to very grave jeopardy; and so the impact of article 211 on the interpretation of article 194(3) in respect of this particular power is again decisively against the contention raised by the House.
If the power of the High Courts under article 226 and the authority of this Court under article 32 are not subject to any exceptions, then it would be futile to contend that a citizen cannot move the (1) [1959] Supp. 1 S.C.R. 806.
494 High Courts or this Court to invoke their jurisdiction even in, cases where his fundamental rights have been violated.
The existence of judicial power in that behalf must necessarily and inevitably postulate the existence of a right in the citizen to move the Court in that behalf; otherwise the power conferred on the High Courts and this Court would be rendered virtually meaningless.
Let it not be forgotten that the judicial power conferred on the High Courts and this Court is meant for the protection of the citizens ' fundamental rights, and so, in the existence of the said judicial power itself is necessarily involved the right of the citizen.
to appeal to the said power in a proper case.
In In re Parliamentary Privilege Act, 1770(1), the Privy Council was asked to consider whether the House of Commons would be acting contrary to the Parliamentary Privilege Act, 1770, if it treated the issue of a writ against a Member of Parliament in respect of a speech or proceeding by him in Parliament as a breach of its privileges.
The said question had given rise to some doubt, and so, it was referred to the Privy Council for its opinion.
The opinion expressed by the Privy Council was in favour of Parliament.
Confining its answer to the said limited question, the Privy Council took the precaution of adding that "they express no opinion whether the proceedings referred to in the introductory paragraph were 'a proceeding in Parliament, a question not discussed before them, nor on the question whether the mere is sue of a writ would in any circumstances be a breach of privilege." "In taking this course", said Viscount Simonds who spoke for the Privy Council, "they have been mindful of the inalienable right of Her Majesty 's subjects to have recourse to her courts of law for the remedy of their wrongs and would not prejudice the hearing of any cause in which a plaintiff sought relief.
" The inalienable right to which Viscount Simonds referred is implicit in the provisions of article 226 and article 32, and its existence is clearly incon sistent with the right claimed by the House that a general warrant should be treated as conclusive in all courts of law; it would also be equally inconsistent with the claim made by the House that Keshav Singh has committed contempt by moving the High Court under article 226.
In this connection, it would be interesting to refer to a resolution passed by the House of Lords in 1704.
By this resolution, it was declared that deterring electors from prosecuting actions in the ordinary courts of law, where they are deprived of their right of voting, and terrifying attorneys, solicitors, counsellors, and serjeants at law, from soliciting, prosecuting and pleading in such cases, by voting their so doing to be a breach of privilege of the (1) ; 495 House of Commons, is a manifest assuming of power to control the law, to hinder the course of justice, and subject the property of Englishmen to the arbitrary votes of the House of Commons.
This was in answer to the resolution passed by the House of Commons in the same year indicating that the House would treat the conduct of any person in moving the court for appropriate reliefs in matters mentioned by the resolution of the House as amounting to its contempt.
These resolutions and counterresolutions merely illustrate the fierce struggle which was going on between the House of Commons and the House of Lords during those turbulent days; but the interesting part of this dispute is that if a question had gone to the House of Lords in regard to the competence of the House of Commons to punish a man for invoking the jurisdiction of the ordinary courts of law, the House of Lords would undoubtedly have rejected such a claim, and that was the basic apprehension of the House of Commons which was responsible for its refusal to recognise the jurisdiction of the courts which in the last analysis were subordinate to the House of Lords.
Section 30 of the (25 of 1961) confers on all Advocates the statutory right to practise in all courts including the Supreme Court, before any tribunal or person legally authorised to take evidence, and before any other authority or person before whom such advocate is by or under any law for the time being in force entitled to practise.
Section 14 of the Bar Councils Act recognises a similar right.
If a citizen has the right to move the High Court or the Supreme Court against the invasion of his fundamental rights, the statutory right of the advocate to assist the citizen steps in and helps the enforcement of the fundamental rights of the citizen.
It is hardly necessary to emphasise that in the enforcement of fundamental rights guaranteed to the citizens the legal profession plays a very important and vital role, and so, just as the right of the Judicature to deal with matters brought before them under article 226 or article 32 cannot be subjected to the powers and privileges of the House under article 194(3), so the rights of the citizens to move the Judicature and the rights of the advocates to assist that process must remain uncontrolled by Article 194(3).
That is one integrated scheme for enforcing the fundamental rights and for sustaining the rule of law in this country.
Therefore, our conclusion is that the particular right which the House claims to be an integral part of its power or privilege is inconsistent with the material provisions of the Constitution and cannot be deemed to have been included under the latter part of article 194(3).
496 In this connection, we ought to add that there is no substance in the grievance made by Mr. Seervai that Keshav Singh acted illegally in impleading the House to the habeas corpus petition filed by him before the Lucknow Bench.
In our opinion, it cannot be said that the House was improperly joined by Keshav Singh, because it was open to him to join the House on the ground that his commitment was based on the order passed by the House, and in that sense the House was responsible for, and had control over, his commitment (vide The King vs The Earl of Crewe, Ex parte Sekgome(1) and The King vs Secretary of State for Home Affairs, Ex parte O 'brien(2).
Besides, the fact that Keshav Singh joined the House to his petition, can have no relevance or materiality in determining the main question of the power of the House to take action against the Judges, the Advocate, and the 'party for their alleged contempt.
As we have indicated at the outset of this opinion, the crux of the matter is the, construction of the latter part of article 194(3), and in the light of the assistance in which we must derive from the other relevant and material provisions of the Constitution, it is necessary to hold that the particular power claimed by the House that its general warrants must be held to be conclusive, cannot be deemed to be the subject matter of the latter part of article 194(3).
In this connection, we may incidentally observe that it is somewhat doubtful whether the power to issue a general unspeaking warrant claimed by the House is consistent with section 554(2)(b) and section 555 of the Code of Criminal Procedure.
It appears that in England, general warrants are issued in respect of commitment for contempt by superior courts of record, and the whole controversy on this point, therefore, rested on the theory that the right to issue a general warrant which is recognised in respect of superior Courts of Record must be conceded to the House of Commons, because as a part of the High Court of Parliament it is itself a superior Court of Record.
Before we part with this topic, there are two general considerations to which we ought to advert.
It has been urged before us by Mr. Seervai that the right claimed by the House to issue a conclusive general warrant in respect of contempt is an essential right for the effective functioning of the House itself, and he has asked us to deal with this matter from this point of view.
It is true that this right appears to have been recognised by courts in England by agreement or convention or by considerations of comity; but we think it is strictly not accurate to say that every (1) (2) 497 democratic legislature is armed with such a power.
Take the, case of the American Legislatures.
Article 1, section 5 of the American Constitution does not confer on the American Legislature such a power at all.
it provides that each House shall be the judge of the Elections, Returns and Qualifications of its own Members, and a majority of each shall constitute a quorum to do business; but a smaller number may adjourn from day to day, and may be authorised to compel the attendance of absent Members, in such manner, and under such penalties as each House may provide.
Each House may determine the Rules of its proceedings, punish its Members for disorderly behaviour, and, with the concurrence of two thirds, expel a Member.
Contempt committed outside the four walls of the legislative chamber by a citizen who is not a Member of the House seems to be outside the jurisdiction of the American Legislature ' As Willis has observed, punishment for contempt is clearly a judicial function; yet in the United States, Congress may exercise the power to punish for contempt as it relates to keeping order among its own members, to compelling their attendance, to protecting from assaults or disturbances by others (except by slander and libel), to determining election cases and impeachment charges, and to exacting information about other departments in aid of the legislative function(1).
Nobody has ever suggested that the American Congress has not been functioning effectively because it has not been armed with the particular power claimed by the House before us.
In India, there are several State Legislatures in addition to the Houses of Parliament.
If the power claimed by the House before us is conceded, it is not difficult to imagine that its exercise may lead to anomalous situations.
If by virtue of the absolute freedom of speech conferred on the Members of the Legislatures, a Member of one Legislature makes a speech in his legislative chamber which another legislative chamber regards as amounting to its contempt, what would be the position ? The latter legislative chamber can issue a general warrant and punish the Member alleged to be in contempt, and a free exercise of such power may lead to very embarrassing situations.
That is one reason why the Constitution makers thought it necessary that the Legislatures should in due course enact laws in respect of their powers, privileges and immunities, because they knew that when such laws are made, they would be subject to the fundamental rights and would be open to examination by the courts in India.
Pending the making of such laws, powers, privileges and immunities were conferred by the latter part of article 194(3).
As we have already (1) Wills, constitutional Law, p. 145.
498 emphasised, the construction of this part of the article is within the jurisdiction of this Court, and in construing this part, we have to bear in mind the other relevant and material provisions of the Constitution.
Mr. Seervai no doubt invited our attention to the fact that the Committees of Privileges of the Lok Sabha and the Council of States have adopted a Report on May 22, 1954 with a view to avoid any embarrassing or anomalous situations resulting from the exercise of the legislative powers and privileges against the members of the respective bodies, and we were told that similar resolutions have been adopted by almost all the Legislatures in India.
But these are matters of agreement, not matters of law, and it is not difficult to imagine that if the same political party is not in power in all the States, these agreements themselves may not prove to be absolutely effective.
Apart from his aspect of the matter, in construing the relevant clause of article 194(3), these agreements can play no significant part.
In the course of his arguments Mr. Seervai laid considerable emphasis on the fact that in habeas corpus proceedings, the High Court had no jurisdiction to grant interim bail.
It may be conceded that in England it appears to be recognised that in regard to habeas corpus proceedings commenced against orders of commitment passed by the House of Commons on the ground of ,contempt, bail is not granted by courts.
As a matter of course, during the last century and more in such habeas corpus proceedings returns are made according to law by the House of Commons, but "the general rule is that the parties who stand committed for contempt cannot be admitted to bail.
" But it is difficult to accept the argument that in India the position is exactly the same in this matter.
If article 226 confers jurisdiction on the Court to ,deal with the validity of the order of commitment even though the commitment has been ordered by the House, how can it be said that the Court has no jurisdiction to make an interim order in such proceedings? As has been held by this Court in State of Orissa vs Madan Gopal Rungta, and Others("), an interim relief can be granted only in aid of, and as ancillary to, the main relief which may be available to the party on final determination of his rights in a suit or proceeding.
Indeed, as Maxwell has observed, when an Act confers a jurisdiction, it impliedly also grants the power of doing all such acts, or employing such means, as are essentially necessary to its execution(2).
That being so, the argument based on the relevant provisions of the Criminal Procedure (1) [1952] S.C.R. 28.
(2) Maxwell on Interpretation of Statutes, 11th ed., p. 350.
499 Code and the decision of the Privy Council in Lala Jairam Das and Others vs King Emperor(1), is of no assistance.
We ought to make it clear that we are dealing with the ques tion of jurisdiction and are not concerned with the propriety or reasonableness of the exercise of such jurisdiction.
Besides, in the case of a superior Court of Record, it is for the court to consider whether any matter falls within its jurisdiction or not.
Unlike a court of limited jurisdiction, the superior Court is entitled to determine for itself questions about its own jurisdiction.
"Prima facie", says Halsbury, "no matter is deemed to be beyond the jurisdiction of a superior court unless it is expressly shown to be so, while nothing is within the jurisdiction of an inferior court unless it is expressly shown on the face of the proceedings that the particular matter is within the cognizance of the particular court.
We cannot, therefore, accede to the proposition that in passing the order for interim bail, the High Court can be said to have exceeded its jurisdiction with the result that the order in question is null and void.
Besides, the validity of the order has no relation whatever with the question as to whether in passing the order, the Judges have committed contempt of the House.
There is yet one more aspect of this matter to which we may incidentally refer.
We have already noticed that in the present case, when the habeas corpus petition was presented before the Lucknow Bench at 2 P.m. on March 19, 1964, both parties.
appeared by their respective Advocates and agreed that the application should be taken up at 3 P.m. the same day, and yet the House which was impleaded to the writ petition and the other respondents to it for whom Mr. Kapur had appeared at the earlier stage, were absent at that time.
That is how the Court directed that notice on the petition should be issued to the respondents and released the petitioner on bail subject to the terms and conditions which have already been mentioned; and it is this latter order of bail which has led to the subsequent developments.
In other words, before taking the precipitate action of issuing warrants against the Judges of the Lucknow Bench, the House did not conform to the uniform practice which the House of Commons has followed for more than a century past and did not instruct its lawyer either to file a return or to ask for time to do so, and to request that the Court should stay its hands until the return was filed.
It is not disputed that whenever commitment orders passed by the House of Commons are challenged in England before (1) 72 I.A. 120.
(2) Halsbury 's Laws of England, vol. 9, p. 349.
500 the Courts at Westminster, the House invariably makes a return and if the warrant issued by it is general and unspeaking, it is so stated in the return and the warrant is produced.
If this course had been adopted in the present proceedings, it could have been said that the House in exercising its powers and privileges, conformed to the pattern which, by convention, the House of Commons has invariably followed in England during the last century and more; but that was not done; and as soon as the House knew that an order granting bail had been passed, it proceeded to consider whether the Judges themselves were not in contempt.
On these narrow facts, it would be possible to take the view that no question of contempt committed by the Judges arises.
In view of the fact that Mr. Kapur had appeared before the Court at 2 P.m. on behalf of all the respondents and had agreed that the matter should be taken up at 3 P.m., it was his duty to have appeared at 3 P.m. and to have either filed a return or to have asked for time to do so on behalf of the House.
If the House did not instruct Mr. Kapur to take this step and the Court had no knowledge as to why Mr. Kapur did not appear, it is hardly fair to blame the Court for having proceeded to issue notice on the petition and granted bail to the petitioner.
In these proceedings it is not necessary for us to consider what happened between Mr. Kapur and the House and why Mr. Kapur did not appear at 3 P.m. to represent the House and the other respondents.
The failure of Mr. Kapur to appear before the Court at 3 P.m. has introduced an unfortunate element in the proceedings before the Court and is partly responsible for the order passed by the Court.
One fact is clear, and that is that at the time when the Court issued notice and released the petitioner on bail, it had no knowledge that the warrant under which the petitioner had been sentenced was a general warrant and no suggestion was made to the Court that in the case of such a warrant the Court had no authority to make any order of bail.
This fact cannot be ignored in dealing with the case of the House that the Judges committed contempt in releasing the petitioner on bail.
But we ought to make it clear that we do not propose to base our answers on this narrow view of the matter, because questions 3 and 5 are broad enough and they need answers on a correspondingly broad basis.
Besides, the material questions arising from this broader aspect have been fully argued before us, and it is plain that in making the present Reference, the President desires that we should render our answers to all the questions and not ,exclude from our consideration any relevant aspects on the ground 501 that these aspects would not strictly arise on the special facts which have happened so far in the present proceedings.
In conclusion,, we ought to add that throughout our discus sion we have consistently attempted to make it clear that the main point which we are discussing is the right of the House to claim that a general warrant issued by it in respect of its contempt alleged to have been committed by a citizen who is not a Member of the House outside the four walls of the House, is conclusive, for it is on that claim that the House has chosen to take the view that the Judges, the Advocate, and the party have committed contempt by reference to their conduct in the habeas corpus petition pending before the Lucknow Bench of the Allahabad High Court.
Since we have held that in the present case no contempt was committed either by the Judges, or the Advocate, or the party respectively, it follows that it was open to the High Court of Allahabad, and indeed it was its duty, to entertain the petitions filed before it by the two Judges and by the Advocate, and it was within its jurisdiction to pass the interim orders prohibiting the further execution of the impugned orders passed by the House.
Before we part with this topic, we would like to refer to one aspect of the question relating to the exercise of power to punish for contempt.
So far as the courts are concerned, Judges always keep in mind the warning addressed to them by Lord Atkin in Andre Paul vs Attorney General of Trinidad(1).
Said Lord Atkin "Justice is not a cloistered virtue; she must be allowed to suffer the scrutiny and respectful even though out spoken comments of ordinary men.
" We ought never to forget that the power to punish for contempt large as it is, must always be exercised cautiously, wisely and with circumspection.
Frequent or indiscriminate use of this power in anger or irritation would not help to sustain the dignity or status of the court, but may sometimes affect it adversely.
Wise Judges never forget that the best way to sustain the dignity and status of their office is to deserve respect from the public at large by the quality of their judgments, the fearlessness, fairness and objectivity of their approach, and by the restraint, dignity and decorum which they observe in their judicial conduct.
We venture to think that what is true of the Judicature is equally true of the Legislatures.
Having thus discussed all the relevant points argued before us and recorded our conclusions on them, we are now in a position (1) A.I.R. 1936 P.C. 141.
502 to render our answers to the five questions referred to us by the President.
Our answers are: (1) On the facts and circumstances of the it was competent for the Lucknow Bench of the High Court of Uttar Pradesh, consisting of N. U. Beg and G. D. Sahgal JJ., to entertain and deal with the petition of Keshav Singh challenging the legality of the sentence of imprisonment imposed upon him by the Legislative Assembly of Uttar Pradesh for its contempt and for infringement of its privileges and to pass orders releasing Keshav Singh on bail pending the disposal of his said petition.
(2) On the facts and circumstances of the case, Keshav Singh by causing the petition to be presented on his behalf to the High Court of Uttar Pradesh as aforesaid, Mr. B. Solomon Advocate, by presenting the said petition, and the said two Hon 'ble Judges by entertaining and dealing with the said petition and order ing the release of Keshav Singh on bail pending disposal of the said petition, did not commit contempt of the Legislative Assembly of Uttar Pradesh.
(3) On the facts and circumstances of the case, it was not competent for the Legislative Assembly of Uttar Pradesh to direct the production of the said two Hon 'ble Judges and Mr. B. Solomon Advocate, before it in custody or to call for their explanation for its contempt.
(4) On the facts and circumstances of the case, it was competent for the Full Bench of the High Court of Uttar Pradesh to entertain and deal with the petitions of the said two Hon 'ble Judges and Mr. B. Solomon Advocate, and to pass interim orders restraining the Speaker of the Legislative Assembly of Uttar Pradesh and other respondents to the said petitions from implementing the aforesaid direction of the said Legislative Assembly; and (5) In rendering our answer to this question which is very broadly worded, we ought to preface our answer with the observation that the answer is confined to cases in relation to contempt alleged to have been committed by a citizen who is not a member of the House outside the four walls of the legislative chamber. 'A Judge of a High Court who entertains or deals with 503 a petition challenging any order or decision of a Legislature imposing any penalty on the petitioner or issuing any process against the petitioner for its contempt, or for infringement of its privileges and immunities, or who passes any order on such petition, does not commit contempt of the said Legislature; and the said Legislature is not competent to take proceedings against such a Judge in the exercise and enforcement of its powers, privileges and immunities.
In this answer, we have deliberately omitted reference to infringement of privileges and immunities of the House which may include priveleges and immunities other than those with which we are concerned in the present Reference.
Sarkar J.
This matter has come to us on a reference made by the President under article 143 of the Constitution.
The occasion for the reference was a sharp conflict that arose and still exists between the Vidhan Sabha (Legislative Assembly) of the Uttar Pradesh State Legislature, hereinafter referred to as the Assembly, and the High Court of that State.
That conflict arose because the High Court had ordered the release on bail of a person whom the Assembly had committed to prison for contempt.
The Assembly considered that the action of the Judges making the order and of the lawyer concerned in moving the High Court amounted to contempt and started proceedings against them on that basis, and the High Court, thereupon, issued orders restraining the Assembly and its officers from taking steps in implementation of the view that the action of the Judges and the lawyer and also the person on whose behalf the High Court had been moved amounted to contempt.
A very large number of parties appeared on the reference and this was only natural because of the public importance of the question involved.
These parties were divided into two broad groups, one supporting the Assembly and the other, the High Court.
I shall now state the actual facts which gave rise to the conflict.
The Assembly had passed a resolution that a reprimand be administered to one Keshav Singh for having committed contempt of the Assembly by publishing a certain pamphlet libelling one of its members.
No question as to the legality of this resolution arises in this case and we are concerned only with what followed.
Keshav Singh who was a resident of Gorakhpar, in spite of being repeatedly required to do so, failed to appear before the Assembly which held its sittings in Lucknow, to receive the reprimand 504 alleging inability to procure money to pay the fare for the necessary railway journey.
He was thereupon brought under the custody of the Marshal of the Assembly in execution of a warrant issued by the Speaker in that behalf and produced at the Bar of the House on March 14, 1964.
He was asked his name by the Speaker repeatedly but he would not answer any question at all.
He stood there with his back to the Speaker showing great disrespect to the House and would not turn round to face the Speaker though asked to do so.
The reprimand having been administered, the Speaker brought to the notice of the Assembly a letter dated March 11, 1964, written by Keshav Singh to him, in which he stated that he protested against the sentence of reprimand and had absolutely no hesitation in calling a corrupt man corrupt, adding that the contents of his pamphlet were correct and that a brutal attack had been made on democracy by issuing the "Nadirshahi Firman" (warrant) upon him.
Keshav Singh admitted having written that letter.
The Assembly thereupon passed a resolution that "Keshav Singh be sentenced to imprisonment for seven days for having written a letter worded in language which constitutes ,contempt of the House and his misbehaviour in view of the House.
" A general warrant was issued to the Marshal of the House and the Superintendent, District Jail, Lucknow which stated, "Whereas the .
Assembly has decided . that Shri Keshav Singh be sentenced to simple imprisonment for seven days for committing the offence of the contempt of the Assembly, it is accordingly ordered that Keshav Singh be detained in the District Jail, Lucknow for a period of seven days.
" The warrant did not state the facts which constituted the contempt.
Keshav Singh was thereupon taken to the Jail on the same day and kept imprisoned there.
On March 19, 1964, B. Solomon, an advocate, presented a petition to a Bench of the High Court of Uttar Pradesh then constituted by Beg and Sahgal JJ., which sat in Lucknow, for a writ of habeas corpus for the release of Keshav Singh alleging that he had been deprived of his personal liberty without any authority of law and that this detention was mala fide.
This Bench has been referred to as the Lucknow Bench.
This petition was treated as having been made under article 226 of the Constitution and section 491 of the Code of Criminal Procedure.
On the same date the learned Judges made an order that Keshav Singh be released on bail and that the petition be admitted and notice be issued to the respondents named in it.
Keshav Singh was promptly released on bail.
This order interfered with the sentence of imprisonment passed by the House by permitting Keshav Singh to be released before he had served the full term of his sentence.
On March 21, 1964, the, Assembly 505 passed a resolution stating that Beg J., Sahgal J., B. Solomon and Keshav Singh had committed contempt of the House and that Keshav Singh be immediately taken into custody and kept confined in the District Jail for the remaining term of his imprisonment and that Beg J., Sahgal J. and B. Solomon be brought in custody before the House, and also that Keshav Singh be brought before the House after he had served the remainder of his sentence.
Warrants were issued on March 23.
1964 to the Marshal of the House and the Commissioner of Lucknow for carrying out the terms of the resolution.
On the same day, Sahgal J. moved a petition under article 226 of the Constitution in the High Court of Uttar Pradesh at Allahabad for a writ of certiorari quashing the resolution of the Assembly of March 21, 1964 and for other necessary writs restraining the Speaker and the Marshal of the Assembly and the State Government from implementing that resolution and the execution of the orders issued pursuant to the resolution.
The petition however did not mention that the war.rants had been issued.
That may have been because the warrants were issued after the petition had been presented, or the issue of the warrant was not known to the petitioner.
This petition was heard by all the Judges of the High Court excepting Sahgal and Beg JJ.
and they passed an order on the same day directing that the implementation of the resolution be stayed.
Similar petitions were presented by B. Solomon and Beg J. and also by other parties, including the Avadh Bar Association, and on some of them similar orders, as on the petition of Sahgal J., appear to have been made.
On March 25, 1964, the Assembly recorded an observation that by its resolution of March 21, 1964 it was not its intention to decide that Beg J., Sahgal J., B. Solomon and Keshav Singh had committed contempt of the House without giving them a hearing, but it had required their presence before the House for giving them an opportunity to explain their position and it resolved that the question may be decided after giving an opportunity to the above named persons according to the rules to explain their conduct.
Pursuant to this resolution, notices were issued on March 26, 1964 to Beg J., Sahgal J. and B. Solomon informing them that "they may appear before the Committee at 10 A.M. on April 6, 1964. . . to make their submissions".
The warrants issued on March 23, 1964, which had never been executed, were withdrawn in view of these notices.
The present reference was made on March 26.
1964 and thereupon the Assembly withdrew the notices of March 26, 1964 stating that in view of the reference the two Judges and Solomon and Keshav Singh need not appear before the Privilege Committee as required.
506 These 'facts are set out in the recitals contained in the order of reference.
There is however one dispute as to the statement of facts in the recitals.
It is there stated that the Assembly resolved on March 21, 1964 that the two Judges, Solomon and Keshav Singh "committed, by their actions aforesaid, contempt of the House.
" The words "actions aforesaid" referred to the presentation of the petition of Keshav Singh of March 19, 1964 and the order made thereon.
It is pointed out on behalf of the Assembly that the resolution does not say what constituted the contempt.
This contention is correct.
The main question 'in this reference is whether the Assembly has.
the privilege of committing a person to prison for contempt by general warrant, that is, without stating the facts, which constituted the contempt, and if it does so, have the courts of law the power to examine the legality of such a committal '? In other words if there is such a privilege, does it take precedence over the fundamental rights of the detained citizen.
It is said on behalf of the Assembly that it has such a privilege and the interference by the court in the present case was without jurisdiction.
The question is then of the privilege of the Assembly, for if it does ,lot possess the necessary privilege, it is not disputed, that what the High Court has done in this case would for the present purposes be unexceptionable.
First then as to the privileges of the Assembly.
The Assembly relies for purpose on cl.
(3) of article 194 of the Constitution.
The first three clauses of that article may at this stage be set out.
article 194(1) Subject to the provisions of this Constitution and to the rules and standing orders regulating the procedure of the Legislature, there shall be freedom of speech in + 'he Legislature of every State.
(2) No member of the Legislature of a State shall be liable to any proceedings in any Court in respect of anything said or any vote given by him in the Legislature or any committee thereof, and no person shall be so liable in respect of the publication by or under the authority of a House of such a Legislature of any report, paper, votes or proceedings.
(3) In other respects, the powers, privileges and immunities of a House of the Legislature of a State, and of the members and the committees of a House of such Legislature, shall be such as may from time to time be defined by the Legislature by law, and, until 507 so defined, shall be those of the House of Commons of the Parliament of the United Kingdom, and of its members and committees, at the commencement of this Constitution.
Article 105 contains identical provisions in relation to the Central Legislature.
It is not in dispute that the Uttar Pradesh Legislature has not made any law defining the powers, privileges and immunities of its two Houses.
The Assembly, therefore, claims that :It has those privileges which the House of Commons in England had on January 25, 1950.
I would like at this stage to say a few general words about "powers, privileges and immunities" of the House of Commons or its members.
First I wish to note that it is not necessary for our purposes to make a distinction between "privileges", " powers" and "immunities".
They are no doubt different in the matter of their respective contents but perhaps in no otherwise.
Thus the right of the House to have absolute control of its internal proceedings may be considered as its privilege, its right to punish one for contempt may be more properly described as its power, while the right that no member shall be liable for anything said in the House may be really an immunity.
All these rights are however created by one law and judged by the same standard.
I shall for the sake of convenience, describe them all as "privileges".
Next I note that this case is concerned with privileges of the House of Commons alone, and not with those of its members and its committees.
I stress however that the privileges of the latter two are in no respect different from those of the former except as to their content,;.
The nature of the privileges of the House of Commons can be best discussed by referring to May 's Parliamentary Practice, which is an acknowledged work of authority on matters concern in the English Parliament.
It may help to observe here that for a long time now there is no dispute as to the nature of the recognised privileges of the Commons.
I start to explain the nature of the privileges by pointing out the distinction between them and the functions of the House.
Thus the financial powers of the House of Commons to initiate taxation legislation is often described as its privilege.
This, however, is not the kind of privilege of the House of Commons to which cl.
(3) of article 194 refers.
Privileges of the House of Commons have a technical meaning in English Parliamentary Law and the article uses the word in that sense only.
That technical sense has been de scribed in these words: "[C]ertain fundamental 508 rights of each House which are generally accepted as necessary for the exercise of its constitutional functions.
"(1) A point I would like to stress now is that it is of the essence of the nature of the privileges that they are ancillary to the main functions of the House of Commons.
Another thing which I wish to observe at this stage is that "[s]one privileges rest solely upon the law and custom of Parliament, while others have been defined by statute.
Upon these grounds alone all privileges whatever are founded" (2).
In this case we shall be concerned with the former kind of privilege only.
The point to note is that this variety of privilege derives its authority from the law and custom of Parliament.
This law has been given the name of Lex Parliamenti.
It owes its origin to the custom of Parliament.
It is, therefore, different from the common law of England which, though also based on custom, is based on a separate set of custom, namely, that which prevails in the rest of the realm.
This difference in the origin had given rise to serious disputes between Parliament and the courts of law but they have been settled there for many years now and except a dispute as to theory, the recurrence of any practical dispute is not considered a possibility.
So Lord Coleridge C.J. said in Bradlaugh vs Gossett( ').
"Whether in all cases and under all circumstances the Houses are the sole judges of their own privileges, in the sense that a resolution of either House on the subject has the same effect for a court of law as an Act of Parliament, is a question which it is not now necessary to determine.
No doubt, to allow any review of parliamentary privilege by a court of law may lead, has led, to very grave complications, and might in many supposable cases end in the privileges of the Commons being determined by the Lords.
But, to hold the resolutions of either House absolutely beyond inquiry in a court of law may land us in conclusions not free from grave complications too.
It is enough for me to say that it seems to me that in theory the question is extremely hard to solve; in practice it is not very important, and at any rate does not now arise.
" This passage should suffice to illustrate the nature of the dispute.
It will not be profitable at all, and indeed I think it will be 'mischievous, ' to enter upon a discussion of that dispute for it will only serve to make turbid, by raking up impurities which have settled down, a stream which has run clear now for years.
Furthermore (1) May ', Parliamentary Practice, 16th ed.
p. 42.
(3) , 275.
(2) lbid, p. 44. 509 that dispute can never arise in this country for here it is undoubtedly for the courts to interpret the Constitution and, therefore, article 194(3).
It follows that when a question arises in this country under that article as to whether the House of Commons possessed a particular privilege at the commencement of the Constitution, that question must be settled, and settled only, by the courts of law.
There is no scope of the dreaded "dualism" appearing here, that is, courts entering into a controversy with a House of a Legislature as to what its privileges are.
I think what I have said should suffice to explain the nature of the privileges for the purposes of the present reference and I will now proceed to discuss the privileges of the Assembly that are in question in this case, using that word in the sense of rights ancillary to the main function of the legislature.
The privilege which I take up first is the power to commit for contempt.
It is not disputed that the House of Commons has this power.
All the decided cases and text books speak of such power.
"The power of commitment is truly described as the ' 'keystone of parliamentary privilege '. without it the privileges of Parliament could not have become self subsistent, but, if they had not lapsed, would have survived on sufferance.
"(1) In Burdett V. Abbott, (2) Lord Ellenborough C.J. observed, "Could it be expected. . that the Speaker with his mace should be under the necessity of going before a grand jury to prefer a bill of indictment for the insult offered to the House ? They certainly must have the power of self vindication and self protection in their own hands. .
The possession of this power by the House of Commons is, therefore, undoubted.
It would help to appreciate the nature of the power to commit for contempt to compare it with breach of privlege which itself may amount to contempt.
Thus the publication of the proceedings of the House of Commons against its orders is a breach of its privilege and amounts to contempt.
All contempts, however, are not breaches of privilege.
Offences against the dignity or authority of the House though called "breaches of privilege" are more properly distinguished as contempts.
Committing to prison for contempts is itself a privilege of the House of Commons whether the contempt is committed by a direct breach of its privilege or by offending its (1) May, P. 90.
(2) ; , 559.
510 dignity or authority.(1) "The functions, privileges and disciplinary powers of a legislative body are thus closely connected.
The privileges are the necessary complement of the functions, and the disciplinary powers of the privileges.
"(1) I may add that it is not in dispute that power to commit for contempt may be exercised not only against a member of the House but against an outsider as well.
(3) It was contended on behalf of the High Court that the power of the House of Commons to commit for contempt was not con ferred by cl.
(3) of article 194 on the Houses of a State Legislature because our Constitution has to be read along with its basic scheme providing for a division of powers and the power to commit to prison for contempt being in essence a judicial power, can under our Constitution be possessed only by a judicial body, namely, the courts and not by a legislative body like the Assembly.
It was, therefore contended that article 194(3) could not be read as conferring judicial powers possessed by the House of Commons in England as one of its privileges on a legislative body and so the Assembly did not possess it.
This contention of the High Court is, in my view, completely without foundation; both principle and authority are against it.
This Court has on earlier occasions observed that the principle of separation of powers is not an essential part of our Constitution : see for example In re.
Delhi Laws Act(1).
Again the Constitution is of course supreme and even if it was based on the principle of separation of powers, there was nothing to prevent the Constitution makers, if they so liked, from conferring judicial powers on a legislative body.
If they did so, it could not be said that the provision concerning it was bad as our Constitution was based on a division of powers.
Such a contention would of course be absurd.
The only question, therefore, is whether our Constitution makers have conferred the power to commit on the Legislatures.
The question is not whether they had the power to do so, for there was no limit to their powers.
What the Constitution makers had done can, however, be ascertained only from the words used by them in the Constitution that they made.
If those words are plain, effect must be given to them irrespective of whether our Constitution is based on a division of power or not.
That takes me to the language used in cl.
(3) of article 194.
The words there appearing are "the powers, privileges and immunities of a House. shall (1) May, p. 43.
(2) lbid.
(3) Ibid., p. 91 (4) ; ,883.
511 be those of the House of Commons".
I cannot imagine more plain language than this.
That language can only have one meaning and that is that it was intended to confer on the State Legislatures the powers, privileges and immunities which the House of Commons in England had.
There is no occasion here for astuteness in denying words their plain meaning by professing allegiance to a supposed theory of division of powers.
So much as to the principle regarding the application of the theory of division of powers.
This question is further completely concluded by the decision of this Court in Pt.
M. section M. Sharma vs Shri Sri Krishna Sinha(1).
I will have to refer to this case in some detail later.
There Das C.J., delivered the majority judgment of the constitution bench consisting of five Judges and Subba Rao J. delivered his own dissenting opinion.
Das C.J., proceeded on the basis that the Houses of a State Legislature had the power to commit for contempt.
It was, therefore, held that there was nothing in our Constitution to prevent a legislative body from possessing judicial powers.
On this point Subba Rao J. expressed no dissent.
Further, the Judicial Committee in England has in two cases held that under provisions, substantially similar to those of article 194(3) of our Constitution, the power of the House of Commons to commit for contempt had been conferred on certain legislative bodies of some of the British Colonies.
In the Speaker of the Legislative Assembly of Victoria vs Glass(1) it was held that a statute stating. "The Legislative Council of Victoria. shall hold, enjoy and exercise such and the like privileges, immunities and powers as. were held, enjoyed and exercised by the Commons House of Parliament of Great Britain and Ireland" conferred on the Houses of the Legislature of the Australian Colony of Victoria the judicial power to commit for contempt.
In Queen vs Richards(1) it was held that section 49 of the Commonwealth of Australia Constitution Act, 1901 which provided that "the powers, privileges and immunities of the Senate and the House of Representatives . shall be such as are declared by the Parliament, and until declared, shall be those of the Commons House of Parliament of the United Kingdom. ", conferred on the Houses judicial powers of committing a person to prison for contempt.
It was observed by Dixon C.J. "This is not the occasion to discuss the historical grounds upon which these powers and privileges attached to the House of Commons.
It is sufficient to say (1) [19591 Supp. 1 S.C.R. 806.
(2) (3) ; 512 that they were regarded by many authorities as proper incidents of the Legislative function, notwithstanding the fact that considered more theoretically perhaps one might even say, scientifically they belong to the judicial sphere.
But our decision is based upon the ground that a general view of the Constitution and the separation of powers is not a sufficient reason for giving to these words, which appear to us to be so clear, a restrictive or secondary meaning which they do not properly bear.
"(1) The similarity in the language of the provisions in the Australian Constitution and our Constitution is striking.
It was said however that they were not the same for under section 49 the Australian Houses might by resolution declare the privileges whereas in our case the privileges had to be defined by law and that in Australia there were no fundamental rights.
I Confess I do not follow this argument at all.
The guestion is not how the privileges are declared in Australia or what effect fundamental rights have on privileges, but as to the meaning of the words which in the two statutes are identical.
In Richard 's case(1) an application was made to the Judicial Committee for leave to appeal from the judgment of Dixon C.J. but such leave was refused, Viscount Simonds observing that the judgment of the Australian High Court "is unimpeachable": Queen vs Richards(1).
Reference may also be made to Fielding vs Thomas(1) for the interpretation of a similar provision conferring the privileges of the Commons on the Legislature of Nova Scotia in Canada.
It would, therefore, appear that article 194(3) conferred on the Assembly the power to commit for contempt and it possessed that power.
The next question is as to the privilege to commit by a general warrant.
There is no dispute in England that if the House of Commons commits by a general warrant without stating the facts which constitute the contempt, then the courts will not review that order(").
It was however said on behalf of the High Court that this power of the English House of Commons was not one of its privileges but it was possessed by that House because it was a superior court and, therefore, that power, not being a privilege, has not been conferred on the State Legislatures by article 194(3) of our Constitution.
It is not claimed by the Assembly that it is a superior court and has, therefore, a power to commit for contempt by a general warrant.
I would find nothing to justify such a claim if it had been (1) ; , (2) ; (3) ; ,171.
(4) (5) See Burdett vs Abbot ; ; May 's Parliamentary Practice 16th ed.
p. 173 513 made.
This takes me to the question, is the power to commit by a general warrant one of the privileges of the House of Commons, or, is it something which under the common law of England that House possessed because it was a superior court ? I find no authority to support the contention that the power to commit by a general warrant with the consequent deprivation of the jurisdiction of the Courts of law in respect of that committal is something which the House of Commons had because it was a superior court.
First, I do not think that the House of Commons was itself ever a court.
The history of that House does not support such a contention.
Before proceeding further I think it necessary to observe that we are concerned with the privileges of the House of Commons as a separate body though no doubt a constituent part of the British Parliament which consists also of the King and the House of Lords.
The privileges however with which we are concerned are those which the House of Commons claims for itself alone as an independent body and as apart from those possessed by the House of Lords.
Indeed it is clear that the privileges of the two Houses are not the same: May Ch.
It may be that in the early days of English history the Parliament was a court.
The House of Commons, however, does not seem to have been a part of this Court.
In medieval times the legal conception was that the King was the source of all things; justice was considered to flow from him and, therefore, the court of justice was attached to the King.
The King 's Court thus was a court of law and that is the origin of what is called "the High Court of Parliament".
The history of the High Court of Parliament has been summarised in Potter 's Outlines of English Legal History (1958 ed.) and may be set out as follows : The King 's Council, under its older title of Curia Regis, was the mother of the Common law courts, but still retained some judicial functions even after the common law courts had been well established.
(p. 78).
Later however in the 14th and 15th centuries it came to be held that appeals from the King 's Bench lay to the Parliament and not to the Council.
But Parliament had a great deal of work to do and could find little time for hearing petitions or even for hearing rules of Error from the King 's Bench and this jurisdiction fell into abeyance in the 15th century.
It would appear, however, that of this Parliament, Commons were no part.
In 1485 it was held by all the Judges that the jurisdiction in Error belonged exclusively to the House of Lords and not to the whole Parliament.
Professor Holdsworth states in explanation of this fact that it was not quite forgotten that the jurisdiction was to the King and his Council in Parliament whereas the Commons were 514 never part of his Council, the King in his Council in Parliament meaning only the King and the House of Lords; p. 95.
It is also interesting to point out that when the Commons deliberated apart, they sat in the chapter house or the refectory of the Abbot of Westminster; and they continued their sittings in that place after their final, separation; May p. 12.
The separation referred to is the separation between the House of Lords and the House of Commons.
It may also be pointed out that when it is said that laws in England are made by the King in Parliament, what happens is 'that the Commons go to the Bar of the House of Lords where the King either in person, or through someone holding a commission from him, assents to an Act.
All this would show that the House of Commons when it sits as a separate body it does not sit in Parliament.
So sitting it is not the High Court of Parliament.
I wish here to emphasise that we are in this case concerned with the privileges of the House of Commons functioning as a separate body, that is, not sitting in Parliament.
May observes at p. 90, "Whether the House of Commons be, in law, a court of record, it would be difficult to determine:" In Anson 's Law of the Constitution, 5th ed.
Vol. 1 at p. 197, it has been stated that "Whether or not the House of Commons is a court of record, not only has it the same power of protecting itself from insult by commitment for contempt, but the Superior Courts of Law have dealt with it in this matter as they would with one another, and have accepted as conclusive its statement that a contempt has been committed, without asking 'What that contempt may have been.
" I think in this state of the authorities it would at least be hazardous to hold that the House of Commons was a court of record.
If it was not, it cannot be said to have possessed the power to commit for its contempt by a general warrant as a court of record.
I now proceed to state how this right of the House of Commons to commit by a general warrant has been dealt with by authoritative textbook writers in England.
At p. 173, after having discussed the tussle between the Commons and the Courts in regard to the privileges of the former and having stated that in theory there is no way of resolving the real point at issue should a conflict between the two arise.
May observes, "In practice however there is much more agreement on the nature and principles of privilege than the deadlock on the question of jurisdiction would lead one to expect.
" He then adds, "The courts admit : (3) that the control of each House, over its internal proceedings is absolute and cannot be interfered with by the courts.
(4) That a committal for contempt by "either House is in practice within its exclusive jurisdiction, since the 515 facts constituting the alleged contempt need not be stated on the warrant of committal.
" So May treats the right of the House of Commons to commit by a general warrant as one of its privileges and not something to which it is entitled under the common law as of right as a Court of Record.
In Cases on Constitutional Law by Keir and Lawson, (4th ed.) p. 126, it is stated that among the undoubted privileges of the House of Commons is "the power of executing decisions on matters of privilege by committing members of Parliament, or any other individuals, to imprisonment for contempt of the House.
This is exemplified in the case of Sheriff of Middlesex.
" That is a case where the House of Commons had committed the Sheriff of Middlesex for contempt by a general warrant, the Sheriff having in breach of the orders of the House carried out an order of the King 's Bench Division, which he was bound to do and that Court held that it had no jurisdiction to go into the question of the legality of the committal by the House : see Sheriff of Middlesex(1).
In Halsbury 's Laws of England, Vol.
28 p. 467, it is stated that the Courts of law will not enquire into the reasons for which a person is adjudged guilty of contempt and committed by either House by a warrant which does not state the causes of his a. rest.
This observation is made in dealing with the conflict between the House of Commons and the courts concerning the privileges of the former and obviously treats the power to issue a general warrant as a matter of the privilege of the House.
Lastly, in Dicey 's Constitutional Law (10th ed.) at p. 58 in the footnote it is stated.
"Parliamentary privilege has from the nature of things never been the subject of precise legal definition.
One or two points are worth notice as being clearly established.
(1) Either House of Parliament may commit for contempt; and the courts will not go behind the committal and enquire into the facts constituting the alleged contempt provided that the cause of the contempt is not stated.
" I thus find that writers of undoubted authority have treated this power to commit by a general warrant with the consequent deprivation of the court 's jurisdiction to adjudicate on the legality of the imprisonment, as a matter of privilege of the House and not as a right possessed by it as a superior court.
I now proceed to refer to recent decisions of the Judicial Committee which a also put the right of the House.
of Commons to com (1) ; 516 mit by a general warrant on the ground of privilege.
The first case which I will consider is Glass 's(1) case.
There the Legislative Assembly of the Colony of Victoria by a general warrant committed Glass to prison for contempt and the matter was brought before the court on a habeas corpus petition.
I have earlier stated that under certain statutes the Assembly claimed the Same privileges which the House of Commons possessed.
The Supreme Court of Victoria held in favour of Glass.
The matter was then taken to the Judicial Committee and,it appears to have been argued there that "the privilege is the privilege of committing for contempt merely; that the judging of contempt without appeal, and the power of committing by a general Warrant, are mere incidents or accidents applicable to this Country, and not transferred to the Colony.
" The words "this Country" referred to England.
Lord Cairns rejected this argument with the following observations: "The ingredients of judging the contempt, and committing by a general Warrant, are perhaps the most important ingredients in the privileges which the House of Commons in this Country possesses; and it would be strange indeed if, under a power to transfer the whole of the privileges and powers of the House of Commons, that which would ,only be a part, and a comparatively insignificant part, of this privilege and power were transferred." (p. 573).
He also said, (p. 572) "Beyond all doubt, one of the privileges and one of the most important privileges of the House of Commons is the privilege of committing for contempt and incidental to that privilege, it has, as has already been stated, been well established in this Country that the House of Commons have the right to be the .judges themselves of what is contempt, and to commit for that contempt by a Warrant, stating that the commitment is for contempt of the House generally, without specifying what the character of the contempt is.
It would, therefore, almost of necessity follow, that the Legislature of the Colony having been permitted to carry over to the Colony the privileges, immunities, and powers of the House of Commons, and having in terms carried over all the privileges and powers exercised by the House of Commons at the date of the Statute, there was carried over to the Legislative Assembly of the Colony the privilege or power of the House of Commons connected with contempt the privilege or power, namely, of committing for contempt, of judging itself of what is contempt, and of committing for contempt by a Warrant stating generally that a contempt had taken place.
" In Richard 's case (2) the power to commit by a general warrant was considered as a privilege of the House and the observations of Lord Cairns (1) ; (2) ; 517 in Glass 's(1) case were cited in support of that view.
As I have already said this view was upheld by the Judicial Committee : Queen vs Richard (2).
It is of some interest to note that Dixon C.J. was of the opinion, as I have earlier shown, that the power to commit was scientifically more properly a judicial power but nonetheless he found that it was a privilege technically so called of the House of Commons and so transferred to the Australian Houses by section 49 of the Australian Constitution Act of 1901.
It is also necessary to state here that this case was of the year 1955 and shows that the view then held was that the right to commit by a general warrant was a privilege of the House.
I am pointing out this only because it has been suggested that even if it was a privilege.
it had been lost by desuetude.
These cases show that that is not so.
Fielding vs Thomas(") also takes the same view.
It was said that the decisions of the Judicial Committee were not binding on us.
That may be so.
But then it has not been shown that they are wrong and, therefore, they are of value at least as persuasive authorities.
The fact that the decisions of the Judicial Committee are not binding on us as judgments of a superior court is however to no purpose.
The real question for our decision is whether the House of Commons possessed a certain privilege.
We may either have to take judicial notice of that privilege or decide its existence as a matter of foreign law.
It is unnecessary to decide which is the correct view.
If the former, under section 57 of the Evidence Act a reference to the authorised law reports of England would be legitimate and if the latter, then again under section 38 of that Act a reference to these reports would be justified.
So in either case we are entitled to look at these reports and since they contain decisions of one of the highest Courts in England, we are not entitled to say that what they call a privilege of the House of Commons of their country is not a privilege unless other equally high authority taking a contrary view is forthcoming.
I now come to some of the English cases on which the proposition that the right to commit by a general warrant is not a matter of privilege of the House of Commons but a right which it possessed as a superior court is, as I understood the argument of learned advocate for the High Court, based.
I will take the cases in order of date.
It will not be necessary to refer to the facts of these cases and it should suffice to state that each of them dealt with the right of the House of Commons to commit by a general warrant.
First, there is Burdett vs Abbot(4).In this case, in the first court judg (1) ; , (2) ; (3) (4) ; 518 ments were delivered by Ellenborough C.J. and Baylay J. With regard to this case, Anson in his book at p. 189 says, "It is noticeable that in the case of Burdett vs Abbot while Bayley J. rests the claim of the House to commit on its parity of position with the Courts of Judicature.
Lord Ellenborough C.J. rests his decision on the broader ground of expediency, and the necessity of such a power for the maintenance of the dignity of the House.
" Ellenborough C.J., therefore, according to Anson, clearly does not take the view that the House of Commons is a court and all that Bay ley J. does, according to him, is to put the House of Commons in parity with a Superior Court.
If the House of Commons was a court, there, of course, was no question of putting it in parity with one.
There was an appeal from this judgment to the House of Lords and in that appeal after the close of the arguments, Lord Eldon L.C. referred the following question to the Judges for their advice, 16 Whether, if the Court of Common Pleas, having adjudged an act to be a contempt of Court, had committed for the contempt under a warrant, stating such adjudication generally without the particular circumstances, and the matter were brought before the Court of King 's Bench, by return to a writ of habeas cot pus.
the return setting forth the warrant, stating such adjudication of contempt generally; whether in that case the Court of King 's Bench would discharge the prisoner, because the particular facts and circumstances, out of which the contempt arose, were not set forth in the warrant": Burdett vs Abbot(1).
The Judges answered the question in the negative.
Upon that Lord Eldon delivered his judgment with which the other members of the Court agreed, stating that the House of Commons had the power to commit by a general warrant.
I am unable to hold that this case shows that Lord Eldon came to that conclusion because the House of Commons was a superior court.
It seems to me that Lord Eldon thought that the House of Commons should be treated the same way as one superior court treated another and wanted to find out how the courts treated each other.
I shall later show that this is the view which has been taken of Lord Eldon 's decision in other cases.
But I will now mention that if Lord Eldon had held that the House of Commons was a court, a constitutional lawyer of Anson 's eminence would not have put the matter in the way that I have just read from his work.
Then I come to the case of Stockdale vs Hansard(2).
That case was heard by Lord Denman C.J., Littledale J., Patteson J. and Coleridge J. Lord Denman said, (p. 1168), (1) ; (2)112 E. R. 11 12.
519 "Before I finally take leave of this head of the argument, I will dispose of the notion that the House of Commons is a separate Court, having exclusive jurisdiction over the subject matter, on which, for that reason, its adjudication must be final.
The argument placed the House herein on a level with the Spiritual Court and the Court of Admiralty.
Adopting this analogy, it appears to me to destroy the defence attempted to the present action . we are now enquiring whether the subject matter does fall within the jurisdiction of the House of Commons.
It is contended that they can bring it within their jurisdiction by declaring it so.
To this claim, as arising from their privileges, I have already stated my answer: it is perfectly clear that none of these Courts could give themselves jurisdiction by adjudging that they enjoy it." Clearly Lord Denman did not proceed on the basis that the Commons was a court.
In fact he refers to the right "as arising from this privilege.
" Then I find Littledale J. observing at p. 1174: "But this proceeding in the House of Commons does not arise on adverse claims; there are no proceedings in the Court; there is no Judge to decide between the litigant parties; but it is the House of Commons who are the only parties making a declaration of what they say belongs to them." So Littledale J. also did not consider the Commons as a court.
Then came Patteson J. who stated at p. 1185, "The House of Commons by itself is not the court of Parliament".
Then again at p. 1185 he observes: "I deny that mere resolution of the House of Lords . would be binding upon the Courts of Law. . much less can a resolution of the House of Commons, which is not a Court of Judicature for the decision of any question either of law or fact between litigant parties, except in regard to the election of its members, be binding upon the Courts of Law." Lastly I come to Coleridge J.
He stated at p. 1196: "But it is said that this and all other Courts of Law are inferior in dignity to the House of Commons, and that therefore it is impossible for us to review its decision.
This argument appears to me founded on a misunderstanding of several particulars; first, in what sense it is that this Court is inferior to the House of Commons; next in what sense the House is a Court at all.
" S.C.I./65 8 520 Then at p. 1196 he stated : "In truth, the House is not a Court of Law at all, in the sense in which that term can alone be properly applied here; neither originally, nor by appeal, can it decide a matter in litigation between two parties; it has no means of doing so; it claims no such power; powers of enquiry and of accusation it has, but it decides nothing judicially, except where it is itself a party, in the case of contempts.
As to them no question of decree arises between Courts;" The observations of Coleridge J. are of special significance for the reasons hereafter to appear.
It is obvious that neither Patteson J. nor Coleridge J. thought that the House of Commons was a Court or possessed any powers as such.
Next in order of date is the case of the Sheriff of Middlesex(1).
Lord Denman, C.J. said at p. 426: "Representative bodies must necessarily vindicate their authority by means of their own; and those means lie in the process of committal for contempt.
This applies not to the Houses of Parliament only, but [as was observed in Burdett vs Abbot , to the Courts of Justice, which, as well as the Houses, must be liable to continual obstruction and insult if they were not entrusted with such powers.
It is unnecessary to discuss the question whether each House of Parliament be or be not a Court; it is clear that they cannot exercise their proper functions without the power of protecting themselves against interference.
The test of the authority of the House of Commons in this respect, submitted by Lord Eldon to the Judges in Burdett vs Abbot (5 Dow, 199) was whether, if the Court of Common Pleas had adjudged an act to be a contempt of Court, and committed for it, stating the adjudication generally, the Court of King 's Bench, on a habeas corpus setting forth the warrant, would discharge the prisoner because the facts and circumstances of the contempt were not stated.
A negative answer being given, Lord Eldon, with the concurrence of Lord Erskine (who had before been adverse to the exercise of the jurisdiction), and without a dissentient voice from the House, affirmed the judgment below.
And we must presume that (1) ; , 521 what any Court, much more what either House of Parliament, acting on great legal authority, takes upon it to pronounce a contempt, is so.
" This observation would support what I have said about the judgment of Lord Eldon in Burdett vs Abbot(1).
Denman C.J. did not think that Lord Eldon considered the House of Commons to be a Court for he himself found it unnecessary to discuss that question.
The basis why he thought that the House of Commons must possess the right to commit by a general warrant was one of expediency and of confidence in a body of that stature.
Coleridge J. observes at p. 427, "It appears by precedents that the House of Commons have been long in the habit of shaping their warrants in that manner.
Their right to adjudicate in this general form in cases of contempt is not founded on privilege, but rests upon the same grounds on which this Court or the Court of Common Pleas might commit for a contempt without stating a cause in the commitment.
Lord Eldon puts the case in this manner in Burdett vs Abbot (5 Dow, 165, 199).
" Great reliance is placed on this observation of Coleridge J. but I think that is due to a misconception.
Coleridge J. at p. 427 expressly affirms all that had been said by him and the other Judges in Stockdale vs Hansard(2).
As I have earlier shown, he had there said that "in truth, the House is not a Court of Law at all." Therefore when he said that the right to adjudicate in the general form was not founded on privilege, whatever he might have meant, he did not mean that it was founded on the House of Commons being a court.
I think what he meant was that it was a right which the House of Commons had to possess in order to discharge its duties properly and, therefore, not something conceded to it as a sign of honour and respect.
He might also have meant that the power was not something peculiar to the House as it was also possessed by the courts for the same reason of expediency, and, therefore, it was not a privilege, a term which has been used in the sense of something which the Parliament possessed and which exceeded those possessed by other bodies or individuals : Cf.
May 42.
Then comes the case of Howard vs Gossett(3).
It will be enough to refer to the judgment of the Court of Exchequer Chamber in appeal which begins at p. 158.
That judgment was delivered by Parke B. who observed at p. 171: (1) ; (2) 112 E.R. 1112.
(3) ; 522 .lm15 "the warrant of the Speaker is, in our opinion, valid, so as to be a protection to the officer of the House, upon a principle which, as it applies to the process and officers of every Superior Court, must surely be applicable to those of the High Court of Parliament and each branch ofit.
" Here again the House is treated as being entitled to the same respect as a superior court, but it is not being said that the House is a superior court.
Lastly, I come to Bradlaugh vs Gossett(1) in which at p. 285 Stephen J. said, "The House of Commons is not a Court of justice.
" I am unable to see how these authorities can be said to hold that the power of the House of Commons to commit by a general warrant is possessed by it because it is a superior court.
It was then said that even if the right to commit by a general warrant cannot be said to have been possessed by the House of ,Commons because it was superior court, the observations in the cases on the subject, including those to which I have already referred, would establish that the right springs from some rule of comity of courts, or of presumptive evidence or from an agreement between the courts of law and the House or lastly from some concession made by the former to the latter.
I at once observe that these cases do not support the contention and no text book has taken the view they do or that the right is anything but a privilege.
The contention further seems to me to be clearly fallacious and overlooks the basic nature of a privilege of the House of Commons.
I have earlier stated the nature of the privilege but I will repeat it here.
All privileges of the House of Commons are based on law.
That law is known as lex Parliamenti.
Hence privileges are matters which the House of Commons possesses as of right.
In Stockdale vs Hansard(2) all the Judges held that the rights of the House of Commons are based on lex Parliamenti and that law like any other law, is a law of the land which the courts are entitled to administer.
Now if the privilege of committing by a general warrant, is a right enforceable in law which belongs to the House of Commons, it cannot be a matter controlled by the rule of comity of courts.
Comity of courts is only a self imposed restraint.
It is something which the court on its own chooses not to do.
It is really not a rule of law at all.
It creates no enforceable right.
A 'right ' to the privilege cannot be based on it.
Besides there is no question of (1) (1884) (2) 12.
523 comity of courts unless there are two courts, each extending civility or consideration to the other.
Here we have the House of Commons and the courts of law.
The former is not a court and the latter needs no civility or consideration from the House for its proper functioning.
Here there is no scope of applying any principle of comity of courts.
Next as to the privilege being really nothing more than a rule of presumption that a general warrant of the House of Commons imprisons a person legally, so that the question of the legality of the committal need not be examined by a court of law, I suppose it is said that this is a presumption which the law requires to be made.
If it is not so, then the right of the House would depend on the indulgence of the judge concerned and, therefore, be no right at all.
That cannot be, nor is it said that it is so.
What then ? If it is a presumption of law, what is the law on which the presumption is based ? None has been pointed out and so far as I know, none exists unless it be lex Parliamenti.
Once that is said, it really becomes a matter of privilege for the lex Parliamenti would not create the presumption except for establishing a privilege.
A right created by lex Parliamenti is a privilege.
This I have earlier said in discussing the nature of privileges.
Lastly, has the right its origin in agreement between the House of Commons and the courts of law, or in a concession granted by the latter to the former ? This is a novel argument.
I have not known of any instance where a right, and therefore, the law on which it is based, is created by an agreement with courts.
Courts do not create laws at all, least of all by agreement; they ascertain them and administer them.
For the same reason, courts cannot create a law by concession.
A court has no right to concede a question of law unless the law already exists.
I find it impossible to imagine that any parliamentary privilege which creates an enforceable right could be brought into existence by agreement with courts or by a concession made by them.
Before I part with the present topic I will take the liberty of observing that it is not for us to start new ideas about the privileges of the House of Commons, ideas which had not ever been imagined in England.
Our job is not to start an innovation as to privileges by our own researches.
It would be unsafe to base these novel ideas on odd observations in the judgments in the English cases, torn out of their context and in disregard of the purpose for which they were made.
What I have quoted from these cases will at least make one pause and think that these cases can furnish no sure foundation for a novel theory as to the right of the House of 524 Commons to commit by a general warrant.
Researches into old English history are wholly out of place in the present context and what is more, are likely to lead to misconceptions.
To base our conclusion as to the privileges on researches into antiquities, will furthermore be an erroneous procedure for the question is what the privileges of the House of Commons were recognised to be in 1950.
Researches into the period when these privileges were taking shape can afford no answer to their contents and nature in 1950.
The question can be answered only by ascertaining whether the right under discussion was treated as a privilege of the House of Commons by authoritative opinion in England in the years preceding 1950.
I then come to the conclusion that the right to commit for contempt by a general warrant with the consequent deprivation of jurisdiction of the courts of law to enquire into that committal is a privilege of the House of Commons.
That privilege is, in my view, for the reasons earlier stated, possessed by the Uttar Pradesh Assembly by reason of article 194(3) of the Constitution.
It is then said that even so that privilege of the Assembly can be exercised only subject to the fundamental rights of a citizen ,guaranteed by the Constitution.
That takes me to Sharma 's case(1) As I read the judgment of the majority in that case, they seem to me to hold that the privileges of the House of Commons which were conferred on the Houses of a State Legislature by article 194(3), take precedence over fundamental rights.
The facts were these.
A House of the Bihar Legislature which also had made no law defining its privileges under article 194(3), had directed certain parts of its proceedings to be expunged but notwithstanding this the petitioner published a full account of the proceedings in his paper including what was expunged.
A notice was thereupon issued to him by the House to show cause why steps should not be taken against him for breach of privileges of the House.
The privilege claimed in that case was the right to prohibit publication of its proceedings.
The petitioner, the Editor of the paper, then filed a petition under article 32 of the Constitution stating that the privilege did not control his fundamental right of freedom of speech under article 19 (1) (a), and that, therefore, the House had no right to take proceedings against him.
He also disputed that the House of Commons had the privilege which the Bihar Assembly claimed.
The majority held that the House possessed the privilege to prohibit the publication of its proceedings and that privilege was not subject to the fundamental right of a citizen under article (1) [1959] Supp. 1 S.C.R. 806.
525 19 (1)(a).
Subba Rao J., took a dissentient view and held that fundamental rights take precedence over privileges and also that the House did not possess the privilege of prohibiting the publication of its proceedings.
With the latter question we are not concerned in the present case.
In the result Sharma 's(1) petition was dismissed.
On behalf of the High Court two points have been taken in regard to this case.
It was first said that the majority judgment required reconsideration and then it was said that in any event, that judgment only held that the privilege there claimed took precedence over the fundamental right of the freedom of speech and not that any other privilege took precedence over fundamental rights.
I am unable to accept either of these contentions.
On behalf of the Assembly it has been pointed out that in a reference under article 143 we have no jurisdiction to set aside an earlier decision of this Court, for we have to give our answers to the questions referred on the law as it stands and a decision of this Court so long as it stands of course lays down the law.
I am unable to say that this contention is idle.
It was said on behalf of the High Court that in In re.
Delhi Laws Act(1) a question arose whether a decision of the Federal Court which under our Constitution has the same authority as our decisions, was right.
It may be argued that this case does not help, for the question posed, itself required the reconsideration of the earlier judgment.
I do not propose to discuss this matter further, for I do not feel So strongly in favour of the contention of the Assembly that I should differ from the view of my learned brothers on this question.
I feel no doubt, however, that the majority judgment in Sharma 's case(1) was perfectly correct when it held that privileges were not subject to fundamental rights.
I have earlier set out the first three clauses of article 194.
The first clause was expressly made subject to the provisions of the Constitution whatever the provisions contemplated were while the third clause was not made so subject.
Both the majority and the minority judgments are agreed that the third clause cannot, therefore, be read as if it had been expressly made subject to the provisions of the Constitu tion.
For myself, I do not think that any other reading is possible.
Clause (3) of article 194 thus not having been expressly made subject to the other provisions of the Constitution, how is a conflict between it and any other provisions of the Constitution which may be found to exist, to be resolved ? The majority held that the (1) [1959] Supp. 1.
S.C.R. 806.
(2) ; 526 principle of harmonious construction has to be applied for reconciling the two and article 194(3) being a special provision must take precedence over the fundamental right mentioned in article 19(1) (a) which was a general provision: (p. 860).
Though Subba Rao J. said that there was no inherent inconsistency between article 19 (1) (a) and article 194(3), he nonetheless applied the rule of harmonious construction.
He felt that since the legislature had a wide range of powers and privileges and those privileges can be exercised without infringing the fundamental rights, the privilege should yield to the fundamental right.
This construction, he thought, gave full effect to both the articles: (pp. 880 1).
With great respect to the learned Judge, I find it difficult to follow how this interpretation produced the result of both the articles having effect and thus achieving a harmonious construction.
Ex facie there is no conflict between articles 194(3) and 19 (1) (a), for they deal with different matters.
The former says that the State Legislatures shall have the powers and privileges of the English House of Commons while article 19 (1) (a) states that every citizen shall have full freedom of speech.
The conflict however comes to the surface when we consider the particular privileges claimed under article 194(3).
When article 194(3) says that the State Legislatures shall have certain privileges, it really incorporates those privileges in itself.
Therefore, the proper reading of article 194(3) is that it provides that the State Legislatures have, amongst other privileges, the privilege to prohibit publica tion of any of its proceedings.
It is only then that the conflict between articles 194 (3) and 19 (1) (a) can be seen; one restricts a right to publish something while the other says all things may be published.
I believe that is how the articles were read in Sharma 's case(1) by all the Judges.
If they had not done that, there would have been no question of a conflict between the two provisions or of reconciling them.
Now if article 19 (1) (a) is to have precedence, then a citizen has full liberty to publish whatever he likes; he can publish the proceedings in the House even though the House prohibited their publication.
The result of that reading however is to wipe out that part of article 194(3) which said that the State Legislatures shall have power and privilege to prohibit publication of their proceedings.
That can hardly be described as harmonious reading of the provisions, a reading which gives effect to both provisions.
It is a reading which gives effect to one of the provisions and treats the other as if it did not exist.
(1) [1959] Supp. 1 S.C.R. 806.
527 It is true that if article 19(1) (a) prevailed, it would not wipe out all the other privileges of the House of Commons which had to be read in article 194(3).
Thus the right of the House to exclude strangers remained intact even if the right to prohibit publication of proceedings was destroyed by article 19 (1) (a).
But this is to no purpose as there never was any conflict between the right to exclude strangers and the freedom of speech and no question of reconciling the two by the rule of harmonious construction arose.
When one part of a provision alone is in conflict with another provision, the two are not reconciled by wiping out of the statute book the conflicting part and saying that the two provisions have thereby been harmonised because after such deletion the rest of the first and the whole of the second operate.
We are concerned with harmonising two conflicting provisions by giving both the best effect possible and that is not done by cutting the gordian knot by removing the conflicting part out of the statute.
I agree that in view of the conflict between article 194(3) and article 1 9 ( 1 ) (a), which arises in the manner earlier stated, it has to be resolved by harmonious construction.
As I understand the principle, it is this.
When the Legislature here the Constitutionmakers enacted both the provisions they intended both to have effect.
If per chance it so happens that both cannot have full effect, then the intention of the legislature would be best served by giving the provisions that interpretation which would have the effect of giving both of them the most efficacy.
This, I believe, is the principle behind the rule of harmonious construction.
Applying that rule to Sharma 's case(1), if the privilege claimed by the Legislature under article 194(3) of prohibiting publication of proceedings was given full effect, article 19 (1) (a) would not be wiped out of the Constitution completely, the freedom of speech guaranteed by the last mentioned article would remain in force in respect of other matters.
If, on the contrary article 19 (1) (a) was to have full effect, that is, to say, a citizen was to have liberty to say and publish anything he liked, then that part of article 194(3) which says that the House can prohibit publication of its proceedings is completely destroyed, it is as if it had never been put in the,Constitution.
That, to my mind, can hardly have been intended or be the proper reading of the Constitution.
I would for these reasons say that the rule of harmonious construction supports the interpretation arrived at by the majority in Sharma 's case(1).
Subba Rao J. gave another reason why he thought that funda mental rights should have precedence over the privileges of the (1) [1959] Supp. 1 S.C.R. 806. 528 Legislature and on this also learned counsel for the High Court relied in the present case.
Subba Rao J. said that that part of article 194(3) under which the State Legislature claimed the same privilege as those of the House of Commons in England, which has been called the second part of this clause, was obviously a transitory provision because it was to have effect until the Legislature made a law defining the privileges as the Constitution makers must have intended it to do.
He added that if and when the Legislature made that law that would be subject to the fundamental rights and it would be strange if provisions which were transitory were read as being free of those rights.
The majority in Sharma 's case(1) no doubt said without any discussion that the law made under article 194(3) would be subject to all fundamental rights.
Learned advocate for the Assembly however contended before us that that view was not justified.
In the present case it seems to me it makes no difference whatever view is taken.
Assume that the law made by a Legislature defining its privileges has to be subject to fundamental rights.
But that will be so only because article 13 says so.
Really the law made under article 194(3) is not to be read as subject to fundamental rights; the position is that if that law is in conflict with any fundamental right, it is as good as not made at all.
That is the effect of article 13.
The argument that since the laws made under article 194(3) are subject to fundamental rights, so must the privileges conferred by the second part of cl.
(3) be, is therefore based on a misconception.
Article 13 makes a law bad if it conflicts with fundamental rights.
It cannot be argued that since article 13 might make laws made under cl.
(3) of article 194 void, the privileges conferred by the second part of that clause must also be void.
Article 13 has no application to a provision in the Constitution itself.
It governs only the laws made by a State Legislature which article 194(3) is not.
Therefore, I do not see why it must be held that because a law defining privileges if made, would be void if in conflict with fundamental rights, the privileges incorporated in article 194(3) 1 have already said that that is how the second Dart of article 194(3) has to be read must also have been intended to be subject to the fundamental rights.
If such was the intention, cl.
(3) would have started with a provision that it would be subject to the Constitution.
The fact that in cl.
(1 ) the words 'subject to the provisions of this Constitution ' occur while they are omitted from cl.
(3) is a strong indication that the latter clause was not intended to be so subject.
Furthermore, that could not have been the intention because then the privilege with which the present case is concerned, namely, to commit for contempt by a general 1.
[1959] Supp. 1 S.C.R. 806. 529 warrant without the committal being subjected to the review of the court, would be wiped out of the Constitution for the fundamental right required that the legality of every deprivation of liberty would be examinable in courts.
It was also said that fundamental rights are transcendental.
I do not know what is meant by that.
If they are transcendental that must have been because the Constitution made them so.
The Constitution no doubt by article 13 makes laws made by the Legislatures subject to fundamental rights, but I do not know, nor has it been pointed out to us, in what other way the Constitution makes the fundamental rights transcendental.
We are not entitled to read into the Constitution things which are not there.
We are certainly not entitled to say that a specific provision in the Constitution is to have no effect only because it is in conflict with fundamental rights, or because the latter are from their nature, though not expressly made so, transcendental.
Then as to the second part of article 194(3) being transitory, that depends on what the intention of the Constitution makers was.
No doubt it was provided that when the law was made by the Legislature under the first part of article 194(3) the privileges of the House of Commons enjoyed under the latter part of that provision would cease to be available.
But I do not see that it follows from this that the second part was transitory.
There is nothing to show that the Constitution makers intended that the Legislature should make its own law defining its privileges.
The Constitution makers had before them when they made the Constitution in 1950, more or less similar provisions in the Australian Constitution Act, 1901 and they were aware that during, fifty years, laws had not been made in Australia defining the privileges of the Houses of the Legislatures there but the Houses had been content to carry on with the privileges of the House of Commons conferred on them by their Constitution.
With this example before them I have no rea son to think that our Constitution makers, when they made a similar provision in our Constitution, desired that our Legislatures should make laws defining their own privileges and get rid of the privileges of the House of Commons conferred on them by the second part of article 194(3).
1 think it right also to state that even if the rights conferred by the second part of article 194(3) were transitory, that would not justify a reading the result of which would be to delete a part of it from the Constitution.
It is necessary to notice at this stage that in Ganupati Keshav Ram Reddy vs Nafisul Hassan(1) his Court held the arrest of (1) A.I.R. 1954 S.C.636 530 a citizen under the Speaker 's order for breach of privilege of the Uttar Pradesh Assembly without producing him before a magistrate as required by article 22 (2) of the Constitution was a violation of the fundamental right mentioned there.
Reddy 's case(1) states no reason in support of the view taken.
Subba Rao J., though he noticed this, nonetheless felt bound by it.
The majority did not do so observing that the decision there proceeded on a concession by counsel.
In this Court learned Advocate for the High Court said that there was no concession in the earlier case.
I notice that Das C.J." who delivered the judgment of the majority in Sharma 's case(1) was a member of the Bench which decided Reddy 's case(1).
If the decision in Reddy 's case( ') was not by concession at least in the sense that the learned advocate was unable to advance any argument to support the contention that privilege superseded fundamental right, it would be strange that the point was not discussed in the judgment.
However all this may be, in view of the fact that it does not seem from the judgment to have been contended in Reddy 's case(1) that the second part of article 194(3) created privileges which took precedence over the fundamental rights, as the judgment does not state any reason in support of the view taken, for myself I have no difficulty in not following Reddy 's case(1) especially as the majority in Sharma 's case(1) did not follow it.
It was also said that the privileges were only intended to make the Legislatures function smoothly and without obstruction.
The main function of the Legislatures, it was pointed out, was the making of laws and the object of the privileges was to assist in the due discharge of that function.
It was contended that if the laws made by a Legislature, for the making of which it primarily exists, are subject to fundamental rights, it is curious that something which is ancillary to that primary function should be free of them.
I find nothing strange.
in this.
Laws made by a Legislature are subject to fundamental rights because the Constitution says so.
The privileges are not subject because they are conferred by the Constitution itself and have neither been made so subject nor found on a proper interpretation to be such.
I believe I have now discussed all the reasons advanced in support of the view that the majority decision in Sharma 's case (2) was erroneous.
As I have said, I am not persuaded that these reasons are sound.
C. 636.
(2) [1959] Supp. 1 S.C.R. 806.
531 In R. K. Karanjia vs The Hon 'ble Mr. M. Anantasayanam lyyangar, Speaker, Lok Sabha (W.P. No. 221 of 1961 unreport ed), which was a petition under article 32 of the Constitution, a Bench of seven Judges of this Court was asked to reconsider the Correctness of the majority decision in Sharma 's case(1) but it considered that decision to be correct and refused to admit the petition.
This is another reason for holding that Sharma 's case (1) was correctly decided.
I now come to the other contention concerning Sharma 's case(1).
It was said that all that the majority judgment held in that case was that the privilege of prohibiting publication of its proceedings conferred on a Legislature by the second part of cl.
(3) of article 194 was not subject to the fundamental right of freedom of speech guaranteed by article 19 (1) (a) It was pointed out that that case did not say that all the privileges under the second part of article 194(3) would take precedence over all fundamental rights.
It was stressed that Das C.J. dealt with the argument advanced in that case that article 21 would be violated by the exercise of the privilege of the House to commit for contempt by stating that there would be no violation of article 21 as the arrest would be according to procedure established by law because the arrest and detention would be according to rules of procedure framed by the House under article 208.
It was contended that the majority therefore held that the fundamental right guaranteed by article 21 would take pre cedence over the privilege to commit.
This contention is also not acceptable tome.
No doubt Sharma 's case( ') was concerned with the conflict between article 19 (1) (a) and the privilege of the House under the second part of article 194(3) to prohibit publication of its proceedings and, therefore, it was unnecessary to refer to the other fundamental rights.
The reason, however, which led the majority to hold that the conflict between the two had to be resolved by giving precedence to the privilege would be available in the case of a conflict between many other privileges and many other fundamental rights.
Now that reason was that to resolve the conflict, the rule of harmonious construction had to be applied and the result of that would be that fundamental rights, which in their nature were general, had to yield to the privileges which were special.
The., whole decision of the majority in that case was that when there was a conflict between a privilege created by the second part of article 194(3) and a fundamental right, that conflict should be resolved by harmonising the two.
Tne decision would apply certainly to the conflict (1) [1959] Supp. 1 S.C.R. 806. 532 between the privilege of committal to prison for contempt by a general warrant without the validity of that warrant being reviewed by a court of law and the fundamental rights guaranteed by articles 21, 22 and 32.
The majority judgment would be authority for holding that the conflict should be solved by a harmonious construction.
Indeed that was the view of the minority also.
The difference was as to the actual construction.
Das C.J. no doubt said that there was no violation of article 21 in Sharma 's case(1) because the deprivation of liberty was according to procedure established by law.
That was, to my mind, only an alternative reason, for he could have dealt with that point on the same reason on which he said that the fundamental right under article 19 (1) (a) must yield to the privilege of the House to prohibit publication of its proceedings, namely, by the application of the rule of harmonious construction.
He could have said by the same logic that he used earlier, that the fundamental right guaranteed by article 21 was general and the privilege to detain by a general warrant was a special provision and must, therefore, prevail.
I am unable to hold that by dealing with the argument based on article 21 in the manner he did, Das C.J. held that the fundamental right under article 21 took precedence over the privilege of committal by a general warrant which the Legislature possessed under the second part of cl.
(3) of article 194.
If he did so, then there would be no reason why he should have held that fundamental right of freedom of speech should yield to the House 's privilege to stop publication of its proceedings.
Another reason for saying that Das C.J. did not hold that article 21 took precedence over the privilege to commit by a general warrant is the fact that he held that Reddy 's case(1) was wrongly decided.
That case had held that article 22 had precedence over the privilege of committal.
If article 22 did not have precedence, as Das C.J. must have held since he did not accept the correctness of Reddy 's case(2), no more could he have held that article 21 would have precedence over the privilege to commit for contempt.
Some reference was made to cls.
(1) and (2) of article 194 to show that Sharma 's case (1) decided that article 19 (1) (a) alone had to yield to the privilege conferred by the second part of cl.
(3) of article 194, but I do not think that the majority decision in Sharma 's case(1) was at all based on those clauses.
These clauses, it will be remembered, dealt with freedom of speech in the House.
Das C.J., referred to them only because some arguments, to which it is unnecessary now to refer, had been advanced on the basis of these (1) [1959] Supp. 1 S.C.R. 806.
(2) A.I.R. 1954 S.C. 636.
533 clauses for the purpose of showing that the privileges were subject to the fundamental right of freedom of speech.
Both the minority and the majority judgments were unable to accept these arguments.
Indeed the question in that case concerned the power to affect a citizen 's freedom of speech outside the House and cls.
(1) and (2) only deal with freedom of speech of a member in the House itself and with such freedom that case had nothing to do.
In this Court some discussion took place as to the meaning of the words "subject to the provisions of thein cl.
(1) of article 194.
These words can, in my view, only refer to the provisions of the Constitution laying down the procedureto be observed in the House for otherwise cls.
(1) and (2) will conflict with each other.
I will now make a digression and state that learned advocate for the Assembly pointed out that in article 194 the Constitution makers treated the liberty of speech of a member differently by expressly providing for it in cls.
(1) and (2) and by providing for other privileges that is, privileges other than that of the freedom of speech in the House, in cl.
He said that the reason was that if the freedom of speech in the House was conferred by cl.
(3) it would be controlled by law made by the legislature and then the party in power might conceivably destroy that freedom.
The intention was that the freedom of speech in the House should be guaranteed by the Constitution itself so as to be beyond the reach of any impairment by any law made by the legislature.
I think that is the only reason why that freedom was treated separately in the Constitution in cls.
(1) and (2) of article 194.
Therefore those clauses have nothing to do with the case in hand.
Nor had they anything to do with the decision in Sharma 's case. 'Me result is that in my judgment Sharma 's case covers the present case and cannot be distinguished from it.
For the reasons earlier stated I come to the conclusion that when there is a conflict between a privilege conferred on a House by the second part of article 194(3) and a fundamental right, that conflict has to be resolved by harmonising the two provisions.
It would be wrong to say that the fundamental right must have precedence over the privilege simply because it is a fundamental right or for any other reason.
In the present case the conflict is between the privilege of the House to commit a person for contempt with out that committal being liable to be examined by a court of law and the personal liberty of a citizen guaranteed by article 21 and the right to move the courts in enforcement of that right under article 32 or article 226.
If the right to move the courts in enforcement of the fundamental right is given precedence, the privilege which provide,% 534 that if a House commits a person by a general warrant that committal would not be reviewed by courts of law, will lose all its effect and it would be as if that privilege had not been granted to a House by the second part of article 194(3).
This, in my view, ,cannot be.
That being so, it would follow that when a House commits a person for contempt by a general warrant that person would have no right to approach the courts nor can the courts sit in judgment over such order of committal.
It is not my intention to state that there may not be exceptions to the rule but I do not propose to enter into discussion of these exceptions, if any, in the present ,case.
The existence of those exceptions may be supported by the observations of Lord Ellenborough C.J. in Burdett vs Abbot(1).
May at p. 159 puts the matter thus: "Lord Ellenborough C.J., left open the possibility that cases might arise in which the courts would have to decide on the validity of a committal for contempt where the facts displayed in the return could by no reasonable interpreta tion be considered as a contempt".
I think I have now sufficiently discussed the law on the subject and may proceed to answer the questions stated in the order of reference.
Question No. 1.
Whether, on the facts and cir cumstances of the case, it was competent for the Lucknow Bench of the High Court of Uttar Pradesh.
consisting of the Hon 'ble Shri Justice N. U. Beg and the Hon 'ble Shri Justice G. D. Sahgal, to entertain and deal with the petition of Shri Keshav Singh challenging the legality of the sentence of imprisonment imposed upon him by the Legislative Assembly of Uttar Pradesh for its contempt and for infringement of its privileges and to pass orders releasing Shri Keshav Singh on bail pending the disposal of his said petit ion.
This question should, in my opinion, be answered in the affirmative.
The Lucknow Bench was certainly competent to deal with ,habeas corpus petitions generally.
The only point raised by the Assembly is that it has no jurisdiction to deal with such petitions when the detention complained of is under a general warrant issued by the Speaker.
But the Lucknow Bench had to find out whether the detention of Keshav Singh was by such a warrant before it could throw out the petition on the ground of want of jurisdiction.
The petition did not show that the detention was under a general warrant.
That would have appeared when the Speaker of the Assembly and the jailor who were respondents to the petition made (1) (1811) 14 East I. 152: ; 535 their return.
That stage had not come when the Lucknow Bench dealt with the petition and made orders on it.
Till the Lucknow Bench was apprised of the fact that the detention complained of was under a general warrant, it had full competence to deal with the petition and make orders on it.
It was said that the order for bail was illegal because in law release on bail is not permitted when imprisonment is for contempt.
I do not think this is a fit occasion for deciding that question of law for even if the order for bail was not justifiable in law that would not otherwise affect the competence of the Bench to make the order.
I do not suppose this reference was intended to seek an answer on the question whether in a habeas corpus petition where the imprisonment is for contempt, the law permits a release on bail.
Question No. 2.
Whether, on the facts and cir cumstances of the case, Shri Keshav Singh by causing the petition to be presented on his behalf to the High Court of Uttar Pradesh as aforesaid, Shri B. Solomon, Advocate, by presenting the said petition and the said two Hon 'ble Judges by entertaining and dealing with the said petition and ordering the release of Shri Keshav Singh on bail pending disposal of the said petition committed contempt of the Legislative Assembly of Uttar Pradesh.
The first thing I observe is that the question whether there is a contempt of the Assembly is for the Assembly to determine.
If that determination does not state the facts, courts of law cannot review the legality of it.
Having made that observation, I proceed to deal with the question.
The question should be answered in the negative.
I suppose for an act to amount to contempt, it has not only to be illegal but also wilfully illegal.
Now in the present case it does not appear that any of the persons mentioned had any knowledge that the imprisonment was under a general warrant.
That being so, I have no material to say that the presentation of the petition was an illegal act much less a wilfully illegal act.
No contempt was, therefore, committed by the Hon 'ble Judges or B. Solomon or Keshav Singh for the respective parts taken by them in connection with the petition.
Question No. 3.
Whether on the facts and cir cumstances of the case, it was competent for the Legislative Assembly of Uttar Pradesh to direct the production of the said two Hon 'ble Judges and Shri B. Solomon, Sup.
C.I./65 9 536 Advocate, before it in custody or to call for their explanation for its contempt; It will be remembered that, according to the recitals, the resolution of March 21, 1964 which directed the production of the Hon 'ble Judges in custody stated that they had committed contempt of the House by what they respectively did in connection with Keshav Singh 's petition of March 19, 1964 and that the Assembly disputes that the resolution so provided.
We have however to answer the question on the facts as stated in the order of reference and have no concern with what may be the correct facts.
For one thing, it would not be competent for the Assembly to find the Hon 'ble Judges and B. Solomon to be guilty of contempt without giving them a hearing.
Secondly, in the present case I have already shown that they were not so guilty.
That being so, it was not competent for the Assembly to direct their production in custody.
It has to be noticed that in the present case the Assembly had directed the production of the Hon 'ble Judges not for the purpose of hearing them on the question of contempt but on the basis that they had committed a contempt.
It is unnecessary, therefore, to discuss the question of the privilege of the House to "cause persons to be brought in custody to the Bar to answer charges of contempt".
See May p. 94.
Furthermore, the Assembly had modified its resolution to have the Judges, Solomon and Keshav Singh brought under custody and asked only for explanation from the Hon 'ble Judges and B. Solomon for their conduct.
Therefore, strictly speaking, the question as to bringing them in custody before the House does not arise on the facts of the case.
As to the competence of the Assembly to ask for explanation from the two Judges and B. Solomon, I think it had.
That is one of the privileges of the House.
As it has power to commit for contempt, it must have power to ascertain facts concerning contempt.
Question No. 4.
Whether, on the facts and cir cumstances of the case, it was competent for the Full Bench of the High Court of Uttar Pradesh to entertain and deal with the petitions of the said two Hon 'ble Judges and Shri B. Solomon, Advocate and to pass interim orders restraining the Speaker of the Legislative Assembly of Uttar Pradesh and other Respondents to the said petitions from implementing the aforesaid direction of the said Legislative Assembly; I would answer the question in the affirmative.
The Full Bench had before it petitions by the two Judges and B. Solomon 537 complaining of the resolution of the Assembly finding them guilty of contempt.
I have earlier stated that on the facts of this case, they cannot be said to have been so guilty.
It would follow that the Full Bench had the power to pass the interim orders that it did.
Question No. 5.
Whether a Judge of a High Court who entertains or deals with a petition challenging any order or decision of a Legislature imposing any penalty on the petitioner or issuing any process against the petitioner for its contempt or for infringement of its privileges and immunities or who passes any order on such petition commits contempt of the said Legislature and whether the said Legislature is competent to take proceedings against such a Judge in the exercise and enforcement of its powers, privileges and immunities.
This is too general a question and is not capable of a single, answer; the answers would vary as the circumstances vary, and it is not possible to imagine all the sets of circumstances.
Nor do I think we are called upon to do so.
As learned advocates for the parties said, this question hag to be answered on the facts of this case.
On those facts the question has to be answered in the negative.
I propose now to refer to an aspect of the case on which a great deal of arguments had been addressed at the bar.
That concerns the liability of a Judge for contempt.
If I am right in what I have said earlier, a judge has no jurisdiction to interfere with a commitment by a House under a general warrant.
If he makes an order which interferes with such a commitment, his action would be without jurisdiction.
It would then be a nullity.
Any officer executing that order would be interfering with the committal by the House and such interference would be illegal because the order is without jurisdiction and hence a nullity.
If the House proceeded against him in contempt, a Court of Law could not, in any event, have given him any relief based on that order.
It may be that the Judge by making such an order would be committing contempt of the House for by it he would be interfering with the order of the House illegally and wholly without jurisdiction.
The question however to which I wish now to refer is whether the judge, assuming that he has committed contempt, can be made liable for it by the House.
In other words, the question is , has the Judge immunity against action by the House for contempt committed by him ? If his order was legal, then, of course, he would not have committed contempt and question of immunity for him would not arise.
538 It was said on behalf of the High Court that even assuming that a Judge can commit contempt of a House, he has fully immunity.
This was put first on the scheme of the Constitution which, it was said, favoured complete judicial independence.
It was next pointed out that under our Constitution Judges cannot be removed from office except by the process of impeachment under article 124(4), that is, by the order of the President upon an address by each House of Parliament supported by a certain majority.
Reliance was then placed on article 211 of the Constitution which prohibits discussion in the Legislature of the conduct of a Judge in the discharge of his duties and it was said that this indicated that a Judge cannot be liable for contempt, because to make him so liable his conduct has to be discussed.
It was however conceded that article 211 did not give an enforceable right in view of article 194(2) but it was said to indicate the intention of the Constitution makers that a Judge is to be immune from liability for contempt of the Assembly.
The correctness of these contentions was challenged on behalf of the Assembly.
With regard to the point of judicial independence, it was said that it would hardly have been intended that a Judge should have immunity even though he deliberately committed contempt of a House.
It was pointed out that the contempt would be deliberate, because the Judge would know that in the case of a general warrant he had no jurisdiction to proceed further.
As regards the argument based on the irremovability of Judges except in the manner provided, it was said that that had nothing to do with immunity for contempt.
It was pointed out that the Constitution provided for State autonomy and it could not have been intended that when a Judge committed contempt of a State Legislature, the only remedy of that body would be to approach the Central Parliament with a request to take steps for the removal of the Judge.
That would, also seriously impair the dignity of the State Legislature.
The grant of relief, in such a case would depend on the sweet will of the Central Parliament and relief would be unlikely to be obtained particularly when the parties in power in the State and.
the Centre, were as might happen, different.
The irremovability of the Judges was not, it was said, intended to protect their deliberate wrongful act but only to secure their independence against illegal interference from powerful influences.
It was argued that the immunity of a Judge would also put the officers of the court who would be bound to 539 execute all his orders, in a helpless and precarious condition, for they have to carry out even illegal orders of the Judges and thereby expose themselves to the risk of punishment legitimately imposed by an Assembly.
It was lastly said that if independence of the Judges was necessary for the good of the country, so was the independence of the Legislatures.
In regard to article 211, it was observed that it did not at all indicate an intention that the Judges would not be liable for contempt committed by themselves.
Its main object, it was contended, was to permit the freedom of speech guaranteed by article 194(1) to be restrained in a certain manner.
Furthermore, it was pointed out that article 211 would not bar a discussion unless it was first decided that that discussion related to the conduct of a Judge in the discharge of his duties, a decision which would often be difficult to make and in any case the decision of the House would not be open to question in a court of law, for it is one of the privileges of the House of Commons which a State Legislature has obtained under article 194(3) that it has absolute control of its internal proceedings: (see Bradlaugh vs Gosset).
On all these grounds it was contended that our Constitution did not confer any immunity on a Judge for an admitted contempt committed by him.
It was pointed out that in England judicial officers, including Judges of superior courts, did not have that immunity and reference was made to Jay vs Topham(1) and case of Brass Crossby(2).
I am not sure that I have set out all the arguments on this question but what I have said will give a fair idea of the competing contentions.
For the purpose of this case, I do not think it necessary to go into the merits of those contentions.
The questions that arise on the facts of the reference can, in my view, be answered without pronouncing on the question of immunity of Judges.
It is often much better that theoretical disputes should be allowed to lie buried in learned tracts and not be permitted to soil our daily lives.
It would not require much strain to avoid in practice circumstances which give rise to those disputes.
In England they have done so and there is no reason why in our country also that would not happen.
I strongly feel that it would serve the interest of our country much better not to answer this question especially as it has really not arisen.
I do hope that it will never arise.
(1) 12 Howell 's State Trials 82 1.
(2) 19 Howell 's State Trials 1138.
540 I think it right to mention that Mr. Verma appearing for the Advocate General of Bihar raised a point that this reference was incompetent or at least should not be answered.
He said that a reference can be made, by the President only when he needed the advice of this Court with regard to difficulties that he might feel in the discharge of his duties.
Mr. Verma 's contention was that the questions in the reference related to matters which did not concern the President at all.
He said that the advice given by us on this reference will not solve any difficulty with which the President may be faced.
On the other side, it was contended that the President might consider the amendment of the Constitution in the light of the answers that he might receive from this Court.
Mr. Verma replied to this answer to his argument by saying that it was not for the President to consider amendments of the Constitution and that it was not the object of article 143 that this Court should be consulted for the purpose of initiating legislation.
I am unable to say that Mr. Verma 's contention is wholly unfounded but I do not propose to express an opinion on that question in the present case.
Before I conclude, I must say that I feel extremely unhappy that the circumstances should have taken the turn that they did and that the reference to this Court by the President should have been rendered necessary.
With a little more tact, restraint and consideration for others.
the situation that has arisen could have been avoided.
I feel no doubt that Beg and Sahgal JJ. would have dismissed the petition of March 19, 1964 after they had possession of the full facts.
I regret that instead of showing that restraint which the occasion called for, particularly as the order of imprisonment challenged was expressly stated to have been passed by a body of the stature of the Assembly for contempt shown to it, a precipitate action was taken.
No doubt there was not much time for waiting but Keshav Singh could not force the hands of the Court by coming at the last moment.
The result of the order of the Hon 'ble Judges was no interfere with a perfectly legitimate action of the Assembly in, a case where interference was not justifiable and was certainly avoidable.
On the other hand, the Assembly could have also avoided the crisis by practising restraint and not starting proceedings against the Judges at once.
It might have kept in mind that the Judges had difficult duties to perform, that often they had to act on imperfect materials, and errors were, therefore, possible.
It could have realised that when it placed the facts before the Judges, its point of view would have been appreciated and appropriate orders 541 made to undo what had been done in the absence of full mate rials.
Such an action of the Assembly would have enhanced its stature and prestige and helped a harmonious working of the different organs of the State.
I wish to add that I am not one of those who feel that a Legislative Assembly cannot be trusted with an absolute power of committing for contempt.
The Legislatures have by the Constitution been expressly entrusted with much more important things.
During the fourteen years that the Constitution has been in operation, the Legislatures have not done anything to justify the view that they do not deserve to be trusted with power.
I would point out that though article 211 is not enforceable, the Legislatures have shown an admirable spirit of restraint and have not even once in all these years discussed the conduct of Judges.
We must not lose faith in our people, we must not think that the Legislatures would misuse the powers given to them by the Constitution or that safety lay only in judicial correction.
Such correction may produce friction and cause more harm than good.
In a modem State it is often necessary for the good of the country that parallel powers should exist in different authorities.
It is not inevitable that such powers will clash.
It would be defeatism to take the view that in our country men would not be available to work these powers smoothly and in the best interests of the people and without producing friction.
I sincerely hope that what has happened will never happen again and our Constitution will be worked by the different organs of the State amicably, wisely, courageously and in the spirit in which the makers of the Constitution expected them to act. | The Legislative Assembly of the State of Uttar Pradesh committed one Keshav Singh,who was not one of its members, to prison for its contempt.
The warrant of committal did not contain the facts constituting the alleged contempt.
While undergoing imprisonment for the committal, Keshav Singh through his Advocate moved a petition under article 226 of the Constitution and section 491 of the Code of Criminal Pro cedure, challenging his committal as being in breach of big fundamental rights; he also prayed for interim bail.
The High Court (Lucknow Bench) gave notice to the Government Counsel who accepted it on behalf of all the respondents including the Legislative Assembly.
At the time fixed for the hearing of the bail application the Government Counsel did not appear.
Beg and Saghal JJ.
who heard the application ordered that Keshav Singh be released on bail pending the decision of his petition under article 226.
The Legislative Assembly found that Keshav Singh and his Advocate in moving the High Court, and the two Judges of the High Court in entertaining the petition and granting bail had committed contempt of the Assembly, and passed a resolution that all of them be produced before it in custody.
The Judges and the Advocate thereupon filed writ petitions before the High Court at Allahabad and a Full Bench of the High Court admitted their petitions and ordered the stay of the execution of the Assembly 's resolution against them.
The Assembly then passed a clarificatory resolution which modified its earlier stand.
Instead of being produced in custody, the Judges and the Advocate were asked to appear before the House and offer their explanation.
At this stage the President of India made a Reference under article 143(1) of the Constitution in which the whole dispute as to the constitutional relationship between the High Court and the State Legislative including the question whether on the facts of the case Keshav Singh 414 his Advocate, and the two Judges, by their respective acts, were guilt of contempt of the State Legislature, was referred,.
, to the Supreme Court for its opinion and report.
At the hearing of the Reference a preliminary objection as to the competency of the Reference was raised on behalf of the Advocate General of Bihar, on the ground that it did not relate to any, of the matters covered by the President 's powers and duties under the Constitution.
It was also urged, that even if the Reference was competent, the Court.
should not answer it as it not obliged "to do so, and the answers given by,it would not help) the President in solving any of the difficulties with which ' he might be faced in discharging his duties.
The Court did not ' accept these contentions and proceeded to hear the parties which fell,broadly,into two groups those supporting the Assembly and those supporting the High Court.
On behalf of,the,Assembly it was urged that by 194(3) of the Constitution all the power and immunities of the House of Commons of the United Kingdom on,.
was I the sole judge 'of its privileges and the Courts had no jurisdiction to interfere with their exercise.
In the alternative , it was contended that Courts in England never interfered virtue of article privileges with a committal by the House of Commons for contempt when the committal was by a general warrant, I.e., a warrant which did not state the facts constituting the contempt, and, therefore Courts in India were also precluded from examining the legality of the general warrants of, the State Legislatures.
The proceedings in the High Court in the present case were, therefore, in contempt of the legislature.
Those supporting the stand taken by the High Court urged that the Legislature received the powers of the House of Commons subject to provisions of the Constitution and to the fundamental rights, that the power to commit by general warrant was not one of the privileges of the House of Commons, that by virtue of Articles 226 and 32, "the citizen had the right to move the Courts when his fundamental rights were contravened, and that because of the provisions in article 211, the Legislature was precluded from taking any action against the Judges.
HELD : (Per P. B. Gajendragadkar C. J., K. Subba Rao, K. N. Wanchoo ' M. Hidayatullah, J. Shah and N. jj.)The terms of article 143(1) are very wide and all that they require is that the President should be satisfied that the questions to be referred are ' of such a nature and of such public imp that it would be expedient to obtain the Supreme Court opinion on them.
The President 's order making the present Reference showed that he was so satisfied, and therefore the Reference was competent.
The argument that a Reference "under article 143(1) could only be on matters directly 'related to the President 's powers and duties under the Constitution was misconceived [431 E F] 432 E F].
Earlier References made by the President under article 143(1) showed no uniform pattern and that was consistent with the broad and wide words used in article 143(1).
[433 C D].
In re : The ; , , In re: The Kerala Education Bill, 1957, [1959] S.C.R. 995, In re: Berubari Union & Exchange of Enclaves, and In re: Sea Customs Act, [1964] 3S.C.R. 787, referred to.
It is not obligatory on the Supreme Court to answer a Reference under article 143(1) the word used in that Article being 'may, in contrast to the word 'shall ' used in article 143(2).
Refusal to make a report 415 answering the questions referred would however be justified only for sufficient and satisfactory reasons e.g., the questions referred being of a purely socio economic or political character with no constitutional significance at all.
The present Reference raised questions of grave constitutional importance and the answers given by the Court could help the President to advise the Union and State Governments to take suitable legislative or executive action 1 It was therefore the duty of; the court to answer it.
[434 B D; 433 G H].
The advisory opinion rendered by the Court in the present Reference proceedings was not adjudication properly so called, and would bind no parties as such.
[446 H; 447 A].
(ii) The State Legislatures in India.
could not by virtue of article 194(3) claim to be the sole of their powers and privileges to the exclusion of the courts.
Their powers and privileges were to be found in article 194(3) alone and nowhere else, and the power to interpret that Article lay under the scheme of the Indian Constitution, exclusively with the Judiciary of this country.
(Scheme of the Constitution dis cussed).
[444 G H; 446 G H" It was not the intention of the Constitution to perpetuate in India the 'dualism ' that rudely disturbed public life in England during the 16th, 17th and 18th centuries.
The Constitution makers were aware of the several unhappy situations that arose there as a result of the conflict between the Judicature and the Houses of Parliament, and the provisions of articles 226, 32, 208, 212(1) and 211 (examined by the Court) showed that the intention was ' to avoid such a conflict in this country.
[454 A B; 455 C E].
Article 211 which provides that the Legislatures could not discuss the conduct of the Judge in the discharge of his duties, was mandatory.
[457 G H].
State of U. P. vs Manbodhan Lal Srivastava, [1958] S.C.R. 533 and Montreal Street Railway Company vs Nornwndin, L. R. ; , referred to.
(iii) Although article 194(3) has not been made expressly subject to the provisions of the Constitution, it would be unreasonable in construing it to ignore the other provisions, if for valid reasons they were found to be relevant and applicable.
Therefore wherever it appeared that there was a conflict between the provisions of article 194(3) and the provisions relating to fundamental rights, an attempt had to be made to resolve the said conflict by the adoption of the rule of harmonious construction as was done in Sharma Is case.
[443 C E].
Pandit M. section M. Sharma vs Shri Sri Krishna Sinha & Others, [1959] Supp. 1 S.C.R. 806.
(iv) In Sharma 's case a majority of this Court held, in terms, that article 21 was applicable to the contents of article 194(3) though article 19(1) was not.
The minority view was that article 194(3) was subject to all the fundamental rights.
[451 B C].
The majority in Sharma 's case cannot be said to have held that article 194(3) was independent of all the fundamental rights for the simple reason that it was held that article 21 was applicable, although on the facts of the case its provisions were found not to have been contravened.
The petitioner in that case had not raised at all the general issue as to the applicability and relevance to article 194(3) of all the fundamental rights in Part 111, and therefore it was unnecessary for the Court to discuss and decide that general issue.
His claim was based on the applic 416 ability of two Articles only i.e., Articles 21 and 19(1) (a).
The Court A held that the former was applicable and the latter was not.
This must therefore be taken to have been settled in Sharma 's case.
[451 C F].
But Sharma 's case cannot be said to have settled the issue whether article 22(2) was applicable to article 194(3) or not.
[Observations of the majority therein as to the correctness of the decision in Freddy 's case which was decided on the basis that Art,.
22(2) was applicable, held to be obiter].
[452 D E].
Pandit M. section M. Sharma vs Shri Sri Krishna Sinha & Others, [1959] Supp. 1 S.C.R. 806 and Gunupati Keshavram Reddy vs Nafisul Hasaan and the State of U.P., A.I.R. 1954 S.C. 636, discussed.
(v) The view taken in Sharma 's case that the laws defining the powers and privileges of the legislatures under the first part of article 194(3) would be subject to article 13 and therefore to the fundamental rights, did not require reconsideration.
[453 G].
Anantha Krishnan vs State of Madras, A.I.R. 1952 Mad. 395, considered.
(vi) The first part of article 194(3) empowers the State Legislatures to define by law their own powers, privileges and immunities.
The second part of the Article says that till they define their powers etc.
in the above manner, their powers, privileges and immunities will be those of the British House of Commons.
The second part was obviously in tended to confer for the interim period till laws were made under the first part, those incidental privileges and immunities which every Legislature must possess in order that it may be able to function effectively.
[442 C E].
The powers of the House of Commons conferred by this clause are those which were still in existence at the commencement of the Constitution i.e., 26th January, 1950 and not those which had fallen into desuetude or the claim in respect of which had been given up.
Further, only those powers can be deemed to have been conferred which were not only claimed by the House of Commons but also recognised by the British Courts.
[442 F H].
(vii) The claim that all the powers of the British House of Commons became vested in the Indian Legislatures by virtue of article 194(3) cannot be accepted in its entirety for there are many powers of the House of Commons such as right of access to the sovereign, passing acts of attainder, impeachment, determining its own Constitution etc.which cannot be possibly exercised by the Indian Legislatures.
[448 D G].
May 's Parliamentary Practice, 16th Edn.
p. 86, referred to.
(viii) article 194(3) did not confer on the Indian State Legislatures the right to commit for contempt by a general warrant which could not be examined for its validity by courts in habeas corpus proceedings.
The right claimed by the House of Commons not to have its general warrants examined in habeas corpus proceedings, was based on the con sideration that the House of Commons was in the position of a superior court of record and had the right like other superior courts of record to issue a general warrant for the commitment of persons found guilty of contempt.
There was a convention in England whereby the general warrants committing for contempt issued by a superior court of record were not examined by other courts.
It was on that ground and not on the F ground of privilege that the general warrants issued by the House of Commons were treated as beyond scrutiny by the courts.
[482 B D 496 F].
417 May 's Parliamentary Practice, 16th Edn.
relied on.
Ashby vs White, L.J. (1701 05) 714, Earl of Shaftesbury 's case, , Bradlaugh vs Gossett, L.R. XII Q.B.D. 271, 12 State Tr.122, Sir Francis Burdett, Abbott, 104 E.R. 501, Stockdale vs Hansard, , Ashby vs White and Others, ; , R. vs Paty & others; , , Murray 's case; , , Brass Crosby, , Burdett vs Abbott 3 E .
R. 1289, Sheriff of Middlesex; , and Howard vs Gossett, ; , discussed and relied on.
Bradlaugh vs Gossett, L.R. XII Q.B.D. 271, held not applicable.
Speaker of the Legislative Assembly of Victoria vs Hugh Glass, (1869 71) III L.R., P.C. 560, Fielding and Others vs Thomas, , The Queen vs Richards, ; and Dill vs ; , not followed.
Observations of Gwyer C.J., in Central Provinces and Berar Act No. XIV of 1938 to the effect that decisions in respect of other Constitutions could not be safely applied even when the Provisions interpreted are similar, relied on.
Observations of Parker J. in re: Hunt 's case [1959] 1 Q.B.D. 678, referred to as indicating that even in regard to a commitment for contempt by a superior court of record, the court exercising its jurisdiction over a petition filed for habeas corpus would be competent to consider the legality of the said contempt notwithstanding the fact that the warrant for commitment was general or unspeaking.
The Indian State Legislatures were not at any time in their history, either under the Constitution Act.
1935, or under the Indian Independence Act, 1947, intended to be courts of record.
The legal fiction in article 194(3) could not transfer the history of England to India and confer on the Indian State Legislatures the status of superior courts of record.
Thus the very basis on which the English Courts agreed to treat a general warrant issued by the House of Commons on the footing that it was a warrant issued by a superior court of record, was absent in their case, and so, it would be unreasonable to contend that the relevant power to claim a conclusive character for the general warrant which the House of Common ,, by agreement, was deemed to possess, became vested in the Indian Legislatures.
On this view of the matter the claim made by the Uttar Pradesh Assembly had to be rejected.
[492 A B].
(ix) Even if the power to commit by non examinable general warrant were treated as forming an integral part of the privileges of the House of Commons it would not follow that the Indian State Legislatures could exercise that power by virtue of article 194(3).
[495 H].
The very existence of the powers of the Courts under article 226 and 32 necessarily implies a right in the citizen to approach the High Court or the Supreme Court for the protection of his fundamental rights.
(The present dispute was really between a citizen and the Legislature and not one between the High Court and the Legislature).
[494 A B].
If a citizen moved this court and complained that his fundamental right under article 21 [held to be applicable to article 194(3) in Sharma 's case] or any other applicable right, bad been contravened, it would plainly be the duty of this Court to examine the merits of the said contention.
It would be no answer in such a case to say that the warrant issued against the citizen was a general warrant and a general warrant must stop all further judicial enquiry and scrutiny.
The impact of the 418 fundamental right conferred on Indian citizen by article 32 on the construction of the latter part of article 194(3) was decisively against the view that a power or privilege could be claimed by the House though it may be inconsistent with article 21.
In this connection it was relevant to recall that the rules for regulating the procedure of the House were subject to the provision of the Constitution under article 208(1).
[493 D E].
Observations of Simonds J., in In re : Parliamentary Privileges Act, 1770; , and Resolution of the House of Lords, C.J. 1702 04, pp.
555, 560, (Cited in May 16th Edn.
p. 47), referred to.
It would be strange if the House which was incompetent because of article 21 1 to discuss the conduct of a Judge in the discharge of his duties, should have the power to summon him in custody for alleged contempt committed in discharge of his duties.
If the claim of the House were upheld it would mean that the House could issue a general warrant against a Judge and no judicial,scrutiny,could be held in respect of the validity of such a warrant.
This would Put the basic concept of judicial independence into grave jeopardy.
[493 E H].
It 'was also ' doubtful whether the power to issue a general up spcaking warrant was consistent with section 554(2)(b) and section 555 of the Code of Criminal Procedure [496 E F].
Section 30 of the , confers on all Advocates, the statutory right to practice in all courts, including the Supreme Court, before any Tribunal or person legally authorised to take evidence, and before any other authority or person before whom such Advocate is by or under any,law for the time being in force entitled to practice.
Section 14 of the Bar Councils Act recognises a similar right.
Just as the rights of the Judicature to deal with matters before them under article 226 or article 32 cannot be subjected to the powers and privileges of the House under article 194(3), so the rights of the citizen to move the Judicature and the right of the Advocates to assist that process must remain uncontrolled by article 194(3).
That is one integrated scheme for protecting the fundamental rights and for sustaining the rule of law in this country.
Therefore the right to commit by a conclusive general warrant which the State Assembly claimed to be an integral part of its powers or privileges was inconsistent with the material provisions of the Constitution and could not be deemed to have been included under the latter part of article 194(3).
[495 E H].
The power to commit by general warrant was moreover not essential for the effective functioning of a House of Legislature.
The American Congress had been functioning effectively without such power.
[497 B E].
In India, there are 14 State Legislatures in addition to the Houses of Parliament.
If the power claimed by the U.P. Assembly were conceded it is not difficult to imagine that its exercise may lead to anomalous situations as when a member of one Legislature is committed for contempt by a general warrant issued by another Legislature on account of a speech made by him in his own Legislature.
[497 E F].
(x) It was open to Keshav Singh in his petition under article 226 to implead the, House on the ground that his commitment was based on.
the order passed by the House, and in that sense the House was responsible for, and had control over his commitment.
[496 B C].
The King vs The Earl of Crewe Ex parte Sekgome.
[1910] 2 K.B.D. 576 and The King vs Secretary of State for Home Affairs Ex parte O 'brien, [1923] 2 K.B.D. 361, referred to.
419 (xi) Although in England parties who stand committed for contempt by the house of Commons are not admitted to bail by courts, the position in India is different.
If article 226 confers jurisdiction on the court to deal with the validity of the order of commitment even though the commitment has been ordered by the House, it follows that the court has jurisdiction to make an interim order in such proceedings.
[498 F H] State of Orissa vs Madan Gopal Rungla and others, [1952] S.C.R. 28 and Maxwell on Interpretation of Statutes, 11th Edn.
p. 350, relied on.
Lala Jairam Dav & others and King Emperor, 72 I.A. 120, held inapplicable.
(xii) On the facts of the case the High Court was competent to entertain the petition of Keshav Singh and to grant him bail pending, disposal of his petition.
There was no contempt of the U.P. Assembly committed by Keshav Singh or his Advocate in moving the application under article 226, or by the High Court in entertaining the said petition and granting bail.
It was not competent for the Legislative Assembly to direct the production of the two Hon 'ble Judges and the Advocate before it in custody or to call for their explanation for their conduct.
It was competent for the Full Bench of the Allahabad High Court to entertain and deal with the petitions of the said two Hon 'ble Judges and ,the Advocate, and to pass interim orders restraining the Speaker of the U.P. Assembly and other respondents to the said petitions from implementing the aforesaid direction of the Assembly.
A Judge of a High Court who entertains or deals with a petition challenging any order or decision of a Legislature imposing any penalty on the petitioner (who is not a member of the Legislature) or issuing any process against the petitioner for its contempt (the alleged contempt having been committed outside the four walls of the House), or for the infringement of its privileges and immunities, or who passes any order on such petition, does not commit any contempt of the said Legislature, and the said Legislature is not competent to take proceedings against such a Judge in the exercise and enforcement of its powers, privileges and immunities.
[502 A; 503 C].
(xiii) It is necessary to remember that the status, dignity and importance of the two institutions, the Legislature and the Judicature, are derived primarily from the status, dignity and importance of the respective causes that are assigned to their charge by the Constitution.
These two bodies as well as the executive which is another important constituent of a democratic State, must function not in antinomy nor in a spirit of hostility, but rationally, harmoniously and in a spirit of understanding within their respective spheres, for such harmonious working of the ;three constituents of the democratic State alone will help the peaceful development, growth and stabilization of the democratic way of life in this Country.
[447 D E].
(xiv) The power to punish for contempt large as it is, must always be exercised cautiously, wisely and with circumspection.
Frequent or indiscriminate use of this power in anger or irritation would not help to sustain the dignity of the court, but may sometimes affect it adversely.
Wise Judges never forget that the best way to sustain the dignity and stat of their office is to deserve respect from the public at large by them quality of their judgments, the fearlessness, fairness and objectivity of their approach, and by the restraint, dignity and decorum which they observe in their judicial conduct.
We venture to think that what is true of the Judicature is equally true of the Legislature.
[501 F G]. 420 Observations of Lord Atkin in Andre Paul vs Attorney General of Trinidad, A.I.R.1936 P.C. 141, referred to.
Per Sarkar J. (i) It is undoubtedly for the Courts to interpret the Constitution and therefore article 194(3).
It follows that when a question arises in this Country as to whether the House of Commons possessed a particular privilege at the commencement of the Constitution, that question must be settled, and settled only by the courts of law.
There is no scope of the dreaded 'dualism ' appearing here, that is, courts entering into a controversy with a House of a Legislature as to what its privileges are.
[509 A B].
(ii) The words appearing in article 194(3) are "the powers, privileges and immunities of a House. shall be those of the House of Commons.
" One cannot imagine more plain language than this.
That language can only have one meaning and that is that it was intended to confer on the State legislatures the powers, privileges and immunities which the House of Commons in England had.
There is no occasion here for astuteness in denying words their plain meaning by professing allegiance to a supposed theory of division of powers.
[511 A B].
Bradlaugh vs Gossett, (1884) 12 Q.B.D.271, Burdett vs Abbott. ; , In re : Delhi Laws, [1951] S.C.R. 747.
M.S.M. Sharma vs Shri Sri Krishna Sinha.
[1959] Supp. 1 S.C.R. 806, Speaker of the Legislative Assembly of Victoria vs Glass Queen vs Richards; , , Queen vs Richards, ; and Fielding vs Thomas, [1896] A.C. 660, referred to.
(iii) The power to commit by a general warrant with the consequent deprivation of the jurisdiction of the courts was, one of the privileges of the House of Commons.
That privilege was possessed by the U.P. Assembly by virtue of article 194(3) of the Constitution.
[524 C D].
There is no authority to show that the House of Commons possessed the powers to commit by a general warrant because it was a superior court of record.
Neither the history of the House, nor the judgments in English cases support that contention.
The courts only treated the House as entitled to the same respect as a superior court.
They did not say that the House was a superior court.
[513 B C, 522 B].
May 's Parliamentary Practice, 16th Edn. Potter 's Outlines of Legal History, (1958 Edn.) Anson 's Law of the Constitution.
6th Edn.
Vol. 1, referred to.
Bradlaugh vs Gossett, Burdett vs Abbott, 5 Dow 165, Sheriff of Middlesex, , Stockdale vs Hansard, (1839) 9 AD & El and Howard vs Gossett, relied on.
It is fallacious to say that the right to commit by general warrant possessed by the House of Commons springs from some rule of comity of courts, or of presumptive evidence, or from an agreement between courts of law and the House, or lastly, from some concessions made by the former to the latter.
[522 E F].
All privileges of the House of Commons are based on law.
That law is known as Lex Parliamenti.
That law like any other law is a law of the land which courts are entitled to administer.
[522 F G].
It is not for us to start new ideas about privileges of the House of Commons, ideas which had not ever been imagined in England.
Researches into the period when these privileges were taking shape can afford no answer to their contents and nature in 1950.
[523 G H; 524 B C].
421 Writers of undoubted authority as well as certain recent decisions of the Judicial Committee have treated the power to commit by a conclusive general warrant as a matter of privilege of the House and not as a right possessed by it as a superior court.
[515 G H].
May 's Parliamentary Practice, 16th Edn.
Cases on Constitutional Law by Keir and Lawson, Halsbury 's Law 's of England, Vol. 28, 467, Dicey 's Constitutional Law, 10th Edn., referred to.
Speaker of the Legislative Assembly of Victoria vs Glass, Fielding vs Thomas, and Sheriff of Middlesex, relied on.
(iv) The decisions of the Judicial Committee may not be binding on Indian courts but they have high persuasive value, unless shown to be wrong.
The question is whether the House of Commons had a certain privilege.
If judicial notice of the privilege has to be taken, then under section 57 of the Evidence Act, a reference to the authorised law reports of England would be legitimate, and if the existence of the privilege has to be decided as a matter of foreign law, then again under section 38 of that Act a reference to these reports would be justified.
And since they contain decisions of one of the highest courts in England, we are not entitled to say that what they call a privilege of the House of Commons of their country is not a privilege, unless some equally high authority taking the contrary view is forthcoming.
[517 D F].
(v) It cannot be said that the privilege in question can be exercised by the Indian State Legislatures only subject to the fundamental rights of a citizen guaranteed by the Constitution.
In Sharma 's case this court laid down that the privileges of the House of Commons which were conferred on the House of a State Legislature by article 194(3) take precedence over fundamental rights.
This decision was correct and did not require reconsideration.
[524 E F; 525 B C, F].
In re : Delhi Laws Act, 1950; , , referred to.
It was not held in Sharma 's case that article 21 takes precedence over the privileges in article 194(3).
Das C.J. no doubt said that there was no violation of article 21 in that case because the deprivation of liberty was according to procedure established by law.
But that was only an alter native reason for he could have held as he did in the case of article 19(1)(a) that article 21 being a general provision and article 194(3) being special, the former must yield to the latter.
[531 E F; 532 B E].
Another reason for saying that Das C.J. did not hold that Art 21 took precedence over the privilege to commit by a general warrant is the fact that he held that Reddy 's case was wrongly decided.
That case had held that article 22 had precedence over the privilege of committal.
If article 22 did not have precedence, as Das C.J. must have held since he did not accept the correctness of Reddy 's case, no more could he have held that article 21 would have precedence over the privilege to commit for contempt.
[532 E F].
(vi) The majority in Sharma 's case no doubt said without discussion that the law under article 194(3) would be subject to all fundamental rights, but that is so only because article 13 says so.
[528 C D].
Article 13 makes a law bad if it conflicts with fundamental rights.
it cannot be said that since article 13 might make laws made under cl.
(3) of article 194 void, the privileges conferred by the second part must also be void.
Article 13 has no application to the provisions of the Constitution itself.
It governs only the laws made by a State Legislature which article 194(3) is not.
The fact that in cl.
(1) of article 194 the words 422 'subject to the provisions of the Constitution ' occur, while they are omitted from cl.
(3) is a strong indication that the latter clause was not intended to be so subject.
[528 E H).
(vii) When there is a conflict between a privilege conferred on a House by the second part of article 194(3) and a fundamental right that conflict has to be resolved as in Sharma 's case by harmonising the two provisions.
Harmonious construction means that both the provisions should be given maximum effect without one of them wiping out the other.
In the instant case the conflict was between the privilege of the House to commit a person for contempt without that committal being liable to be examined by a court of law, and the personal liberty of a citizen guaranteed by article 21 and the right to move the courts in enforcement of that right under article 32 or article 226.
If the right to move the courts in enforcement of the fundamental right is given precedence, the privilege which provides that if a House commits a person by a general warrant that committal would not be reviewed by courts of law, will lose all its effect and it would be as if the privilege had not been granted to a House by the second part of article 194(3).
This was not harmonious construction.
That being so, it would follow that when a House commits a person for contempt by a general warrant that person would have no right to approach the courts nor can the courts sit in judgment over such order of committal.
[533 G H, 534 A C].
Observation of Lord Ellenborough C. J. in Burdett vs Abbott, referred to for possible exceptions to the rule.
[534 C D].
(viii) The Lucknow Bench was not apprised of the fact that the detention of Keshav Singh was under a general warrant, and till so apprised it had full competence to deal with the petition under article 226.
It was not necessary in the present reference to decide the question whether in a habeas corpus petition where the commitment is for contempt the law permits release on bail, because the Reference was not meant to seek an answer to that question.
No contempt was committed by the Hon 'ble Judges or B. Solomon or Keshav Singh for the respective parts taken by them in connection with the petition as it did not appear that any of those persons knew that the commitment was under a general warrant.
Since they were not guilty, it was not competent for the Assembly to order their production in custody.
Strictly speaking, the question as to bringing them in custody before the House did not arise on the facts of the case as the Assembly had modified its resolution in that regard.
The Assembly was competent to ask for explanation from the two Judges and B. Solomon.
As it had power to cormorant for contempt it necessarily had power to ascertain facts concerning the contempt.
The Full Bench was competent to entertain the petition of the two Judges and B. Solomon Advocate if on the facts of the case they could not be said to be guilty.
It would follow that the Full Bench had the power to pass the interim orders it did.
On the facts of the case, a Judge of a High Court who entertains or deals with a petition challenging any order or decision of a Legislature imposing any penalty on the petitioner or issuing any process against the petitioner for its contempt or for infringement of its privileges and immunities or who passes I any order on such a petition does not commit contempt of the said Legislature, and the said Legislature is not competent to take proceedings against such a Judge in the exercise and enforcement of its powers, privileges and immunities.
[534 D; 537 D].
(ix) During the fourteen years that the Constitution has been in operation, the Legislatures have not done anything to justify the view that they do not deserve to be trusted with power.
Though article 211 is 423 not enforceable the Legislatures have shown an admirable spirit of restraint and have not even once in all these years discussed the conduct of Judges.
We must not lose faith in our people, must not think that the Legislatures Would misuse the powers given to them by the Constitution or that safety lay in judicial correction.
Such correction may do more harm than good.
In a modern State it is often necessary for the good of the country that parallel powers shoul exist in different authorities.
It is not inevitable that such powers will clash.
[541 C E]. |
Appeal No. 78 of 1952.
Appeal from the Judgment and Order dated the 17th January, 1951, of the High Court of Judicature at Calcutta (Harries C.J. and Banerjee J.) in its Special Jurisdiction (Income tax) in Income tax Reference No. 50 of 1950.
C.K. Daphtary, Solicitor General for India (G. N. Joshi, with him) for the appellant, 26 190 N. C. Chatterjee (section C. Majumdar, with him) for the respondent.
October 8.
The Judgment of the Court was delivered by DAS J.
This is an appeal from the judgment and order of a Bench of the Calcutta High Court delivered on a reference made by the Income tax Appellate Tribunal under section 21 of the Excess Profits Tax Act, 1940, read with section 66(1) of the Indian Income tax Act, whereby the High Court answered in the affirmative the question of law referred to it.
The question referred was: "Whether in the facts and circumstances of these cases, the Income tax Appellate Tribunal was right in holding that the directors of the respondent company had a controlling interest in it as contemplated by section 2 (21) of the Excess Profits Tax Act." The controversy arose between the parties during proceedings for assessment of excess profits tax for five chargeable accounting periods ending on the 31st December of each of the years 1939 to 1943.
The relevant facts which are not in dispute are these: The respondent company is a company incorporated in what was then British India having a capital of Rs. 3,600,000 divided into 360,000 shares of Rs. 10 each.
The Aluminium Limited, a company incorporated in Canada, held 359,790 shares in the chargeable accounting periods ending on December31, 1939, and December 31, 1940, and 359,600 shares in the chargeable accounting periods ending on December 31, 1941, December 31, 1942, and December 31, 1943.
In exercise of the power given to it by article 105 of the articles of association of the respondent company, the Aluminium Ltd. appointed three permanent directors on the board of directors of the respondent company.
Two of these directors eventually retired and only one, namely, Mr. L. G. Bash continued to be a director of the respondent company nominated by the Aluminium Ltd. Mr. L. G. Bash and the other directors had between them during the chargeable 191 accounting periods ending on December 31, 1939, and December 31, 1940, only 210 shares and in the chargeable accounting periods ending on December 31, 1941, December 31, 1942, and December 31, 1943, 400 shares, Mr. L. G. Bash not having a single share during these last mentioned chargeable accounting periods.
By a resolution passed by the directors of the Aluminium Ltd., Mr. L. G. Bash was appointed to vote and/or from time to time to appoint a special or general proxy to vote for and on behalf of the Aluminium Ltd. in respect of the shares held by it in the respondent company at all ordinary or extraordinary general meetings of the shareholders of the respondent company.
Article 90 of the articles of association of the respondent company provides: "90.
Where a company registered under the provisions of the Indian Companies Act or not is a member of this company a person duly appointed to represent such company at a meeting of this company in accordance with the provisions of section 80 of the Indian Companies Act, 1913, shall not be deemed to be a proxy but shall be entitled to vote for such company on a show of hands and to exercise the same power on behalf of the company which he represents as if he were an individual member of this company including the power to appoint a proxy whether special or general and the production at the meeting of a company of such resolution appointing such representative duly signed by one director of such company and by the secretary (if any) and certified by them or him as being a true copy of the resolution shall on production at the meeting be accepted by this company as sufficient evidence of the validity of his appointment." Mr. L. G. Bash has at all material times been exercising the powers conferred by the above article as the representative of the Aluminium Ltd. The claim of the respondent company was that it should be regarded as a company the directors whereof had a controlling interest therein, inasmuch as Mr. L. G. Bash, one of the directors, had the I authority to exercise the voting power of the Aluminium Ltd. and, 192 as such, could control the affairs of the respondent company and that in computing the standard profits the statutory percentage should be taken at 10 per cent.
per annum and not at 8 per cent per annum.
This contention was rejected by the Excess Profits Tax Officer.
On appeal by the respondent company the Appellate Assistant Commissioner of Excess Profits Tax upheld the decision of the Excess Profits Tax Officer.
The respondent company thereupon appealed to the Incometax Appellate Tribunal "which reversed the decision of the Appellate Assistant Commissioner observing that in view of the power of attorney that was given to Mr. L. G. Bash by the Aluminium Ltd. there was no room for doubt that the respondent company, which was then the appellant before the Tribunal, was a director controlled company.
On the application of the Commissioner of Income tax, the Appellate Tribunal referred the question of law herein before set out.
By its judgment dated the 11th January, 1951, the High Court of Calcutta has answered the question in the affirmative.
The Commissioner of Excess Profits Tax, West Bengal, has now come up on appeal to this court with a certificate under section 66 A (2) of the Indian Income tax Act.
In common parlance a person is said to have "a controlling interest" in a company when such a person acquires, by purchase or otherwise, the majority of the vote carrying shares in that company, for the control of the company resides in the voting powers of its shareholders.
In this sense, the directors of a company may well be regarded as having "a controlling interest" in the company when they hold and are entered in the share register as holders of the majority of the shares which, under the articles of association of the company, carry the right to vote.
[See Glasgow Expanded Metal Co., Ltd. vs Commissioners of Inland Revenue (1) and Commissioners of Inland Revenue vs B. W. Noble(2)].
It is not, however, necessary that in order to have "a Controlling interest" the person or persons who hold the majority of the votecarrying shares must have a beneficial interest in the (1) (2) 193 shares held by them.
These persons may hold the shares as trustees and may even be accountable to their beneficiaries and may be brought to book for exercising their votes in breach of trust, nevertheless, as between them as shareholders and the company, they are the shareholders, and as such, have "a controlling interest" in the company.
[See Inland Revenue Commissioners vs J. Bibby & Sons Ltd.(1) and Commissioner of Income tax vs Bipin Silk Mills Ltd. (2)].
According to the facts found in the statement of the case the directors of the respondent company do not themselves hold the majority of shares which, on the contrary, are registered in the name of the Aluminium Ltd. and, therefore, according to the principles discussed above, they cannot be said to have "a controlling interest" in the respondent company.
Learned counsel for the respondent company, however, contends, on the analogy of the reasonings adopted by the House of Lords in British American Tobacco Co. Ltd. vs Commissioners of Inland Revenue(3) that although Mr. L. G. Bash does not hold the majority of shares and has no beneficial interest in the shares held by the Aluminium Ltd. in the respondent company and although he may be bound to cast the votes according to the directions of his principals, the Aluminium Ltd., and may be answerable to the latter if he acts in breach of his duty, nevertheless, as long as his authority is not revoked, as far as the respondent company is concerned, tile, majority of its vote carrying shares are subject, directly or indirectly, to his will and ordering and, therefore, the directors of the respondent company in fact control its affairs at general meetings and as such have " a controlling interest " therein, no matter by what machinery or means that result has been effected.
This line of argument found favour with the Appellate Tribunal and the High Court.
We are unable, with all respect, to accept this argument as sound, for this argument appears to us to oversimplify the position.
Assuming, but without, expressing any final opinion as (1) [1946] 14 I.T.R. (Suppl.) 7; [1945] I All E.R. 667; , (2) ; (3) ; 11 I.T.R. (Suppl.) 29; , 194 to, the correctness of the decision in the last mentioned case, we have no doubt that the analogy is inapt, for the principle of that decision can have no application to the case before us.
In the case of directors, who hold the majority of shares as trustees they, so far as the company is concerned, are the registered shareholders and the right to vote is vested in them, although as between them and their beneficiaries the beneficial interest is vested in the latter.
They are the registered holders of the shares and the votes they cast are their own votes.
That case is entirely different from the case of directors who are only the agents of the holders of the majority of shares.
When a shareholder holding the majority of shares authorises an agent to vote for him in respect of the shares so held by him, the agent acquires no interest, legal or beneficial, in the shares.
The title in the shares remains vested in the shareholder.
The shareholder may revoke the authority of the agent at any time.
In spite of the appointment of the agent the shareholder may himself appear at the meeting and cast his votes personally.
Therefore, the shares being always subject to his will and ordering, the controlling interest which the holder of the majority of shares has never passes to the agent.
Let us take the facts of the present case.
Under article 90, when Mr. L.G. Bash as agent of the Aluminium Ltd. attends a general meeting of the respondent company he has to produce the resolution of his principals authorising him to cast the votes of his principals.
The votes he casts are not his votes but are the votes of the Aluminium Ltd. In such a situation, in the eye of the law, the controlling interest remains vested in the Aluminium Ltd. and is at no time vested in Mr. L. G. Bash.
The shares in question which give the controlling interest are neither held by Mr. L. G. Bash nor are they subject, directly or indirectly, to his will and ordering, and, therefore, he cannot, applying either of the tests mentioned above, be said to have a controlling interest.
The decision of the Court of Appeal in Commissioners of Inland Revenue vs Jamed Hodgkinson (Salford) Ltd.(1) (1) 195 appears to us to be apposite.
It is unfortunate that the last mentioned case was not brought to the notice of the High Court before the judgment under appeal was delivered.
Dissent has been expressed in the judgment under appeal from the recent decision of the Bombay High Court in New Shorrock Spinning and Manufacturing Co. Ltd. vs Commissioner of Income tax, Bombay(1).
The facts of that case are entirely different from the facts of the case before us and that decision has no manner of application to the present case.
It is, therefore, unnecessary for us to discuss or express any opinion as to whether the observations to be found in the judgment in that case are or are not well founded.
For reasons stated above, we accept this appeal and hold that the answer to the question referred by the Appellate Tribunal to the High Court should be in the negative.
The respondent company must pay the costs of the appellant in this court as well as in the High Court.
Appeal allowed. | Ordinarily a company will be a, "company, the directors whereof have a controlling interest therein" for the purposes of the Excess Profits Tax Act, 1940, only if the directors thereof hold, and are entered in the share register as holders of, a majority of the vote carrying shares of the company.
It is not necessary that they must have a beneficial interest in such shares, but the mere fact that one of the directors of the company has been authorised by another company which held a majority of shares in the former company, to vote on its behalf in respect of the shares held by it, will not make the former company a director controlled company.
Glasgow Expanded Metal Co. Ltd. vs Commissioners of Inland Revenue , Commissioners of Inland Revenue vs B. W. Noble , Inland Revenue commissioners V. ,T. Bibby and Sons Ltd. (14 I.T.R. Suppl 7, , Commissioner of Income tax vs Bipin, Silk Mills Ltd. and Commissioners of Inland Revenue vs Hodgkinson (Salford) Ltd. relied on.
British American Tobacco Co. Ltd. vs Commissioners of Inland Revenue ([1943] A.C. 335) and New Shorrock Spinning and Manufacturing Co. Ltd. vs Commissioner of Incometax, Bombay distinguished. |
Appeal No. 464 of 1964.
Appeal by special leave from the Award dated the September 29, 1962 of the Third Industrial Tribunal in Case No. VIII 197 of 1960.
A. V. Viswanatha Sastri, Anand Prakash and D. N. Gupta, for the appellant.
N. C. Chatterjee, D. L. Sen Gupta and Janardan Sharma, for the respondent.
140 The Judgment of the Court was delivered by Hidayatullah, J.
The Dunlop Rubber Co. Ltd. was granted on January 21, 1963 special leave to appeal against the award of the Third Industrial Tribunal, West Bengal dated September 29, 1962.
By that award the Tribunal set aside the dismissal from service of twelve workmen of the Company and ordered their reinstatement with continuity of service but awarded only 25 per cent of the back wages etc.
during the period they were out of employment treating the period as leave.
This dispute was referred by the Government of West Bengal on July 20, 1960 under section 10 of the .
The workmen were dismissed after a domestic enquiry commenced on February 4, 1960 which was carried on exparte because these workmen did not choose to be present.
The Tribunal held that the enquiry was not proper and some of the witnesses were re examined before the Tribunal whose verdict was against the Company and hence this appeal.
Eleven of these workmen belonged to what is known as the Dual Auto Mill and the twelfth was working on what is described as the Baby Mill.
These workmen and several others stopped work from January 21, 1960 and they were placed under suspension on 25/27th January.
Ten other workmen were also dismissed but they were taken back on the intercession of the Government of Bengal.
The incident arose in the following circumstances : In the processing of rubber which is used in the manufacture of rubber goods by the Company, a number of departments have to work in sequence.
The Banbury Section prepares a mixture of rubber and chemicals and it is passed on to the Dual Auto Mill which, after further processing, turns out blocks of rubber called "batches".
Each batch is of about 1250 lbs.
There were at the material time two Dual Auto Mills and they were working in three shifts and as each auto mill required the attendance of two workmen, twelve such workmen were employed to look after the two mills.
Each shift was of 8 hours with half an hour 's rest for meals and an extra 20 minutes for emergencies.
It was expected to produce and was, in fact, producing 17 batches till January 12, 1960.
There was another mill called the Baby Mill but what it was used for is not quite clear on the record of the case.
One of the dismissed workmen (section R. Sen Gupta Check No. 252 was working on the Baby Mill and he was a protected worker.
The workmen in this Company are grouped under three Unions : the most numerous is Union No. 4145 which goes under the name of Dunlop Workers ' Union.
This Union was registered 141 but it was not recognised by the Company.
Another Union which bears No. 729 and goes under the, name of Dunlop Rubber Factory Labour Union was recognised by the Company.
We need not refer to the third Union which does not figure in these proceedings.
It appears that Union No. 4145, which came into existence in 1957, managed to capture all the elective seats open to the workmen by defeating the candidates set up by Union No. 729.
There was great rivalry between the two Unions and the dismissed workmen belonged to Union No. 4145.
It appears that Union No. 4145 had raised a demand for revision of wages etc.
which was being resisted by the Company.
The Baby Mill, the Banbury Mill and the Dual Auto Mills were manned by the workmen belonging to Union No. 4145, except one Raghunandan Das, Check No. 100, who belonged to Union No. 729 and was teamed with Chandramma Chaube one of the dismissed workmen.
Raghunandan Das was absent on leave from January 12 to January 19, 1960.
From January 12, there was a fall in the output of the Dual Auto Mills at all the three shifts.
The number of batches fell from 17 to 15 and later still further.
On January 15, 1960 warnings were issued to these workmen that they were going slow and that "go slow" action was misconduct under cl.
10(XVI) of the Company 's Standing Orders for operators and under cl.
18(C) of the Labour Union Agreement for operators.
They were told that if they did not immediately return to their normal output the Company would be forced to take disciplinary action against them.
All the workmen were served with such letters.
On January 19, Raghunandan Das joined his duties and was teamed again with Chandramma Chaube.
It seems that Raghu nandan Das found that Chandramma Chaube was not giving the full output and was taking more than the required time over the mixing operations.
Chandramma Chaube 's case, on the other hand, was that Raghunandan Das was not allowing sufficient technical time for the mixtures and he (Chandramma Chaube) was objecting to it.
It may be pointed out that the workmen were.
paid extra if they turned out more than the expected quota of batches and Raghunandan Das was anxious to earn more, if possible.
Be that as it may, it seems that these two workmen quarreled on January 21 and Raghunandan Das abused Chandramma Chaube and also Union No. 4145.
Immediately the members of 4145 Union threatened to stop work unless Raghunandan Das was removed from the Dual Auto Mill and transferred to another Department.
The officers of the Company promised an enquiry 142 but asked the workmen to go back to work.
The workmen belonging to the 4145 Union refused to do this.
As a result the Dual Auto Mills either remained closed or worked much below their capacity.
The workmen were again and again requested and ultimately on 25/27th January they were called to the office so that they could be served with charge sheets.
They declined to accepted the charge sheets and were there and then placed under suspension.
The suspended workmen included these twelve workmen and ten others as already stated.
One Mr. P. K. Maitra commenced enquiry into the charges in the presence of Mr. R. M. Bhandari, an observer.
At the commencement of the enquiry each of the workmen asked for a representative of Union No. 4145 who was "conversant with the art of cross examination" to be present.
Under the Standing Orders of this Company representation could only be by a member of a recognised Union but as Union No. 729 was anathema to the members of Union No. 4145 they would not avail of the services of any member of that Union.
They elected to remain absent except section R. Sen Gupta who, though their leader, appeared at the enquiry against himself and made a statement clearing himself but took no further part in the enquiry.
As a result of the enquiry, which was ex parte, Mr. Maitra held that these workmen were going slow and that they were guilty of the charge brought against them.
He recommended the punishment of dismissal.
The Company accordingly ordered their dismissal seeking at the same time the permission of the Tribunal under section 33 of the and tendering one month 's wages to each workman.
Later, the Government of West Bengal took interest in the matter and at the intercession of the Government the Company agreed to take back 10 of the workmen leaving it to Union No. 4145 to select the persons who should be taken back.
All the workmen of the Banbury Mill were taken back and the 1 1 workmen of the Dual Auto Mill and Sen Gupta of the Baby Mill remained dismissed.
The Tribunal in reaching the conclusion that the dismissal was improper and that the workmen should be reinstated held that the Company had not really charged the workmen with "go slow" action but had found them guilty of that charge.
It held that the Company was showing favours to Union No. 729 and was trying to put down the Union of the dismissed workmen.
The Tribunal, however, held that the stoppage of work by the workmen amounted to strike as there were proceedings pending before the Tribunal, but since the strike was peaceful and non 143 vident it was only technically illegal.
The Tribunal blamed the Company for contributing to the strike by its refusal to shift Raghunandan Das from his place of work.
In view of these findings the Tribunal held that the punishment of dismissal was not justified and the order now impugned was accordingly passed.
The Tribunal was wrong in almost all its conclusions.
It was wrong in holding that the workmen were not charged with "go slow" action and therefore could not be dismissed on the finding that they were guilty of "go slow".
Under the Standing Orders of the Company "go slow" is a major misconduct.
Clauses (VIII) and (XVI) of Standing Order 10 deal with insubordination or disobedience or failure whether alone or in combination with others, to carry out any lawful and reasonable or proper order of a Superior (cl. VIII) and engaging or inciting others to engage in irregular or unjustified or illegal strikes; malingering or slowing down of work (cl. XVI).
The charge sheet stated as follows : "You are hereby asked to show cause why disciplinary action should not be taken against you for the following misconduct under Operators Standing orders Clauses 10(VIII) and (XVI).
The two clauses of Standing Order 10, as pointed out above, deal with insubordination and inter alia with going slow.
It was contended before us that the words "go slow" did not figure in this charge as they did in the charges against workmen in the Banbury AM.
It is to be remembered that on January 15, 1960 these workmen had been expressly warned that they were going slow and that "go slow" action was misconduct under cl.
10(XVI) of the Company 's Standing Orders for Operators.
No doubt Mr. Lobo, who drew up the charge, had not mentioned go slow in these charges as he had done in the charges framed against the workmen of the Banbury Mill, but it is nevertheless clear that these charges refer to go slow and indeed the workmen in their replies to the charge denied that they were going slow.
It may be pointed out that Mr. Lobo had stated before the Enquiry Officer that the charge was "go slow".
The log books also showed that from January 12, 1960 against the Dual Auto Mills the remark was "slow work".
It is clearly established by the records produced that instead of 17 batches 15 batches or less were turned out at each shift.
This proves that there was a deliberate "go 144 slow" no sooner Raghunandan Das left on leave and the Dual Auto Mills came into the exclusive hands of Union No. 4145.
This Union thought that the opportunity was too good to be wasted to force their demand for increase of wages by the tactics of "go slow".
The explanation of the workmen that the mixture received from the Banbury Mill was too cold and had to be reheated before it could be processed in the Dual Auto Mills was false.
They attributed the cooling of the mixture to the working of a new machine called the festooner from the 12th of January.
It is clear that this machine was tried for three months before it was put into operation and had worked for three months prior to January 12, 1960 and so such complaint had been made by the workmen.
It is possible that the Banbury Mill operators, who were also suspended and dismissed, were cooling the mixture unduly by means of their blower to delay operation.
But whether the Banbury Mill cooled it and the Dual Auto Mills were required to reheat it or the Dual Auto Mills delayed the operations, it is clear that the motivating force behind it was the action of Union No. 4145 to force the hands of the Company in support of their demands.
It is sufficient to say that after the new workmen had got trained in the working of the Dual Auto Mills the production again reached the same number of batches and after the figure was even better though the festooner continued in operation.
We are satisfied that the workmen were going slow from January 12, 1960, that the charge of "go slow" was incorporated in the charge sheet read with the warning letter and that it was fully substantiated.
This amounted to misconduct under Standing Order No. 10 and was not a minor offence as contended before us by their learned counsel.
The minor offences deal with conduct of a very different kind.
The Tribunal was also wrong in thinking that there was a denial of natural justice because the workmen were refused the assistance of a representative of their own Union.
Under the Standing Orders it is clearly provided that at such enquiries only a re presentative of a Union which is registered under the Indian Trade Union Act and recognised by the Company can assist.
Technically, therefore, the demand of the workmen that they should be represented by their own Union could not be accepted.
It has been ruled by this Court in Kalindi & Ors.
vs Tata Locomotive & Engineering Co. Ltd.(1) and Brook Bond India (P) Ltd. vs Subba Raman(2) that there is no right to representation as such unless the Company by its Standing Orders recognises such a right.
(1)[1960] 3 S.C.R. 407.
(2) 145 Refusal to allow representation by any Union unless the Standing Orders confer that right does not vitiate the proceedings.
It is true that only the rival Union was recognised and there was hostility between the two Unions.
The quarrel itself which sparked off the strike was also between two representatives of the rival Unions.
In such circumstances it is idle to expect that these workmen would have chosen to be represented by a member of the rival Union and the Company might well have considered their demand to be represented by any other workman of their choice.
The workmen, however, insisted that the representation should be in the capacity of a representative of their own unrecognised Union.
In other words, they were desiring recognition of their Union in an indirect way.
The dispute, therefore, was carried on by these workmen with the twin object of achieving their demand for increased wages and also for the recognition of their Union.
The implication of their demand that they should be represented by a member of their own Union was not lost upon the Company and the refusal to allow representation on these terms cannot be characterised as a denial of natural justice or amounting to unfair play.
If the Company had been asked that the workmen wished to be represented by a workman of their own choice without the additional qualification about Union No. 4145 it is possible that the Company might have acceded to the request.
We think, the Company might have asked the workmen to delete all reference to Union No. 4145 and allowed them to have a representative of their own choice in the special circumstances of this dispute.
But we cannot say that the action of the Enquiry Officer was for that reason illegal or amounted to a denial of natural justice.
In this connection, we have repeatedly emphasised that in holding domestic enquiries, reasonable opportunity should be given to the delinquent employees to meet the charge framed against them and it is desirable that at such an enquiry the employ should be given liberty to represent their case by persons of their choice, if there is no standing order against such a course being adopted and if there is nothing otherwise objectionable in the said request.
But as we have just indicated, in the circumstances of this case, we have no doubt that the failure of the Enquiry Officer to accede to the request made by the employees does not introduce any serious defect in the enquiry itself, and so, we have no hesitation in holding that the result of the said enquiry cannot be successfully challenged in the present proceedings.
146 It follows that the two main reasons for interfering with the order of dismissal do not really exist.
The charge was under cls.
(VIII) and (XVI) of Standing Order No. 10.
It said so and its meaning was quite clear to the workmen who, according to plan, were definitely going slow from January 12, 1960 when the Dual Auto Mills passed into the control of workmen belonging to Union No. 4145.
The demand of the workmen, couched as it was, could not be granted by the Enquiry Officer, because the Standing Orders did not permit representation by a member of any but a recognised Union.
The additional reasons given by the Tribunal that later the demands of this Union were accepted in respect of wages can hardly justify the action of these workmen in going on an illegal strike and in declining to resume work unless what they demanded was done.
There was thus justification for the order passed by the Company.
It is on record that the Dual Auto Mills perform a key operation and no rubber goods can be produced without the batches being available.
By their action these workmen slowed down production of every category and by their refusal to work when asked to g0 back to work cause enormous loss to the Company.
The motive underlying the action is more deep seated than a mere quarrel between Chandramma Chaube and Raghunandan Das or the abuses which Raghunandan Das is alleged to have showered on Chandramma Chaube and his Union.
It is contended that there was discrimination between the Banbury Mill and the Dual Auto Mills because workmen of the Banbury Mill were reinstated but not the workmen of the Dual Auto Mills.
The discrimination, if any, was made by Union No. 4145 which nominated those who should be taken back in service.
There must be some reason why the Banbury Mill workmen were treated differently and if we are to hazard a guess, it seems that those workmen were not sending out a cold mixture as alleged but that the Dual Auto Mill workmen were taking more time on their own operation.
The production was slowed down not by the Banbury Mill operators but by the Dual Auto Mill operators.
In other words, the Banbury Mill workmen, though they joined in the strike, did not probably join in the "go slow", but the Dual Auto Mill workmen not only started "go slow" but also led the strike affecting a large number of workmen.
In any event the workmen chosen for reinstatement '.
were chosen by their own Union and it cannot be said that the Company made any discrimination.
We are satisfied that in this case the Tribunal was not justified in interfering.
It has acted as a court of appeal in scrutinizing the evidence and in reaching conclusions of its own.
We are also 147 satisfied that the conclusions reached by it were not justified on the evidence in the case.
In these circumstances, we think that the order passed by the Tribunal should be vacated and the order passed by the Company ought to be accepted.
It is a pity that these workmen, who, on their own admission were better paid than in any other Organisation should lose their job in an attempt to get an indirect recognition of their Union.
But it cannot be helped because the Company must have a free hand in the internal management of its own affairs.
No outside agency should impose its will unless the action of the Company is lacking in bona fides or is manifestly perverse or unfair.
There is nothing to indicate this.
At the same time we must say that existence of Union No. 4145 which has a larger membership than Union No. 729 which is the only recognised Union, has in a great measure contributed to this dispute.
We have often noticed that Companies favour one Union out of several and thus create rivalry which disturbs industrial peace.
It often turns out that this has adverse effect on Company itself.
Since Union No. 729 was formed in 1950 and Union No. 4145 in 1957 we cannot say that the non recognition of Union No. 4145 was deliberate.
But as that Union seems to be the stronger of the two Unions the Company should seriously consider whether Union No. 4145 should not also be recognised.
The appeal must succeed.
It will be allowed but we make no order about costs.
Appeal allowed. | The appellant company dismissed some workmen after a domestic enquiry holding them guilty on a charge of 'go slow ' action.
The respondents raised an industrial dispute.
The Industrial Tribunal found that the dismissal of the respondents could not be sustained as there was no specific mention of 'go slow ' in the charge.
Further it found that there was denial of natural justice at the enquiry as the workmen were not allowed to be represented by a person of their choice.
The Tribunal set aside the dismissal of the respondents and ordered their reinstatement.
The company appealed to the Supreme Court by special leave.
HELD : (i) The charge specified cls.
10(vii) and (xvi) of the Operators Standing Orders.
These clauses deal with insubordination and, inter alia, with 'go slow '.
The workmen had been expressly warned by notice that they were "going slow" and in their reply to the charge they denied that they were going slow.
The Tribunal was thus wrong in holding that the workmen were not charged with 'go slow ' action and could not be found guilty of that charge.
[143 B C, G H] (ii) 'Mere was no denial of natural justice because the workmen asked to be represented by a member of a union which was not recognised The Standing Orders clearly provided that only a representative of a union which is registered under the Trade Union Act and recognised by the company can assist. 'Mere was no right to representation as such unless the company by its Standing Order recognised such a right.
[144 F G, H] Kalindi & Ors.
vs Tata Locomotives & Engineering Co. Ltd.[1960]3 S.C.R. 407 and Brook Bond India (P) Ltd. vs Subba Raman , relied on. |
l Leave Petition (Civil) No. 890 of 1964.
Petition for special leave to appeal to the Supreme Court from the judgment and decree dated December 16, 1963 of the Rajasthan High Court in Civil First Appeal No., 54 of 1956.
Mukat Behari Lal Bhargava, Zalim Singh, Meeratwal and Naunit Lal, for the petitioner M. C. Setalvad, and I. N. Shroff, for the respondent.
The Judgment of the Court was delivered by Shah, J.
The petitioner applies for special leave to appeal under article 136 of the Constitution, against the judgment of the High Court of Rajasthan dated December 16, 1963 in Civil First Appeal No. 54 of 1956 on two grounds (1) that the judgment of the High Court involves a claim or question respecting property of not less than Rs. 20,000 in value, and the High Court erred in refusing a certificate under article 133(1) (b) of the Constitution; and (2) that the case is otherwise fit for appeal to the Supreme Court.
The material facts bearing on the plea raised are these.
The petitioner commenced on July 2, 1951 in the Court of the Subordinate Judge, First Class, Ajmer an action against the respondents claiming a decree for Rs. 10,665 and for rendition of accounts in respect of the balance of sale proceeds of 104 bales of cotton purchased by him through the agency of the respondents.
The petitioner claimed that 104 bales of cotton purchased by him were sold by the respondents as his agents on May 14, 1948 for Rs. 27,267/13/6 and without settling the account the respondents delivered towards that amount a demand draft for Rs. 11,000 which was encashed and four cheques of the aggregate value of Rs. 13,000 which because of lack of arrangement with the respondents ' bankers were not encashed, and the petitioner on that account was entitled to receive from the respondents Rs. 10,665 being the amount due on the foot of dishonoured cheques and interest thereon at the rate of 6% per annum between July 2, 1947 to July 1, 1951, less Rs. 4,000 subsequently received by him.
The petitioner also claimed a decree for the balance of the price.
753 after giving credit for commission, dalali and godown charges incurred by the respondents as his agents and as he was not in a "position to know" the amounts due to or disbursed by the respondents, he claimed a decree for rendition of account.
The subject matter of the suit was, therefore, a claim for Rs. 10,665 due to the petitioner on a cause of action arising on cheques dishonoured and a claim for the balance of the price due as may be ascertained on taking accounts.
The trial Court passed a decree directing that account be taken for ascertaining the amount due in respect of the entire transaction of 104 bales and for taking accounts appointed a Commissioner.
The High Court of Rajasthan reversed the decree passed by the Trial Court and dismissed the suit, holding that the transactions in respect of which the claim was made by the petitioner were those of an unregistered firm constituted by the petitioner and another person named Duli Chand and the suit was barred because the firm was not registered.
An application filed by the petitioner for certificate under article 133 of the Constitution was rejected by the High Court.
The judgment of the High Court proceeds entirely upon appre ciation of evidence and on the findings recorded the petitioner 's suit must stand dismissed.
But counsel for the petitioner urged that the judgment of the High Court directly involves a claim or question respecting property of value not less than Rs. 20,000 and he was entitled as a matter of right to a certificate from the High Court under article 133(1) (b) of the Constitution.
This argument is sought to be presented in two ways.
It is urged in the first instance that the judgment of the High Court involves a question relating to the right of the petitioner respecting 104 bales of cotton belonging to him and sold by the respondents for an amount exceeding Rs. 27,000.
Secondly, it is urged that pursuant to the order of the Trial Court a Commissioner was appointed and the Commissioner reported that Rs. 12,089/14/6 with interest at the rate of 6% per annum from May 14, 1948 were due to the petitioner and as the amount due to the petitioner on that footing was not less than Rs. 20,000 at the date of the decree of the High Court, the judgment of the High Court involved a claim respecting property of that amount or value.
In our view the contention raised by the petitioner under either head has no substance.
It is conceded, and in our judgment counsel is right in so conceding, that the petitioner could not seek a certificate under cl.
(a) 754 of article 133(1).
The claim in the court of first instance did not Teach Rs. 20,000 and one of the conditions for a certificate under that clause being absent, the claim could not be maintained.
To attract the application of article 133(1) (b) it is essential that there must be omitting from consideration other conditions not material a judgment involving directly or indirectly some claim or question respecting property of an amount or value not less that Rs.20,000.
The variation in the language used in cls.
(a) and (b) of article 133 pointedly highlights the conditions which attract the application of the two clauses.
Under cl.
(a) what is decisive is the amount or value of the subject matter in the court of first instance and "still in dispute" in appeal to the Supreme Court: under cl.
(b) it is the amount or value of the property respecting which a claim or question is involved in the judgment sought to be appealed from.
The expression "property" is not defined in the Code, but having regard to the use of the expression "amount" it would apparently include money.
But the property respecting which the claim or question arises must be property in addition to or other than the subject matter of the dispute.
If in a proposed appeal there is no claim or question raised respecting property other than the subject matter, cl.
(a) will apply : if there is involved in the appeal a claim or question respecting property of an amount or value not less than Rs. 20,000 in addition to or other than the subject matter of the dispute cl.
(b) will apply.
In the present case the subject matter in dispute was a claim for money.
A part of that claim was definite and the rest was to be ascertained on taking accounts.
The judgment did not involve any claim or question relating to property in addition to or other than the subject matter in dispute of the value of Rs. 20,000.
It was admitted by the petitioner in his plaint that the bales of cotton were sold by the respondents as his agents.
The right of the respondents to sell the bales was not in dispute.
what was challenged was the right of the respondents to retain the price received by them.
It cannot be said that a judgment dealing with a claim to money alleged to be due from an agent for price of property belonging to the principal sold by the agent either directly or indirectly involves a claim or question respecting property which is sold.
Nor does the alternative ground assist the petitioner.
It is true that by his petition the petitioner claims restoration of the decree of the Trial Court, and by adding interest at the rate of 6% per annum to the petitioner 's claim as awarded under the report 755 of the Commissioner, the claim of the petitioner on appeal exceeds Rs. 20,000.
But this is still the subject matter in dispute : the Judgment does not involve any claim or question respecting property in addition to or other than the subject matter of the suit.
The petition therefore fails and is dismissed with costs.
Petition dismissed. | The petitioner filed a suit in the court of the Sub Judge claiming a decree for Rs. 10,665 and any balance ascertained as due to him on taking account, being proceeds of sales made by the respondents as the petitioner 's agents.
The trial court passed a decree directing that an account be taken of the amount due and appointed a Commissioner for the purpose.
In appeal the High Court reversed the decree and dismissed the suit.
An application filed by the petitioner for a certificate under article 133 was rejected by the High Court.
Upon a petition for special leave to appeal tinder article 136, it was contended on behalf of the petitioner, that the judgment of the High Court involved a claim or question respecting property of a value exceeding Rs. 20,000 and the petitioner was entitled as a matter of right to a certificate from the High Court under article 133(1)(b).
HELD : Under cl.
(a) what is decisive is the amount or value of the subject matter in the court of first instance and "still in dispute" in appeal to the Supreme Court; under el.
(b) it is the amount or value of the property respecting which a claim or question is involved in the judgment sough, to be appealed from.
The expression "property" is not defined in the Code, but having regard to the use of the expression " amount" it would apparently include money.
The property respecting which the claim or question arises must be property in addition to or other than the subject matter of the dispute.
If in a proposed appeal there is no claim or question raised respecting property other than the subject matter, cl.
(a) will apply : if there is involved in the appeal a claim or question respecting property of an amount or value not less than Rs. 20,000 in addition to or other than the subject matter of the dispute el.
(b) will apply.
[754 B E] In, the present case, the claim in the court.
of first instance did not reach Rs. 20,000, and therefore a certificate could not be granted under article 133(1)(a).
[754 A] It could not be said that a judgment dealing with a claim to money alleged to be due from an agent for price of goods belonging to the principal, sold by the agent, involved a claim or question respecting the goods which had been sold.
Furthermore, although the petitioner 's claim on appeal including interest exceeded Rs. 20,000, this was still the subject matter in dispute; the judgment did.
not involve any claim or question respecting property in addition to or other than the subject matter of the suit.
Article 133(1)(b) was, therefore, also not applicable.
[754 G H; 755 A] 752 |
iminal Appeals No,%.
79 and 89 of 1959.
Appeals by special leave from the judgment and order dated May 6,1959, of the Allhabad High Court in Criminal Appeal No. 1224 of 1957.
A. section R. Chari, B. K. Gary, D.P. Singh, section C. Agarvial and M. K. Ramamurthi, for the appellants.
G. C. Mathur and C. P. Lal for the respondent.
77 1961.
February 15.
The judgment of the Court was delivered by SUBBA RAO, J.
These two appeals are directed against the judgment of the High Court of Judicature at Allahabad dismissing the appeal preferred by the appellants and maintaining the convictions and sentences imposed on them by the learned Sessions Judge Meerut, under a. 147, section 424, section 452, section 325, read with section 149, and is.
323, read with section 149, of the Indian Penal Code.
Briefly stated the case of the prosecution is as follows: One Har Narain had obtained a decree from the court of the Additional Munsif, Ghaziabad, against one Sunehri Jogi for a sum of money.
In execution of that decree the Munsif issued a warrant for the attachment of the judgment debtor 's property.
The amin to whom the said warrant was entrusted attached, inter alia, three buffaloes and two cows, which were in the house of the judgment debtor, as his property.
The amin kept the cattle in the custody of one Chhajju, the sapurdar.
As the said sapurdar had no accommodation in his house for keeping the animals, he kept them for the night in the enclosure of the decree holder with his permission.
The next day at about 7 a. m., the nine appellants, armed with lathies, went to the enclosure of the decree bolder and began to untie two of the attached buffaloes.
The decree holder, his son and his nephew protested against the acts of the appellants whereupon the appellants struck the three inmates of the house with lathies, and when P.W. 4 intervened, they struck him also with lathies.
Thereafter, appellants 1. 2 and 3 took away the two buffaloes followed by the other appellants.
The defence version is that on June 1, 1955, at about 7 a. m. the first appellant, Tika, was taking his two buffaloes for grazing when Har Narain and 1 1 others came with the amin and forcibly snatched the said buffaloes, that when Tika objected to it, those 12 persons assaulted him with lathies, that when appellant 2, Raja Ram, came there, he was also assaulted, and that Tika and Raja Ram used their lathies in self defence.
78 The learned Sessions Judge, on a consideration of the evidence, held that the cattle were attached on the evening of May 31, 1955, and that, after their seizure, they were kept in the house of Har Narain.
The Sessions Judge disbelieved the defence version that the accused gave the beating to Har Narain and others at 11 a. m. on June 1, 1955 in self defence.
On that finding, he convicted the accused as aforesaid.
On appeal, the learned Judges of the High Court accepted the finding arrived at by the learned Sessions Judge and confirmed the convictions and the sentences passed by him on the accused, but directed the various sentences to run concurrently.
Hence the appellants have preferred these two appeals against the Judgment of the High Court.
Learned counsel for the appellants raised before us the following contentions: (1) The attachment of the buffaloes was illegal and, therefore, the appellants in taking away their own buffaloes from the possession of the decree holder did not commit any offence under section 424 of the Indian Penal Code.
(2) Even if the attachment was valid, neither the amin had any authority to keep the attached buffaloes in the custody of the sapurdar, nor the sapurdar had any power to keep them in the custody of the decree holder, and therefore the decree holder 's possession was illegal and the appellants in taking away the buffaloes did not commit any offence within the meaning of section 424 of the Indian Penal Code.
(3) The appellants also did not commit any offence under section 441 of the Indian Penal Code, as they had no intention to commit an offence or cause annoyance to the decree holder, but they entered the house of the decree holder only to recover their buffaloes from illegal custody.
(4) The appellants did not commit an offence under section 325, read with as. 147 and 149, of the Indian Penal Code, as their common object was not to cause grievous hurt to the decree holder and others, but was only to recover their buffaloes illegally detained by the decree holder.
The first two contentions may be considered together.
The material facts relevant to the said contentions may be stated.
Har Narain in execution of his 79 decree against Sunehri Jogi attached the buffaloes that were in the house of the judgment debtor.
Tika, appellant 1, filed a claim petition it is common case that subsequent to the incident his claim petition was allowed.
in the claim petition, the High Court pointed out that Tika did not question the validity of the attachment but only set up his title to the buffaloes.
Indeed, his defence in the criminal case also was not that the incident happened when the attached buffaloes were in the house of the decree holder but that the incident took place before the attachment was effected.
Before the Sessions Judge no point was taken on the basis of the illegality of the attachment.
For the first time in the High Court a point was sought to be made on the ground of the illegality of the attachment, but the learned Judges rejected the contention not only on the ground that official acts could be presumed to have been done correctly but also for the reason that the appellants did not question the legality of the attachment in the claim petition.
That apart, P.W. 1, the amin, was examined before the Sessions Judge.
He deposed that he had attached the heads of cattle from the house of the judgment debtor, Sunehri Jogi, and that he had prepared the attachment list.
He further deposed that the warrant of attachment received by him was with him.
A perusal of the cross examination of this witness discloses that no question was put to him in regard to any defects either in the warrant of attachment or in the manner of effecting the attachment.
In these circumstances, we must proceed on the assumption that the attachment had been validly made in strict compliance with all the requirements of law.
If so, the next question is, what is the effect of a valid attachment of moveables? Order XXI, rule 43, of the Code of Civil Procedure describes the mode of attachment of movable properties other than agricultural produce in the possession of the judgment debtor.
It says that the attachment of such properties shall be made by the actual seizure, and the attaching officer shall keep the attached property in his own custody or in the custody of one of his subordinates 80 and shall be responsible for the due custody thereof The relevant rule framed by the Allahabad High Court is r. 116, which reads, "Live stock which has been attached in execution of a decree shall ordinarily be left at the place where the attachment is made either in custody of the judgment debtor on his furnishing security, or in that Of some land holder or other respectable person willing to undertake the responsibility of its custody and to produce it when required by the court.
" The aforesaid rule also empowers the attaching officer to keep the animals attached in the custody of a sapurdar or any other respectable person.
Attachment by actual seizure involves a change of possession from the judgment debtor to the court; and the rule deals only with the liability of the attaching officer to the court.
Whether the amin keeps the buffaloes in his custody or entrusts them to a sapurdar, the possession of the amin or the sapurdar is in law the possession of the court and, so long as the attachment is not raised, the possession of the court continues to subsist.
Would it make any difference in the legal position if the sapurdar, for convenience or out of necessity, keeps the said animals with a responsible third party? In law the said third party would be a bailee of the sapurdar.
Would it make any difference in law when the bailee happens to be the decree holder? Obviously it cannot, for the decree holder 's custody is not in his capacity as decree holder but only as the bailee of the sapurdar.
We, therefore, hold that the decree holder 's possession of the buffaloes; in the present case was only as a bailee of the sapurdar.
But it is said that even on that assumption, appellant 1, being the owner of the buffaloes, was not guilty of an offence under section 424 of the Indian Penal Code, as he could not have acted dishonestly in trying to retrieve his buffaloes as their owner from the custody, of the court 's officer or his bailee.
This argument turns upon the provisions of section 424 of the Indian Penal Code.
The material part of a. 424 of the said Code reads: 81 "Whoever dishonestly or fraudulently removes any property of himself or any other person, shall be punished with imprisonment of either description for a term which may extend to two years, or with fine, or with both".
The necessary condition for the application of this section is that the removal should have been made dishonestly or fraudulently.
Under section 24 of the Indian Penal Code, "Whoever does anything with the intention of causing wrongful gain to one person or wrongful loss to another person is said to do that thing ,dishonestly '.
" Section 23 defines "wrongful gain" and "wrongful loss". "Wrongful gain" is defined as gain by unlawful means of property to which the person gaining is not legally entitled; and "wrongful loss" is the loss by unlawful means of property to which the person losing is legally entitled.
Would the owner of a thing in court 's custody have the intention of causing wrongful gain or wrongful loss within the meaning of a. 23 of the Indian Penal Code? When an attachment is made, the legal possession of a thing attached vests in the court.
So long as the attachment lasts or the claim of a person for the thing attached is not allowed, that person is not legally entitled to get possession of the thing attached.
If he unlawfully takes possession of that property to which he is not entitled he would be making a wrongful gain within the meaning of that section.
So too, till the attachment lasts the court or it officers are legally entitled to be in possession of the thing attached.
If the owner removes it by unlawful means, he is certainly causing wrongful loss to the court or its officers, as the case may be, within the meaning of the words "wrongful loss", In the present case when the owner of the buffaloes removed them unlawfully from the possession of the decree holder, the bailee of the sapurdar, he definitely caused wrongful gain to him.
self and wrongful loss to the court.
In this view, we must hold that appellant 1 dishonestly removed the buffaloes within the meaning of section 424 of the Indian Penal Code and, therefore, he was guilty under that ,section.
82 Now we shall proceed to consider some of the decisions cited at the Bar in support of the contention that under no circumstances the owner of a thing would be guilty of an offence under section 424 of the Indian Penal Code, if he removed it from an officer of a court, even if he was in possession of it under a legal attachment.
Reliance is placed upon the decision of the Court of Criminal Appeal in Rex.
vs Thomas Knight (1) where a prisoner, the owner of the fowls, ' took them away from the possession of the Sheriff 's officer, the court held that the prisoner was not guilty of larceny.
"Larceny if; the willful and wrongful taking away of the goods of another against his consent and with intent to deprive him permanently of his property".
There are essential differences between the concept of larceny and that of theft; one of them being that under larceny the stolen property must be the property of someone whereas under theft it must be in the possession of someone.
It would be inappropriate to apply the decision relating to larceny to an offence constituting theft or dishonest or fraudulent removal of property under the Indian Penal Code, for the ingredients of the offenses are different.
In Sarsar Singh vs Emperor (2), Bajpai, J., held that "the mere fact that the judgment debtor, who is entitled to remove his crops which are not validly attached, has removed them does not prove that he has done so dishonestly".
There the attachment was made in derogation of the provisions of Order XXI, rule 44, Civil Procedure Code; and the Court held that the attachment was illegal and, therefore, the property would not pass from the judgment debtor to the court.
It further held that under such circumstances the court could not presume that the act of removal was done dishonestly within the meaning of section 24, I.P.C. This decision does not help the appellants, as in the present case the attachment was legal.
Sen, J., in Emperor vs Ghasi (3) went to the extent of holding that the owner cutting and removing a portion of the (1) (2) (3) All 214.
83 crops under attachment in execution of a decree and in the custody of a shehna did not constitute an offence under section 424, I.P.C. The learned Judge observed at p. 216, "If they were the owners of the crop and removed the same, their conduct was neither dishonest nor fraudulent".
The learned Judge ignored the circumstance that the attachment of the crops had the legal effect of putting them in the possession of the court.
For the reason given by us earlier, we must hold that the case was wrongly decided.
In Emperor vs Gurdial (1) Pullan, J., held that the owner by removing the attached property from the possession of the custodian and taking it into his own use, did not commit an offence under section 424, I.P.C. But in that case also the attachment was illegal.
But there is a current of judicial opinion holding that where there was a legal attachment, a third party claiming to be the owner of the moveables attached would be guilty of an offence under section 424 or section 379, I.P.C., as the case may be, if lie removed them from the possession of the court or its agent.
Where a revenue court had attached certain plots and certain persons were appointed as custodians of the crop standing on the plots and accused out and removed the crop in spite of knowledge of the promulgation of the order of attachment, the Allahabad High Court held in Dalganjan vs State (2) that the removal of the crop by the accused was dishonest and that the conviction of the accused under section 379, I.P.C. was proper.
The learned Judges said, "Since the possession passed from the accused to the custodians, the cutting of the crop by the accused in March 1951 was dishonest." In State vs Rama (3) the Rajasthan High Court held that where a person takes away the attached property from the possession of the sapurdar, to whom it is entrusted, without his consent, and with the knowledge that the property has been attached by the order of a court, he will be guilty of (1) All.
119., (2) A.I.R. 1956 All.
(3) Raj.
84 committing theft, even though he happens to be the owner of the property.
Though this was a case under s.379, I.P.C., the learned Judges considered the scope of the word "dishonestly" in section 378, which is also one of the ingredients of the offence under section 424, I.P.C. Wanchoo, C. J. observed at p. 775 thus: "There is no doubt that loss of property was caused to Daulatram inasmuch as he was made to lose the animals.
There is also no doubt that Daulatram was legally entitled to keep the animals in his possession as they were entrusted to him.
The only question is whether this loss was caused to Daulatram by unlawful means.
It is to our mind obvious that the loss in this case was caused by un lawful means because it can never be lawful for a person, even if he is the owner of an animal, to take it away after attachment from the person to whom it is entrusted without recourse to the court under whose order the attachment has been made." These observations apply with equal force to the present case.
A division bench of the Allahabad High Court in Emperor vs Kamla Pat (1) considered the meaning of the word "dishonestly" in the context of a theft of property from the possession of a receiver.
Sulaiman, J., observed at p. 372 thus: "Therefore when a property has been attached under an order of a civil court in execution of a decree, possession has legally passed to the court.
Any person who takes possession o f that property subsequent to that attachment would obviously be guilty tinder section 379 of the Indian Penal Code, if he knew that the property had been attached and was therefore necessarily acting dishonestly.
" We need not multiply decisions, as the legal position is clear, and it may be stated as follows: Where a property has been legally attached by a court, the possession of the same passes from the owner to the court or its agent.
In that situation, the owner of the said property cannot take the law into his own hands, but can file a claim petition to enforce his right.
If he resorts to force to get back his property, (1) All. 368. 85 he acts unlawfully and by taking the property from the legal possession of the court or its agent, he is causing wrongful loss to the court.
As long as the attachment is subsisting, he is not entitled to the possession of the property, and by taking that property by unlawful means he is causing wrongful gain to himself.
We are, therefore, of the view that the appellants in unlawfully taking away the cattle from the possession of the decree holder, who is only a bailee of the sapurdar, have caused wrongful loss to him and therefore they are guilty of an offence under section 424,I.P.C.
The next contention turns upon the provisions of section 441 of the Indian Penal Code.
The argument is that the appellants did not commit trespass with intention to commit an offence or intimidate, insult or annoy any person in possession of such property.
A distinction is made between intention and knowledge.
It is said that the appellants did not trespass into the house of the decree holder with any such intention as mentioned in that section.
But in this case we have no doubt, on the evidence, that the appellants entered the house of the decree holder with intent to remove the attached cattle constituting an offence under section 424 of the Indian Penal Code.
The appellants are, therefore, guilty of the offence and have been rightly convicted under section 441 of the Indian Penal Code.
The last contention is that the principal object of the accused was to get back their cattle which had been illegally attached and that their subsidiary object was to use force, if obstructed, and that in the absence of a specific charge in respect of the use of force the accused should not have been convicted of what took place in furtherance of the subsidiary object.
The relevant charge reads thus: "That you, on or about the same day at about the same time and place voluntarily caused such injuries on the persons of Om Prskash, Har Narain, Jhandu and Qabul, that if the injuries would have caused the death of Har Narain, you would have been guilty of murder and thereby committed an offence under section 307 read with section 149 86 I.P.C. and within the cognizance of the court of Sessions.
" Though section 149 of the Indian Penal Code is mentioned in the charge, it is not expressly stated therein that.
the members of the assembly know that an offence under section 325 of the Indian Penal Code was likely to be committed in prosecution of the common object of that assembly.
Under section 537 of the Code of Criminal Procedure, no sentence passed by a court of competent jurisdiction shall be reversed or altered on appeal or revision on account of any error, omission or irregularity in the charge, unless such error, omission or irregularity has in fact occasioned a failure of justice.
The question, therefore, is whether the aforesaid defect 'in the charge has in fact occasioned a failure of justice.
The accused knew from the beginning the case they had to meet.
The prosecution adduced evidence to prove that the accused armed themselves with lathies and entered the premises of the decree holder to recover their cattle and gave lathi blows to the inmates of the house causing thereby serious injuries to them.
Accused had ample opportunity to meet that case.
Both the courts below accepted the evidence and convicted the accused under section 325, read with section 149, I.P.C. The evidence leaves no room to doubt that the accused had knowledge that grievous hurt was likely to be caused to the inmates of the decree holder 's house in prosecution of their common object, namely, to recover their cattle.
We are of the opinion that there is no failure of justice in this case and that no case has been made out for interference.
No other point was raised before us.
In the result, the appeals fail and are dismissed.
Appeals dismissed. | In execution of a decree the Amin attached, inter alia, two buffaloes from the house of the judgment debtor and entrusted them to the custody of a sapurdar.
As the sapurdar had no accommodation in his house for keeping the buffaloes he kept them for the night in the enclosure of the decree holder with his permission.
Early next morning the appellants armed with 76 lathies, went to the enclosure of the decree holder and began to untie the two.
buffaloes; the decree holder, his son and nephew protested whereupon they and another person, who tried to intervene, were beaten by the appellant with lathies and the two buffaloes were taken away.
Afterwards appellant No. 1 made a claim petition before the executing court and that court held that the two buffaloes belonged to him.
The appellants were convicted of offenses under sections 147, 452, 424, 325/149 and 323/149 Indian Penal Code.
They challenged their convictions on the grounds: (i) that the custody of the decree bolder over the buffaloes was illegal as neither the a minor had any authority to give them in the custody of the sapurdar nor had the sapurdar any power to keep them in the custody of the decree holder, (ii) that the appellants bad entered the enclosure of the decree holder only to recover their buffaloes and had not acted dishonestly.
Held, that the appellants were rightly convicted.
The decree holder 's possession of the buffaloes was as a bailee of the sapurdar.
Order 21, Rule 43 read with R. 116 (framed by the Allahabad High Court) empowered the amin to keep the attached buffaloes in the custody of a sapurdar.
The sapurdar could, for convenience or necessity, keep them with a third person as bailee and such third person could be the decree holder also.
Attachment involved a change of possession from the judgment debtor to the Court; and whoever was entrusted with the possession held it on behalf of the Court until the attachment was raised.
So long as the attachment lasted or the claim of a person for the thing attached was not allowed, that person was not legally entitled to get possession of the thing attached.
If he unlawfully took possession of that thing he caused "wrongful gain" to himself and "wrongful loss to the Court.
Rex vs Thomas Knight, , Sarsay Singh vs Emperor, and Emperor vs Gurdial, All. 119 distinguished.
Emperor vs Ghasi, All. 214, disapproved.
Dalganjan vs State, A.I.R. 1956 All.
630, State vs Rama, Raj 772 and Emperor vs Kamla Pat, All. 368, applied. |
ivil Appeal No. 2377 of 1987.
From the Judgment and Order dated 29.10.1986 of the Allahabad High Court in F.A. No. 493 of 1984.
J.P. Goyal, Rajesh and V.K. Verma for the Appellant.
Mrs. Rani Chhabra for the Respondent.
The Judgment of the Court was delivered by VENKATACHALIAH, J.
This appeal, in a matrimonial cause, is by the husband, and is directed against the Judgment and Decree, dated 29.10.1986, of High Court of Allahabad in First Appeal No. 493 of 1984, allowing the Respondent wife 's appeal and reversing the decree of dissolution of marriage dated 31.7.1984 granted by the Second Additional District Judge, Jhansi, in Original Suit No. 34 of 1983 of his file.
Appellant 's suit for a decree of dissolution of his marriage with the respondent on the ground envisaged in Section 13(1)(iii) of the (Act) that respondent suffered from a mental disorder of such a kind that rendered Respondent unfit for married life and that petitioner could not reasonably be expected to live with her had been decreed by the Court of first instance but dismissed by the High Court in appeal.
Appellant husband has come up by Special Leave.
The marriage between appellant, Ram Narain Gupta, and respondent, Rameshwari Gupta, was solemnised on 17.6.1979 at Jhansi.
The suit for the dissolution of the marriage was filed on 14.7.1983 on the allegation that the wife was a schizophrenic.
The High Court, while holding it probable that the wife did suffer from some such mental disorder, however, was persuaded to the view that appellant had not established the requisite extent and degree of the mental disorder recognised by law as constituting a legal justification for the dissolution of the marriage.
In the suit appellant had also alleged that the respondent was of PG NO 916 unsound mind even before the marriage and that this fact had been concealed from him at the time of the marriage.
This alternative case that the marriage was itself induced by the suppression of the material facts pertaining to the mental state of the bride and that, accordingly, the marriage required to be annuled was, however, not pressed before the High Court.
In his suit appellant pleaded that the respondent suffered from a mental disorder, psychiatrically recognised as `schizophrenia ', which was of such severeity as to render Respondent unsociable and given to violent propensities, that the wife had been treated by the doctors at the Department of Psychiatry at the Medical College, Jhansi, and that despite competent professional treatment the mental condition of respondent continued to deteriorate to the point of making manifest in her suicidal tendencies and aggressive violent behaviour towards others.
Appellant, therefore, averred that the mental disorder of the respondent was of such a kind and to such extent that appellant could not reasonably be expected to live with respondent as man and wife.
Respondent in her written statement denied the imputation of insanity and commission of several overt acts indicative of mental disorder alleged against her and contended that appellant 's determination to get rid of her was attributable to the domestic discord between her on the one side and the mother and sisters of the appellant on the other.
Indeed, she also entered the witness box to testify to and substantiate her defence.
She was subjected to searching cross examination .
The Trial Court framed the necessary and material issues stemming from the pleadings.
On his side, appellant called a certain Dr. Ganesh Datt Shukla, (PW.
l) Head of the Diptt.
of Psychiatry.
Maharani Laxmi Bai Medical College to support his version.
Appellant himself tendered evidence as PW 2.
He also examined a certain Gyasi Ram (PW 3) said to be an artisan who claimed that during one of his visits to appellant 's house for some odd job.
he had seen respondent beating up small children and conducting herself in a disorderly manner.
Appellant also called a certain Janki Prasad (PW 4) said to be the private home teacher of appellant 's nephews.
PW 4 spoke to what, according to him, were oddities in the behaviour of the respondent and of her violent propensities.
Appellant in order to show that Respondent was a violent lunatic relied upon the medical certificates at Exhibits P3, P4 and A2, the first two issued by PW 1 and the third by a certain Dr.
S.A. Khan.
PG NO 917 Appellant also relied upon certain incidents which occurred on 1.7.1983 in which the respondent is alleged to have exhibited unprovoked violence towards appellant 's sisters and inflicted injuries on their person.
The respondent wife, as stated earlier, tendered evidence as D W 1.
She also produced a copy of the order passed by the Magistrate in proceedings under the Lunacy Act initiated by the appellant for her committal to a mental asylum.
In those proceedings, it would appear, the Magistrate, after examining the respondent, is stated have found no abnormality in her, requiring institutionalised treatment.
The trial court on an appreciation of the evidence accepted appellant 's case and recorded a finding that respondent was afflicted with schizophrenia which was dangerous for her as well as for those who lived with her and granted a decree for the dissolution of the marriage.
This decree, as stated earlier, has been reversed by the High Court.
The point that commended itself to the High Court was that though the evidence indicated the possibility of some mental disorder, however, the requirement of the law as to the existence of the requisite degree and the nature of the disorder that could alone justify a reasonable apprehension in the mind of the appellant that he could not live with the respondent wife had not been established.
This implied that the High Court partly accepted the appellant s case that respondent did suffer from a mental disorder which in this case was described as schizophrenia.
The High Court stated: "The case of the plaintiff is that the defendant remained under the treatment of the psychiatrist Dr. G.D Shukla, in Maharani Laxmi Bai Medical College, Jhansi.
1 and 2 are the prescription and discharge certificates issued by Dr. G.D. Shukla, Ext.
4. is the medical certificate dated 18.5.1983, which was issued by Dr. Shukla, in which he certified that the defendant suffered from schizophrenia since 26th March, 1983.
There is no counter certificate of any expert from the side of the defendant.
I, therefore, do not see any cogent reason to brush aside this certificate of Dr. G.D. Shukla, who examined himself as P.W.1.
" The High Court proceeded to refer to certain medical literature on 'schizophrenia ' and felt pursuaded to the view PG NO 918 that having regard to the various kinds of schizophrenia or rather the various ways in which that mental illness is known to manifest itself, it would be necessary for the appellant to go further and establish the degree and severity of the mental illness which would alone satisfy the requirement of the ground for dissolution of marriage envisaged in Section 13(1)(iii) of the Act.
In substance, the High Court held that appellant had not shown that the mental illness of the wife was of such a kind and intensity as to justify a reasonable apprehension that it would not be possible or safe for appellant to live with the respondent.
The High Court posited the proposition which required its consideration thus: "So it is only when the schizophrenia is of the third variety i.e. catatonia, that the patient is in a state of wild excitement destructive violent and abusive.
Let us see whether the defendant suffers from schizophrenia and whether there is any unassailable and cogent evidence to establish that the schizophrenia is of third variety, namely, catatonia, when the patient becomes destructive, wild and abusive.
" Dealing with this, High Court noticed what according to it were certain shifts in emphasis in the two certificates Exhibit 4 dated noticed 18.5.1983 and Exhibit 3 dated 2.7.1983 issued by P.W. 1.
High Court that while the earlier certificate dated 18.5.1983 did not contain any specific reference to the severity of the disease or to the violent propensities attributed to respondent which tended to endanger safety of others, the later certificate dated 2.7.1983, how ever, sought to supply this element.
The High Court allow noticed certain events of 1.7.1983, in the wake of which the certificate Exhibit 3 dated 2.7.1983 came into existence.
High Court referred to the evidence on record which disclosed that at 11.45 AM on 1.7.
1983, respondent wife had lodged the first information, as per Exhibit 11, with the jurisdictional police complaining that she had been assaulted, first, by her husband 's nephew and then by the members of the family of the appellant.
She also had occasion to complain that appellant 's mother, sisters etc.
had threatened to extinguish respondent 's life by setting her ablaze.
The attempt on the part of the appellant, the High Court noticed, to commit her to an asylum was made on the PG NO 919 very next day viz., 2.7.83.
The medical certificate ex.
3 is also of that date.
The Magistrate who was moved by the appellant under the provisions of the Lunacy Act rejected the application observing that respondent whom he had occasion to examine talked "in a sensible manner and is not at all hostile.
" Referring to the setting in which Dr. Shukla 's (PW. 1) certificate dated 2.7.1983 was required to be appreciated the High Court observed: ". .The second certificate (Ext. 3) by Dr. G.D. Shukla dated 2nd July, 1983, has to be seen in the sequence of the above events.
There is nothing on record to show that the defendant lodged false report with the police in the morning of 1st July, 1983, against the plaintiff inter alia.
It is after the said report was lodged the plaintiff made efforts to collect all the evidence with the aim of sending the defendant to the mental asylum and filed the suit for dissolution of marriage by the decree of divorce.
The above evidence were collected in quick succession.
Keeping in view the above events, the reliability of the second medical certificate (ext. 3) dated 2.7.1983 has to be tested . " ". .
Neither in the first certificate (Ext. 4) nor in the second certificate (Ext. 3) Dr. G.D. Shukla stated that the schizophrenia, the defendant is suffering from, was of the third variety, namely, Catatona, when the patient becomes wild, destructive and violent.
In this statement also, Dr. G .
Shukla (PW. 1) does not state that the schizophrenia was of Catatonia variety.
He does not say even a word about the danger, arising from the mental disorder of the defendant.
The certificate Ext.
3 does not bear the thumb impression or signature of the defendant and, therefore, it cannot be said with certainty that the said certificate was issued by Dr. G.D. Shukla after having examined the defendant.
The High Court also evaluated the evidence of PW 3 & 4 and pointed out the intrinsic improbabilities of the evidence and the consequent unacceptability of their versions.
The High Court, in particular, noticed that PW 4 in his cross examination "expressed total inability to give description of the defendant 's Physique i.e. her complexion, height etc.
" The High Court observed: PG NO 920 " .
The inability of this witness in giving the physical description of the defendant shows that his entire statement is tutored one.
This is the state of affairs of the evidence of the plaintiff.
The High Court also referred to the respondent 's grievance that the environment of hostility and harassment to which she was subjected by appellant 's parent and sisters etc.
had taken its toll and rendered her apprehensive and irritable.
High Court observed: ". .
Cruelty inflicted by the in laws culminated in the first information report which the defendant lodged in the morning of 1st July, 1983, for which no convincing evidence has been given by the plaintiff that the said report was false and that was filed by the defendant without any grave provocation.
The case of the defendant is that the ill treatment extended to her by her in laws throughout right from the time of marriage told upon her mental state and she became very irritable and apprehensive.
The case of the defendant has to be seen in this background.
" Concluding the High Court said: . . . .
I accept the contention of learned counsel for the defendant appellant that the decree of the divorce cannot be sustained, as the plaintiff failed to adduce any evidence that could prove beyond reasonable doubt that the mental disorder of the defendant was of such a kind and to such an extent that the plaintiff cannot live safely with the defendant." 8.
Shri Goel, learned senior counsel appearing in support of the appeal, assailed the correctness of the approach of and the conclusions reached by the High Court.
Learned counsel submitted that the High Court having, on the basis of overwhelming medical evidence, rightly accepted that part of the appellant 's case that the respondent did suffer from 'schizophrenia ', however, fell into an error in weighing the possible manifestation of that insidious disease in golden scales and in its conclusion that appellant could yet live with her.
Learned counsel submitted that if the evidence of the conduct of the respondent is assessed in the background of the fact that she was a confirmed 'schizophrenic ', there would be no room for any PG NO 921 speculative allowance to be made for any possibility of any alternative hypothesis for that behaviour.
Learned counsel submitted that in assessing the reasonableness of the apprehension of the husband that he could not be expected to spend the rest of his life with a 'schizophrenic ', due acknowledgment had to be made to the subjective susceptibilities of the husband also.
Rani Chhabra for the respondent, however, soughtto support the judgment under appeal.
The point, however, to note is that Section 13(1)(iii) does not make the mere existence of a mental disorder of any degree sufficient in law to justify the dissolution of a marriage.
Section 13(1)(iii) provides: "Sec. 13.
Divorce: (1) Any marriage solemnised, whether before or after the commencement of this Act, may, on a petition presented by either the husband or the wife, be dissolved by a decree of divorce on the ground that the other party (i) ] (ii) ] Omitted as unnecessary (iii) has been incurably of unsound mind, or has been suffering continuously or intermittently from mental disorder of such a kind and to such an extent that the petitioner cannot reasonably be expected to live with the respondent.
Explanation: In this clause, (a) the expression mental disorder means mental illness, arrested or incomplete development of mind, psychopathic disorder or any other disorder or disability of mind and includes schizophrenia;" (b) Omitted as unnecessary.
(Emphasis Supplied) 10.
The context in which the ideas of unsoundness of 'mind ' and 'mental disorder ' occur in the section as grounds for dissolution of a marriage, require the assessment of the degree of the 'mental dis order.
Its degree must be such as PG NO 922 that the spouse seeking relief cannot reasonably be expected to live with the other.
All mental abnormalities are not recognised as grounds for grant of Decree.
If the mere existence of any degree of mental abnormality could justify dissolution of a marriage few marriages would, indeed, survive in law.
The answer to the apparently simple and perhaps misleading question as to "who is normal?" runs inevitably into philosophical thickets of the concept of mental normalcy and as involved therein, of the 'mind ' itself.
These concepts of 'mind ', 'mental phenomena ' etc., are more known than understood and the theories of "mind" and "ment~on" do not indicate any internal consistency, let alone validity, of their basic ideas.
Theories of 'mind ' with cognate ideas of 'perception ' and 'consciousness ' encompass a wide range of thoughts, more ontological than epistemological.
Theories of mental phenomena are diverse and include the dualist concept shared by Descartes and Sigmund Freud of the separateness of the existence of the physical or the material world as distinguished from the non material mental world with its existence only spatially and not temporally.
There is, again, the theory which stresses the neurological basis of the 'mental phenomenon ' by asserting the functional correlation of the neuronal arrangements of the brain with mental phenomena.
The 'behaviourist ' tradition, on the other hand, interprets all reference to mind as 'constructs ' out of behaviour.
"Functionalism", however, seems to assert that mind is the logical or functional state of physical systems.
But all theories seem to recognise, in varying degrees, that the psychometric control over the mind operates at a level not yet fully taught to science.
When a person is oppressed by intense and seemingly insoluble moral dilemmas, or when grief of loss of dear ones etch away all the bright colours of life, or where a broken marriage brings with it the loss of emotional security what standards of normalcy of behaviour could be formulated and applied? The arcane infallibility of science has not fully pervaded the study of the non material dimensions of 'being '.
Speaking of the indisposition of science towards this study, a learned author says: ".
We have inherited cultural resistence to treating the conscious mind as a biological phenomenon like any other.
This goes back to Descartes in the seventeenth century.
Descartes divided th,e world into two kinds of sub stances; mental substances and physical substances.
Physical PG NO 923 substances were the proper domain of science and mental substances were the property of religion.
Something of an acceptance of this division exists even to the present day.
So, for example, consciousness and subjectivity are often regarded as unsuitable topics for science.
And this reluctance to deal with consciousness and subjectivity is part of a persistent objectifying tendency.
People think science must be about objectively observable phenomena.
On occasions when I have lectured to audiences of biologists and neurophysiologists, I have found many of them very reluctant to treat the mind in general and consciousness in particular as a proper domain of scientific investigation. " . the use of the noun mind ' is dangerously inhabited by the ghosts of old philosophical theories.
It is very difficult to resist the idea that the mind is a kind of a thing, or at least an arena, or at least some kind of black box in which all of these mental processes occur." (See: John Searle Minds, Brains And Science 1984 Reith Lectures, p. 10 & l l) Lord Wilberforce, referring to the psychological basis of physical illness said that the area of ignorance of the body mind relation seems to expand with that of knowledge.
In McLoughlin vs O 'Brian, [ 1983] 1 Law Reports 410 at 418 the learned Lord said, though in a different context: ". .
Whatever is unknown about the mind body relationship (and the area of ignorance seems to expand with that of knowledge), it is now accepted by medical science that recognisable and severe physical damage to the human body and system may be caused by the impact, through the senses, of external events on the mind.
There may thus be produced what is as identifiable an illness as any that may be caused by direct physical impact.
It is safe to say that this, in general terms, is understood by the ordinary man or woman who is hypothesised by the courts But the illnesses that are called mental ' are kept distinguished from those that ail the 'body ' in a fundamental way.
In Philosophy and Medicine", Vol. 5 at PG NO 924 page X the learned Editor refers to what distinguishes the two qualitatively: ".
Undoubtedly, mental illness is so disvalued because it strikes at the very roots of our personhood.
It visits us with uncontrollable fears, obsessions, compulsions, and anxieties . " " .
This is captured in part by the language we use in describing the mentally ill.
One is an hysteric, is a neurotic, is an obsessive, is a schizophrenic, is a manic depressive.
On the other hand, one has heart disease, has cancer, has the flu, has malaria, has smallpox . " (emphasis supplied) 12. 'Schizophrenia ', it is true, is said to be difficult mental affliction.
It is said to be insidious in its onset and has hereditary pre disposing factor.
It is characterized by the shallowness of emotions and is marked by a detachment from reality.
In paranoid states, the victim responds even to fleeting expressions of disapproval from others by disproportionate reactions generated by hallucinations of persecution.
Even well meant acts of kindness and of expression of sympathy appear to the victim as insidious traps.
In its worst manifes tation, this illness produces a crude wrench from reality and brings about a lowering of the higher mental functions.
"Schizophrenia" is described thus: "A severe mental disorder (or group of disorders) charac terized by a disintegration of the process of thinking, of contact with reality, and of emotional responsiveness.
Delusions and hallucinations (especially of voices) are usual features, and the patient usually feels that his thoughts, sensations, and actions are controlled by, or shared with, others.
He becomes socially withdrawn and loses energy and initiative.
The main types of schizophrenia are simple, in which increasing social withdrawal and personal ineffectiveness are the major changes; hebephrenic, which starts in adolescence or young adulthood (see hebephrenia); paranoid; characterized by prominent delusion; and catatonic, with marked motor disturbances (See catatonia).
PG NO 925 Schizophrenia commonly but not inevitably runs a progressive course.
The prognosis has been improved in recent years with drugs such as phenothiazines and by vigorous psychological and social management and rehabilitation.
There are strong genetic factors in the causation, and environmental stress can precipitate illness." (See Concise Medical Dictionary at page 566: Oxford Medical Publications, 1980) But the point to note and emphasise is that the personality disintegration that characterises this illness may be of varying degrees.
Not all schzophrenics are characterised by the same intensity of the disease.
F.C. Redlich & Daniel X. Freedman in "The Theory and Practice of Psychiatry" ( 1966 Edn.) say: ". . .
Some schizophrenic reactions, which we call psychoses, may be relatively mild and transient; others may not interfere too seriously with many aspects of everyday living . ." (p. 252) "Are the characteristic remissions and relapses expressions of endogenous processes, or are they responses to psychosocial variables, or both? Some patients recover, apparently completely, when such recovery occurs without treatment we speak of spontaneous remission.
The term need not imply an indpendent endogenous process; it is just as likely that the spontaneous remission is a response to nondeliberate but none the less favourable psychosocial stimuli other than specific therapeutic activity . ." (p. 465) (Emphasis Supplied) 13.
The reasoning of the High Court is that the requisite degree of the mental disorder which alone would justify dissolution of the marriage has not been established.
This, it seems to us, to be not an unreasonable assessment of the situation strong arguments of the Sri Goel to the contrary notwithstanding.
The High Court referred to and relied upon the decision of the Calcutta High Court in Smt.
Rita Roy vs Sitesh Chandra, AIR 1982 (Cal.) 138.
In; that case the Division Bench of the Calcutta High Court observed: PG NO 926 " . each case of schizophrenia has to be considered on its own merits . " ". .
According to the aforesaid clause (iii), two elements are necessary to get a decree.
The party concerned must be of unsound mind or intermittently suffering from schizophrenia or mental disorder.
At the same time that disease must be of such a kind and of such an extent that the other party cannot reasonably be expected to live with her.
So only one element of that clause is insufficient to grant a decree .
" Considering the evidence in that case, the High Court reached the conclusion: " .
We are clearly of the opinion that she only has slight mental disorder and she has been suffering intermittently from the same.
But after considering the totality of the evidence and the impact on the husband, we must hold that such mental disorder is not of such a kind and to such an extent that the husband cannot reasonably be expected to live with her, within the meaning of the second portion of clause (iii) of Sec.
13(1) of the Act . " We approve this approach of the High Court of Calcutta.
Indeed, the following observations of Ormrod J. in Bennett vs Bennett, with reference to 'mental disorder ' in Section 4 of the Mental Health Act, 1959, are opposite in the context of Sec.
13(1)(iii) of the` Act ': " . .
Now, the definition of `mental disorder ' in sec.
4 of the Mental Health Act, 1959, is in very wide language indeed.
It includes mental illness, arrested or incomplete development of mind, psychopathic disorder, and any other disorder or disability of mind and so, for the moment to turn to medical language it clearly includes, or one would suppose it clearly includes, not only psychotic illness but neurotic illnesses as well and thus begins by enormously enlarging the field.
The way in which this very large field is cut down in the Act of 1965, section 9(1)(b), is by the use of this phrase "of such a kind or to such an extent as to be unfitted for marriage and the procreation of children.
" PG NO 927 The burden of proof of the existence of the requisite degree of mental disorder is on the spouse basing the claim on that state of facts.
Indeed the caution of a learned author against too readily giving a name to a thing is worth recalling: "Giving something a name seems to have a deadening influence upon all our relations to it.
It brings matter to a finality.
Nothing further seems to need to be done.
The disease has been identified.
The necessity for further understanding of it has ceased to exist.
" (See "The Auto biography of a purpose": William Alanson White New York: Double day & Co., 1938, p. 53) It is precisely for this reason that a learned authority on mental health saw wisdom in eschewing the mere choice of words and the hollowness they would bring with them.
He said: "I do not use the word 'schizophrenia ' because I do not think any such disease exists .
I know it means widely different things to different people.
With a number of other psychiatrists, I hold that the words 'neurosis ', 'psychoneurosis ', 'psychopathic personality ', and the like, are similarly valueless.
I do not use them, and I try to prevent my students from using them, although the latter effort is almost futile once the psychiatrist discovers how conveniently ambiguous these terms really are . " "In general, we hold that mental illness should be thought and spoken of less in terms of disease entities than in terms of personality disorganization.
We can precisely define organization and disorganization; we cannot precisely define disease . ." "Of course, one can describe a 'manic ' or a 'depressed ' or a 'schizophrenic ' constellation of symptoms, but what is most important about this constellation in each case? Not, we think, its curious external form, but rather what it indicates in regard to the process of disorganization and reorganization of a personality which is in a fluctuant state of attempted adjustment to environmental reality.
Is the imbalance increasing or decreasing? To what is the stress related? What psychological factors are accessible to external modification? What latent capacities for PG NO 928 satisfaction in work, play, love, creativity, are discoverable for therapeutic planning? And this is language that can be understood.
It is practical language and not language of incantation and exorcism. " (Emphasis Supplied) (See Karl Menninger, "Communication and Mental Health", "The Menninger Quarterly (1962) p. 1 Readings in Law and Psychiatry: Richard C. Allen, Elyce Zenott Ferster, Jessee C. Rubin: Revised & Expanded Edn. 1975: page 38).
This medical concern against too readily reducing a human being into a functional non entity and as a negative unit in family or society is law 's concern also and is reflected, at least partially, in the requirements of Section 13(1)(iii).
In the last analysis, the mere branding of a person as schizophrenic will not suffice.
For purposes of Section 13(1)(iii) 'schizophrenia ' is what Schizophrenia does.
The appeal is dismissed.
There will be no order as to costs.
G.N. Appeal dismissed. | The appellant and respondent married in 1977.
In 1983, the appellant filed a suit for dissolution of the marriage, alleging that his wife was suffering from severe mental disorder, psychiatrically recognised as `Schizophrenia ' which rendered her unsociable and despite competent professional treatment, her condition deteriorated to the point of making manifest in her suicidal tendencies and aggressive violent behaviour towards others.
The appellant could not therefore reasonably be expected to live with the respondent as man and wife.
The Respondent denied the imputation of insanity and contended that the appellant was determined to get rid of her, as a result of the domestic discord between her and the appellant 's mother and sister.
Both the husband and the wife gave evidence, to prove their respective cases.
Other witnesses were also examined.
The respondent wife produced a copy of the order passed by the Magistrate in proceedings initiated by the appellant under the Lunacy Act.
for the committal of his wife to a mental asylum.
The order stated that there was no abnormality in her, requiring institutional treatment.
On appreciation of the evidence, the trial court accepted the case of the appellant and granted a decree for dissolution of the marriage.
The Respondent wife appealed to the High Court.
Allowing the appeal, the High Court reversed the decree of dissolution of marriage, granted by the trial court.
It held that the appellant had not shown that his wife 's mental illness was so intense as to justify a reasonable apprehension that it would be impossible or unsafe for the appellant to live with her.
PG NO 913 PG NO 914 In the present appeal before this Court, it was contended on behalf of the appellant that in assessing the reasonableness of the husband 's apprehension that he could not be expected to spend the rest of his life with a `Schizophrenic ', due acknowledgement required to be made to his subjective susceptibilities also.
Dismissing the appeal, HELD: 1.1 Section 13(1)(iii) does not make the mere existence of a mental disorder of any degree sufficient to justify the dissolution of a marriage.
The burden of proof of the existence of the requisite degree of mental disorder is on the spouse basing the claim on that state of facts.
The context in which the ideas of unsoundness of `mind ' and `mental disorder ' occur in the section as grounds for dissolution of a marriage, require the assessment of the degree of the `mental disorder '.
Its degree must be such as that the spouse seeking relief cannot reasonably be expected to live with the other.
All mental abnormalities are not recognised as grounds for grant of decree.
[921 C H; 922A] 1.2 scnizophrenia is said to be a difficult mental affliction.
It is insidious in its onset and has hereditary pre disposing factor.
Each case of Schizophrenia has to be considered on its own merits.
Mere branding of a person as Schizophrenic will not suffice.
For purpose of Sec.
13(1)(iii) Schizophrenia is what Schizophrenia does.
Not all Schzophrenics are characterised by the same intensity of the disease.[924D;928D] 2.
In the instant case, taking into account the facts and circumstances the High Court, on a reasonable assessment of the situation, rightly came to the conclusion that the requisite degree of the mental disorder which alone would justify dissolution of marriage has not been established and that the decree for the dissolution of the marriage.
granted by the trial court was not justified.
[917C D] Rita Roy vs Sitesh Chandra, AIR 1982 Cal 138, approved.
McLoughin vs O 'Brian, ; ; Bennett vs Bennett. , relied on.
John Searle `Minds, Brains and Science ' [l984] Reith Lectures, PP.
10 & 11, Concise Medical Dictionary, p. 566, Oxford Medical Publications, 1980, Philosophy and Medicine, Vol.
5, p.x.
F.C. Redlich and Daniel X. Freedman.
`The Theory and Practice of Psychiatry ' [1966] Edn.
William Alanson White, New York, The Autobiography of a Purpose ' PG NO 915 Doubleday & Co. 1938 p. 53, Karl Menninger `Communication and Mental Health ', The Menninger Quarterly, [1962], p. 1., Richard C. Allen, Elyce Zennott Ferster, Jassee C. Rubin `Readings in Law and Psychiatry ', Revised & Expanded edn.
(1975), p. 38 relied on. |
ivil Appeal No. 414 of 1965.
Appeal from the judgment and order dated February 21, 1962, of the Punjab High Court in I.T. Reference No. 9 of 1959.
N.C. Chatterjee and R.V. Pillai, for the appellant.
C.K. Daphtary, Attorney General, R. Ganapathy lyer, R.N. Sachthey for R.H. Dhebar, for the respondent.
The Judgment of SUBBA RAO, MUDHOLKAR and RAMASWAMI JJ.
was .delivered by SUBBA RAO, J.
The dissenting Opinion of DAYAL and BACHAWAT JJ.
was delivered by BACHAWAT J. Subba Rao, J.
This appeal by certificate raises the main question whether section 2(6A)(d) of the Indian Income tax Act, 1922, hereinafter called the Act, is ultra vires the Central Legislature.
The assessee, a public limited company, was incorporated on May 23, 1945, under the Indian Companies Act, 1913, with a share capital of Rs. 50 lakhs.
On December 15, 1947, at the instance of the appellant the High Court sanctioned the reduction of the capital of the company from Rs. 50 lakhs to Rs. 25 lakhs.
On December 16, 1953, the High Court sanctioned a further reduction of the share capital from Rs. 25 lakhs to Rs. 15 lakhs.
On November 4, 1954, the Registrar of Companies granted the requisite certificate under section 61(4) of the Indian Companies Act.
On November 5, 1954, the appellant issued notices to the shareholders inviting applications for the refund of share capital so reduced.
On the receipt of the applications, appropriate debit entries were made in the accounts of the shareholders and the amounts were actually paid to them during the previous year, i.e., December 1, 1954, to November 30, 1955.
Under section 2(6A)(d) of the Act, "dividend" includes any distribution by a company on the reduction of its capital to the extent to which the company possesses accumulated profits, whether such accumulated profits have been capitalised or not.
In assessing the income of the appellant company for the assessment year 1956 57, the Income tax Officer held that the said dividends were distributed during the accounting year and on that finding he calculated the rebate on super tax in terms of el.
(i)(b) of the second proviso tO paragraph D of Part I1 of the first schedule to the Finance Act, 1956.
If the dividends were distributed during the accounting year.
i.e., December I, 1953, to November 30, 1954, the appellant would be entitled to a higher rate of rebate on super tax under el.
(ii) of the first proviso to paragraph D of Part II of the first schedule to the Finance Act, 1956.
The Income tax Officer further held that the 4 assessee 's accumulated profits at the time of the reduction of the Capital from Rs. 25 lakhs to Rs. 15 lakhs were Rs. 8,42,337.
On appeal the Appellate Assistant Commissioner accepted the said figure arrived at the Income tax Officer.
On further appeal, the Income tax Appellate Tribunal, for the reasons recorded by it in its order, reduced the figure under the said head by a sum of Rs. 3.61,40.5.
It was contended on behalf of the assessee that in as much as the certificate from the Registrar for the reduction of the capital from Rs. 25 lakhs to Rs. 15 lakhs was obtained on November 4, 1954, the distribution of the dividends should be deemed to have taken place during the year 1953 54 and, therefore, the said dividends were not exigible to tax for the assessment year.
The Incometax Officer, the Appellate Assistant Commissioner and the Tribunal concurrently rejected that plea and held that, as the actual payment to the shareholders of the refund of the capital and the debit in the accounts of the shareholders were effected in the accounting year, the said dividends must be held to have been distributed in the accounting year.
There is another sum of Rs. 11,687 3 0 received by the appellant as security deposit on account of empty bottles.
A question was raised whether the said amount could be considered as capital gains and, therefore, should be excluded from the accumulated profits.
The Appellate Tribunal held in favour of the assessee.
The assessee and the Commissioner of Income tax filed two applications before the Tribunal for referring questions of law arising out of the Tribunal 's order to the High Court.
The Tribunal referred the following questions of law to the High Court for its opinion.
(1) Whether the provisions of section 2(6A)(d) of the Indian Income tax Act are ultra vires of the Central Legislature.
(2) Whether the accumulated profits amounting to Rs. 4,69,244 13 0 could be deemed to have been distributed on the reduction of the capital from Rs. 25 lakhs to Rs. 15 lakhs within the meaning of Section 2(6A)(d) of the indian Income tax Act.
(3) Whether the amount of Rs. 11.687 3 0 received by the assessee us security deposit on account of empty bottles could be considered as Capital Gains.
(4) Whether the accumulated profits could be considered as dividend deemed to have been distributed in the assessment year 1955 56 in view of the certificate granted by the Registrar of Companies under Section 61(4) of the Indian Companies Act, 1913, or could be considered us dividend deemed to have been distributed in the assessment year 1956 57 because the debits of refunds were actually made in the accounts of the shareholders during the accounting period of the assessment year 1956 57.
5 The High Court answered all the questions against the assessee.
Hence the appeal.
Mr. N.C. Chatterjee, learned ,counsel for the assessee, did not contest the correctness of the answer given by the High Court in 'regard to the third question and, therefore, nothing further ' need be said about it.
The first question is whether section 2(6A)(d) of the Act is ultra vires the Central Legislature.
Sub.section (6A) was inserted in section 2 of the Act by section 2 of the Indian Income tax (Amendment) Act,.
1939 (Act VII of 1939).
Section 2(6A)(d) of the Act reads: " 'Dividend ' includes any distribution by a company on the reduction of its capital to the extent to which the company possesses accumulated profits which arose after the end of the previous year ending next before the 1st day of April, 1933, whether such accumulated profits have been capitalised or not." The said Act VII of 1939 was passed by the Central Legislature in exercise of its powers conferred under section 100 of the Government of India Act, 1935, read with entry 54 of List I of the.
Seventh Schedule thereof.
Entry 54 reads: "Tax on income other than agricultural income." Mr. Chatterjee contends that while the said entry 54 enables the appropriate Legislature to impose a tax on "income", the Legislature by enlarging the definition of dividend so as to include the amount received by a shareholder towards the share capital contributed by him, which cannot possibly be income, seeks to tax a capital receipt, and, therefore, the said clause is ultra vires the Central Legislature.
Mr. R. Ganapathy lyer, learned counsel for the Revenue, contends that a legislative entry must receive the widest connotation and should not be interpreted in any narrow or restricted sense, and if so construed the said entry enables the Legislature to make a law to prevent evasion of tax on income by devious methods and that the Legislature in the instant case seeks to prevent the growing evil of tax evasion by companies distributing profits under the guise of reduction of capital.
It is well settled rule of construction that entries in the legislative lists cannot be read in a narrow or restricted sense: they should be construed most liberally and in their widest amplitude.
In the words of Gwyer, C.J., in The United Provinces vs Atiqa Begum(1) "each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended by it.
" This Court in a number of decisions held that the expression "income" in entry 54 of List I of the Seventh Schedule to the Government of India Act, 1935, and the (1) 6 corresponding entry 82 of List 1 of the Seventh Schedule to the Constitution of India, shall be widely and liberally construed so as to enable a Legislature to provide by law for the prevention of evasion of income tax.
In Sardar Baldev Singh vs Commissioner Income tax, Delhi and Ajmer (1) this Court maintained the constitutional validity of section 23A(1) of the Income tax Act, which empowered the Income tax Officer to impose super tax in a case where a private limited company distributed less than sixty per cent.
of the total income of the company as dividends on the ground that the object of the section was to prevent avoidance of super tax by shareholders of a company in which the public were not substantially interested.
In Balaji vs Income tax Officer, Special Investigation Circle (2) this Court ruled that section 16(3)(a)(i) and (ii) of the Income tax Act, which enabled the Income tax Officer in computing the total income of a person to include the share of the income of his wife and minor sons therein, was constitutionally valid for the reason that it was intended to prevent evasion of tax by persons putting the properties in the names of their wives or minor children, as the case may be.
This Court again in Navnitlal C. Javeri vs
K.K. Sen, Appellate Assistant Commissioner Income tax, "D" Range, Bombay (3) sustained the validity of section 2(6A)(e) of the Indian Income tax Act, 1922, which included the definition of "dividend", inter alia, payment made by the company by way of advance or loan to a shareholder to the extent to which the company possessed accumulated profits on the ground that it was a measure to prevent private controlled companies adopting the device of making advances or giving loans to their shareholders with the object of evading payment of tax.
The question in the instant case, therefore, is whether the constitutional validity of section 2(6A)(d) of the Act can be supported on the ground that it was enacted to prevent evasion of income tax.
While an entry delineating a legislative field must be widely and liberally construed, there must be a reasonable nexus between the item taxed and the field so delineated.
The said clause deals with the distribution by a company on the reduction of its capital to the extent to which the company possesses accumulated profits.
Accumulated profits of a company may be utilised in the following 3 ways: (1) for increasing the capital stocks; (2) for distributing the same among the shareholders by way of dividends; and (3) for reducing the capital.
Ordinarily a company reduces the capital when there is loss or depreciation of assets; in that event there is no question of distribution of profits to the shareholders but the shares are only devaluated.
But a company may, on the pretext of reducing its capital, utilise its accumulated profits to pay back to the shareholders the whole or part of the paid up amounts on the shares.
A shareholder though in form gets back the whole (1) ; (2) [1962]2 S.C.R. 983.
(3)[1965] 1 S.C.R. 909.
7 or a part of the capital contributed by him, in effect he gets a share of the accumulated profits, which, if a straightforward course was followed, he should have received as dividend.
This is a division of profits under the guise of division of capital; a distribution of profits under the colour of reduction of capital.
If this was permitted, there would be evasion of super tax, the extent of the evasion depending upon the prevalence of the evil.
The Legislature, presumably in the interest of the exchequer, enlarged the definition of "dividend" to catch the said payments within the net of taxation.
By doing so, it is really taxing the profits in the hands of the shareholders, though they are receiving the said profits under the cloak of capital.
Learned counsel for the appellant contends that under the Companies Act a company can lawful1y reduce the share capital with the sanction of the Court, that there is no prohibition thereunder against such a reduction being made by way of distribution of accumulated profits to the shareholders, that the amounts so paid to them would be in law capital receipts and that, therefore, there could not be in law or in fact any evasion of tax on income.
Reliance is placed upon sections 100 to 103 of the Companies Act.
This argument mixes up two aspects the legal and fiscal.
Under Company Law the question of reducing capital is a domestic one for the decision of the majority of shareholders.
The Court comes into the picture only to see that the reduction is fair and equitable and that the interests of the minority and the creditors do not suffer.
It may not also be concerned with the motive of the general body in resolving to reduce the capital; but the Income tax law is concerned with tax evasion.
Tax can be evaded by breaking the law, or avoided in terms of the law.
When there is a factual avoidance of tax in terms of law, the Legislature steps in to amend the Income tax law so that it can catch such an income within the net of taxation.
There is, therefore, no inconsistency between a receipt being a capital one under the Company law, and by fiction being treated as taxable income under the Income tax Act.
Therefore, as section 2(6A)(d) of the Act embodies a law to prevent evasion of tax, it falls within the ken of entry 54 of List I of Schedule Seven to Government of India Act, 1935.
The next question is whether the said dividends were distributed in the year 1953 54, as the appellant contends, or in the accounting year 1954 55, as the respondent argues.
The relevant sections of the Act in this context are section 2(6A)(c1) and section 16(2).
Section 2(6A)(d) has been already extracted.
The relevant part of l 6(2) reads: "For the purposes of inclusion in the total income of an assessee any dividend shall be deemed to be income of the previous year in which it is paid, credited or di i b u t e d . . . . . . . . .
8 "Dividend", with which we are now concerned, is not that which we ordinarily understand by that expression, but dividend by definition.
Under section 2(6A)(d) of the Act it is one of the ingredients of the definition that it shall have been distributed by a company on reduction of the capital to the extent to which the company possesses accumulated profits.
Under section 16(2) of the Act such a dividend shall be deemed to be an income of the previous year in which it is paid, credited or distributed.
Unless such a distribution as is mentioned in cl.
(d) of section 2(6A) of the Act had taken place, it would not be a dividend.
If it was not so distributed, section 16(2) of the Act would not be attracted.
To put it in other words, if the accumulated profits were distributed, it would satisfy not only the definition of "dividend" in cl.
(d) but also would fix the year in which it would be deemed to be income.
What then is the meaning of the expression "distribution"? The dictionary meaning of the expression "distribution" is "to give each a share, to give to several persons".
The expression "distribution" connotes something actual and not notional.
It can be physical; it can also be constructive.
One may distribute amounts between different shareholders either by crediting the amount due to each one of them in their respective accounts or by actually paying to each one of them the amount due to him.
This Court had to construe the scope of the word "paid" in section 16(2) of the Act in J. Dalmia vs Commissioner of I.T. Delhi(1).
Shah, J., speaking for the Court observed: "The expression "paid" in section 16(2), it is true, does not contemplate actual receipt of the dividend by the member.
In general, dividend may be said to be paid within the meaning of section 16(2) when the company discharges its liability and makes the amount of dividend unconditionally available to the member entitled thereto." This Court again reaffirmed the said principle in Mrs. P.R. Saraiya vs Commissioner of Income tax, Bombay City 1, Bombay(2) and held that where dividend was not credited to any separate account of the assessee so that he could, if he wished, draw it, it was not "credited or paid" within the meaning of section 16(2) of the Act.
The same meaning must be given to the word "distribution".
The only difference between the expression "paid" and the expression "distribution" is that the latter necessarily involves the idea of division between several persons which is the same as payment to several persons.
At this stage the anomaly that is alleged to flow from our view may conveniently be noticed.
It is said that there will bedifferent points of time for ascertaining the extent of the accumu lated profits.
With the result section 2(6A)(d) of the .Act becomes un workable in practice or at any rate leads to unnecessary complications.
We do not see any justification for this comment.
9 Distribution is a culmination of a process.
Firstly, there will bea resolution by the General Body of a company for reduction of capital by distribution of the accumulated profits amongst the shareholders; secondly, the company will file an application in the Court for an order confirming the reduction of capital; thirdly, after it is confirmed, it will be registered by the Registrar of Joint Stock Companies; fourthly, after the registration the company issues notices to the shareholders inviting applications for refund of the share capital; and fifthly, on receiving the applications the company will distribute the said profits either by crediting the proportionate share capital to each of the shareholders in their respective, accounts or by paying the said amounts in cash.
Out of the said 5 steps, the first 4 are only necessary preliminary steps which entitle the company to distribute the accumulated profits.
Credits or payments are related to the said declaration; that is to say, distribution is from and out of the accumulated profits resolved to be distributed by the company.
In this view, the accumulated profits to be distributed are fixed by the resolution and the figure does not change with the date of payment or credit.
Indeed, a similar process is to be followed in the case of declaration of ordinary dividends; firstly, there will be a resolution by the General Body of the company declaring the dividends; secondly, thereafter the amounts payable to each of the shareholders are distributed by appropriate credits or payments.
Dividends may be paid or credited to different shareholders during.
different accounting years; and the shareholders may be assessed in respect of the said payments in different years.
Even so, the payments are referable only to the declaration of the dividends out of the profits of a particular year.
This Court, as we have noticed earlier, in the decisions cited supra held that the year of credit or payment to a shareholder was crucial for the purpose of assessment and not the date of declaration.
Let us see whether this view introduces any complication in the matter of reduction of rebate on super tax payable by the company.
The appellant Company set up a claim for a rebate on super tax under el.
(ii) of the first proviso to paragraph D of Part II of the first schedule to the Finance Act, 1956.
The Company based its claim on the contention that the distribution of dividends on reduction of capital took place during the year ending November 30, 1954, and not during the year ending November 30, 1955, and, therefore, el.
(i)(b) of the second proviso to paragraph D of Part II of the first schedule to the Finance Act, 1956, read with Explanation (ii) to paragraph D, which provides for reduction of rebate allowable under cl.
(ii) of the first proviso by an amount computed at certain slab rates on the amount of dividends distributed to the shareholders during the previous year.
could not be invoked.
To put it in other words, the assessee claimed that as the dividents were not distributed in the accounting year, there could not be any reduction of the rebates under 10 cl.
(i)(b) of the said proviso.
If, as we have held, the distribution was made during the year ending November 30, 1955, i.e., the accounting year when the amounts were paid, the Revenue would be entitled to reduce the rebate by the amount computed at the prescribed rates on the amount of dividends.
Some complication may arise only 'if we accept the argument that the date of payment fixes the date for ascertaining the quantum of accumulated profits.
But we have rejected that contention.
In this view, the claim of reduction of rebate on super tax provided by the first schedule to the Finance Act, 1956, can be worked out without any confusion or complication.
We, therefore, hold that the dividends must be deemed to have been paid or distributed in the year when it was actually, whether physically or constructively, paid to the different shareholders, that is to say when the amount was credited to the separate accounts of the shareholders or paid to them.
What are the facts in the present case? The High Court, on August 6, 1954, sanctioned the reduction of the capital from Rs. 25 lakhs to Rs. 15 lakhs.
On November 4, 1954, the Registrar of Companies issued the certificate under section 61(4) of the Companies Act.
On November 5, 1954, the Company issued notices to the shareholders inviting applications for refunds.
In the notice sent to the shareholders they were informed that the share transfer register of the Company would remain dosed from November 16, to November 30, 1954 (both days inclusive) and refund would be made to those shareholders whose names stood on November 15, 1954, in the books of the Company.
After the applications were received, the amounts payable to the shareholders were debited in the accounts and refunds were actually granted during the accounting year, i.e., between December 1, 1954, and November 30, 1955.
It is clear from the said facts that the amounts were distributed only during the accounting year, when the amounts were both debited and paid.
We, therefore, agree with the High Court that the dividends were distributed to the shareholders during the accounting year, i.e., 1954 55.
In the result, the appeal fails and is dismissed with costs.
Bachawat J;.
For the reasons given by brother Subba Rao J, we agree that section 2(6A)(d) of the Indian Income tax Act, 1922 is not ultra vires the Central Legislature, but we are unable to agree with his conclusion with regard to the fourth question of law referred for the opinion of the High Court.
The fourth question arose because of the claim of the appellant company to a rebate of super tax under cl.
(ii) of the first proviso to paragraph D of part II of the first schedule to the Finance Act, 1956 and its contention that the distribution of dividends on reduction of capital contemplated by section 2(6A)(d) of the Indian Income tax Act, 1922 took place during the year ending November 30, 1954, and not during the year ending November 30, 1955, and consequently there could be no reduction of the rebate under cl.
(i)(b) of the second proviso to paragraph D of part II of the first schedule to the Finance Act, 1956 read with explanation (ii) to paragraph D. 11 Now, el.
(i)(b) of the second proviso to paragraph D of part II of the first schedule to the Finance Act, 1956 provides for reduction of the rebate allowable under cl.
(ii) of the preceding proviso by an amount computed at certain slab rates on the amount of dividends "in the case of a company referred to in el.
(ii) of the preceding proviso which has distributed to its shareholders during the previous year dividends in excess of 6 per cent of its paid up capital not being dividends payable at a fixed rate", and the explanation (ii) to paragraph D provides that for purpose of paragraph D "the expression 'dividend ' shall be deemed to include any distribution included in the expression 'dividend ' as defined in el.
(6A) of section 2 of the Indian Income tax Act".
Section 2(6A)(d) of the Indian Income tax Act, 1922 provides that "dividend" includes "any distribution by a company on the reduction of its capital to the extent to which the company possesses accumulated profits which arose after the end of the previous year ending next before the lst day of April, 1933, whether such accumulated profits have been capitalised or not.
" Obviously, section 2(6A)(d) contemplates a distribution on reduction of capital under section 55(1)(c) of the Indian Companies Act, 1913,under which subject to confirmation by the Court, a limited company, if so authorised by its articles, may by special resolution reduce the share capital in any way, and in particular may "either with or without extinguishing or reducing liability on any of its shares, pay off any paid up capital which is in excess of the wants of the company", and may, if and so far as is necessary, alter its memorandum by reducing the amount of its share capital and of its shares accordingly.
Section 56 of the Act enables the company to apply to the Court for an order confirming the reduction, and under section 60 of the Act, the Court may make an order confirming,the reduction on such terms and conditions as it thinks fit.
Upon compliance with certain formalities, the Registrar of Joint Stock Companies is required under section 61 of the Act to register the order and a minute approved by the Court, and on such registration, and not before, the resolution for reducing share capital as confirmed by the order so registered shall take effect.
Under section 62,the minute when registered shall be deemed to be substituted for the corresponding part of the memorandum of the company.
In the instant ease, the issued, subscribed and paid up capital the company was Rs. 25 lakhs, consisting of 5 lakhs shares of Rs. 5 each.
On December 16, 1953, the company passed a special resolution for reducing its share capital from Rs. 25 lakhs to Rs. 15 lakhs and for payment of Rs. 2 per share to the existing share holders under section 55(1)(c) of the Indian Companies Act, 1913.On May 10.
1954, the company applied to the Court for an order confirming the reduction.
On August 6, 1954, the High Court made an order confirming the reduction.
On November 4, 1954,the order and the minute approved by the Court were duly registered with the Registrar, and on the same date, the Registrar 12 issued a certificate of registration.
On November 5, 1954, the notice of registration was duly published.
On the same day, the company issued a circular notice to its shareholders stating that the refund of Rs. 2 per share will be made on receiving confirmation of the registration and requesting the shareholders to send their share certificates to the company at an early date for necessary endorsement and refund of share capital and stating that the refund would be made to the shareholders, whose names stood on November 15, 1954 in the books of the company, the share transfer register would remain closed from November 16 to November 30, 1954, and the refunds would be made to the shareholders whose names stood on November 15, 1954 in the books of the company.
The balance ,sheet for the year ending November 30, 1954 did not show the reduction, and the capital of the company in this balance sheet was shown to be Rs. 25 lakhs.
The necessary book entries and the payments of dividends to the shareholders were not made during the year ending November 30, 1954.
The book entries with regard to the reduction and refund were made, and the refunds were given to the shareholders during the year ending November 30.
1955 and the reduction was shown in the balance sheet for the year ending November 30, 1955.
The point in issue is when does the distribution contemplated by section 2(6A)(d) of the Income tax Act.
1922 take place? Section 2(6A)(d) speaks of dividend in the shape of any distribution by a company amongst its shareholders on reduction on its capital to the extent of accumulated profits possessed by it.
We reject the contention that this distribution takes place when the dividend is paid or credited to the shareholders.
The distribution contemplated section 2(6A)(d) is a distribution by a company "on the reduction of its capital".
The word "on" has no fixed meaning, but in the context of the sub section, it must be given the meaning "at the time of".
as "on entering", "on the 1st of the month".
The distribution contemplated by the sub section is therefore, distribution at the time of the reduction of its capital, that is to say, when the resolution for reduction of its capital under section 55(1)(c) of the Indian Companies Act, 1913 takes effect.
As soon as the resolution for reduction of capital and consequential refund of the surplus capital to the shareholders takes effect, the capital stands reduced, the surplus ceases to be capital and stands allotted to the shareholders, each shareholder obtains a vested right to the refund of his share of the surplus, and a liability arises on the part of the company to make the refund.
This liability arises as soon as the reduction of capital takes effect, and it matters not that the company has not made the necessary book entries showing the reduction of capital and the transfer of the surplus to the account of the shareholders.
The word "distribution" has several dictionary meanings.
In the context of section 2(6A)(d), it means allotment or apportionment of the surplus amongst the shareholders; this allotment takes place and each shareholder gets a vested right to his portion of the surplus as soon as the capital stands reduced.
13 A close scrutiny of section 2(6A)(d) reveals that (a) the distribution takes place on a single date and (b) the expression "accumulated profits" means profits accumulated up to the date of the distribution.
These two basic ideas which are implicit in section 2(6A)(d) are forcibly brought out in the explanation to the corresponding section 2(22) of the Income tax Act, 1961.
We thus find firstly that the entire distribution of the surplus amongst the shareholders takes place on a single date.
Now if the distribution is to have a certain date, that date can only be the date when the reduction of capital becomes effective.
The payments to the shareholders either actual or notional by credit entries in the books of account are made subsequently.
The payments need not be made on one date; they may be and often are made on several dates.
The successive payments cannot be the distribution contemplated by section 2(6A)(d).
We find secondly that the accumulated profits are to be ascertained on the date of the distribution.
But we find independently for reasons mentioned hereafter.
that the accumulated profits must be ascertained on the date of the reduction of capital.
Thus the two events, namely, the distribution and the reduction of capital must synchronise, and the accumulated profits must also be ascertained at the same point of time.
The synchronisation is also obvious on a plain reading of the abridged text "any distribution on the reduction of capital to the extent of accumulated profits".
The artificial dividend under section 2(6A)(d) must be fixed by reference to the accumulated profits on the date of the reduction of capital and not by reference to the accumulated profits on the successive dates of the payments.
If the amount of the dividend were to be fixed by reference to the accumulated profits on the several dates of the payments, the result might well be that some payments would be dividends to their full extent, some would be dividends to a limited extent and some would not be dividends at all.
Take a case where the accounting year of the company ends on November 30, a resolution for the reduction of its capital to the extent of Rs. 10 lakhs and for refund of Rs. 2 for each share of Rs. 5 takes effect on June 30, 1954 and payments of rupees one, six and three lakhs are made respectively on October 30, 1954, October 30, 1955 and October 30, 1956; and assume that the extent of the accumulated profits is rupees ten lakhs on June 30, 1954 and on October 30, 1954, rupees two Iakhs on October 30, 1955 and rupees two lakhs on October 30, 1956.
If the amount of the dividend were ' to be fixed by reference to the accumulated profits on the dates of the payments, the result would be that the payment of rupees one lakh would be dividend to the full extent, the payment of rupees six lakhs would be dividend to the extent of one third and the payment of rupees three lakhs would not be dividend at all.
It is reasonable to think that the legislature did not contemplate such a result.
The character of the distribution is determined by the extent of the accumulated profits on the date when the reduction /B(D)2SCI 3 14 of capital becomes effective and is not altered by any subsequent increase or decrease of the accumulated profits, and all subsequent payment of the capital so distributed share alike the original character of the distribution.
It is argued that in the case of a normal dividend, a comparable distribution takes place, a declaration of dividend out of the profits of a particular year is made, and is followed by payment of the dividend, and decided cases under section 16(2) show that the distribution takes place on payment and not on the declaration of a dividend.
We think this comparison of the normal dividend with the artificial dividend in section 2(6A)(d) in the shape of distribution to the extent of the accumulated profits is misleading, and the assumptions on which this comparison is made are not correct.
The declaration of a normal dividend may be made out of accumulated profits, and need not necessarily be made out of the profits of any particular year.
Section 2(6A)(d) does not contain any definition of a normal dividend.
In the case of a normal dividend, the question of ascertaining the accumulated ' profits to the extent of which the distribution amounts to dividend does not arise.
This problem would have arisen, had section 2(6A) defined normal dividend as "any distribution by a company on the declaration of dividend to the extent to which the company possesses accumulated profits".
On such a definition, the only possible interpretation would have been that the accumulated profits are ascertained and the distribution takes place on the date of the declaration of the dividend.
The argument based upon the decided cases under section 16(2) is misconceived.
Section 16(2) dealt with the question when the dividend shall be deemed to be the income of the shareholders.
By section 16(2) the dividend was deemed to be the income of the shareholders when it was paid, credited or distributed.
An artificial dividend ' under section 2(6A)(d) is either distributed or paid, whereas the normal dividend is either paid or credited, and in the case of J. Dalmia vs Commissioner of Income tax(1) and Padmavati R. Suraiya vs Commissioner of Income tax(2) it was held that the normal dividend is neither paid nor credited by reason of the fact that the dividend is declared.
In this case, we are not concerned with the problem of construction of section 16(2) or the interpretation of the word "paid" or "credited".
The word "distributed" is not synonymous with the word "paid" or "credited".
The three words are used in the Act in different senses.
Moreover, the policy of the legislature on the question of the taxability of the dividend in the hands of the shareholders has varied from time to time.
Subsection (2) of section 16 was repealed and in its place, sub section (IA) of section 12 was introduced by the Finance Act, 1959 with effect from April 1, 1960, and the corresponding provision is to be found in section 8 of the Income tax Act, 1961.
Under section 12(IA) of the Incometax Act, 1922 and section 8 of the Income tax Act the declaration of , 90.
(2) [1965] 1 S.C.R. 307.
15 dividend is crucial even for purposes of assessment of the shareholders.
The legislature thus recognises now that the distribution of the normal dividend takes place on the declaration of the dividend.
In the instant case, the resolution for the reduction of the capital of the company and the consequential refund of the surplus capital to its shareholders took effect on November 4, 1954.
Consequently.
the distribution of the dividend as defined by section 2(6A)(d) took place on November 4.
1954, i.e. during the previous year corresponding to the assessment year 1955 56.
It is true that during the accounting year ending November 30, 1954.
the company did not pay any dividends, nor make any book entries with regard to reduction of capital or with regard to refund or payment of surplus capital.
But the company incurred on November 4, 1954 the legal liability to make the refunds and the distribution must be deemed to have taken place on November 4, 1954, though n0 book entries were made and no payments were made on that date.
In view of the fact that the distribution took effect on November 4, 1954, the company was bound to make necessary entries in their books on November 4, 1954 showing the reduction of capital, and was also bound to show the reduction in its balance sheet for the year ending November 30, 1954.
Irrespective of its method of book keeping, the company incurred on November 4, 1954, the legal liability to make the refunds.
The method of bookkeeping is not relevant, but, were it so, it is pertinent to remember that the accounts of the company were kept on the mercantile basis.
That system of accounting brings into debit an expenditure the amount for which a legal liability has been incurred before it is actually disbursed.
See Keshav Mills Ltd. vs Commissioner of Income tax, Bombay(1).
In conclusion, we must point out that the revenue authorities should have, but in fact have not fixed the amount of the dividend by reference to the accumulated profits on November 4, 1954.
when the resolution for reduction of capital became effective, or by reference to the accumulated profits brought forward on December 1, 1953 at the commencement of the accounting year during which the reduction of capital took effect.
Instead, the revenue authorities took into account the accumulated profits on December 1, 1954, that is to say, the date of the commencement of the subsequent accounting year during which the dividends were paid.
The amount of the accumulated profits as on December 1, 1954 was fixed by the Income tax Officer at Rs. 8,42,337, and was subsequently reduced by the Tribunal to Rs. 4,69,244 13 0.
The revenue authorities rightly assumed that the distribution and the ascertainment of the accumulated profits to the extent of which the distribution is deemed to be dividend under section 2(6A)(d) took place 16 during the same accounting year, but they erred in holding that the accounting year commencing on December 1, 1954 is the relevant year.
In our opinion, the High Court was in error in holding that dividends under section 2(6A)(d) were distributed during the previous year corresponding to the assessment year, 1956 57.
We think that the dividends, if any, under section 2(6A)(d) were distributed in the previous year corresponding to the assessment year 1955 56.
and the fourth question should be answered accordingly.
The appeal is allowed in part to this extent.
In view of the divided success, we direct that the parties will pay and bear their own costs in this Court and in the Court below.
ORDER BY COURT In accordance with the majority Judgment, the appeal fails and is dismissed with costs. | The appellant .company reduced its capital and the reduction was confirmed by the High Court.
On November 4 , 1954, i.e. during the course of the appellant 's accounting year ending November 30, 1954, the Registrar of Companies issued the requisite certificate under section 61(4) of the Indian Companies Act.
The surplus share capital consequent on reduction was, however, not refunded to the shareholders during the said accounting year.
It was refunded by actual payment or by credit entries in the next accounting year which ended on November 30, 1955.
The Income tax Officer held that the said distribution to the extent of accumulated profits was 'dividend ' under section 2(6A)(d) of the Indian Income tax Act, 1922.
He further held that the distribution took place in the accounting year ending November 30, 1955, relevant for the assessment year 1956 57.
On these findings he calculated the rebate on super tax in the terms of cl.
(i)(b) of the second proviso to paragraph D of Part II of the first schedule to the Finance Act, 1956.
The findings of the Income tax Officer were upheld by the Appellate Assistant Commissioner and the Appellate Tribunal, and also, in reference, by the High Court.
The appellant came to the Supremen Court by certificate.
It was contended on behalf of the appellant: (1) In defining 'dividend ' to include capital receipts resulting from distribution of capital on reduction, the legislature went beyond the ambit of entry 54 List I, Seventh Schedule, Government of India Act, 1935, and section 2(6A)(d) of the Indian Income tax Act, 1922 was therefore, ultra vires.
(2) The certificate of the Registrar under section 61(4) of the Indian Companies Act was issued on November 4, 1954 and therefore the 'distribution ' under section 2(6A)(d) took place in the previous year relevant to the assessment year 11955 56.
HELD ': The expression 'income ' in entry 54 List I of the Seventh Schedule to the Government of India Act, 1935, and the corresponding entry 82 of List I of the Seventh Schedule to the Constitution of India must be widely and liberally construed so as to enable the Legislature to provide by law for the prevention of evasion of Income tax, [5H; 6A] 2 United Provinces vs Atiqa Begum, , Sardar Baldev Singh vs Commissioner of Income tax, Delhi and Ajmer, ; , Balaji vs Income tax Officer Special Investigation Circle, ; and Navnittal C. Javeri vs K.K. Sen, Appellate Assistant Commissioner of Income tax 'D ' Range, Bombay; , , referred to.
A company may on the pretext of reducing its capital, utilise its accumulated profits to pay back to the shareholders the whole or part of the paid up amounts on the shares.
This is a division of profits under the guise of division of capital.
If this were permitted there would be evasion of super tax.
Section 2(6A)(d) embodies a law to prevent such evasion and hence it falls within the ken of entry 54 of List I of Schedule Seven to the Government of India Act, 1935.
[6H; 7A, G] There is no inconsistency between a receipt being a capital one under the company law and by fiction being treated as taxable under the Income tax Act.
[7F G] Per Subba Rao.
Mudholkar and Ramaswami, JJ.
The expression 'distribution ' connotes something actual and not notional.
Like 'paid ' or 'credited ' in section 16(2), distribution ' signifies 'the discharge of the company 's liability and making the dividend available to the members entitled thereto.
[8D, F, G] J. Dalmia vs Commissioner of I.T. Delhi, and Mrs. P.R. Saraiya vs Commissioner of Income tax, Bombay City 1, Bombay; , , relied on.
Distribution can ke physical, it can be constructive.
One may distribute assets between different shareholders either by crediting the amount due to each one of them in their respective accounts, or by actually paying to each one of them the amount due to him.
[8D] Distribution in the above manner may take place partly in one year and partly in another.
But the amount of accumulated profits is fixed by the resolution of the company reducing its capital, and the figure does not change with the date of payment or credit.
[9D, E] In the present case the payments and credits were actually given during the accounting year ending November 30, 1955.
The dividend under section 2(6A)(d) must be deemed to have been distributed in the said year.
The relevant assessment year therefore was 1956 57.[10F] Per Raghubar Dayal and Bachawat, JJ.
The word distributed ', in section 2(6A)(d) does not mean 'paid ' or credited '.
Cases under section 16(2) are not relevant to the issue.
[14G H] The 'distribution ' contemplated by section 2(6A)(d) is distribution at the time of reduction of capital, that is to say, when the resolution of the company reducing the capital takes effect.
It means allotment or apportionment of the surplus among the shareholders; this allotment takes place and each shareholder gets a vested right to his portion of the surplus as soon as the capital stands reduced.
[12F H] While the distribution as above takes place on a single date i.e. the date of the reduction of capital, the payments to the shareholders either actual or by credit entries in books of account may be made subsequently and on different dates.
The successive payments cannot be 'distribution ' contemplated by section 2(6A) (d).
[13A C] 3 In the instant case the resolution for the reduction of the capital of the company and the consequential refund of the surplus capital to the shareholder took effect on November 4, 1954.
Consequently the distribution of the 'dividend ' as defined by section 2(6A)(d) took place on that date i.e. during the previous year corresponding to the assessment year 1955 56. |
No. 59 of1951.
Appeal from the Judgment and Decree dated the 22nd August, 1944, of the High Court of Judicature at Allahabad (Verma and Hamilton JJ.) in First Appeal No. 345 of 1940 arising out of the Judgment and Decree dated the 24th August, 1940, of the Court of the Special Judge, 1st Grade of Shahjahanpur in Miscellaneous Case No. 52 of 1940 and Original Suit No. 2 of 1938.
Chaudhry Niamutullah (Gopalji Mehrotra, with him) for the appellant.
Onkar Nath Srivastava for respondent No. 5. 1953.
October 8.
507 MAHAJAN J.
This appeal is before us on a certificate granted by the High Court of Judicature at Allahabad under section 110 of the Code of Civil Procedure and the only point it raises is whether the appeal preferred by the appellant to the High Court was imperfectly constituted, inasmuch as all the creditors were not impleaded as parties to that appeal.
The facts are that on the 28th October, 1936, Rama Krishna Narain and others submitted an application under section 4 of the U. P. Encumbered Estates Act, 1934, to the sub divisional officer, Tilhar, Shahjahanpur, praying that the provisions of the said Act be applied to them.
This application was eventually transferred by the sub divisional officer to the court of the special judge, first grade, Shahjahanpur.
The landlords on 26th August, 1938, submitted a written statement to the special judge under section 8 of the Act and therein stated inter alia that they had a pro prietary interest to the extent of ten annas share in 52 items of taluqdari villages which formed part of taluka Bharawan.
A notice of this application was published as required by section 11(1) of the Act in the U.P. Gazette dated 13th May, 1939.
On 30th November, 1939, Raja Dev Singh, who subsequently became a ward of the Court of Wards, filed a claim petition under section 11(2) of the Act and alleged therein that he was the proprietor of 6 1/2 pies share in 47 items of property mentioned in schedule (A) of the landlords ' written statement.
This claim was.
disallowed by the special judge by an order dated 24th August, 1940, and it was held that Raja Dev Singh was not the owner of the property claimed by him in his objection petition.
The Deputy Commissioner of Hardoi who is the Court of Wards of Bharawan estate filed an appeal against this decision of the special judge to the High Court.
All the applicant landlords were impleaded as respondents in the appeal along with the Unao Commercial Bank Ltd., one of the creditors who had taken part in the proceedings before the special judge at that stage.
It does not appear from the record that the other creditors had either filed written statements 67 508 under section 10 or had made any allegation that the landlords had secreted any property.
Their names were not mentioned in the memorandum of parties annexed to the memo of costs, and in these circumstances they were not impleaded as respondents in the appeal.
Subsequently the appellant made an application for impleading them as respondents in the appeal and prayed that he be given the benefit of section 5 of the Indian Limitation Act.
This application was rejected, and eventually the appeal was dismissed on the ground that it was.
defective and could not be entertained in the absence of all the creditors as respondents in the appeal.
The, cross objection filed by the Unao Commercial Bank with respect to costs was allowed.
The appellant on 21st November, 1944, filed a petition for leave to appeal to His Majesty in Council.
It was alleged in this application that the valuation of the subject matter of the appeal in the trial court in the High Court and before His Majesty in Council was over Rs. 10,000 and that though in the result the judgment and decree of the High Court affirmed the judgment and decree of the trial court , a substantial question of law affecting not only the parties but of general interest was involved.
The High Court with out deciding whether the appeal raised a substantial question of law granted leave to the appellant under section 110 of the Code of Civil Procedure on the ground that the judgment of the High Court being one of variance, and the value of the subject. matter in dispute in the trial court as well as in the appeal to His Majesty in Council being over Rs. 10,000, the case fulfilled the requirements of that section.
Mr. Srivastava who represented the debtors landlords before us raised a preliminary objection that the certificate under section 110 of the Civil Procedure Code was defective and the appeal was thus incompetent and could not be entertained by us.
He contended that the only variation made by the High Court in the judgment of the trial judge was in respect of costs and such a variation in the matter of costs only did not invoice the decree a decree of variance, and that 509 being.
so, the ground on which the High Court had granted the certificate was erroneous and the certificate being defective this appeal could not be heard.
In our opinion, this contention is without force.
It is no doubt true that costs are not taken into consideration and are treated as extraneous to the subjectmatter of a suit, and variation in the matter of costs does not make the decree of the appellate court a decree of variance; but as already stated, the appellant did not pray for the certificate on that ground.
He had expressly alleged that the decree being one of affirmance he was entitled to a certificate, because the subject of the suit as well as of the appeal was a sum of orver Rs. 10,000 and the case involveda4 substantial question of law.
It is obvious that the ground on which the appeal was dismissed by the High Court raises a question of law of importance to the parties and that being so, on that ground alone the appellant was entitled to a certificate under section I 10, Civil Procedure Code.
The certificate therefore is good, though the around on which it was granted is erroneous.
It is always open to an appellant to support the certificate on grounds other than those, on which it has been actually ordered to be given.
The preliminary objection therefore fails.
In order to determine whether the creditors are necessary parties in proceedings under chapters 3 and 4 of the U.P.
Encumbered Estates Act, 1934, it is necessary to refer to the relevant provisions of the Act.
The law was enacted for giving relief to encumbered estates in U. P. Section 4 provides that any landlord, who is subject to or whose immoveable property or any part thereof is encumbered with private debts, may make an application in writing to the Collector of the district, stating the amount of such private debts and also of his public debts both decreed and undecreed and requesting that the provisions of this Act be applied to him.
The section gives an option to the landlord who is subject to private debts to make an application for obtaining relief under the provisions of the Act.
The Collector then transmits the application to the special judge appointed under the Act.
510 The direct consequence of the acceptance of such an application by the collector is that the creditors are deprived of their rights of proceeding against such a landlord in civil or revenue courts in respect of their debts and all attachments made in execution of decrees become null and void and no process in execution can issue after that date.
The provisions of the Act are clearly detrimental to the contractual rights of the creditors and to their remedies in civil law and such a statute can by no stretch of imagination be described to have been enacted for the benefit of creditors.
Section 8 of the Act confers power on the special judge of calling upon the applicant to submit to him within a period to be fixed by him in this behalf, a written statement containing full particulars respecting the public and private debts to which he is subject or with which his immoveable property is encumbered; of the nature and extent of his proprietary rights in land; of the nature and extent of his property which is liable to attachment and sale; and lastly, of the names and addresses of the creditors, so far as can be ascertained by him.
If the applicant fails to submit a written statement as called for or furnish the information referred to in the proviso to sub section (2), the special judge is empowered to dismiss the application.
The landlord is not required to implead any creditors as party respondents in his written statement, but he has to furnish information, regarding the names and addresses of his creditors so far as they are known to or can be ascertained by him and his failure to give information may result in a dismissal of the application.
Section 9 requires the special judge to publish in the official gazette a notice in English calling upon all persons having claims in respect of private debts both decreed and undecreed against the person or the property of the landlord to present to the special judge within three months from the date of the publication of the notice, a written statement of their claims.
He is also required to cause copies of such notice to be published in such paper or papers as he may direct and to exhibit it at his own office, at the office of the collector and at some 511 conspicuous place where the landlord resides.
He is further directed to send a copy of the notice and a copy of the written statement under sub section (1) of section 8 by registered post to each of the creditors whose names and addresses are mentioned in the statement under clause,(d) of sub section (1) of section 8.
Section 10 provides that every claimant referred to in section 9 shall in the written statement of his claim give full particulars thereof and shall state so far as they are known to or can be ascertained by him, the nature and extent of the landlord 's proprietary rights in the land and the nature and extent of the landlord 's property other than proprietary rights in land.
The provisions of this section not only require a creditor to give particulars of his own debt but also give him opportunity to contend that the landlord has secreted some property.
Section 11 (1) of the AA directs the special judge to publish a notice specifying the property mentioned by the applicant under section 8 or by any claimant under section 10.
The object of the provisions made in section 11 (1) is to find out the extent of the property that can be utilized to wards liquidation of the debts ascertained under the subsequent provisions of the Act.
Section 11 (2) provides as follows: Any person having any claim to the property mentioned in such notice shall, within a period of three months, from the date of the publication of the notice in the official gazette make an application to the special judge stating his claim and the special judge shall determine whether the property specified in the claim, or any part thereof is liable to attachment sale or mortgage in satisfaction of the debts of the applicant.
" Sub section (3) directs the special judge to determine such claims before he proceeds to determine the amount due to any creditor under section 14.
He is further directed not to pass any decree under section 14 until the expiry of a period of one month from the last day on which he determines a claim under section 11.
Sub section (4) off section 11 provides that any order passed by the special judge under this section shall be 512 deemed to be a decree of a civil court of competent jurisdiction.
Section 13 enacts that every claim, decreed or undecreed against the landlord shall, unless made within the time prescribed be deemed for ;III purposes and on all occasions to have been duly discharged.
Section 14 lays down the procedure for determination of the amount of debts.
The judge is directed to give notice of the date of enquiring into the claims of the creditors to the different claimants and to the person who has made the application under ,section 4.
He is directed to examine each claim after hearing all such parties as desire to be heard and after considering the evidence, if any, produced by them.
The section lays down them mode of calculating interest on the amount of such claims and provides for the application of the provisions of the Usurious Loans Act to the proceedings under the Act.
Sub section (7), provides as follows: "If the special judge finds that any amount is due to the claimant be shall pass a simple money decree for such amount together with any costs which he may allow in respect of proceedings in his court and of proceedings in any civil court stayed under the provisions of this Act, together with pendente lite and future interest at a rate not greater than the rate specified in section 27 and if he finds that no amount is due, he may pass a decree for costs in favour of the landlord.
Such decree shall be deemed to be a decree of a ' civil court of competent jurisdiction but no decree against the landlord shall be executable within the United Provinces except under the provisions of this Act.
" Section 18 provides that subject to the right of appeal or revision, the effect of a decree of the special judge under sub section (7) of section 14 shall be to extinguish the previously existing rights, if any, of the claimant, together with all rights, if any, of mortgage or lien by which the same are secured and, where any decree is given by the special judge to substitute for those rights a right to recover the amount of the decree in the manner and to the extent specified in the Act.
Section 45 provides for appeals and revisions against orders and decrees of the special judge.
513 It is apparent from the provisions of the Act cited above that the U.P.
Encumbered Estates Act is no more, nor less than, a code for the administration of the assets of the landlord debtor and for giving relief to him in a number of ways against the contractual rights of his creditors.
It clearly deprives the creditors of any remedies that they would ordinarily have in ordinary civil courts and extinguishes the mortgages held by them.
Sectional(2) deals with claims of third parties to the property alleged by the landlord as belonging to him and the judge is required to determine whether such property is liable to attachment or sale.
It is noteworthy that under section 14(1) the special judge is directed to follow a certain procedure, but no such procedure is prescribed under section 1 1(2).
In section 14 he is required to fix a date and to give notice of the date of inquiring into the claims of the creditors to all the claimants.
There is no such parallel requirement in respect of claims of third parties under section 11(2), though as a matter of practice similar procedure is also followed in an enquiry under this section.
The question that requires consideration in these circumstances is whether the rules of the first schedule to the Code of Civil Procedure should be rigorously applied to proceedings under the Encumbered Estates Act, and whether the creditors who are no doubt ' .persons interested in those proceedings and who would ultimately be entitled to recover their decretal debts from the property the extent of which falls for determination in an enquiry under section II, are necessary parties in the enquiry, or are merely proper parties thereto and as such entitled only to notice of the proceedings.
Order 1, Rules I and 3 of the Code of Civil Procedure, provide in regard to the persons who are to be joined as plaintiffs or those who have to be joined as defendants in suits.
Rule 1 is in these terms: "All persons may be joined in one suit as plaintiff, in whom any right to relief in respect of or arising of the same act or transaction or series of act transactions is alleged to exist, whether 514 severally or in the alternative, where, if such persons brought separate suits, any common question of law or fact would arise." Rule 3 provides: " All persons may be joined as defendants against whom any right to relief in respect of or arising out of the same act or transaction or series of acts or transactions is alleged to exist, whether jointly, severally or in the alternative, where, if separate suits were brought aaainst such persons any common question of law or fact would arise.
" It is apparent that strictly speaking the provisions of these rules cannot be applied to the proceedings contemplated by the U. P. Encumbered Estates Act.
These proceedings cannot be.
described as suits.
It was conceded at the Bar that an inquiry into third party claims under section 11(2) cannot be described as a suit.
Neither section 8 nor section 1 1 provides that the creditors have to be impleaded as parties respondents in such an objection application.
As already said, the section provides that the applicant has to give information about the names of the creditors and the amounts due to them.
Till the time that a decree is passed under section 14 in favour of any of the creditors it cannot be, said that any one of them is entitled to share in the property of the debtor.
It is only when a claim has been made under section 10 by a creditor and it has ripened into a decree that he is entitled to share in the assets of the landlord.
But if he commits a default in submitting a written statement of the claim under section 10, the claim stands discharged under section 13.
In this particular case it is not clear whether any of the creditors except the Unao Commercial Bank had made a claim under section 10.
It is also not clear whether any decree under section 14 has been passed in favour of any of the creditors.
An inquiry for the determination of the quantum of the debts of the landlord can only be made after third party claims have been settled under the provisions of section 11(2).
In view of these provisions it seems difficult to hold that the technical and 515 strict rules as to impleading of parties can have appli cation to proceedings under section 11 of the U.P.
Encumbered Estates Act.
It is true that the creditors must be given notice and opportunity to say whether the landlord has secreted any property, but if they do not do so and are content with the disclosures made by the landlord they cannot be said to have any further interest in the quantum of the property which the landlord has mentioned under the provisions of section 8 in his written statement.
In that situation, if a third party claims any item of property mentioned by the landlord in the written statement, the controversy at that stage lies only between the landlord and the claimant, though in the result the creditors may either be benefited or deprived of some of the 'assets which the landlord discloses in the application as liable to attachment and sale towards payment of decrees that may be passed in favour of the creditors.
It can well be assumed that the fight at that stage being a bona fide fight between the objector and the landlord, the interests of the creditors will be fully represented by the landlord and any decision obtained in his favour or against him would be binding on all the creditors on the principles enacted in explanation 6 to section I 1, Civil Procedure Code.
If, therefore, in such a contest the claimant loses and the landlord succeeds, then in an appeal against that decision he need only implead the landlord as a party respondent and it is not necessary to implead all the creditors as respondents merely on the ground that ultimately they would be affected by the result, either to their benefit or to their detriment.
The court has power, if it considers that the presence of the creditors is necessary at the hearing, to give them notice of the appeal so that they may have the opportunity of placing their con tentions before it.
The observance of such a procedure may well conduce to a fair hearing of the appeal, even if the creditors have raised no plea of any kind before the special judge.
In a case, however, where the creditors raise a plea that the landlord has secreted certain property and it should be included in the schedule and such property is then claimed by a third 516 party, they may well be regarded as real parties to the controversy and failure to implead them may result in the appeal being imperfectly constituted.
In the situation that arises in the present case the appeal should have been held to be properly constituted because all those who raised any controversy whatsoever as to the ownership of the property in dispute were impleaded.
We are fully conscious of the fact that the view that we have expressed above is not in conformity with a number of decisions of the Oudh Chief Court and the Allahabad High Court.
It is therefore necessary to examine those decisions in order to see whether the reasons given therein are sound or erroneous.
In Rameshwar vs Ajodhia Prasad(1) a Bench of the Oudh Court held that all the creditors who were impleaded as parties to the application under the Act are necessary parties to an appeal by the objector against an adverse order passed against him under section 11.
This judgment proceeds on the assumption that all the creditors having been impleaded as parties to the application and not having been made respondents in the appeal, the appeal became imperfectly constituted.
In this case the question whether under the provisions of the Encumbered Estates Act an applicant is required to implead creditors as parties to the application was neither argued nor considered; on the other hand, it was assumed that all the creditors have to be impleaded as parties in the application made by the claimants under the Act.
That assumption is, of course, erroneous.
Under section 4 the applicant is entitled to request the collector, that the provisions of the Act be applied to him and relief given to him under its provisions.
He is not required even to give information about the names and addresses of creditors and no question of impleading anyone as a respondent arises at that stage.
When the collector has forwarded this application to the special judge, then the special judge is empowered to call upon the applicant to file a written statement and therein he is bound %to give information About the (1) A.I.R. 1941 Oudh 580, 517 names and addresses of his creditors so far as they are known to him or can be ascertained by him.
In the written statement which he is called upon to file on a requisition by the special judge he is not called upon to implead any persons as parties, in the sense in which that term is used in the Code of Civil Procedure.
This decision therefore is not of any help on the point that was argued before us.
In Chaudhri Bishunath Prasad vs Sarju Saran Tewari(1), another Bench of the Oudh Court held that an enquiry into the indebtedness of the landlord is to be carried out by the special judge in the presence of all the creditors, that though it is true that each creditor is interested in establishing his own debt against the landlord, he is further interested that the landlord should not be allowed to withhold any property from the court, and that if 'a claimant under section I I sets up a title to the property shown by the landlord to belong to him, although the real contest may for the time being be between the claimant on the one hand and the landlord on the other hand, it is to the ultimate interest of the entire body of the creditors that the property should be held to belong to the landlord, and if the decision is in favour of the landlord, all the creditors will be entitled to have their debts satisfied out of such property; but if, however, the decision is against them, the property will go out of the reach of the creditors and will not be available to them for the satisfaction of their debts.
It was further held that as all.
the creditors had not been joined as parties to the appeal and as they were interested in the result of the appeal, it could not be held that they were wholly unconcerned in the result of the case and therefore the appeal was not maintainable.
It seems to us that in making these observations the learned Judges did not clearly bear in mind the distinctions between the provisions of sections 11 and 14 of the Act.
Section 14 lays down a definite procedure so far as the enquiry into the claims of creditors is concerned .
Each creditor has to establish his claim against the landlord as he (1) A.I.R. 1942 Oudh 16.
518 would do if he had filed a suit against him.
This enquiry is made after the quantum of the property of the debtor has been ascertained under section 11.
As already pointed out, if any creditor raises any dispute as to the quantum of the property as he is entitled to raise such a dispute in his written statement filed under section 10, in that situation it may well be held that such a creditor is directly interested in the enquiry under section 11 ; but it is difficult to see that all other creditors who have accepted the list of property filed by the debtor as true are directly interested in the enquiry under that section and are as such necessary parties and that without impleading them the enquiry cannot proceed.
Rules I and 3 of Schedule I Of the Code of Civil Procedure do not lay down that every person who is ultimately interested in the result of a suit should be impleaded as a defendant.
All that these rules insist upon is that all persons should be joined as defendants against whom any right to relief is alleged to exist, provided that such right arises in respect of the same act or transaction or series of acts or transactions and the case is one where common question of law or fact would arise.
It is not possible to hold that the objector can claim any right to relief against the creditors as such.
The right to relief in the enquiry under section 11 is only against the landlord who alleges himself to be the owner of the property which the claimant says belongs to him, and creditors have no right of interest in the property claimed by the objector.
The test of ultimate benefit therefore laid down by the Oudh Court for holding that all creditors are necessary parties in the enquiry under section 11 of the U.P.
Encumbered Estates Act does not fulfil the conditions laid down in the Code for impleading parties as plaintiffs or as defendants.
If they are not necessary parties in the true sense of the term in the enquiry under section 11, a fortiori failure to implead them as respondents in the appeal detective.
In Lakshmi Narain vs Satgurnath(1) another Bench of the Oudh Court took the ' same view.
In this case.
(1) A.I.R. 1942 Oudh 339.
519 the earlier decisions of the Oudh Court were followed The view was reiterated that creditors are parties in the proceedings under the Encumbered Estates Act.
In Benares Bank Ltd., Benares vs Bhagwandas (1), a Full Bench of the Allahabad High Court considered this question and expressed the same opinion as had been expressed in the Oudh decisions referred to above.
Mr. Justice Braund, who was one of the Judges constituting the Full Bench, with great reluctance shared the opinion of the majority merely out of respect for the opinion of Pathak J. and it appears that, left to himself, he would have held otherwise.
The majority judgment was delivered by Pathak J. He enunciated two tests for deciding whether a certain person was a necessary party in a proceeding: (1) that there must be a right to some relief against such party in respect of the matter involved in the proceedings in question, and (2) it should not be possible to pass an effective decree in the absence of such party, and proceeded to observe that the creditors of a landlord who have claimed relief under the Encumbered Estates Act are necessary parties to the proceedings under that Act and that the object of the Act is to compel the landlord to surrender his entire property for the benefit of his creditors and to liquidate the debts of all the creditors in accordance with and to the extent per mitted by the Act.
There can be no question that these are the true tests for determining whether a person is a necessary party to certain proceedings but the question is whether judged on these tests the creditors of a landlord under the U. P.
Encumbered Estates Act can be said to be necessary parties in an enquiry under section 11.
It seems to us that in the first instance it is an incorrect assumption to make that the object of the Act is to grant relief to the creditors of a landlord; it is quite the converse.
The object of the Act is to grant relief to the landlord whose estate is encumbered with debts, by scaling, down the debts and by depriving the creditors of their (1) A.I.R. 1947 All. 18.
520 civil remedies.
The creditors are allowed to prove their debts and obtain decrees from the special judge according to the provisions of and to the extent allowed by the Act and they lose all their rights on securities held by them.
Coming to the application of the tests laid down by the learned Judge, it is not possible to hold that any right of relief exists in an objector under section 11 as against the creditors.
It is also difficult to see how an effective decree cannot be passed as regards title to the property in the absence of creditors.
One test of the effectiveness of a decree is whether that decree can be executed without the presence of creditors as regards property decreed in favour of a claimant.
It is obvious that in execution proceedings a warrant of attachment and for delivery of possession can only be issued against the owner, viz., the landlord, and not against the creditors.
In these proceedings the special judge can give no relief to the objector against the creditors.
So on the tests mentioned by the learned Judge it is clear that the creditors of a debtor are not necessary parties in these administrative proceedings under the Encumbered Estates Act, though they may be given notice of those proceedings and afforded opportunity to watch those proceedings in order to see that no property is secreted from them and it is preserved for satisfaction of decrees that may eventually be passed in their favour.
In his judgment Pathak J. proceeded to observe that though the landlord is a, party to the dispute under section 11, it is obvious that the main party who is vitally interested in that dispute is the entire body of creditors, because the issue that arises out of such a claim is whether the property which is the subject matter of the claim is liable for the satisfaction of the debts due to the entire body of creditors.
This statement also, in our opinion is not very precise.
It is not correct to say that the result of a decision,in such a claim makes the property liable for satisfaction of debts due to the entire body of creditors who had made claims at that stage.
The property is only 521 liable for satisfaction of decrees that may be passed subsequently under section 14.
It may well be that of the persons who have been disclosed as creditor under section 8, a number of them may not at all be interested in the result of the decision of the claim under section II.
It is an overstatement to make that the main party who is vitally interested in the dispute is the entire body of creditors '.
The dispute relates to title to property and according to all principles of impleading of parties it is not the eventual benefit that a person may derive from a certain decision that is the crucial test in deciding whether a party is a necessary party or merely a proper party.
Pathak J. proceeded to observe as follows : "Could it be suggested that in a suit under Order XXI, rule 63, Civil Procedure Code, the decree holders who desire to seize the property belonging to the judgment debtor are not necessary parties?" With great respect again, this analogy is not very happy or apposite.
Under Order XXI, rule 63, it is only the attaching creditor who has the right to file a suit or of being impleaded as defendant in a suit by the judgment debtor.
AR the creditors of the judgment debtor who have not attached the property are not necessary parties in a suit under Order XXI, rule 63, though after the decision in that suit they may be entitled to share in the rateable distribution of the property if they make an application for that purpose.
In a way it is true to say that in all suits by a creditor against a debtor where the debtor owes to a number of creditors, every other creditor is interested in seeing that that creditor 's suit is dismissed or his debt is considerably cut down; but from that it does not follow that in a suit on a promissory note by a creditor against the debtor all the other creditors are necessary parties.
The eventual interest of a party in the fruits of a litigation cannot be hold to be the true test of impleading parties under the Code of Civil Procedure and it is rather difficult to hold that where that is not the true test under the Code, that should be adopted as A test in proceedings of an administrative 522 character under the U. P.
Encumbered Estates Act.
it cannot be forgotten that under the provisions of section 11 no provision has been made for issuing notice to all the creditors.
Reference may also be made to rule 6 framed under the Encumbered Estates Act.
This rule provides that the proceedings under this Act shall be governed by the Code of Civil Procedure so far as they are applicable.
As already pointed out, the provisions of Order 1, rules 1 and 3, cannot aptly be held applicable in such proceedings.
We cannot uphold the view of Pathak J. that all creditors become parties to the proceedings under the Act in the technical sense of the term after a notice has been served upon them and in any event after they have filed the written statements, that they continue to remain ' as parties until the debts are liquidated or proceedings terminated in accordance with the provisions of the Act.
This seems to be too wide a statement of the law on the point.
Can it be said that after each individual creditor obtains a decree in respect of his claim under section 14, each one of these creditors has to be impleaded as a party in an appeal preferred by that creditor or by the debtor.
It is not possible to give an answer in the affirmative to such proposition.
no hesitation in saying that though he ultimately abondoned n thinking that in.
We have therefore Mr. Justice Braund, his view, was right administrative proceedings technical rules of the First Schedule of the Code of Civil Procedure regarding impleading of parties should not be invoked and that the matter should be viewed in a more liberal way, regard always being had to the fact that there is no collusion between the debtor and the claimant and that there are persons who are bona fide litigating in respect of the title of the claimant under section 11, and if there has been such a bona fide fight which results in a decree in an appeal against that decree it is sufficient that those who took an active part in the proceedings under section II are impleaded.
It is not necessary to implead each and every creditor who either did pot appear or put forward a written statement under 523 section 10 or took no active part in the proceedings under section 11(2).
In the view that we have taken it is not necessary to decide the question whether the High Court was right in not exercising its powers under Order XLI, rule 20, in impleading the creditors as respondents to the appeal.
For the reasons given above we allow this appeal, set aside the judgment of the High Court and remand the case to that court for hearing the appeal in accordance with law on its merits.
If the High Court thinks fit that the presence of any creditors would help the court in arriving at a true decision of the matter it in its discretion may give notice to the creditors of the date of hearing, We leave the parties to bear their own costs of this appeal.
Appeal allowed.
Agent for respondent No. 5: section section Shukla. | Creditors who did not take an active part in the proceedings are not necessary parties to an appeal from an order rejecting a claim made in a proceeding under section 11 (2) of the U. P. Encumbered Estates Act, 1934.
The technical rules of the Civil Procedure Code regarding the impleading of parties should not be applied to such proceedings.
The matter should be viewed in a more liberal way, regard being always had to the fact that there is no collusion between the debtor and the claimant.
I Rameshwar vs Ajodhia Prasad (A.I.R. 1941 Oudh 580), Chaudhri Bishuanth Prasad vs Sarju Saran Tewar (A.I.R. 1942 Oudh 16), Lakshmi Narain vs Satgurnath (A.I.R. 1942 Oudh 339) and Benares Bank Ltd. vs Bhagwandas (A.I.R. 1947 All. 18) overruled. |
ivil Appeal No. 424 of 1963.
Appeal by special leave from the judgment and order dated April 8, 1960 of the Allahabad High Court in Civil Misc.
Writ No. 2650 of 1956.
C.B. Agarwala and O.P. Rana, for the appellant.
Yogeshwar Prasad, Harder Singh and M.V. Goswami, for the respondents.
The Judgment of the Court was delivered by Raghubar Dayal, J.
This appeal, by special leave, raises the question whether Zamindari Abolition Compensation Bonds (shortly termed Bonds) issued by the U.P. Government to intermediaries in payment of compensation payable on the basis of their rights under the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950 (U.P. Act I of 1951), hereinafter referred to as the Act, have to be accepted by the appropriate authorities in payment of the agricultural income tax due from them.
131 The facts leading to the appeal, in brief, are that the respondent, an ex Zamindar, was assessed to agricultural income tax in the assessment year 1360 F corresponding to 1952 53, on the basis of the agricultural income accruing in the previous year 1359 F corresponding to 1951 52.
He did not pay the assessed tax and was further assessed to a penalty.
In the result, Rs. 868/ were to be paid by him for tax plus penalty.
The respondent 's writ petition contending that he was not liable to pay tax was dismissed by the High Court.
Thereafter, the agricultural income tax authorities took out proceedings for the realisation of the amount due from him.
On July 24, 1956, the respondent presented an application to the Agricultural Income tax Assessing Officer, Allahabad, stating that he had no ready cash to pay the dues and that he was therefore depositing Bonds of the value of Rs. 850/ and Rs. 18/ in cash and praying that the Bonds be accepted in payment of tax dues.
This application was rejected by an order stating that there was no rule for the acceptance of those bonds and that they be returned to the applicant.
On August 1, 1956, the respondent made a similar application to the Collector complaining that the Assessing Officer had no valid reason to refuse to take the Bonds when the Bonds were negotiable instruments.
This application was also rejected on a report of the Assessing Officer that the Bonds were not accepted in the settlement of agricultural income tax dues, that they were not negotiable and that there was no provision in the Act for their acceptance.
Thereafter, the respondent presented a writ petition to the High Court of Allahabad praying for the issue of a writ of certiorari quashing the orders of the Assessing Officer and the Collector, Allahabad, for the issue of a writ of mandamus directing them to accept the Bonds in lieu of the tax dues and, in any case, to deduct the amount from the rehabilitation grant due to the petitioner and for the issue of a writ of prohibition directing the opposite parties from adopting coercive measures for the realisation of the tax due from the petitioner.
The grounds mentioned in support of the prayers were that the Bonds were negotiable instruments and therefore refusal to accept them in payment of agricultural income tax was illegal, that they, having been issued by Government, could not be subsequently refused they being perfectly valid legal tender and that in view or r. 8A of the Rules made under the Act the amount due for tax should have been deducted from the interim compensation.
The counter affidavit filed by the Naib Tehsildar Agriculture Income tax Officer, Allahabad, on behalf of the State, stated that the respondent was assessed to agricultural income tax in the assessment year commencing from July 1, 1952 on the income derived in the previous year commencing from July 1, 1951, that the tax 132 had to be paid in four instalments and in default of payment a penality of Rs. 43/ was imposed for each default in payment of the four instalments and that the Bonds could not be accepted towards the tax due under section 6(d) of the Act read with r. 48 of the Rules as the tax had fallen due in 1360 F, corresponding to July 1, 1952 to June 30, 1953.
The High Court held that the orders of the Agricultural Income tax Assessing Officer and the Collector were wrong as the ground for refusing to accept the Bonds in payment of the tax on the ground that there was no rule or statutory provision for their acceptance was incorrect and appeared to have been given in complete ignorance of the provision of law.
Reference was made to the provisions of section 6(d) of the Act and r. 8A.
The High Court was of the opinion that these have been completely ignored by the two officers.
It, therefore thought that the orders were liable to be quashed and that adequate relief would be available to the respondent if a direction was given to the Collector to decide his application dated August I, 1956, in accordance with law.
The High Court therefore quashed the order of the Collector dated August 24, 1956 and directed him to decide the respondent 's application afresh in accordance with law as indicated above.
The appellant thereafter obtained special leave from this Court and appealed against the order of the High Court dated April 8, 1960.
The main contention for the appellant before us is that neither section 6(d) of the Act nor r. 8A provides that Bonds can be accepted in payment of agricultural income:tax and that therefore the order of the Collector dated August 24, 1956 was correct.
For the respondent it is urged that r. 8A makes it mandatory for the Agricultural Income tax Officer to realise the agricultural income tax due from the compensation payable and that compensation continues to be payable till the Bonds are actually encashed, Section 6(d) of the Act, as originally enacted, did not provide, among the consequences of the vesting of the estate in the State, that arrears on account of agricultural income tax might be realised by deducting the amount from the compensation money payable to the intermediary under Chapter III.
An amendment was made in this clause (d) by section 3 of U.P. Act XVI of 1953, with retrospective effect from July 1, 1952.
and the relevant portion of the provision after amendment reads thus: "All arrears of revenue, . or an arrear on account of tax on agricultural income assessed under the U.P. Agricultural Income tax, Act, 1948 for any period prior to the date of vesting shall continue to be recoverable from such intermediary and may, without prejudice to any other mode of recovery be realised by deducting the amount from the compensation money payable to such intermediary under Chapter III;" 133 Rule 8A was added to the rules by Notification No. 3266/I A 1056 1954 dated August 17, 1954 and its relevant portions read: "8 A. Without prejudice to the right of the State Government to recover the dues mentioned below by such other means, as may be open to it under law: (1) all arrears of land revenue in respect of the estates which have vested in the State Government as a result of the notification under Section 4 of the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950 (Act 1 of 1951), and of tax on agricultural income assessed under the U.P. Agricultural Income tax Act, 1948 (U.P. Act III of 1949) due from an intermediary for any period prior to the date of vesting shall be realised: (a) in the case of an intermediary who was assessed to land revenue of Rs. 10,000 or more from the amount of interim compensation due to him, and (b) in the case of an intermediary who was assessed to a land revenue of less than Rs. 10,000 per annum by deduction from the amount of compensation payable to It is clear from the above provisions that neither section 6(d) nor r. 8A provide that Bonds must or can be accepted in payment of tax on agricultural income.
It has been held by this Court in Collector of Sultanpur v Raja Jagdish Prasad Sahi(1) that the provisions of section 6(d) of the Act would apply to arrears on account of agricultural income tax assessed in 1360F on the basis of agricultural income during the year 1359F and that the provisions of r. 8A are mandatory.
It is not urged for the appellant that r. 8A is inconsistent with the provisions of section 6(d) which provides that arrears of tax may be realised from the compensation payable and therefore appears to give a discretion to.
the authorities to realise the arrears of tax from the compensation payable.
We do not agree with the contention for the respondent that the compensation payable to the intermediary continues to remain payable even after the compensation Bond 's had been delivered to him.
Section 68 of the Act provides that the compensation under the Act shall be payable in cash or in bonds or partly in cash and partly in bonds as may be prescribed.
It is clear therefore that the delivery of Bonds to the intermediary is in payment of the compensation.
The claim for compensation is thus satisfied when the compensation has been paid in accordance with the provisions of section 68.
This is also clear from the relevant rules for the payment of compensation.
(1) 134 Rule 62 as it stood prior to November 29, 1956, provided that the compensation would be paid in negotiable bonds which would be described as Zamindari Abolition Compensation Bonds.
Rule 63 as it then stood provided that the Bonds would be issued in specified denominations and would bear interest at the specified rate on the principal that had become payable calculated from the date of vesting.
Rule 64 provided that interest together with the principal of a Bond would be paid in equated annual installments except for the last, as described in Appendix IV during the period of 40 years beginning from the date of vesting, provided that any Bond might be redeemed at an earlier date at the option of the Government.
Rule 65 provided that the instalments due on a Bond from the date of its effacement would be payable on presentation from and after July 1st next after the delivery of the Bond to the intermediary.
These rules show that the compensation does not remain payable alter the delivery of the Bonds and that the Bonds could not be cashed before the due date for their encashment.
The fact that the Bonds are negotiable does not make them legal tender and does not make it obligatory on anyone, including Government, to accept them in payment of any dues.
The only result of their being treated as negotiable instruments is that the owner of the Bends can transfer them to any person who is agreeable to purchase them.
When the compensation payable to an intermediary has been paid in the form of cash or Bonds, that compensation ceases to be payable.
Section 6(d) of the Act and r. 8A of the rules do not.
as already stated, provide for the receipt of agricultural income tax in the form of Bonds.
We are therefore of opinion that the Collector cannot be said be in error in not accepting the Bonds which had been delivered and which were not even cashable at the time, in payment of the arrears of agricultural income tax payable under the Agricultural Income tax Act.
We accordingly allow the appeal, set aside the order of the High Court and restore that of the Collector dated August 24, 1956 The respondent will pay the costs of the appeal to the appellants Appeal allowed. | The respondent who was assessed to agricultural income tax made an application to the Assessing Officer depositing compensation Bonds and prayed that the Bonds be accepted in payment of tax dues.
This was rejected stating that there was no rule for acceptance of these bonds.
Another attempt by the respondent was also turned down by the Collector.
Thereafter the respondent presented a writ petition in the High Court for directing them to accept the Bonds in lieu off the tax dues.
The High Court was of the opinion that the two officers completely ignored the provisions of section 6(d) of the Act and r. 8A, and directed the Collector to decide the respondent 's application in accordance with law.
In appeal by special leave: HELD: (i) Neither section 6(d) nor r. 8A provide that the Bonds must or can be accepted in payment of tax on agriculture income.
[133 E] Collector of Sultanpur vs Raja Jagdish Prasad Sahi. , referred to.
(ii) When the compensation payable to an intermediary has been paid in the form of cash or Bonds.
that compensation ceased to be payable.
The fact that the Bonds are negotiable does not make them legal tender and does not make it obligatory on anyone including Government to accept them in payment of any dues.
The only result of their being treated as negotiable instruments is that the owner of the Bonds can transfer them to any person who is agreeable to purchase them.
[134 D F] |
Appeal No. 583 of 1961.
Appeal by special leave from the Judgment and decree dated August 12, 1959, of the Rajasthan High Court in Civil Misc.
First Appeal No. 50 of 1956.
Gopal Singh, for the appellant.
B. P. Maheshwari, for the respondent.
April 22, 1964.
The Judgment of the Court was delivered by AYYANGAR, J.
The facts giving rise to this appeal, by special leave, are briefly as folows: The respondent Bhooralal brought a suit Civil Suit 20 1954 in the Court of the Subordinate Judge, First Class, Kekri against the appellant claiming possession of certain property which was described in the plaint and for mesne profits.
The allegation in the plaint was that the plaintiff was the absolute owner of the said property of which the defendant was in wrongful possession and that in spite of demands he had failed to vacate the same and was therefore liable to pay the mesne profits claimed.
In the plaint he made reference to a previous suit that had been filed by him and his mother (C.S. 28 of 1950) wherein a claim had been made against the defendant for the recovery of the mesne profits in regard to the same property for the period ending with February 10, 1950.
It was also stated that mesne profits had been decreed in the said suit.
In the Written Statement that was filed by the present appellant, besides disputing the claim of the plaintiff to the reliefs prayed for on the merits, a technical plea to the maintainability of the suit was also raised in these terms: "That 0.
r. 2, Civil Procedure Code is a bar to the suit.
When the suit referred to in paragraph 2 of the plaint was filed the plaintiff had a cause of action for the reliefs also.
He having omitted to sue for possession in that suit, is now barred from claiming relief of possession.
No second suit for recovery of mesne profits is maintainable in law.
833 Since the plaintiff had lost his remedy for the relief of possession he cannot seek recovery of mesne profits also.
" On these pleadings the learned Subordinate Judge framed 5 issues and of these the 4th issue ran: "Whether 0.
r. 2, Civil Procedure Code is a bar?".
Before evidence was led by the parties issue No. 4 was argued before the learned trial Judge as a preliminary issue and the Court recorded a finding that the suit was barred by the provision named and directed the dismissal of the suit.
The plaintiff preferred an appeal from this decree to the additional District Judge and the appellate Court considered this plea as regards the bar under 0.
r. 2, Civil Procedure Code on two alternative bases.
In the first place, the learned District Judge pointed out that the pleadings in the earlier suit C.S. 28 of 1950 had not been field in the case and made part of the record, so that it was not known what the precise allegations of the plaintiff in his previous suit were.
For this reason the learned District Judge held that the plea of a bar under 0.
r. 2, Civil Procedure Code should not have been entertained at all.
He also considered the question as to whether, if the plea was available, it could have succeeded.
On this he referred to the conflict of Judicial opinion on this point and held that if the point did arise for decision he would have decided in favour of the plaintiff and treated the cause of action for a suit for mesne profits as different from the cause of action for the relief of possession of property from a trespasser.
In view, however, of his finding on the first point as to there being no material on the record to justify the plea of a bar under 0. 2.
r. 2, Civil Procedure Code the learned District Judge did not rest his decision on his view of the law as regards the construction of 0. 2.
r. 2(3).
In the circumstances he set aside the dismissal of the suit and remanded it to the trial Court for being decided on the merits in accordance with the law.
The defendant the appellant before us preferred a second appeal to the High Court of Rajasthan and the learned Single Judge dismissed this appeal.
It is from this judgment that the appellants have preferred this appeal after obtaining special leave.
As already indicated, there is a conflict of judicial opinion on the question whether a suit for possession of immoveable property and a suit for the recovery of mesne profits from the same property are both based on the same cause of action, for it is only if these two reliefs are based on "the same cause of action" that the plea of 0.
, Civil Procedure Code 1, P(D)ISCI 27 834 that was raised by the appellant could succeed.
Clause (3)of O. 2.
r. 2, Civil Procedure Code that is relevant in this context reads: (3) A person entitled to more than one relief in respect of the same cause of action may sue for all or any of such reliefs, but if he omits, except with the leave of the Court, to sue for all such reliefs, he shall not afterwards sue for any reliefs so omitted.
" Some of the High Courts, notably Madras, have in this con nection, referred to the terms of 0.
2. r. 4 which runs: "R. 4.
No cause of action shall, unless with the leave of the Court, be joined with a suit for the recovery of immoveable property, except (a) claims for mesne profits or arrears of rent in respect of the property claimed or any part thereof; (b) claims for damages for breach of any contract under which the property or any part thereof is held; and (c) claims in which the relief sought is based on the same cause of action: Provided that nothing in this rule shall be deemed to prevent any party in a suit for foreclosure or redemption from asking to be put into possession of the mortgaged property".
as an aid to the construction of the term 'cause of action ' and the expression 'relief based on the same cause of action ' in 0. 2. r. 2(3).
Reading these two provisions together it has been held that the cause of action for suits for possession of immoveable property and the cause of action for a suit in respect of mesne profits from the same property are distinct and different.
On the other hand, it has been held, particularly by the High Court of Allahabad that the basis of a claim for mesne profits is wrongful possession of property and so is a claim for possession and thus the cause of action for claiming either relief is the same viz., wrongful possession of property to which the plaintiff is entitled.
On this reasoning it has been held that a plaintiff who brings in the first instance a suit for possession alone or for mesne profits alone is afterwards debarred from suing for the other relief under 0. 2.
r. 2(3).
The learned trial Judge had, after referring to the ,conflict of authority, expressed his preference for the Allahabad view and had, therefore, upheld the defence.
At the stage of the appeal the learned District Judge had, as already pointed out, expressed his preference for the other view.
The 835 learned Single Judge expressed his concurrence with the learned District Judge in preferring the Madras view as against the decisions of the Allahabad High Court.
Learned counsel for the appellant sought to argue that the Allahabad view was more in accordance with principle and with the proper construction of 0. 2.
r. 2(3), Civil Proce dure Code.
We do not consider it necessary to examine this conflict of judicial opinion in this case as, in our opinion, the learned District Judge was right in holding that the appellant had not placed before the Court material for the purpose of founding a plea of 0.
r. 2, Civil Procedure Code.
In order that a plea of a bar under 0. 2. r. 2(3), Civil Procedure Code should succeed the defendant who raises the plea must make out (1) that the second suit was in respect of the same cause of action as that on which the previous suit was based, (2) that in respect of that cause of action the plaintiff was entitled to more than one relief, (3) that being thus entitled to more than one relief the plaintiff, without leave obtained from the Court, omitted to sue for the relief for which the second suit had been filed.
From this analysis it would be seen that the defendant would have to establish primarily and to start with, the precise cause of action upon which the previous suit was filed, for unless there is identity between the cause of action on which the earlier suit was filed and that on which the claim in the later suit is based there would be no scope for the application of the bar.
No doubt, a relief which is sought in a plaint could ordinarly be traceable to a particular cause of action but this might, by no means, be the universal rule.
As the plea is a technical bar it has to be established satisfactorily and cannot be presumed merely on basis of inferential reasoning.
It is for this reason that we consider that a plea of a bar under 0. 2.
r. 2, Civil Procedure Code can be established only if the defendant files in evidence the pleadings in the previous suit and thereby proves to the Court the identity of the cause of action in the two suits.
It is common ground that the pleadings in C.S. 28 of 1950 were not filed by the appellant in the present suit as evidence in support of his plea under 0.
r. 2, Civil Procedure Code.
The learned trial Judge, however, without these pleadings being on the record inferred what the cause of action should have been from the reference to the previous suit contained in the plaint as a matter of deduction.
At the stage of the appeal the learned District Judge noticed this lacuna in the appelllant 's case and pointed out, in our opinion rightly, that without the plaint in the previous suit being on the record, a plea of a bar under 0.
r. 2, Civil Procedure Code was not main tainable.
Learned counsel for the appellant, however, drew our attention to a passage in the judgment of the learned Judge in the High Court which read: LP(D)ISCl 27(a) 836 "The plaint, written statement or the judgment of the earlier court has not been filed by any of the parties to the suit.
The only document filed was the judgment in appeal in the earlier suit.
The two courts have, however, freely cited from the record of the earlier suit.
The counsel for the parties have likewise done so.
That file is also before this Court.
" It was his submission that from this passage we should infer that the parties had, by agreement, consented to make the pleadings in the earlier suit part of the record in the present suit.
We are unable to agree with this interpretation of these ,observations.
The statement of the learned Judge "the two courts have, however, freely cited from the record of the ,earlier suit" is obviously inaccurate as the learned District Judge specifically pointed out that the pleadings in the earlier suit were not part of the record and on that very ground had rejected the plea of the bar under 0. 2.
r. 2, Civil Procedure Code.
Nor can we find any basis for the suggestion that the learned Judge had admitted these documents at the second appeal stage under 0.
r. 27, Civil Procedure Code by consent of parties.
There is nothing on the record to suggest such an agreement or such an order, assuming that additional evidence could legitimately be admitted in a second appeal under 0.
r. 27, Civil Procedure Code.
We can therefore proceed only on the basis that the pleadings in the earlier suit were not part of the record in the present suit.
Learned counsel for the appellant, however, urged that in his plaint in the present suit the respondent had specifically referred to the previous suit having been for mesne profits and that as mesne profits could not be claimed except from a trespasser there should also have been an allegation in the previous suit that the defendant was a trespasser in wrongful possession of the property and that alone could have been the basis for claiming mesne profits.
We are unable to accept this argument.
In the first place, it is admitted that the plaint in the present suit was in Hindi and that the word `mesne profits ' is an English translation of some expression used in the original.
The original of the plaint is not before us and so it is not possible to verify whether the expression `mesne profits ' is an accurate translation of the expression in the original plaint.
This apart, we consider that learned counsel 's argument must be rejected for a more basic reason.
Just as in the case of a plea of res judicata which cannot be established in the absence on the record of the judgment and decree which is pleaded as estoppel, we consider that a plea under 0.
r. 2, Civil Procedure Code cannot be made out except on proof of the plaint in the previous suit the filing of which is said to create the bar.
As the plea is basically founded 837 on the identity of the cause of action in the two suits the ,defence which raises the bar has necessarily to establish the ,cause of action in the previous suit.
The cause of action would be the facts which the plaintiff had then alleged to support the right to the relief that he claimed.
Without placing before the Court the plaint in which those facts were alleged, the defendant cannot invite the Court to speculate or infer by a process of deduction what those facts might be with reference to the reliefs which were then claimed.
It is not impossible that reliefs were claimed without the necessary averments to justify their grant.
From the mere use of the words `mesne profits ' therefore one need not necessarily infer that the possession of the defendant was alleged to be wrongful.
It is also possible that the expression 'mesne profits ' has been used in the present plaint without a proper appreciation of its significance in law.
What matters is not the characterisation of the particular sum demanded but what in substance is the ,allegation on which the claim to the sum was based and as regards the legal relationship on the basis of which that relief was sought.
If is because of these reasons that we consider that a plea based on the existence of a former pleading cannot be entertained when the pleading on which it rests has not been produced.
We therefore consider that the order of remand passed by the learned Additional District Judge which was confirmed by the learned Judge in the High Court was right.
The merits of the suit have yet to be tried and this has been directed by the order of remand which we are affirming.
The appeal fails and is dismissed.
In the circumstances of the case there will be no order as to costs.
Appeal dismissed. | The plaintiff respondent brought a suit against the appel lant for recovery of possession of certain property and for mesne profits.
The plaintiff claimed recovery of possession and mesne profits on the ground that he was the absolute owner of the property described in the plaint and the defendant was in, wrongful possession of the same.
In the plaint the plaintiff made reference to a previous suit that had been filed by him and his mother (C.S. 28 of 1950) wherein a claim had been made against the defendant for the recovery of the mesne profits in regard to the same property for the period ending February 1.0, 1950.
In the previous suit the mense profits had been decreed.
In his written statement in the present suit the defendant appellant raised a technical plea under Order 2 rule 2 of the Civil Procedure Code to the maintainability of the suit.
Before evidence was led by the parties the trial court de cided this preliminary issue raised by the defendant.
The trial court held that the suit was barred under 0.
2 r. 2 of the Code.
On appeal, the Appellate Court held that the plea of a bar under Order 2 rule 2, Civil Procedum Code should not have teen entertained at all because the pleadings in the earlier suit C.S. 28 of 1950 had not been filed in the present case.
Therefore, the Appellate Court set aside the order of the trial Court.
Against this order the defendant preferred an appeal which was dismissed by the High Court.
The appellant obtained special leave against the judgment of the High Court.
Hence the appeal Held:(i) A plea under Order 2 rule 2 of the Code based on the existence of a former pleading cannot be entertained when the pleading on which it rests has not been produced.
It is for this reason that a plea of a bar under 0.
2 r. 2 of the Code can be established only if the defendant files in evidence the pleadings in the previous suit and thereby proves to the court the identity of the cause of action in the two suits.
In other words a plea under 0.
2 r. 2 of the Code cannot be made out except on proof of the plaint in the previous suit the filing of which is said to create the bar.
Without placing before the court the plaint in which those facts were alleged, the defendant cannot invite the court to speculate or infer by a process of deduction what those facts might be with reference to the reliefs which were then claimed.
On the facts of this case it has to be held that the plea of a bar under 0, 2 r. 2 of the Code should not have been entertained at all by 832 the trial Court because the pleadings in civil suit No. 28 of 1950 were not filed by the appellant in support of this plea.
(ii)in order that a plea of a bar under 0. 2 r. 2 (3) of the Code should succeed the defendant who raises the plea must make out (i) that the second suit was in respect of the same cause of action as that on which the previous suit was based; (ii) that in respect of that cause of action the plaintiff was entitled to more that one relief (iii) that being thus entitled to more than one relief plaintiff, without leave obtained from the Court omitted to sue for the relief for which the second suit had been filed. |
Criminal Appeal No. 60 of 1963.
Appeal by special leave from the judgment and order dated August 24, 1962 of the Allahabad High Court in Government Appeal No. 1379 of 1962.
B.C. Misra and O.P. Rana, for the appellant.
1. P. Goyal, for the respondent.
The Judgment of the Court was delivered by Sikri, J.
This appeal by special leave is directed against the judgment of the Allahabad High Court dismissing the appeal of the State against the judgment of the Sessions Judge allowing the appeal of the respondent and acquitting him.
The respondent obtained permits under the Iron and Steel (Control) Order, 1956 hereinafter referred to as the Control Order for about 28 tons of iron, including 6 tons of rods, 151/2 tons of joints and 2 tons of G.C. Sheets.
He is alleged to have purchased these articles on the basis of the above permits between July 1957 and March 1958.
The permits were obtained on three applications made by the respondent.
Only two applications are in the printed record.
The first application is dated May 23, 1957, and is addressed to the Provincial Iron and Steel Controller, Kanpur, through the District Magistrate, Deoria.
In this application the respondent stated that he was a political sufferer and he was constructing a public temple for which he required five tons of M.S. Round and eight tons of Girder.
He further stated that the requirements were nor available at Deoria and as such the application should be considered and forwarded to the Controller for consideration and orders.
It appears that this application was forwarded, duly recommended, by the District Supply Officer.
Deoria, and ultimately a permit was given to him by the Controller.
He made another application dated September 7, 1957.
In this application he again stated that he was a political sufferer and he was constructing a public temple and dharamshala for which he required certain quantities of iron.
He further stated that the requirements were not available at Deoria and as such the application should be forwarded to the Controller.
This application was also recommended and forwarded and ultimately a permit was given to him.
On January 2, 1958, the accused made another application (exhibit Ka 9 not available in the printed record) and a permit was given to him by the District Supply Officer himself.
We may mention that the original permits are not printed in the record, and, therefore, we have not been able to see for ourselves as to what are the exact conditions contained in the permits.
It is the case of the prosecution that the respondent after obtaining the materials sanctioned to him under the permits did not construct any temple or dharamshala building at Barhaj Bazar or at any other place.
We may mention that Barhaj Bazar is the place where he lives and the applications which are in the record also mention this address.
163 Before the Magistrate who tried the case the respondent was put the following question: "It is alleged that the iron obtained under the permits mentioned in questions 2, 3 and 4 was not utilised for the purpose for which it was taken.
What have you to say in this respect?" The respondent 's reply was: "No. Whatever iron 1 got, I used it in the temple situate in mauza Tinbari, P.S. Madhubam district Azamgarh, which is my place of residence as well.
" Before the Magistrate the accused had admitted to have purchased about 17 tons of iron.
The Magistrate held it proved that the accused had atleast purchased one ton more from one Mishri Lal, P.W. 7.
Thus, he came to the conclusion that the accused had purchased at least 18 tons of iron.
He further held that on the evidence it was clear that only 3/4 ton of rods had been utilised in the building constructed at Tinhari, but as the building had been constructed between 1943 52, no portion of the iron obtained by the accused had been utilised for the purpose for which it was procured.
He further held that the accused had disposed of the iron wrongfully at Kanpur and did not even bring the same to Barhaj Bazar or Tinhar.
Accordingly he held that the respondent had contravened the provisions of cl. 7 of the Control Order.
The respondent filed an appeal before the Sessions Judge.
The Sessions Judge held that barring a very small quantity of iron, the remaining quantity that was received by the respondent had not been utilised in the temple or dharmashala at Tinhari.
Differing from the Magistrate, he held that it was not proved by any evidence that the respondent had actually sold the excess quantity at Kanpur.
He then observed that "in the absence of any such evidence the possibility of the appellant retaining the iron at some other place is not completely excluded.
" Then construing d. 7 of the Control Order, he observed that "in the aforesaid section there is no mention that the iron purchased should be utilised at any particular place or within a particular period.
The condition in the various permits granted to the appellant was simply this that he should utilise the iron in creecting a temple or dharamshala in the town of Barhai.
It may be noted that the main purpose was the construction of a temple and dharamshala; the place where it was to be constructed does not appear to have much significance.
Further no time limit is given during which the entire quantity of iron should be utilised.
" Accordingly he held that there had been no contravention of cl. 7 of the Control Order.
The State appealed to the High Court.
Srivastava, J. dismissed the appeal holding that there had been no contravention of cl. 7 of the Control Order.
According to him, two essentials are necessary before there can be contravention of el. 7. "In the 164 first place the iron and steel should be 'used '; secondly it should be used otherwise than in accordance with the conditions contained or incorporated in the document which was the authority for the acquisition." He held that the first condition had not been fulfilled because it had not been proved that the respondent had used the iron which he had obtained on the basis of the permit.
It appears that the findings of the learned Sessions Judge, as well as the Magistrate, that he had not used or utilised the remaining portions of the iron and steel at all were not questioned before him.
According to him, if the remaining quantity of iron was still unutilised or unused, then the respondent could not be said to have done anything contrary to cl. 7.
He further held that the second condition had also not been fulfilled because the permit itself contained only one condition printed on its back.
This condition was "that the materials required against the permit will be used only for the purpose for which it was asked for and has been given." According to him, it is not permissible to refer to the application made for the permit because the only document that can be looked at is the permit.
He was, however, prepared to concede that "it is also open to the officer to mention in the permit that it is being granted for the purpose mentioned in the application.
That may be a short cut for avoiding the trouble of entering in the permit the details of the purpose.
In that case it may be permissible to refer to the application.
" In spite of this concession, he concluded that "when even that is not done in fact no condition is mentioned in the permit at all about the manner in which the iron or steel is to be utilised it cannot be said that a condition of the permit has been broken because the assurance given in the application has not been carried out." Mr. B.C. Misra, learned counsel for the appellant.
has urged before us that on the facts found by the learned Sessions Judge.
cl. 7 of the Control Order has been contravened.
He says that the word "use" in el. 7 includes "kept for eventual use for another purpose." He says that if one stores iron and steel.
one uses it and the word "use" does not imply consumption only.
Relying on Maxwell on Interpretation of Statutes, Eleventh Edition, p. 266.
he says that we should give a wide construction to the word ' "use" in cl. 7.
Clause 5 and the relevant portion of cl. 7 of the Control Order are as follows: "5. Disposals.
No person, who acquires iron or steel under clause 4.
or no producer shall dispose of or agree to dispose of or export or agree to export from any place to which this Order extends any iron or steel, except in accordance with the conditions contained or incorporated in a special or general written order of the Controller.
165 7.
Use of Iron and Steel to conform to conditions governing acquisition.
A person acquiring iron or steel in accordance with the provisions of el. 4 shall not use the iron or steel otherwise than in accordance with any conditions contained or incorporated in the document which was the authority for the acquisition . " We are unable to accede to the above contentions.
There is no provision in the Control Order requiring that iron or steel acquired under the Control Order should be utilised within a specified time.
If it had been the intention to include keeping or storing within the word 'use ' there would have been some provision regarding the period during which it would be permissible to keep or store the iron, for it is common knowledge that building operations take some considerable time and are sometimes held up for shortage of material or other reasons.
Further the word 'use ' must take its colour from the context in which it is used.
In cl. 7 the expression "use. in accordance with the conditions contained" suggests something done positively, e.g. utilisation or disposal.
Mere 'non use ', in our opinion, is not included in the word 'use '.
The passage relied on by the learned counsel in Maxwell is as follows: "Wide Sense given to words: The rule of strict construction, however, whenever invoked, comes attended with qualifications and other rules no less important, and it is by the light which each contributes that the meaning must be determined.
Among them is the rule that the sense of the words is to be adopted which best harmonises with the context and promotes in the fullest manner the policy and object of the legislature.
The paramount object, in construing penal as well as other statutes, is to ascertain the legislative intent, and the rule of strict construction is not violated by permitting the words to have their full meaning, or the more extensive of two meanings, when best effectuating the intention.
They are, indeed, frequently taken in the widest sense, sometimes even in a sense more wide than etymological belongs or is popularly attached to them, in order to carry out effectually the legislative intent, or, to use Sir Edward Coke 's words, to suppress the mischief and advance the remedy.
" But this passage does not warrant the giving of a meaning to a word apart from the context in which it is used.
There is no doubt that the legislative intent of the Control Order is that this essential commodity should be utilised in accordance with the conditions contained in the permit, but no clause in this Control Order evinces a legislative intent that a mere non user is also prohibited and made punishable.
166 The learned counsel referred to London County Council vs Wood(1), but we do not derive any assistance from that case.
The head note brings out the point decided in that case as follows: "The Highways and Locomotives Act, 1878, provides by section 32 that "A country authority may. make. by laws for granting annual licences to locomotives used within their country.
" And by a by law made by the London County Council under that section it was provided that "No locomotive shall be used on any highway within the county of London until an annual licence for the use of the same shall have been obtained from the council by the owner thereof": Held, that a steam roller which was not at the time being employed in road making, but was merely passing through the county to a destination outside was being "used within the country" within the meaning of the section and the by law." In the context, the word "used" was, with respect, properly construed.
Collins, J., held that "the object of the Act was evidently to protect the highways, and the effect of a steam roller upon the highways may be just the same whether it be engaged in mending the roads or not".
In conclusion we hold that it has not been established that the respondent had used the iron acquired by him in contravention of cl. 7 of the Control Order.
The learned council further urges that the High Court erred in holding that the application cannot be referred to for the purpose of construing the conditions appearing in the permit, the condition being that "the materials acquired against a permit will be used only for the purpose for which it was asked for and has been given." He says that the expression "the purpose for which it was asked for" refers back to the application, and the expression "has been given" refers back to the Order.
There is some force in what he urges.
We are unable to sustain the finding of the High Court that it is not permissible to refer to the application and the order to find out the purpose for which the iron was obtained.
But even if we look at the applications, which are in the printed record, the purpose mentioned is only construction of a temple, in the application dated May 23, 1957, and temple and dharamshala in the application dated September 7, 1957.
These applications do not disclose that the respondent wanted to construct the temple and dharamshala at any particular place.
It is urged that the sentence which occurs in both the applications, namely that the requirements are not available at Deoria, shows that the purpose for which the iron and steel was required was for construction (1)[1897] 2 QB 482.
167 of a temple and dharamshala in the district of Deoria.
This argument is sought to be reinforced by asserting that a District Magistrate was not empowered to recommend applications for iron required for works to be constructed outside the District, and therefore it must be held that the purpose was construction of a temple and dharamshala in the district of Deoria.
However, no orders showing the jurisdiction of the District Magistrate in respect of this matter has been shown to us, and we are unable to conclude from the applications that the purpose was construction of a temple and dharamshala in the district of Deoria alone.
Accordingly we hold that the respondent has not contravened cl. 7 of the Control Order.
The appeal accordingly fails and is dismissed Appeal dismissed. | The respondent obtained permits under the Iron and Steel (Control) Order, 1956 on the representation that he wanted to purchase iron goods for the purpose of building a temple and a dharamshala.
The permits were obtained from the authorities of District Deoria in U.P.
At the back of the permit a condition was printed tematerials required against the permit will be used only that "h.q for the purpose for which it was asked for and has been given".
The respondent was tried for the contravention of cl. ? of the aforesaid order on the allegation that he had not used the goods purchased under the permits for the purpose for which ,they were issued.
The trial Magistrate found him guilty.
In appeal, however, the Sessions Judge acquitted him on the ground that the possibility of his retaining the iron at some other place was not entirely excluded.
The High Court in appeal by the State confirmed the acquittal holding that it had not been proved that the respondent had "used" the iron which he had obtained on the basis of the permit.
The High court further held that it was not possible to look into the application in order to see for what purpose the applicant took the permit and no condition actually printed at the back of the permit had been broken.
By special leave the State appealed to the Supreme Court, On behalf of the appellant it was urged: (1) the word "use" in cl. 7 of the order includes "kept for eventual use for another purpose." (2) The High Court erred in holding that the application cannot be referred to for the purpose of construing the conditions appearing in the permit.
HELD: The respondent could not be held guilty of a contravention of cl. 7 of the order.
(i) No doubt the legislative intent of the Iron & Steel (Control) Order is that this essential commodity should be utilised in accordance with the conditions contained in the permit, but no clause in the Control Order in question evinces a legislative intent that a mere non user is also prohibited and made punishable.
[165 H] The word 'use ' must take its colour from the context in which is used.
In cl. ? the expression "use. in accordance with the conditions contained" suggests something done positively e.g. utilisation or disposal.
Mere "non use" is not included in the word "use".
165 D] (ii) The High Court was wrong in holding that it is not permissible to look at the application to determine the purpose for which permit is obtained.
However in the present case the applications did not disclose that the respondent wanted to build a temple or dharamshala at any particular place.
From the mere fact that the applications were made to the authorities in Deoria District, or the fact that in the applications it was mentioned that the goods were not available in Deoria District, it did not necessarily follow that the goods were intended to be used in that District.
[166 H] 162 |
vil Appeal No. 998 of 1963.
Appeal from the judgment and decree dated January 12, 1962 of the Madras High Court in Appeal Suit No. 292 of 1958.
A.V. Viswanatha Sastri, V.S. Ramaswami lyengar and R. Thiagarajan, for the appellants.
S.V. Gupte, Solicitor General, and R. Ganapathy lyer, for the respondent.
The Judgment of the Court was delivered by Bachawat J.
One Sivasubramania Pillai died in the year 1924 leaving him surviving his mother.
two widows, Thialaiachi and Karpagathachi, and a daughter, Nagarathinathachi (respondent herein) born of Thialaiachi.
The two widows inherited the properties left by Sivasubramania.
in July 1927, they divided the bulk of the properties and each entered into separate possession and enjoyment of the properties allotted to her.
The partition is evidenced by two partition lists called partition deeds, Exs A I and B 45 dated July 14.
1927 and signed by both of them.
Under this partition, two veils of land were set apart for the maintenance 336 of Sivasubramania 's mother, to be enjoyed ' by her during her lifetime, and on her death, to be taken and enjoyed by the two widows in separate portions as mentioned in the partition lists.
On August 26.
1954, Thialaiachi died, and upon her death, the respondent took possession of the properties allotted to Thialaiachi under the partition of July, 1927.
On December 8, 1954, Karpagathachi instituted against the respondent the suit, out of which this appeal arises, claiming possession of the suit properties.
The respondent resisted the suit claiming that under the partition each widow gave up her right of survivorship in respect of the properties allotted to the other, and consequently on the death of Thialaiachi, the respondent as her daughter was entitled to take her share as her heir and to enjoy the same during the life of Karpagathachi.
By his judgment dated August 18, 1958, the District Judge, East Thanjavur, rejected ' the defendant 's contention, and held that the division between the two widows was for convenience of enjoyment only, and decreed the suit in respect of the properties held by Thialaiachi under the partition of July, 1927.
On appeal, the Madras High Court by its judgment dated January, 12, 1962 held that under the partition each widow gave up her life interest in the properties allotted to the other and consequently Karpagathachi was not entitled to recover possession of the properties allotted to Thialaiachi, set aside the decree of the District Judge, and dismissed the suit.
Karpagathachi and several other persons impleaded as party respondents in the appeal before the High Court now appeal under a certificate granted by the High Court to this court under article 133 of the Constitution.
Mr. Viswanatha Sastry appearing on behalf of the appellants contends that: (1) the right of survivorship of each widow in respect of her husband 's estate is the chance of the surviving widow to take the entire estate of her husband on the death of the cowidow, and in view of s.6(a) of the , the widows were not competent to enter into an arrangement transferring or relinquishing their right of survivorship; (2) the partition lists, Exs.
A I and B 45 not being registered, are not admissible in evidence; (3) the partition between the widows was for convenience of enjoyment only, and the respondent has failed to establish that each co widow gave up her right of survivorship in respect of the properties allotted to the other.
The learned ' Solicitor General appearing on behalf of the respondent disputed these contention.
We are of opinion that the first contention of Mr. Viswanatha Sastry should be rejected.
Under the Hindu law as it stood in 1924.
two widows inheriting their husband 's properties took together one estate as joint tenants with rights of survivorship and equal beneficial enjoyment.
They were entitled to enforce a partition of those properties so that each could separately possess and enjoy the portion allotted to her, see Bhugwan Deen Doobey vs Myna Baee (1) [1867] 11 M .I. A. 487 337 Gauri Nath Kakaji vs Gaya Kuar(1).
Neither of them could without the consent of the other enforce an absolute partition of the estate so as to destroy the right of survivorship, see Commissioner of Income tax vs Smt.
Indira Balakrishna(2) But by mutual consent they could enter into any arrangement regarding their respective rights in the properties during the continuance of the widow 's estate, and could absolutely divide the properties, so as to preclude the right of survivorship of each to the portion allotted to the other.
See Ramakkal vs Ramasami Naickan(3), Sudalai Ammal vs Gomathi Ammal(4).
Likewise, two daughters succeeding ,to their father 's estate as joint tenants with rights of survivorship could enter into a similar arrangement.
See Kailash Chandra Chuckerbutty vs Kashi Chandra Chuckerbutty(5) Subbammal vs Lakshmana lyer (6), Ammani Ammal vs Periasami Udayan(7).
Such an arrangement was not repugnant to s.6(a) of the .
The interest of each widow in the properties inherited by her was property, and this property together with the incidental right of survivorship could be lawfully transferred.
Section 6(a) of the prohibits the transfer of the bare chance of the surviving widow taking the entire estate as the next heir of her husband on the death of the co widow, but it does not prohibit the transfer by the widow of her present interest in the properties inherited by her together with the incidental right of survivorship.
The widows were competent to partition the properties and allot separate portions to each, and incidental to such an allotment, each could agree to relinquish her right of survivorship in the portion allotted to the other.
The first contention of Mr. Viswanatha Sastry must be rejected.
The second contention of Mr. Viswanatha Sastry must also be rejected.
A partition may be effected orally.
By an oral partition, the two widows could adjust their diverse rights in the entire estate, and as part of this arrangement, each could orally agree to relinquish her right of survivorship to the portion allotted to the other.
In the trial Court, the suit was tried on the footing that the partition was oral, and that the two partition lists were merely pieces of evidence of the oral partition, and no objection was raised with regard to their admissibility in evidence.
In the High Court, the appellants raised the contention for the first time that the two partition lists were required to be registered.
The point could not be decided without further investigation into questions of fact, and in the circumstances, the High Court rightly ruled that this new contention could not be raised for the first time in appeal.
We (1) [1928] L.R. 55 I.A. 299.
; , 517.
(2) Mad.
(3) (4) Cal.
(5) 338 think that the appellants ought not to be allowed to raise this new contention.
We think that the third contention of Mr. Viswanatha Sastry is sound ' and should be accepted.
Mere partition of the estate between the two widows does not destroy the right of survivorship of each to the properties allotted to the other.
The party who asserts that there was an arrangement by which the widows agreed to relinquish the right of survivorship must establish this arrangement by clear and cogent evidence.
The respondent has failed to discharge this onus.
It is common case that the partition is evidenced by Exs.
A 1 and B. 45.
Exhibit B 45 is the list showing the properties allotted to Thialaiachi.
The relevant portion of exhibit B. 45 reads: "In accordance with the chit cast, Theiyalai Achi.
wife of Sivasubramania Pillai, residing at Karuppur, shall take the nanja, punja, house and ground, cattle shed, cattle, pathway for men, cattle and cart and shed where dried dung cakes are stored mentioned in the list and shall pay the Government kist for the aforesaid properties from the current fasli 1337 and enjoy them.
" Exhibit A 1 showing the properties allotted to Karpagathachi contains similar words.
Now the two lists show that each widow is to "take and enjoy" the properties allotted to her.
The corresponding Tamil words are "adainthu anuhavithu.
" These words do not either expressly or by necessary intendment exclude the right of survivorship of the other widow.
The Tamil words "Sarva Swantantra Badyamayum" and "Santhathi pravesamayum" and other words indicating relinquishment of the right of survivorship are conspicuous by their absence.
The words used in the two partition lists are wholly insufficient to show that the two widows relinquished their right of survivorship inter se.
The fact that two separate partition lists were drawn up and each was signed by the two widows does not carry the matter any further.
The two partition lists show that the two velis of land kept separately for the maintenance of the mother in taw were to be divided by metes and bounds on her death between the two widows.
The division of the two velis on the death of the mother in law was agreed upon to avoid future disputes.
The fact that Thialaiachi had a daughter and was older than Karpagathachi by 20 years does not show that Karpagathachi mush have agreed that Thialaiachi 's daughter should enjoy the properties allotted to Thialaiachi after her death.
After the partition, the pattas in respect of all the lands continued to be in the joint names of both the widows.
If there was an absolute partition between the two widows.
it is not explained why there was no separate mutation in the name of each widow in respect of the lands allotted to her.
The deeds executed by Thialaiachi.
B 3, B 4.
B 7 and B 8 to B 43 recite the partition, but they do not use words indicating that there was an absolute partition.
The sale 339 deeds, Exs.
A 3, A 4, and A 6 executed by both the widows are in respect of undivided properties and throw no light on the question at issue.
The evidence on the record does not show clearly whether the sale deed ', exhibit B 44, executed by both the widows relates to undivided properties, or whether it relates to properties as separately allotted to Thialaiachi.
From time to time, Thialaiachi executed three wills, Exs.
B I, B 2 and A 5 giving to the legatees and particularly the respondent certain properties absolutely with full powers of alienation.
The first two wills, Exs.
B I and B 2, refer separately to Thialaiachi 's separate properties and to the properties obtained by her on partition.
The recitals in the two wills do not indicate that Thialaiachi obtained her husband 's properties on partition with absolute rights.
The third will, exhibit A 5, does not purport to dispose of specifically the properties obtained by her on partition.
Karpagathachi knew that Thialaiachi had executed the wills, but it is not shown that she knew of the contents of the wills.
By exhibit A 2, both Thialaiachi and Karpagathachi made a free gift of some of the properties allotted to Thialaiachi.
D.W. 1 is unable to explain why Thialaiachi joined in this deed.
By sale deed, exhibit B 5, Thialaiachi sold absolutely some of the properties allotted to her and a notice, exhibit A 22, regarding the proposed transfer of the patta in the name of the vendee was served upon Karpagathachi.
It is not clear if the patta was actualy transferred in the name of the vendee.
The explanation of Karpagathachi that she protested against the transfer and ultimately received ' one half of the sale price has not been believed.
But assuming that Karpagathachi did not object to the transfer, this single circumstance does not establish that at the time of the partition, he had agreed to give up her right of survivorship in respect of he properties allotted to Thialaiachi.
Karpagathachi (P.W. 1) denied that there was an absolute partition.
She was not shaken in cross examination.
Nataraja Pillai P.W. 2) said that there was no talk that each should take the properties absolutely and it was agreed that each would enjoy separately.
We find nothing in the evidence of P.W. 2 to show that the widows agreed to partition the properties absolutely so as to destroy the right of survivorship.
Manickam Pillai (D.W. 1) said that at the time of the partition, Thialaiachi said that she had a daughter and if what was allotted for her share was given to her absolutely she would agree to the partition and Karpagathachi also wanted to have absolute rights.
The District Judge rightly rejected evidence of D.W. 1.
The partition lists were drawn up after consulting lawyers.
D.W. 1 is unable to explain why words indicating absolute partition were not used in the partition lists.
D.W. 1 had been in management of the properties of the respondent, yet he falsely denied this fact.
He had intimate dealings with Thialaiachi and the respondent.
On a meticulous examination of the oral and documentary evidence, the learned District Judge rejected the respondent 's case that the widows had orally agreed to relinquish their 3 SCI 9 340 right of survivorship.
We think that this finding is correct, and the High Court was in error in reversing this finding.
In the result, the appeal is allowed, the decree and judgment passed by the High Court are set aside and those of the trial Judge restored '.
In all the circumstances, we direct that the parties will pay and bear their own costs throughout, in this Court and also in the Courts below. | Two co widows divided their husband 's property and each entered into separate possession of her share.
on the death of one of the widows her daughter the respondent took possession of her mother 's share.
The appellant the surviving widow filed a suit against the respondent claiming possession of that share.
The Trial Court decreed the suit, which on appeal was set aside by the High Court.
In appeal by certificate: HELD: (i) Under the Hindu Law the widows were competent to partition the properties and allot separate portions each, and incidental to such allotment each could agree to relinquish her right of survivorship in the portion allotted to the other.
Such an arrangement was not repugnant to section 6(a) of the .
[337 C D].
Case law referred to.
(ii) Mere partition of the estate between the two widows does not destroy the right of survivorship of each to the properties allotted to the other.
The party who asserts that there was an arrangement by which the widows agreed to relinquish the right of survivorship must establish this arrangement b.v clear and cogent evidence.
[338 B].
The respondent, in the instant case, had failed to discharge this onus.
[338 B C]. |
Appeal No. 130 of 1964.
Appeal from the judgment and order dated November 21, 1958 of the Bombay High Court in Appeal No. 31 of 1958.
D. N. Mukherjee, for the appellants.
G. section Pathak, section N. Andley and Rameshwar Nath, for respon dent No. 1 The Judgment of the Court was delivered by Bachawat, J.
Maharaja Sir Rajendra Prakash Bahadur Maharaja of Sirmur, Maharani Mandalsa Kumari Debi Rajmata of Sirmur, Maharani Premlata Debi of Chhota Udaipur, Maiyan Sahiba Sheba Kumari Debi of Jharipani, Major Rao Raja Sirendra Singh, Jagat Pershad, Shib Chander Kumar, Praduman Kumar and Dayawati Rani carried on business in co partnership under the firm name and style of Messrs. Jagatsons International Corporation (hereinafter referred to as the firm) at New Delhi.
Respondent No. 1, Ramnarain (Private) Ltd. instituted Summary Suit No. 162 of 1957 against Messrs. Jagatsons International Corporation on the Orginal Side of the Bombay High Court claiming a money decree for Rs. 1,96,831 58 N.P.
The suit was instituted on the allegation that respondent No. 1 and the firm had entered into an agreement in writing dated September 26, 1956, whereby respondent No. 1 agreed to provide finance to the firm, as a result of the dealings under the agreement a sum of Rs. 1,96,831.58 N.P. was due to respondent No. 1 from the firm, and in view of the breaches of the agreement by the firm, the agreement has stood terminated.
The consent of the Central Government to the institution of the suit was not obtained, though the Maharaja of Sirmur is a Ruler of the former Indian State within the meaning of section 87B of the Code of Civil Procedure.
The summons of the suit was served oil Shib Chander Kumar as a partner of the firm and as a person having the control or management of the partnership business.
On July 15, 1957, at the hearing of the summons for judgment taken out by respondent No. 1, the firm admitted its liability as claimed in the plaint and applied for installments, and the Court passed a decree for Rs. 1.89,643.98 N.P. and further interest, and directed that the decretal amount would be payable in certain instalments.
The firm committed defaults in payment of the instalments payable under the decree.
On December 13, 1957.
respondent No. 1 filed an application under 0.
21 r. 50(2) of the Code of Civil Procedure for leave to execute the decree against (1) Maharani Mandalsa Kumari Debi, (2) Maharani Premlata Debi, (3) Maiyan Sahiba Sheba Kumari Debi, (4) Major Rao Raja Sirendra Singh, (5) Jagat Pershad.
(6) Praduman Kumar and (7) Dayawati Rani claiming that respondent No. 1 was entitled to cause the decree to be executed against them 423 as being partners in the firm.
The opposite parties to the application filed an affidavit alleging (1) that the suit and all proceedings therein were incompetent in the absence of the requisite consent of the Central Government under section 86 of the Code of Civil Procedure; (2) Jagat Pershad and Shib Chander Kumar entered into the agreement dated September 26, 1956 and utilised the moneys received under it in fraud of the other partners and without their authority, Shib Chander Kumar dishonestly and fraudulently concealed from the other partners the fact of the institution of the suit and without the authority and knowledge of the other partners submitted to a consent decree in the suit.
, By an order dated March 18, 1958, a learned single Judge of the High Court rejected all the contentions in the affidavit, and allowed the application under 0. 21, r. 50(2) of the Code of Civil Procedure.
The learned single Judge held that (1) the defect of the absence of the requisite consent under section 86 read with section 87 B did not render the decree a nullity, and the objection could not be taken in execution proceedings; (2) the other defences to the merits of the claim in the suit could not be agitated in a proceeding under 0. 21, r. 50(2) of the Code of Civil Procedure.
An appeal preferred by appellants, Maharani Mandalsa Kumari Debi, Maharani Premlata Debi, Major Rao Raja Sirendra Singh and Maiyan Sahiba Sheba Kumari Debi was dismissed by a Bench,of the High Court on November 21, 1958.
The appellate Court held that (1) though the decree against the firm was a decree against all its partners including the Maharaja of Sirmur, and though the decree against the Maharaja of Sirmur might be a nullity, the decree against the other partners of the firm was valid, and (2) the appellants were not entitled to raise other defences to the merits of the claim on an application under 0. 21, r. 50(2) of the Code of Civil Procedure.
The appellants now appeal to this Court under a certificate granted by the High Court.
On behalf of the appellants Mr. D. N. Mukherjee contended that (1) the suit against the firm of Jagatsons International Corporation was a suit against all its partners and in the absence of the requisite consent under section 86 read with section 87 B of the Code of Civil Procedure, the suit was not competent against the Maharaja of Sirmur, and the decree against him was null and void; (2) consequently, the suit against the firm under the provisions of 0. 30 of the Code of Civil Procedure was not competent and the decree passed in the suit was wholly void, the decree not being a decree against the firm could not be executed by recourse to the machinery of 0. 21, r. 50, Code of Civil Procedure, and the application against the appellants under 0.
21, r. 50(2), Code of Civil Procedure was not maintainable; and (3) the appellants were entitled to dispute their liability in an application under 0.
21, r. 50(2) of the Code of Civil Procedure on all the grounds raised in the affidavit field 424 on their behalf and the court ought to have tried and decided all those questions.
In answer to the first contention of Mr. D. N. Mukherjee, Mr. Andley argued that for the purposes of a suit under 0. 30, Code of Civil Procedure, the firm of Jagatsons International Corporation is a legal entity separate and distinct from its partners, and no question of obtaining the consent of the Central Government to sue one of its partners under section 86 read with section 87 B of the Code of Civil Procedure to the institution of such a suit arises.
Mr. Andley relied upon the observations of Das, J. in Dulichand Lakshminarayan vs The Commissioner of Income tax, Nagpur(1) that for the sake of convenience, 0. 30 of the Code of Civil Proce(lure permits a firm to sue or be sued in the firm name "as if it were a corporate body".
Consistently with this legal fiction, R. 3 permits service of the summons on a partner or a person having control or management of the partnership business, R. 4 permits the institution and continuance of the suit in the firm name in spite of the death of a partner before the institution or during the pendency of the suit without joining the legal representatives of the deceased partner as a party to the suit, and R. 9 permits a suit between a firm and one or more of its partners and between firms having one or more common partners.
But the legal fiction must Pot be carried too far.
For some purposes the law has extended a limited personality to a firm, see Bhagangi Morarji Goculdas vs Alembic Chemicals Works Co.(2 ), but the firm is not a legal entity, see Purushottam Umedbhai &, Co. vs M/s. Manilal & Sons(3), Lindley on Partnership, 12th Edn., pp. 27 28.
The persons who arc individually called partners arc collectively called a firm, and the name under which their business is carried on is called the firm name: see section 4 of ' the Indian partnership Act, 1932.
Order 30, R. 1 of the Code of Civil Procedure enables two or more persons claiming or being liable as partners and carrying on business in India to sue or be sued in the name of the firm of which they were partners at the time of the accrual of the cause of action.
Rule 1 shows that the individual partners sue or are sued in their collective firm name.
Rule 2 provides that on disclosure of the names of the partners of the plaintiff firm, the suit proceeds as if they are named as plaintiffs in the plaint.
Rule 6 provides that the persons sued in the firm name must appear individually in their own names.
A suit by or in the name of a firm is thus really a suit by or in the name of all its partners, see Rodriguez vs Speyer Brothers (4), Purushottam Umedbai & Co. V. M/s Manilal &Sons (3) at pp.
991, 993, 995.
So also a suit against the firm is really (1) ,162.
(2) [1948] L.R. 75 I.A. 147.
(3) ; ,994.
(4) 425 a suit against all the partners of the firm.
In Western National Bank of City of New York vs Perez, Triana & Co. (1), Lindley, L.J. said: "When a firm 's name is used, it is only a convenient method of denoting those persons who compose the, firm at the time when that name is used, and a plaintiff who sues partners in the name of their firm in truth sues them individually, just is much as if he had set out all their names".
The decree passed in the suit.
though in form against the firm, is in effect a decree against all the partners.
In Lovell & Christmas vs Beauchamp(2) Lord Herschell, L. C. said: "Although the judgment may be pronounced against the firm in the firm 's name, it is in reality a judgment against all the persons who are in fact members of the firm; and it is because such a judgment exists that the right of execution follows".
The firm name of Jagatsons International Corporation applies as much to the Maharaja of Sirmur as to the other partners.
When respondent No. 1 sued the firm of Jagatsons International Corporation, it sued the Maharaja of Sirmnur and all the other partners as if the plaint had set out their names, and the decree passed in the suit is in reality a decree against all the partners of the firm including the Maharaja of Sirmur.
Now, the Maharaja of Sirmur is the Ruler of a former Indian State, and section 86 read with section 87 B of the Code of Civil Procedure barred the institution of a suit against him except with the consent of the Central Government.
No such consent was given for the institution of the suit against the Mabaraja of Sirmur.
In the absence of the requisite consent of the Central Government, a suit, which is in reality, though not in form, a suit against the Maharaja of Sirmur, is barred by section 86 read with section 87 B. See Gaekwar Baroda State Railway vs Hafiz Habib Ul_Haq(3).
Consequently, the suit so far as it was one against the Maharaja of Sirmur was incompetent and the decree against the firm so far as it is a decree against him personally was a nullity.
The first contention of Mr. Mukherjee is.
therefore, sound and should be accepted.
But we think that the second contention of Mr. Mukherjee should be rejected.
Beyond doubt, in a normal case where all the partners of a firm are capable of being sued and of being adjudged judgment debtors.
a suit may be filed and a decree may be obtained against a firm under 0. 30 of the Code of Civil Procedure.
and such a decree may be executed against the property of the partnership and.
against all the partners by following the procedure of 0. 21, r., 50.
of the Code of Civil Procedure, (1) (2) (3) [1938] L.R. 65 T. A. 182, 196.
426 But there may be abnormal cases where a suit is filed against a firm under the provisions of 0. 30, of the Code of Civil Procedure, and it is found that one of its partners cannot be sued or cannot be adjudged a judgment debtor.
Thus, take the case of an infant who under the English law, can be a partner in a firm, but, though a partner, cannot contract debts by trading and cannot be adjudged to be a debtor in respect of such debts.
In Lovell & Christmas vs Beauchamp(1), the House of Lords held that a creditor of a firm of which an infant was a partner could issue a writ against the firm in the firm 's name, and in such a suit judgment could be recovered against the defendant firm other than the infant partner, and if a judgment had been improperly signed against the firm simply, such a judgment could be suitably amended so as to make it a judgment against the firm other than the infant partner.
The precise point decided in this case cannot arise in this country, because under our law, a minor may not be a partner in a firm, though he may be admitted to the benefits of the partnership.
But the case shows that a creditor of a firm of which one of the partner 's cannot be adjudged to be a debtor, may institute a suit against a firm in the firm name under 0. 30 of the Code of Civil Procedure, and may in such a suit obtain a decree against the firm other than the partner who cannot be adjudged a debtor.
Again, take a case where the creditor of a firm institutes a suit against a firm and one of its partners at the time of the accrual of the cause of action is dead at the time of the institution of the suit.
The suit against the firm is really a suit against all the partners who were its partners at the time of the accrual of the cause of action.
including the dead partner.
Order 30, R. 4 of a Code of Civil Procedure enables the creditor to institute the suit against the firm in the firm name without joining the legal representative of the deceased partner.
The suit is, therefore, competent, but no suit can be instituted nor can a decree be obtained against a dead person.
The decree passed in such a suit will, therefore, bind the partnership and all the surviving partner s, but will not affect the separate property of the deceased partner.
In Ellis vs Wadeson(2), Romer, L. J. observed: "Now consider the question of death.
Suppose a partner dies before action brought, and an action is brought against the firm in the firm 's name.
The dead man is not a party to the action, so, far as his private estate is concerned, for a dead man cannot be sued, though the legal personal representative of a dead man can be sued in a proper case.
In that case the action would be an action solely against the.
surviving partners.
If the legal personal representatives of a deceased partner are not added expressly as defendants.
(1) (2) [1899]1 Q.B. 714 at 718.
427 and the action is brought against the firm in the firm 's name, then judgment can only be obtained as against the surviving partners and be enforced against them and against the partnership assets".
The above illustrations show that a suit may be brought under the provisions of 0. 30 of the Code of Civil Procedure against a firm of which a partner is not capable of being sued or being adjudged a debtor, and in such a suit a decree enforceable against the other partners and the partnership assets may be passed.
Now, in the instant case, respondent No. 1 sued the firm of Jagatsons International Corporation under the provisions of 0. 30 of the Code of Civil Procedure.
The assets of the firm as also all its partners jointly and severally are liable to satisfy the debts of the firm.
Even the Maharaja of Sirmur is jointly and severally liable for the debts of the firm; only the institution of a suit against him without the consent of the Central Government is barred by section 86 read with section 87 B of the Code of Civil Procedure.
As the suit was instituted without the requisite consent of the Central Government, no decree could be passed in the suit against the Maharaja of Sirmur.
But the suit against the firm other than the Maharaja of Sirmur was competent, and a decree could be passed against the firm other than the Maharaja of Sirmur, and such a decree could be executed against the partnership property and against the other partners by following the procedure of 0.
21, r. 50 of the Code of Civil Procedure.
It is true that respondent No. 1 obtained a decree against the firm of Jagatsons International Corporation simply, but the decree should be suitably amended so as to make it a decree against the firm of Jagatsons International Corporation other than the Maharaja of Sirmur, and the decree so read is a valid decree which may be executed against the partnership property and the other partners of the firm by recourse to the machinery of 0.
21, r. 50 of the Code of Civil Procedure.
The application of respondent No. 1 under 0. 21, r. 50(2) for leave to execute the decree against the other partners is, therefore maintainable.
The second contention of Mr. Mukherjee must, therefore, be rejected.
The third contention of Mr. Mukherjee raises the question as to what defences may be raised by a respondent to an appli cation under 0. 21, r. 50(2) of the Code of Civil Procedure.
The law on this point is now well settled.
In Gambhir Mal Pandiya vs J. K. Jute Mills Co. Ltd., Kanpur(1), Hidayatullah, J. speaking on behalf of the Court observed: ". primarily the question to try would be whether the person against whom the decree is sought to be executed was a partner of the firm, when the cause of action accrued.
but he may question the decree on the (1) ; 428 ground of collusion, fraud or the like but so as not to have the suit tried over again or to raise issues between himself and his other partners".
The respondent to an application under 0.
21, r. 50(2) of the Code of Civil Procedure is also entitled to raise a plea of special protection under the law, and on this ground, the learned judge at pp.
205 206 of the Report distinguished the case of Chhattoo Lal Misser & Co. vs Naraindas Baijnath Prasad(1).
We may add that the respondent may also defend the application on the ground that the decree sought to be executed against him is a nullity.
Now, in the instant case, none of the appellant is entitled to any special protection from the institution of the suit under section 86 read with section 87 B, Code of Civil Procedure.
The Maharaja of Sirmur was entitled to this special protection, but he was not a party to the application under 0.
21, r. 50(2) of the Code of Civil Procedure.
Nor is the decree against the firm other than the Maharaja of Sirmur a nullity.
The affidavit filed on behalf of the appellants does not sufficiently raise a plea that the decree was the result of any collusion, fraud or the like.
The affidavit incorrectly assumes that the decree passed on admission of the appearing partner, was a consent decree.
Allegations of dishonesty and fraudulent concealment of the fact of the institution of the suit are made against Shib Chander Kumar, one of the partners of the firm, but no allegation of fraud or collusion is made against respondent No. 1.
It was not alleged that respondent No. 1 was a party to any fraud or collusion or that it obtained the decree by fraud or collusion.
The appellants alleged that their partners, Jagat Pershad and Shib Chander Kumar, had entered into the agreement dated September 26, 1956, and had utilised the moneys received under it in fraud of the appellants and without their authority, but the appellants are not entitled to raise these pleas in the application under 0.
21 r. 50(2) of the Code of Civil Procedure.
The appellants were admittedly partners of the firm of Jagatsons International Corporation at the time when the cause of action accrued.
In the absence of any plea questioning the decree on the ground of collusion, fraud or the like, respondent No. 1 is entitled to an order under 0. 21, r. 50(2) of the Code of Civil Procedure giving it leave to execute the decree against the appellants as partners in the firm.
The third contention of Mr. Mukherjee must, therefore, be rejected.
In the result, the appeal is dismissed with costs.
Appeal dismissed.
(1) Cal, 704. | Under Order 30 of the Code of Civil Procedure the respondent No. 1 a firm sued another firm of which the appellants and a Ruler of a former Indian State were partners.
The consent of the Central Government to the institution of the suit under section 87 B of the Code of Civil Procedure was not obtained.
The firm admitted the liability and the Court passed a decree and directed that the decretal amount would be payable in certain instalments.
On the firm 's default in paying the instalments an application was filed under Order 21 Rule 50(2) of the Code of Civil Procedure for leave to execute the decree against the appellants, excepting the Ruler as partners of the firm.
The Court allowed the application.
The appellants ' appeal was dismissed by the High Court.
On appeal by certificate; HELD: (i) The suit so far as it was one against the Ruler was incompetent and the decree against the firm so far as it was a decree against him personally was a nullity.
In the absence of the requisite consent of the Central Government a suit against the Ruler was barred by section 87 read with section 87 B. [425 F, G].
(ii) The application of respondent No. 1 under Order 21 Rule 50(2) for leave to execute the decree against the other partners was maintainable.
[427 G].
A suit may be brought under the provisions of 0. 30 of the Code against a firm of which a partner is not capable of being sued or being adjudged a debtor, and in such a suit a decree enforceable against the other partner and the partnership assets may be passed.
[427 B].
Case law referred to.
(iii) In an application under 0.
21 Rule 50(2) the judgmentdebtor could question the decree on the ground of collusion, fraud or the like but so as not to have the suit tried over again or to raise issues between himself and his other partners.
[428 A].
The Judgment debtor was also entitled to raise a plea of special protection under the law; and might also defend the application on the ground that the decree sought to be executed against him is a nullity.
But in the instant case none of the appellants was entitled to any special protection; nor was it alleged that respondent No. 1 was a party to any fraud or collusion or that it obtained the decree by fraud or collusion.
[428 B, C].
Gambhir Mal Pandiya vs J. K, Jute Mills Co. Ltd., Kanpur relied upon. 422 |
Appeals Nos./55 157 1964.
Appeals by special leave from the judgment and order dated August 8, 1961 of the Andhra Pradesh High Court in Case Referred No. 25 of 1957.
section V. Gupte, Solicitor General, N. D. Karkhanis and R.N. Sachthey, for the appellant (in all the appeals).
G.S. Pathak, B. Datta and T. Satyanarayan, for the respondent (in all the appeals).
The Judgment of the Court was delivered by Subba Rao, J.
These appeals by special leave raise the question of construction of section 24(2) of the Indian Income tax Act, 1922, hereinafter called the Act.
The material facts may briefly be stated.
The, Cocanada Bank Ltd., Kakinada, hereinafter called the assessee, is a private limited company carrying on banking business with its head office at Kakinada and a branch at Dayal Bagh.
The assessee 's sources of income are banking business and interest from government securities.
For the assessment year 194950 its income was assessed as follows: Interest on securities .
Rs. 84,880 Other banking activities .
Rs. 64,400 (loss) Net loss .
Rs. 55,912 The following tabular form shows at a glance the factual position in regard to the income of the assessee under different heads during the said three years: Business Year of assessment Interest on income or securities loss as finally Total decided by the A.A.C. 1 2 3 4 Rs. Rs. Rs. 1.
1950 51 . 5,191 886 6077 2. 1951 52 . 2174 1,177 3351 3. 1952 53 . 1885 9,121 11,006 621 For the three succeeding years the department showed the income under the said two separate heads but allowed the said loss to be set off against the income under the head "business" and disallowed it against the income under the head "interest on securties".
The view of the Income tax Officer was confirmed, on appeal, by the Appellate Assistant Commissioner and ', on further appeal, by the Income tax Appellate Tribunal.
The following question was referred by the Tribunal to the High Court for its opinion: "Whether on the facts and in the circumstances of the case, the assessee was entitled to set off the business loss of Rs. 55,912 brought forward from the preceding year against the entire income including interest on securities held by the assessee.
" The High Court, having regard to the decision of this Court in United Commercial Bank Ltd., Calcutta vs Commissioner of Income tax, West Bangal(1) remitted the case to the Income tax Tribunal, Hyderabad Bench, for making a fuller statement of case on the question whether these securities in question formed ' part of the trading assets held by the assessee in the course of its business as a banker and whether its dealing with the securities from which it received interest was as much the assessee 's business as receiving deposits from clients and withdrawals by them.
The Income tax Tribunal, on a further hearing, held that the receipt of interest from securities was as much the assessee 's business as its other banking activities like receiving deposits from the clients and withdrawals by them.
On receipt of the supplementary statement of case from the Tribunal the High Court answered the reference in favour of the assessee.
Hence the present appeals.
Learned counsel for the Revenue argued that the income from business and securities fell under different heads, namely, section 10 and section 8 of the Act respectively, that they were mutually exclusive and, therefore, the losses under the head "business" could not be carried forward from the preceding year to the succeeding year and set off under section 22(4) of the Act against the income from securities held by the assessee.
Learned counsel for the assessee, on the other hand, contended that though for the purpose of computation of income, the income from securities and the income from business were calculated separately, in a case where the securities were part of the trading assets of the business, the income therefrom was part of the income of the business and, therefore.
the losses incurred under the head "business" could be set off during the succeeding years against the total income of the business, i.e., income from the business including the income from the securities.
The relevant section of the Act which deals with the matter of set off of losses in computing the aggregate income is section 24.
The (1) ; 622 relevant part of it, before the Finance Act, 1955, read: "(1) Where any assessee sustains a loss of profits or gains in any years under any of the heads mentioned in section 6, he shall be entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year." (2) Where any assessee sustains a loss of profits or gains in any year, being a previous year not earlier than the previous year for the assessment for the year ending on the 31st day of March, 1940, in any business, profession or vocation, and the loss cannot be wholly set off under subsection (1), so much of the loss as is not so set off or the whole loss where the assessee had no other head of income shall be carried forward to the following year and set off against the profits and gains, if any, of the assessee from the same business, profession or vocation for that year; and if it cannot be wholly set off, the amount of loss not so set off shall be carried forward to the following year.
While sub section
(1) of section 24 provides for setting off of the loss in a particular year under one of the heads mentioned in section 6 against the profit under a different head in the same year, sub section
(2) provides for the carrying forward of the loss of one year and setting off of the same against the profit or gains of the assessee from the same business in the subsequent year or years.
The crucial words, therefore, are "profits and gains of the assessee from the same business", i.e., the business in regard to which he sustained loss in the previous year.
The question, therefore, is whether the securities formed part of the trading assets of the business and the income therefrom was income from the business.
The answer to this question depends upon the scope of section 6 of the Act.
Section 6 of the Act classified taxable income under the following several heads: (i) salaries; (ii) interest on securities; (iii) income from property; (iv) profits and gains of business, profession or vocation; (v) income from other sources; and (vi) capital gains.
The scheme of the Act is that income tax is one tax.
Section 6 only classifies the taxable income under different heads for the purpose of computation of the net income of the assessee.
Though for the purpose of computation of the income, interest on securities is separately classified, income by way of interest from securities does not cease to be part of the income from business if the securities are part of the trading assets.
Whether a particular income is part of the income from a business falls to be decided not on the basis of the provisions of section 6 but on commercial principles.
To put it in other words, did the securities in the present case which yielded the income form part of the trading assets of the assessee? The Tribunal and the High Court found that they were the assessee 's trading assets and the income therefrom 623 was, therefore, the income of the business.
If it was the income of the business, section 24(2) of the Act was immediately attracted.
If the income from the securities was the income from its business, the loss could, in terms of that section, be set off against that income.
A comparative study of sub sections
(1) and (2) of section 24 yields the same result.
While in sub s.(1) the expression "head" is used in sub section
(2) the said expression is conspicuously omitted.
This designed distinction brings out the intention of the Legislature.
The Act provides for the setting off of loss against profits in four ways.
To illustrate, take the head "profits and gains of business, profession or vocation".
An assessee may have two businesses.
In ascertaining the income in each of the two businesses, he is entitled to deduct the losses incurred in respect of each of the said businesses.
So calculated, if he has loss in one business and profit in the other both falling under the same head, he can set off the loss in one against the profit in the other in arriving at the income under that head.
Even so, he may still sustain loss under the same head.
He can then set off the loss under the head "business" against profits under another head, say "income from investments", even if investments are not part of the trading assets of the business.
Notwithstanding this process he may still incur loss in his business.
Section 24(2) says that in that event he can carry forward the loss to the subsequent year or years and set off the said loss against the profit in the business.
Be it noted that clause (2) of section 24, in contradistinction to cl.
(1) thereof, is concerned only with the business and not with its heads under section 6 of the Act.
Section 24, therefore, is enacted to give further relief to an assessee carrying on a business and incurring loss in the business though the income therefrom falls under different heads under section 6 of the Act.
Some of the decisions cited at the Bar may conveniently be referred to at this stage.
The Judicial Committee in The Punjab Cooperative Bank Ltd. vs Commissioner of Income tax, Punjab(1) has clearly brought out the business connection between the securities of a bank and its business, thus: "In the ordinary case of a bank, the business consists in its essence of dealing with money and credit.
Numerous depositors place their money with the bank often receiv ing a small rate of interest on it.
A number of borrowers receive loans of a large part of these deposited funds at somewhat higher rates of interest.
But the banker has al ways to keep enough cash or easily realisable securities to meet any probable demand by the depositors . . ." In the present case the Tribunal held, on the evidence, and that was accepted by the High Court, that the assessee was investing its amounts in easily realisable securities and, therefore, the said securities were part of the trading assets of the assessee 's banking business.
The decision of this Court in United Commercial Bank Ltd., 624 Calcutta vs Commissioner of Income tax, west Bengal(1) does not lay down any different proposition.
It held, after an exhaustive review of the authorities, that under the scheme of the Income,tax Act, 1922, the head of income, profits and gains enumerated in the different clauses of section 6 were mutually exclusive, each specific head covering items of income arising from a particular source.
On that reasoning this Court held that even though the securities were part of the trading assets of the company doing business, the income therefrom had to be assessed under section 8 of the Act.
This decision does not say that the income from securities is not income from the business.
Nor does the decision of this Court in East India Housing and Land Development.
Trust Ltd., vs Commissioner of Incometax, West Bengal(2) support the contention of the Revenue.
There.
a company, which was incorporated with the objects of buying and developing landed properties and promoting and developing markets, purchased 10 bighas of land in the town of Calcutta and set up a market therein.
The question was whether the income realised from the tenants of the shops and stalls was liable to be taxed as "business income" under section 10 of the Income tax Act or as income from property under section 9 thereof.
This Court held that the said income fell under the specific head mentioned in section 9 of the Act.
This case also does not lay down that the income from the shops is not the income in the business.
In Commissioner of Income tax, Madras vs Express Newspapers Ltd.,C), this Court held that both section 26(2) and ' the proviso thereto dealt only with profits and gains of a business, profession or vocation and they did not provide for the assessment of income under any other head, e.g., capital gains.
The reason for that conclusion is stated thus: "It (the deeming clause in section 12B) only introduces a limited fiction, name ly, that capital gains accrued will be deemed to be income of the previous year in which the sale was effected.
The fiction does not make them the profits or gains of the business.
It is well settled that a legal fiction is limited to the purpose for which it is created and should not be extended beyond its legitimate field . .
The profits and gains of business and capital gains are two distinct concepts in the Income,tax Act; the former arises from the activity which is called business and the latter accrues because capital assets are disposed of at a value higher than what they cost the assessee.
They are placed under different heads; they are derived from different sources; and the income is computed under different methods.
The fact that the capital gains are connected with the capital assets of the business cannot make them the profit of the business.
They are only deemed to be income of the previous year and not the profits or gains arising from the business during that year." (1) ; (2) (3) , 260 625 It will be seen that the reason for the conclusion was that capital gains were not income from the business.
Though some observations divorced from content may appear to be wide, the said decision was mainly based upon the character of the capital gains and not upon their non inclusion under the heading "business".
The limited scope of the earlier decision was explained by this Court in Commissioner of Income tax, Bombay City Iv.
Chugandas & Co.(1).
Therein this Court held that interest from securities formed part of the assessee 's business income for the purpose of exemption under section 25(3).
Shah, J., speaking for the Court, observed: "The heads described in section 6 and further elaborated for the purpose of computation of income in sections 7 to 10 and 12, 12A, 12AA and 12B are intended merely to indicate the classes of income: the heads do not exhaustively delimit sources from which income arises.
This is made clear in the judgment of this Court in the United Commercial Bank Ltd. 's case(" ').
that business income is broken up under different heads only for the purposes of computation of the total income: by that break up the income does not cease to be income of the business, the different heads of income being only the classification prescribed by the Indian Income tax Act for computation of income.
" The same principle applies to the present case.
We, therefore, hold that under section 24(2) of the Act the income from the securities which formed part of the assessee 's trading assets was part of its income in the business and, therefore, the loss incurred in the business in the earlier year could be set off against that income also in the succeeding years.
In the result, we hold that the High Court was right in answering the question referred to it in the affirmative.
The appeals are dismissed with costs.
One hearing fee.
Appeals dismissed.
(1) [19651 ; , 24. | The respondent bank had income from banking business and interest on securities.
For the assessment year 1949 50 its loss from banking business was set off against the income from interest on securities but for the succeeding three years the income tax officer set off the said loss which had been carried forward, only against the income.
from banking business and disallowed it against the income under the head 'interest on securities '.
The view of the Income Tax Officer was upheld by the Appellate Assistant Commissioner and on further appeal by the Appellate Tribunal.
The Tribunal however referred to the High Court, at the instance of the assessee, the question whether the assessee was entitled to set off business loss brought forward from the preceding assessment year against the entire income including interest on securities.
The High Court remitted the case to the Tribunal for a finding whether the securities in Question formed part of the trading assets held by the assessee.
The Tribunal held that the receipt of interest from securities was as much the assessee 's business as its other banking activities.
On receipt of the supplementary statement of case the High Court answered the reference in favour of the assessee.
The Revenue appealed to this Court.
It was urged for the Revenue that the income from business and securities fell under different heads, namely section 10 and section 8 of the Act respectively, that they were mutually exclusive and, therefore, the losses under the head "business" could not be carried forward from the preceeding year to the succeeding year and set off under section 24(2) of the Act against the income from securities held by the assessee.
HELD: (i) While subs.
(1) of section 24 provides for setting off of the loss in a particular year under one of the heads in section 6 against the profit under a different head in the same year, subs.
(2) provides for the carrying forward of the loss of one year and setting off the same against the profit or gains of the assessee from the same business in subsequent years.
This cl.
(2) of section 24 in contradistinction to cl.
(1) thereof is concerned only with the business and not with its heads under section 6 of the Act.
This designed distinction brings out the intention of the legislature to give further relief to an assessee carrying.
on business and incurring loss in the business though the income therefrom falls under different heads under section 6 of the Act.
[622E; 623E F] (ii) The scheme of the Act is that income tax is one tax.
Section 6 only classifies the income under different heads for the purpose of computation of the net income of the assessee.
Though for the purpose of computation of the income, interest on securities is separately classified, income by way of interest on securities does not cease to be part of the income from business if the securities are part of the 620 trading assets.
Whether a particular income is part of the income from a business falls to be decided not on the basis of the provisions of s.6 but on commercial principles.
[622G H] (iii) In the present case the Tribunal and the High Court found that the securities were the assessee 's trading assets and the income therefrom was, therefore, the income of the business.
If it was income of the business, section 24(2) of the Act was immediately attracted.
If the income from the securities was the income from its business, the loss could, in terms of that section, be set off against that income.
[622H 623A] The Punjab Co operative Bank Ltd. vs Commissioner of Incometax, Punjab, (1940)8 I.T.R. 635 and Commissioner of Income tax Bombay City I vs Chugandas & Co. (1965) 55 I.T.R. 17, relied on.
United Commercial Bank Ltd. vs Commissioner of Income tax West Bengal; , , East India Housing and Land Development Trust Ltd. vs Commissioner of Income tax, West Bengal , and Commissioner of Income tax, Madras vs Express Newspapers Ltd. , distinguished. |
vil Appeals Nos. 676 and 677 of 1962.
Appeals by special leave from the judgment and order dated February 2,7.
1960 of the Life Insurance Tribunal, Nagpur in Case No. 30 / XII of 1959.
O.P. Malhotra, Hamendra K. Shah, .1.
B. Dadachanji, O.C. Mathur and Ravinder Narain, for the appellants (in C.A. No. 767/ 62).
H.M. Thakar, S.N. Andley, Rameshwar Nath and P.L. Vohra, for the appellant (in C.A. No. 677/62).
C.K. Daphtary, Attorney General, D.P. Mehta and K.L. Hathi, for respondent No. 1 (in both the appeals).
The Judgment of the Court was delivered by Raghubar Dayal, J.
These appeals, by special leave, are against the decree of the Life Insurance Tribunal, Nagpur, in proceedings on an application by the Life Insurance Corporation of India (hereinafter called the Corporation) under section 15 of the (Act XXXI of 1956), shortly termed as the LIC Act, for ordering the Vishwabharti Insurance Company, Bombay.
Damji Valji Shah and Jayantilal Hirijibhai Chawda, appellants in the C.A. 676 of 1962, Ghanshyamdas, appellant in C.A. 677 of 1962, the aforementioned individuals being directors of the Vishwabharti Insurance Company, and another director, to pay to the Corporation jointly and severally the sum of Rs. 82,000/ together with interest there at 6 % per annum from September 1, 1956, till full payment.
The decree ordered the company to pay a further sum.
but we are not concerned with that part of the decree as the company has not appealed against it.
(D)5SCI 4 668 The facts of the case briefly are these.
The company was a composite insurer.
i.e., an insurer who carried on.
in addition to life insurance business.
other classes of insurance business.
The LIC Act came into force on july 1.
1956 and the Corporation was established on September 1. 1956 which was the "appointed day" according to section 2(1) of that Act.
On that day.
in view of section 7.
all the assets and liabilities appertaining to the life insurance business (called the controlled business, vide section 2(3)) of the Company stood transferred to and vested in the Corporation.
It was found that certain amounts which had been transferred from the Life Insurance Fund in the books of the company to the General Department had not been transferred in accordance with the provisions of the (Act 4 of 1938) which governed the company and should have continued to be included in the assets appertaining to the controlled business of the company.
It was therefore that an application under section 15 of the LIC Act was made by the Corporation to the Tribunal.
We may now state how this amount of Rs. 82.000/ happened to be transferred from the Life Insurance Fund (or the Life Fund) of the company to its General Department.
The company had to keep separate accounts of all receipts and payments m respect of each class of insurance business.
in view of section 10(1) of the lnsurance Act.
It had to maintain d Life Fund in connection with its life insurance business in view of section 10(2).
Sub section
(2) provided that where an insurer carried on business of life insurance.
all receipts due in respect of such business be curried to and would form a separate fund called the Life insurance Fund and its assets be kept distinct and separate from all other assets c, If the insurer and deposits made by the insurer in respect of life insurance business.
Sub section
(3) of section 10 provided that the life insurance fund would be as absolutely the security of the life policy holders as though it belonged to an insurer carrying on no other business than life insurance business and that it should not be applied directly or indirectly for any purpose other than those of the life insurance business of the insurer.
The amount in this fund had to be sufficient to meet the net liabilities in regard to the life insurance policies issued by the company, If it was not so maintained.
the company stood the chance of being barred from carrying on life insurance business.
By resolution dated December 18, 1948.
Rs. 1.10.000/ were transferred from the General Department to the Life Department as advance to the Life Department Revenue Account for being added to the Life Fund.
subject to the condition that the Life Department would not be liable to pay any interest thereon and that no repayment of the lcan would be made except out of the valuation surplus of the Life Department.
The first actuarial valuation report of the company for the year 1944 48.
dated July 18 669 1949, showed that the net liability of the company was Rs. 6,55,7 18/and that the amount in the Life Fund was Rs. 6,57,450/and therefore the fund showed a surplus of Rs. 1,732/ over the net liabilities.
If the sum of Rs. 1,10,000/ had not been transferred to the Life Department Revenue Account prior to December 31, 1948, this valuation report would have shown the net liability exceeding the amount in the life fund by about a lakh of rupees.
It is clear that the amount was so transferred in order to avoid the consequences of the net liabilities exceeding the Life Fund.
The Profit & Loss Appropriation Account for the year 1949 shows that Rs. 60,000/ out of this amount of Rs. 1,10,000/ was written off as the company had made profits.
Rs. 32,000/ were again similarly transferred to the Life Fund from the General Department with retrospective effect from December 31, 1952 in order to strengthen the position of the Life Fund.
The second actuarial valuation report for the period 1949 52, dated September 9, 1953, showed that the policy liability amounted to Rs. 15,3,3,068, that the Life Fund stood at Rs. 15,35,890/ and that thus the Life Fund exceeded the net liability by Rs. 2,822/ .
There was thus a surplus as Rs. 32,000/ had been transferred to strengthen the Life Fund, with retrospective effect in view of the resolution dated August 20, 1953 which reads.
"Resolved that a loan of Rs. 32,000/ (thirty two thousand only) bearing no interest be hereby given to Life Department by General Department with retrospective effect as on 31st December 1952, the repayment of which shall be made only out of the future Valuation Surplus or surpluses of the Life Department or it may be written off from the future profits of the General Department.
This will have effect in the accounts of the Company for the year ended 31 st December 1952.
" It is to be noted that this resolution itself said that the amount would be repaid only out of the future Valuation Surplus or pluses of the Life Department or might be written off from the future profits of the General Department.
It was this amount of Rs. 82,000/ (Rs. 50,000, ' plus Rs. 32,000/ ) which, by a resolution dated January 6.
1956 was transferred to the General Department from the Life Fund.
The resolution reads: "Resolved that a loan of Rs. 82,000/ (eighty two thousand only) advanced to Life Department Revenue Account by General Department be and is hereby repaid to Genera1 Department and the balance of Rs. 60,000/ 670 due to General Department by Life Department Revenue Account be and is hereby kept in reserve for future and hence no adjustment in regard to Rs. 60,000/ will be made for the present." This resolution was confirmed by the Board of Directors at its meeting dated February 6, 1956.
We may now refer to the changes in law with respect to life insurance business in 1956 and an anticipation of which probably led to the resolution of January 6, 1956.
On January 19, 1956, the Life Insurance (Emergency Provisions) Ordinance, 1956 (Ord.
No. 1 of 1956) was promulgated by the President.
It came into force from that day which was called the 'appointed day '.
Section 3(1) provided that the management of the 'controlled business ' of a11 insurers would vest in the Central Government on and from the appointed day. 'Controlled business ', according to cl.
(2) of section 2, meant all the business appertaining to the life insurance business, if the insurer carried on any other class of insurance business also.
Clause (b) of sub section
(3) prohibited the incurring of any expenditure by the insurer without the previous approval of the person specified by the Central Government in that behalf, from the assets appertaining to the controlled business otherwise than for the purpose of making routine payments etc.
, specified in that clause.
Those purposes do not include the repayment of an advance made from the General Department to the Life Fund or to the Life Department Revenue Account.
Clause (c) of sub section
(3) further prohibited the insurer, without the previous approval of the authorised person, to transfer or otherwise dispose of any such assets appertaining to the controlled business or create any charge or hypothecation, lien or other encumbrance thereon.
It would therefore appear that possibly the Board of Directors were not right in confirming the resolution of January 6, 1959 after the Ordinance had come into force.
However, that is not the point raised in these proceedings.
We have already referred to the coming into force of the LIC Act an July 1, 1956 and of the transfer and vesting in the Corporation of all the assets and the liabilities pertaining to the life insurance business in view of section 7 of that Act.
Section 15 provides that the Corporation may apply for relief to the Tribunal in respect of a transaction which is made by the insurer whose controlled business had been transferred to and vested in the Corporation under the Act at any time within 5 years before January 19, 1956 and by which the composite insurer has transferred any property from his life department to his general department without consideration or for an inadequate consideration and the transfer was not reasonably necessary for the purpose of the controlled business of the insurer or was made with an unreasonable lack of prudence 671 on the part of the insurer regard being had in either case to the circumstances at the time.
The Corporation, in such proceedings, had to make all parties to the transaction parties to the application.
Sub section
(2) of section 15 empowered the Tribunal to make such order against any of the parties to the application as it thought just having regard to the extent to which those parties were respectively responsible for the transaction or benefited from it and all the circumstances of the case.
Section 16 provided for the payment of compensation to the insurer whose Controlled business had been transferred to and vested in the Corporation under the Act.
Section 17 provided for the constitution of Tribunals which were empowered by sub section
(4) to regulate their own procedure and decide all matters within their competence.
Section 41 provided that no civil Court would have jurisdiction to entertain or adjudicate upon any matter which a Tribunal was empowered to decide or determine under the Act.
Section 44 inter alia provided that nothing contained in the Act would apply in relation to any insurer whose business was being voluntarily wound up or was being wound up under orders of the Court.
The Corporation, by its application under section 15, contended that the transfer of Rs. 82,000/ from the Life Fund to the General Department under the resolution of January 6, 1956, was illegal.
being contrary to and in contravention of the insurance Act and as such was inoperative, bad in law and not binding on the petitioner.
It was further contended that the said transfer was without consideration and was not reasonably necessary for the purpose of the controlled business of the company and/or was made with unreasonable lack of prudence on the part of the company, regard being had to the circumstances at the time.
It was therefore that it prayed inter alia for a decree against the respondents for a sum of Rs. 82,000/ with interest.
It impleaded the company as respondent No. 9, the appellants in C.A. 676 of 1962 as respondents Nos. 1 and 4 and the appellant in C.A. 677 of 1962 as respondent No. 2.
Ghanshyamdas and Damji Valji were also parties to the resolution dated February 7. 1956.
Other directors who were parties to the resolution of January 6 were also impleaded.
The aforesaid three directors, the appellants before us, contested the claim of the Corporation and justified the transfer of Rs. 82,000/ to the General Department from the Life Fund on the ground that the amount had been lent by the General Department to the Life Department and had been paid back to the General Department by transfer from the Life Fund when the LifE Fund showed surplus, according to the report of the Actuary dated July 25, 1955.
It was also contended before the Tribunal that the petition could not be proceeded with without the leave of the Bombay High Court in view of section 446 of the Indian Companies 672 Act and that the petition was also not maintainable by reason of section 44 of the LIC Act.
Several other grounds were also taken before the Tribunal.
We are not now concerned with them.
The Tribunal held that the amounts of Rs. 1,10,000/ and Rs. 30,000/ were not advanced to the Life Department as loans and that the transfer of Rs. 82.000/ was not out of the valuation surplus and that therefore the transfer of this amount could not be said to be for consideration and necessary or reasonably necessary for the purpose of the controlled business of the company or even a prudent transaction having regard to the interest of the life policy holders.
It held that no leave of the Bombay High Court was necessary for proceeding with the petition and that the petition was maintainable and that section 44 of the LIC Act did not bar the applicability of the provisions of the Act to the respondent company.
It therefore decreed the suit and ordered the company and the directors, respondents 1 to 4, to pay to.
the Corporation jointly and severally a sum of Rs. 82,000/ together with interest thereon at 6 per cent per annum from September 1, 1956 till full payment.
It is against this decree that C.A. 676 of 1962 has been filed, by special leave, by Damji Valji Shah and Jayantilal Hirjibhai Chawda and C.A. 677 of 1962 by Ghanshyamdas.
This judgment will govern both these appeals.
The points raised by learned counsel for the appellants are: (i) The Tribunal had no jurisdiction to proceed with the proceedings on the petition presented by the Corporation without the leave of the High Court in view of section 446 of the , the company having been ordered to be wound up by the High Court on November 9, 1959, (ii) In view of section 44(a) of the LIC Act none of the provisions of the Act applied to the company and therefore the Tribunal could not proceed on the application of the Corporation subsequent to the company being wound up.
(iii) The transfer of Rs. 82,000/ from the Life Fund to the General Department of the company was for consideration and was necessary for the life insurance business.
The fourth point sought to be urged was that the provisions of section 15(1)(f) of the LIC Act were ultra rites as they contravened the provisions of articles 14 and 19 of the Constitution.
This contention was not raised before the Tribunal during the arguments and was therefore considered by it to have been abandoned.
We did not therefore allow it to be raised before us.
Sub section
(1) of section 446 of the provides that when a winding up order has been made or the Official Liquidator has been appointed as Provisional Liquidator.
no suit or other legal proceeding shall be commenced or, if pending at the date of the winding up order, shall be proceeded with against the company except by leave of the Court and subject to such terms as the 673 Court may impose.
Sub section
(2) provides.
inter alia, that the Court which is winding up the company shall, notwithstanding anything contained in any law for the time being in force, have jurisdiction to entertain or dispose of any suit or proceeding and any claim made by or against the company.
Sub section
(3) provides that any suit or proceeding by or against the company which is pending in any Court other than that in which the winding up is proceeding may, not withstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that Court.
The question is whether these provisions would affect the proceedings of the Tribunal.
In this connection, reference may be made to section 41 of the LIC Act which provides that no civil Court shall have jurisdiction to ' entertain or adjudicate upon any matter which a Tribunal is empowered to decide or determine under that Act.
It is not disputed that the Tribunal had jurisdiction to entertain the application of the Corporation and adjudicate on the matters raised thereby.
The Tribunal is given the exclusive jurisdiction over this matter.
It is in view of the exclusive jurisdiction which sub section
(2) of section 446 of the confers on the company Court to entertain or dispose of any suit or proceeding by or against a company or any claim made by or against it that the restriction referred to in sub section
(1) has been imposed on the commencement of the proceedings or proceeding with such proceedings against a 'company after a winding up order has been made.
In view of section 41 of the LIC Act the company Court has no jurisdiction to entertain and adjudicate upon any matter which the Tribunal is empowered to decide or determine under that Act.
It is not disputed that the Tribunal has jurisdiction under the Act to entertain and decide matters raised in the petition filed by the Corporation under section 15 of the LIC Act.
It must follow that the consequential provision of sub section
(1) of section 446 of the will not operate on the proceedings which be pending before the Tribunal or which may be sought to be commenced before it.
Further, the provisions of the special Act i.e, the LIC Act, will over ride the provisions of the general Act viz., the which is an Act relating to companies in general.
It is however contended for the appellants that in view of section 44(a) of the LIC Act, section 41 will not apply to the company whose business was being wound up under orders of Court and that therefore the provisions of section 446 of the will affect the proceedings before the Tribunal.
The contention is not sound.
The question of the applicablity of the Act to a particular insurer is to be considered in relation to facts existing when the Act came into force.
In view of section 44 of the LIC Act it will not apply to 674 an insurer whose business is being wound up under orders of Court at the time when that Act came into force in 1956 or on the 'appointed day ' i.e., September 1, 1956.
when the assets and liabilities pertaining to the controlled business of the company stood transferred and vested in the Corporation.
The company was not being wound up under orders of the Court on July 1, 1956 when the Act came into force or on the appointed day mentioned earlier.
The Act did apply to the company.
It cannot cease to apply merely because subsequently the company was ordered to be wound up.
The word 'insurer ' is defined in cl.
(6) of section 2 of the LIC Act and means an insurer as defined in the who carries on life insurance business in India and includes the Government and a provident society as defined in section 65 of the .
On November 9, 1959, when the company was ordered to be wound up it was not an 'insurer ' within the meaning of the definition as the company did not carry on life insurance business in India on that date.
Its life insurance business had been taken over by the Corporation on the appointed day and it ceased to carry on that business thereafter.
It follows therefore that the company was not an insurer on November 9. 1959 and cannot take advantage of the provisions of cl.
(a) of section 44 of the LIC Act.
We are therefore of opinion that the Tribunal had jurisdiction to continue the proceedings after November 9, 1959 when the company was ordered to be wound up and that the provisions of section 446, , or section 44(a), LIC Act, do not in any way affect its jurisdiction to continue the proceedings.
We now come to the third point raised for the appellants.
We agree with the Tribunal that the amounts of Rs. 1.10,000/ and Rs. 32,000/ were not lent to the Life Department as such by the General Department.
No question of lending money by one department of the company to the other can be ordinarily contemplated.
The assets of the company really constitute one entity, even though the company maintains separate accounts with respect to its various insurance business.
It carried on other types of insurance business also.
We have already shown how the provisions of the require the company to keep a separate account for the life insurance business and to have a separate fund known as the Life Insurance Fund and to which were to be creditedreceipts due in respect of the life business and the amount deposited by the insurer in respect of life insurance business.
Such a deposit is to be made in view of section 7(1) of the .
This requires ' the insurer to deposit and keep deposited with the Reserve Bank of India for and on behalf of the Central Government either in cash or in approved securities or partly in cash and partly in approved securities the sums specified in the various clauses in 675 regard to the different types of life insurance businesses.
Clause (a) requires a deposit of Rs. 2,00,000/ where the business done or to be done is life insurance only.
Clause (e) requires a deposit of Rs. 3,00,000 / where the business done or to be done is life insurance and any one of the three el.
asses mentioned in clauses (b) to (d).
Clause (e) further provides that out of the deposit of Rs. 3,00,000/ , Rs, 2.00,000/ ' shall be the deposit for 'life insurance business.
Section 7 lays down a statutory amount which the insurer has to deposit.
It does not however restrict the insurer to deposit a larger amount in respect of life insurance business.
Sectionplaces certain restrictions about the use to be made of the deposits under section 7.
Section 8(2) hewever deals with any deposit and provides that where a deposit is made in respect of life insurance business, the deposit made in respect thereof shall not be available for the discharge of any liability of the insurer other than liabilities arising out of policies of life insurance issued by the insurer.
This means that when an insurer puts certain money in the funds pertaining to the life insurance business and especially to a life insurance fund.
such an amount can be used only for the discharge of liabilities of the insurer arising out of life insurance policies issued by him.
The amounts of Rs. 1,10,000/ and Rs. 32,000/ would thus amount to deposits made by the company in respect of life insurance business in order to augment the life fund.
This can be done either to bring the funds to an amount exceeding the expected net liabilities on the policies or merely to augment that fund.
It makes no difference to the company how it distributed its funds so long as its statutory liabilities were satisfied.
The very conduct of the company with respect to these amounts belies the alleged nature of the transfers of these amounts to the Life Department.
The sum of Rs. 60,000/ out of Rs. 1.10,000/ was written off in 1949.
A loan of such an amount is not usually written off.
No special reason is assigned for writ ing off the loan.
The resolution about the transfer of Rs. 32,000, 'itself speaks of the possibility of the amount being written off.
A lender does not think in this way at the time he advances a loan.
It is clear that the amount was really being transferred to the Life Fund through the Life Department Revenue Account as otherwise the Life Fund on the actuarial valuation would have stood at a figure much below the amount of the net liabilities on the policies as calculated in Form H, Schedule Four to the , which is a Form giving summary and valuation of the policies of the company as at the date of the valuation.
Form I is for the valuation balance sheet of the company at the corresponding date and requires in one column the net liability under business as shown in the summary and valuation of policies and in the other column the balance of life insurance fund as shown 676 in the balance sheet, and also provides for noting the eventual position about the Life Fund being in surplus or in deficiency as compared to the net liability.
When the amount was not lent as a loan, no question of its repayment as such could have arisen in 1956.
of course, whenever the Life Fund showed an actuarial valuation surplus that surplus or part of it could be transferred to the General Department according to the desire of the management.
The amount of Rs. 82,000/ was not transferred as a result of the actuarial valuation as contemplated by the various resolutions which authorised the transfer of the amount from the General Department to the Life Department Revenue Account.
It was definitely provided in those resolutions that no repayment of the amount would be made except out of valuation surpluses of the Life Department.
The expression 'valuation surplus ' has a technical meaning under the Act.
Section 13(1) of the provides that every insurer carrying 0n life insurance business shall.
in respect of the life insurance business transacted in India.
cause once at least in every three years an investigation to be made by an actuary into the financial condition of the life insurance business carried on by him, including the valuation of his liabilities in respect thereto.
An abstract of the report of the actuary is to be made in accordance with the regulations contained in of the Fourth Schedule and in conformity with the requirements of of that Schedule.
Section 13(2) provides that the provisions of sub section
(1) regarding the making of an abstract shall apply whenever at any other time an investigation into the financial condition of the insurer is made with a view to the distribution of profits or an investigation is made of which the results are made public.
The abstract is to be certified on behalf of the insurer to the effect that full and effective particulars of every policy under which there is a liability either actual or contingent have been furnished to the actuary for the purpose of investigation.
Section 15 requires the submission of the aforesaid abstract to the Controller within the specified period.
of the Fourth Schedule requires that every extract prepared in accordance with the requirements of that part of the Schedule will have the statement of a consolidated revenue account in Form G, a summary and valuation in Form H. a valuation balance sheet in Form I and a statement in Form DDD as set forth in Part H of/he Third Schedule annexed to it.
The valuation balance sheet in Form I requires the noting of a surplus, if any, of the balance of the life insurance fund as compared to the net liability in the business as shown in the summary and valuation of policies.
It is the surplus no, led in this 677 Form 1 which is really the valuation surplus.
It was out of such surplus that the company resolved that the advances of Rs. 1,10,000/and Rs. 32,000/ could be paid to the General Department by the Life Department.
No such actuarial valuation was made by the actuary prior to the transfer of Rs. 82,000/ to the General Fund by the resolution dated January 6, 1956.
Reliance in this connection is placed on behalf of the appellants on the letter of the actuary dated July 25, 1955.
The actuary states: "On the above basis, the valuation shows a policy liability of Rs. 20,20,421.
The Life Insurance Fund is Rs. 21,32,455.
Thus there is a surplus of Rs. 1.12.033.
The surplus includes Rs. 53,300 being the amount of appreciation on investments taken into account by you in the past two years.
Thus the net working surplus is Rs. 58,733/ .
The cost of Bonus at the rate of Rs. 10/ per thousand is approximately Rs. 48,000/ .
Thus the surplus is sufficient to enable a bonus declaration at the above rate even after excluding the appreciation amount or setting it apart as an additional reserve for future use.
Conclusion: The result is satisfactory.
Continuing the same method of working as you have followed.
the statutory valuation as on 31 12 55 will surely enable you to declare a higher bonus.
" Firstly, it does net appear that the actuary had really conducted an investigation and submitted the valuation report as required by section 13, of the .
There is nothing on the record to show that any abstract in Form I, Fourth Schedule, was prepared and submitted to the Controller.
Further.
the letter shows that the net working surplus was only Rs. 58,733/ as the ostensible surplus of Rs. 1,12,033/ included Rs. 53,300/ by which certain investments of the company had appreciated in that period.
When the net working surplus was much less than Rs. 82,000/ which were transferred from the Life Department to the General Department, the transfer of Rs. 82,000/ cannot be said to have been in accordance with the terms on which the alleged loan was made to the Life Department from the General Department.
When the Life Department had not Rs. 82,000/ with itself, there could not have been any necessity to pay that amount to the General Department.
In fact, the alleged loan could be paid only when there would have been a valuation surplus in the accounts of the lfie Department but this does not mean that the Life Department was bound to pay back the amount the moment it had any valuation surplus.
678 Its liability to pay the alleged loan could arise only when there was a valuation surplus.
Its paying the amount actually would depend upon the circumstances prevailing at the time.
In the circumstances, we cannot resist the conclusion that the Directors passed a resolution for the transfer of this amount January 6, 1956 in anticipation of some law depriving the company of its life insurance business.
It may be that it was a close secret that an Ordinance would be issued on January 19.
But all the same, possibly.
persons in the insurance world could have had an inkling of the trend of events.
The content of the resolution passed on January 6, indicates that the directors had no clear idea at the time as to how much the Life Department, according to them, owed to the General Department.
The resolution speaks not only of the transfer of Rs. 82,000/ to the General Department but also refers to the balance of Rs. 60,000/ due to the General Department by the Life Department Revenue Account.
The amount had been written off in 1950 and could not have thereafter been considered to be a loan advanced to the Life Department Revenue Account from the General Department.
It seems that the resolution was passed in some hurry and the Directors couId not definitely decide as to how any further amount upto Rs. 60,000/ could be taken back to the GeneraI Department from the Life Department Revenue Account.
Any way, such a resolution of the Directors indicates that any entries with respect to the alleged loans were made for the purpose of accounting and the necessities of the business.
Money in the Life Fund had to be augmented in 1948 and 1952 in order to make the Life Fund exceed the net liabilities of the company on account of the life insurance policies.
We are therefore of opinion that the Tribunal took a correct view about the nature of the transfer of Rs. 1,10,000/ in 1948 and Rs. 32,000/ in 1952 to the Life Insurance Fund and rightly held that the transfer of Rs. 82,000/ to the General Department by ' resolution dated January 6, 1956, was not in accordance with the provisions of the and that consequently that amount continued to form part of the assets of the life insurance business of the company upto September 1, 1956 and that as such vested in the Corporation which could recover it from the company and the directors responsible for the transfer of the amount to the General Department.
The appeals therefore fail and are dismissed with costs, one hearing fee.
Appeals dismissed. | Indian section 10 Transfer of Funds from Life Insurance Fund to General Department of composite insurer Permissibility.
The appellants were directors of an insurance company which was a composite insurer i.e. one carrying on other classes of life insurance business besides life insurance.
Under section 10(1) of the Indian Life , a composite insurer had to keep separate accounts in respect of the different classes of business, and its receipts in respect of life insurance business had to go into a fund called the Life Insurance Fund which could be applied only for the put the Life Insurance business and had always to be sufficient to meet the net liabilities of the Life Insurance business.
By resolution dated December 18, 1948, a sum of Rs. 1,10,000 was transferred from the General Department of the company to the Life Department to be added to the Life Fund; if this had not been done the said fund would have shown a deficit in the actuarial valuation report dated July 18, 1949.
In the profit appropriation account of the company for the latter year a sum of Rs. 60,000 out of the above sum was written off so that the sum advanced was reduced to Rs. 50,000.
A further sum of Rs. 32,000 was again similarly transferred from the General to the Life Department by resolution passed in August 1953.
with retrospective effect from December 31, 1952, in order to strengthen the position of the Life Fund which again would have shown a deficit if this had not been done.
The advances thus made on both occasions were according to the relevant resolutions repayable only out of the 'valuation surplus ', if any, ' in the life department.
On January 8, 1956, the Board of Directors of the company transferred a sum of Rs. 82,000 from the Life Department to the General Department.
by way of repayment of the above loans.
On January 19, 1956, by Ordinance No. 1 of 1956 the management of the life insurance business of all insurers in the country passed to the Central Government.
On September 1.
1956, the Life Insurance Corporation of India came into being under the , and the assets and liabilities of the life insurance business carried on by all insurers became vested in it.
The corporation filed an application under section 15 of the said Act before the Tribunal constituted under the Act alleging that transfer of Rs. 82,000 from the Life Department to the General Department of the aforesaid company was without consideration and not for any 665 666 necessity of the life insurance business and prayed for a decree against appellants and the company jointly and severally for the said amount.
The Tribunal overruled the defendants ' objections as to its jurisdiction and granted a decree to the Corporation as prayed.
The company did not appeal but the appellants came to this Court by special leave.
The following contentions were raised on behalf of the appellants; (1) The tribunal had no jurisdiction to proceed with the proceedings on the petition presented by the Corporation without the leave of the High Court in view of section 446 of the , the Company having been ordered to be wound up the High Court on November 9, 1959; (2) In view of section 44(a) of the L.I.C. Act none of the provisions of the Act applied to the company and therefore the Tribunal could not proceed on the application of the Corporation subsequent to the company being wound up; (3) The transfer of Rs. 82,000 from the Life Fund to the General Department of the company was for consideration and was necessary for the life insurance business.
HELD: (i) The provisions of section 446 of the did not affect the proceedings before the Tribunal.
It is in view of the exclusive jurisdiction conferred upon the company court in sub section
(2) of section 446 of the to entertain and dispose of any suit or proceeding by or against a company which is being wound up that provision has been made in subs.
(1) of that section that no suit or proceeding shall be filed, or if pending, proceeded with against such a company without permission having been taken from the Court.
In view of the provision in section 41 of the L.I.C. Act the company court has no jurisdiction to try matters which a Tribunal under the is empowered to entertain and decide.
It could not be disputed that the Tribunal was empowered to try the Corporation 's application under section 15 and the Company Court therefore had no jurisdiction to entertain or decide it.
It must follow that the consequential provision of sub section
(1) of section 446 would not operate on the proceedings before the Tribunal.
[673E G] Further, the provisions of the Special Act i.e. the L.I.C. Act will over ride the provisions of the general Act viz. the which is an Act relating to companies in general.
[673H] (ii) The company could not take advantage of the provisions of section 44(a) of the L.I.C. Act.
[674D E] Section 44(a) provides that the provisions of the Act will not apply to an insurer whose business is being wound up under orders of court.
But the question of the applicability of the Act to a particular insurer is to be considered in relation to facts existing at the time when the Act came into force i.e. July 1, 1956 or on the appointed day, i.e. September 1, 1956, when the assets and liabilities of the controlled insurer of the company stood transferred and vested in the Corporation.
The company was not being wound up under orders of Court on the above dates.
The L.I.C. Act and therefore section 41 thereof did apply to the company.
It could not cease to apply merely because subsequently the company was ordered to be wound up.
[673H 674B] Section 44(a) was not applicable to the company for the further reason that when it was ordered to be wound up in 1959 it was not an 'insurer ' within the meaning of that word in section 2(6) since it was not carrying on life insurance business on that date.
the said busi 667 ness having been taken over by the Corporation on the 'appointed day ' [674C D] (iii) The Tribunal rightly passed a decree in favour of the Corporation.
No question of lending money by one department of the company to the other can ordinarily be contemplated.
The assets of the company really constitute one entity even though the company maintains separate accounts with respect to its various insurance businesses.
From the facts it was clear that the amounts of Rs. 1,10,000 and Rs. 32,000 had been transferred from the General Department to the Life Fund to meet the deficit in the Life Fund which was likely to occur on both occasions.
The circumstances showed that the sum of Its. 82,000 was transferred back to the General Department in a hurry in anticipation of some law depriving the company of its life insurance business.
It was moreover a condition of the alleged 'loans ' that they would be repaid only when there.
was a 'valuation surplus ' in the Life Fund.
There was no such surplus in the Life Fund at the time when the sum was transferred from it the General Department.
[674G] |
Appeals Nos. 213 and 214 of 64.
Appeals from the judgment and order dated April 4, 1961, of the Madras High Court in Case Referred No. 130 of 1956.
Niren De,Additional Solicitor General R. Ganapathy Iyer and R.N. Sachthey, for the appellants (in both the appeals.
A. V. Vishwanatha Sastri, M.M. Ismail and R. Gopalakrishnan, for the respondent in both the appeals.
The Judgment of the Court was delivered by Subba Rao, J.
In the t,own of Nagore in Tanjore District, Madras State, there is a Durgha consecrated to Hazerath Sayed Shahul Hameed Quadir Ali Ganja Savoy Andavar, who lived some 400 years ago.
The said Durgha receives large income from immovable properties endowed to it and the offerings in cash and kind made by the devotees.
The Durgha and its properties are now being administered under a scheme settled by the Madras High Court on March 16, 1955.
Under the scheme the management of the administration of the affairs of the said Durgha vests hereditarily in 8 trustees called Nattamaigars, who constitute a board of trustees.
The said board of trustees shall from among themselves elect one as a managing trustee and he shall hold office for a term of 3 years.
The managing trustee shall at the end of each fasli prepare a balance sheet verified by the manager and ascertain the net amount available for payment to kasupangudars, who are the descendants of Saiyed Muhammed Eusoof, the foster son of the saint.
The Managing Trustee shall declare the amount due to each of the kasupangu (share) and shall allocate the amount to each kasupangudar (sharer) in the list to be prepared for that purpose 661 in each year.
He shall pay the amount to each kasupangudar in accordance with the list.
It is said that at present there are 640 kasupangudars.
Briefly stated under the scheme the management of the properties of the Durgha, both movable and immovable, vests in Nattamaigars, and the kasupangudars are entitled to the surplus in accordance with their shares.
For the assessment years 1953 54 and 1954 55 the Income tax Officer assessed the surplus income in the hands of the Managing Trustee as an association of persons.
The Appellate Assistant Commissioner, on appeal, confirmed the same.
On further appeal, the Income tax Appellate Tribunal took the same view.
At the instance of the assessee, the Tribunal submitted the following question for the opinion of the High Court of Madras under s.66(1) of the Income tax Act.
1922, hereinafter called the Act: "Whether the provisions of Section 41 can be said to apply to the assessees in this case.
" A Division Bench of the High Court, which heard the reference.
held that the Managing Trustee qua the surplus income managed the property and derived the income on behalf of the kasupangudars and that the assessment should be made on the said Managing Trustee to the extent of the interest of each of the kasupangudars in the income received by him.
In the result it answered the question in the affirmative and in favour of the assessee.
The Commissioner of Income tax, Madras, on a certificate of fitness granted by the High Court, has preferred the present appeals against the said Order.
The learned Additional Solicitor General, appearing for the Revenue, contended that the Natmaigars being trustees, the properties of the Durgha vested in them and, therefore, they or the Managing Trustee administered the trust properties in their own right and not on behalf of the kasupangudars and hence s.41 of the Act did not apply, with the result the Income tax Officer had rightly assessed the surplus income in the hands of the trustees as an association of persons.
Mr. A.V. Viswanatha Sastri, learned counsel for the assessee respondent, argued, on the other hand, that the Nattamaigars of the Durgha were not trustees as understood in the law of trust but were only managers managing the properties on behalf of the Durgha and kasupangudars.
On that assumption, his argument proceeded.
as the Nattamaigars, as managers, held the surplus on behalf of the kasupangudars for distribution in definite shares, s.41 of the Act was attracted.
At the outset we may make it clear that in this appeal we are concerned only with the surplus remaining on hand with the Nattamaigars after meeting the expenses of the Durgha.
662 The problem presented in these appeals falls to be decided on a true construction of s.41 of the Act.
The material part of s.41 reads: (1) In the case of income, profits or gain chargeable under this Act, which the Courts of Wards, the Administrators General, the Official Trustees or any receiver or manager (including any person whatever his designation who in fact manages property on behalf of another) appointed by or under any order of a Court, or any trustee or trustees appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise (including the trustee or trustees under any Wakf deed which is valid under the ), are entitled to re ceive on behalf of any person, the tax shall be levied upon and recoverable from such Court of Wards, AdministratorsGeneral, Official Trustee, receiver or manager or trustee or trustees, in the like manner and to the same amount as it would be leviable upon and recoverable from the person on whose behalf such income, profits or gains are receivable, and all the provisions of this Act shall apply accordingly.
Under this section the income of properties receivable by the enumerated persons for the benefit of others is liable to be assessed to tax in their hands in the like manner and to the same amount as it would be leviable upon and recoverable from the person or persons on whose behalf such income is receivable.
This section centres on the basic fact that the person in whose hands the income is assessable shall be entitled to receive the same on behalf of any person; if he is not so entitled, the provisions of the section cannot be invoked.
it is contended that, as the properties vested in the managing trustee and he received the income in his own right and not on behalf of the beneficiaries, though for their benefit,, the said income in the hands of the managing trustee fell outside the scope of s.41 of the Act.
There are two answers to this contention.
The doctrine of vesting is not germane to this contention.
In some of the enumerated perso,ns in the section the property vests and in others it does not vest, but they only manage the property.
In general law the property does not vest in a receiver or manager but it vests in a trustee, but both trustees and receivers are included in s.41 of the Act.
The common thread that passes through all of them is that they function legally or factually for others: they manage the property for the benefit of others.
That the technical doctrine of vesting is not imported in the section is apparent from the fact that a trustee appointed under a trust deed is brought under the section though legally the property vests in him.
In the case of a Muslim Wakf the property vests in the Almighty; even so the mutawallis are brought under the section.
A reasonable interpretation of the 663 section is that all the categories of persons mentioned therein are deemed to receive the income on behalf of another person or persons or manage the same for his or their benefit.
None of them has any beneficial interest in the income; he collects the income for the benefit of others.
In this view, even if the Nattamaigars were trustees in whom the properties of the Durgha vested, they should be deemed to have received the income only on behalf of the kasupangudars in definite shares.
The same conclusion will be reached even if the problem was approached from a different angle.
In the well known decision of the Privy Council in Vidya Varuthi Thirtha vs Balusami Ayyar(1) the inappropriateness of the use of the expression "trustee" to the manager of a Hindu or Mahommedan religious endowments was brought out.
Therein their Lordships observed: "Neither under the Hindu Law nor in the Mahommedan system is any property "conveyed" to a shebait or a mutawalli, in the case of a dedication.
Nor is any property vested in him; whatever property he holds for the idol or the institution he holds as manager with certain beneficial interests regulated by custom and usage.
Under the Mahommedan Law, the moment a wakf is created all rights of property pass out of the wakf, and vest in God Almighty.
The curator, whether called mutawalli or saijadanishin, or by any other name, is merely a manager.
He is certainly not a "trustee" as understood in the English system." The Privy Council, in the context of a wakf property, reaffirmed the said observations, in Allah Rakhi vs Mohammad Abdur Rahirn(2).
The effect of the said decisions is that Nattamaigars are only the managers of the properties in which the Durgha and the kasupangudars have beneficial interests.
The properties do not vest in them.
They receive the income therefrom on behalf of both of them.
After meeting the expenses of the Durgha they hold the.
balance on behalf of the kasupangudars and distribute the same in accordance with their shares.
In this view, in terms of section 41 of the Act the Nattamaigars are the managers of the properties on behalf of others and, are entitled to receive the income therefrom on behalf of them.
With the result, the income which they hold on behalf of the kasupangudars can be assessed only in their hands in the manner prescribed thereunder.
But it is said that whatever may the doctrine of Hindu or Mohammadan law, under the terms of the aforesaid scheme the properties vested in the Nattamaigars and, therefore, they receive the income in their own right and* not on behalf of the kasupangudars.
A careful reading of the relevant (1)(1921) L.R. 48 I.A. 302, 315.
(2) (1933) L.R.61. '.
I.A. 50.
664 part of the scheme does not countenance this argument.
Clause 3 of the scheme, which is the material clause, reads: "The management and administration of the affairs of the Nagore Durgha at Nagore, Tanjore District, and other thakias and shrines connected therewith (mentioned in Schedule A hereunder) and all properties movables and ' immovables which belong to or have been or may hereafter be given, dedicated, endowed thereto, shall subject 10 the provisions thereof vest hereditarily in the eight trustees or nattamaigars of the Durgha who shall constitute the Board of Trustees.
Each trustee or nattamaigar is entitled to hold ' office for life, and after him the trusteeship shall devolve on his next male heir in accordance with the custom prevailing in respect of such office in the Durgha.
" Under this clause the management and administration of the Nagore Durgha and its properties vest in the Nattamaigars.
What vests in the Nattamaigars is not the properties of the Durgha but the management and administration thereof.
Unless the words are clear we are not prepared to hold that the High Court in framing a scheme for the endowments of the Durgha had introduced a foreign concept of "trust" in derogation of Mohammadan law. 'We, therefore, hold that the scheme did not vest the properties of the Durgha in the Nattamaigars.
Lastly, a faint argument was raised to the effect that under the scheme the managing trustee was not appointed under any order of a Court but was appointed by an agreement among the trustees.
But in cl. 4 of the scheme the High Court gave a specific direction that the managing trustee shall be elected from among the Board of Trustees.
The Managing Trustee elected was certainly appointed under an order of a Court, for the election was held pursuant to the order of the Court.
That apart, in the view we have taken, namely, that the Nattamaigars are not trustees in the English sense of the term, this question does not arise for consideration.
In the result, we hold that the High Court has rightly answered the question referred to it in the affirmative and in favour of the assessee.
The appeals fail and are dismissed with costs.
One hearing fee.
Appeals dismissed. | A scheme was settled in 1955 by the Madras High Court for the management of the income and properties of the Durgah consecrated to a saint in Tanjore District.
Under the scheme the management of the properties of the Durgah was to be in the hands of eight trustees called Nattamaigars one of whom was to be elected by them as Managing Trustee.
The net income of the trust was to be distributed among descendants of the foster son of the saint, called Kasupangudars, whose definite shares were to be determined each year by a list prepared by the Managing Trustee.
For the assessment years 1953 54 and 1954 55, the Income tax Officer assessed the surplus income of the wakf in the hands of the Managing Trustee as an association of persons.
The trustees unsuccessfully appealed to the Appellate Assistant Commissioner and the Appellate Tribunal.
The controversy centred round the question whether s.41 of the Indian Income tax Act, 1922 applied to the case.
In a reference made by the Tribunal at the instance of the assessee the High Court held that that section 41 applied to the case and that the income was received by the trustees on behalf of the beneficiaries.
Aggrieved, the Commissioner of income Tax appealed, by certificate, to this Court.
It was contended on behalf of the appellant that as the properties vested in the managing trustee and he received the income in his own right and not on behalf of the beneficiaries, though for their benefit, the said income in the hands of the managing trustee fell outside the scope of s.41 of the Act.
HELD: The High Court had rightly answered the question in favour of the assessee.
(i) The technical doctrine of vesting is not imported into section 41.
This is apparent from the fact that a trustee appointed under a trust deed is brought under the section though legally the property vests in him.
In the case of a Muslim Wakf the property vests in the Almighty; even so the mutawallis are brought under the section.
Thus in some of the persons enumerated in the section property vests and in others it does not.
A reasonable interpretation of the section is that all categories of persons mentioned therein are deemed to receive them on behalf of another person or persons or manage the same for his or their benefit.
None of them has any beneficial interest in the income; he collects the income for the benefit of others.
In this view even if the Nattarnaigars were trustees in whom the 65 660 properties of the Durgah vested, they should be deemed to have received the income only on behalf of the Kasupangudars in definite shares.
[662G 663B] (ii) The mutawalli of a Muslim Wakf is merely a manager and not a "trustee" as understood in the English system.
[663E] Vidya Varuthi Thirtha vs Balusami Ayyar, (1921) 48 I.A. 32 and Allah Rakhi vs Mohammad Abdur Rahim, (1933) 61 I.A. 50, relied on.
Therefore in terms of s.41 of the Act the Nattamaigars were the manager of the properties on behalf of other and were entitled to receive the income therefrom on behalf of them.
[663G H] (iii) Under c1.3 of the scheme it was the "management and administration" of the Durgah and its properties which was vested in the Nattamaigars and not the properties themselves.
In the absence of clear words it could not be held that the High Court in framing a scheme for the endowments of the Durgah had introduced a foreign concept of "trust" in derogation of Mohammadan Law.
The scheme therefore did not vest the properties of the Durgah in the Nattamaigars and the contention on behalf of the Revenue could not succeed.
[664D, E] |
ivil Appeal No. 3175 of 1986.
From the Judgment and Order dated 17.8.1985 of the Rajasthan High Court in D.B.S.A. No. 161 of 1985.
Satish Chandra and A.V. Rangam for the Appellants.
V.M. Tarkunde and section K. Jain for the Respondent.
The Judgment of the Court was delivered by PG NO 1028 JAGANNATHA SHETTY, J.
By obtaining special leave, the State Bank of Bikaner & Jaipur ("Bank") has appealed to this Court against the judgment dated September 17, 1985 of the Division Bench of Rajasthan High Court in Special Civil Appeal No. 161 of 1985.
The question raised in this appeal is as to the nature of right of the respondent to get an extension of service beyond the age of superannuation.
The respondent was an officer of the Bank.
His service conditions were regulated by what is termed as State Bank of Bikaner & Jaipur (Officers ') Service Regulations, 1979.
The regulations came into force with effect from October 1, 1979.
Regulation No. 19 provides for the age of retirement.
It also preserves discretion to the Bank .
to extend the period of service of any officer beyond the age of retire ment.
The relevant portion of Regulation 19 reads: "Age of Retirement: 19(1) An officer shall retire from the service of the Bank on attaining the age of fifty eight years or up to the completion of thirty years ' service, whichever occurs first.
Note: However, the existing practice of utilising the service of officers beyond the age of 58 years by considering individual cases for grant of extension will continue only in respect of employees who joined the service as workmen or as officers before the 19th July, 1969.
Further, such employees may be granted extension in service instead of re employment as is the case in the State Bank of Mysore and State Bank of Saurashtra.
A suitable diary note should be made in this regard and carried over looked at the time when the case of emplotees who joined on or after 19th July, 1969 come up for consideration (RER/32/80 dated 20.5.1980).
Provided that the competent authority may, at its discretion, extend the period of service of an officer who has attained the age of fifty eight years or has completed thirty years ' service as the case may be, should such extension be deemed desirable in the interest of the Bank.
The aforesaid 'note ' to Regulation 19 refers to the existing practice in the Bank and that 'note ' was added by notification dated May 20, 1980.
PG NO 1029 By letter dated June 14, 1979, the Bank intimated the respondent that he was granted extension of service up to September 28, 1982 that is, till he completed 58 years of age.
By further letter dated July l, 1982 the respondent was informed that he would be attaining superannuation age of 58 years on September 30, 1982 and would stand retired on that date.
Accordingly, he was retired from service with effect from September 30, 1982.
After an unsuccessful attempt for reconsideration of the case.
the respondent took up the matter before Managing Director of the Bank.
There also he could not succeed.
He was informed that his case did not fit in the guidelines of the Bank.
The respondent moved the High Court for relief under Article 226 of the Constitution.
The Bank resisted the petition contending inter alia: "The extension is considered on three parameters (i) continued utility; (ii) good health, and (iii) integrity beyond reproach.
since, in the case of the officials whose names have been submitted in the list D, all the three tests have been fulfilled, their services were extended.
In the case of the petitioner? his services were not extended because in the view of the competent authority, his continued utility in the service of the Bank was found to be restricted.
It is submitted that it is not open to the petitioner to claim that he should be granted extension in the service as a matter of right.
In this context, it is submitted that when orders were issued to the petitioner on the 4th February, 1981 posting him as Branch Manager of a local branch at Jaipur.
the petitioner instead of acting in a responsible manner and taking over charge of the branch, immediately proceeded on leave and went on extending it from time to time.
Ultimately, the respondent Bank had to cancel the posting on the 1st May, 1981.
Moreover, the guidelines for granting extension stipulated that continuance of the officer 's service in his existing grade/capacity would be PG NO 1030 useful to the Bank in all its field of activities in a manner that the Bank is not restricted in continuing to entrust him with the responsibilities relating to the normal placement commensurate with his seniority and grade and as the petitioner did not satisfy this criteria, the Bank did not grant him extension in service.
" But by the time the petition came up for consideration, the Respondent attained 60 years of age.
The learned single Judge without going into the merits of the matter dismissed the petition.
He observed that it would be unnecessary to enter into the merits since the respondent has completed 60 years.
The matter was taken up in appeal before a Division Bench of the High Court.
The Division Bench accepted the appeal and gave relief to the respondent.
It was commented: "The order of refusing to give extension to the petitioner appellant was because the extension was not deemed desirable in the interest of the Bank vide Annex.
letter dated July 29, 1982.
Hence it is obvious that while considering the case of the petitioner the Bank took into consideration the criteria whether his extension shall be desirable in the interest of the bank and the 13ank did not apply its mind as to whether his services were found unsuitable on the ground of continued utility and health or integrity.
It appears that the Bank keeping in mind the note which was added to sec.
19(1) and only relying on the first proviso Resolution 19(1) they have decided the case of petitioner for extension of service This clearly shows that there was no serious application of mind while dealing with the case of extension of the petitioner is based on collateral grounds and it also arbitrary as the Bank has applied different criteria which ought not to have been applied in the case of the petitioner.
The Bank has not formed the opinion for not extending the services of the petitioner on any material or relevant consideration, but has applied in the different criteria altogether and, therefore.
the order is based on collateral and arbitrary grounds.
The extension of the petitioner could have been refused only if he was found unsuitable on the ground of continued utility or good health or integrity and not whether it was desirable in the interest of the Bank. ' And observed: PG NO 1031 "It is true that the right of extension of service is not a legal right, but it is a benefit.
However, this benefit is not a concession, but is a privilege to which an officer is entitled after years of hard work in the Bank.
" It seems to us that the High Court has misconstrued the legal right claimed by the respondent.
The right to get extension of service beyond the age of superannuation has received consideration of this Court in several cases.
In State of Assam vs Basanta Kumar Das, [l973] 3 SCR 158, after reviewing almost all the earlier decisions Kailash Chandra vs Union of India, ; ; B.N. Misra vs State, ; and State of Assam vs Pramadhar, ; this Court said (at 165): "A Government servant has no right to continue in service beyond the age of superannuation and if he is retained beyond that age, it is only in exercise of the discretion of the Government.
xxxx xxxxx xxxxx xxxx xxxx xxxxx xxxxx the fact that certain persons were found fit to be continued in service does not mean that others who were not so found fit had been discriminated against.
Otherwise, the whole idea of continuing only efficient people in service even after they had completed 55 years becomes only meaningless.
" What do we have here in this case to distinguish those principles or not to apply those principles? In our opinion, there is none.
In the scheme provided herein the respondent or any other officer of the Bank has a legitimate right to remain in service till he attains the age of superannuation.
But beyond that age, he has no such right unless his service is extended by the Bank.
The further rights of parties are regulated by the proviso to Regulation 19(1).
It reads: "Provided that the competent authority may at its discretion, extend the period of service ot an officer who has attained the age of fifty eight years or has completed thirty years ' service as the case may be, should such extension be deemed desirable in the interest of the Bank. " (Emphasis supplied) PG NO 1132 Look at the language of proviso and the purpose underlying.
The Bank may in its discretion extend the service of any officer.
On what ground? For what purpose? That has been also made clear in the proviso itself.
It states "should such extension be deemed desirable in the interest of the Bank".
The sole purpose of giving extension of service is, therefore, to promote the interest of the Bank and not to confer any benefit on the retiring officers.
Incidentally the extension may benefit retired officials.
But it is incorrect to state that it is a conferment of benefit or privilege on officers.
The officers upon attaining the age of superannuation or putting the required number of years of service do not earn that benefit or privilege.
The High Court has completely misunderstood the nature of right and purpose of the proviso.
The proviso preserves discretion to the Bank.
It is a discretion available with every employer, every management, State or otherwise.
If the Bank considers that the service of an officer is desirable in the interest of the Bank, i~ may allow him to continue in service beyond the age of superannuation.
If the Bank considers that the service of an officer is not required beyond superannuation, it is an end of the matter.
It is no reflection on the officer.
It carries no stigma.
The Bank, however, is required to consider the case of individual officers with due regard to (i) continued utility; (ii) good health; and (iii) integrity beyond reproach of the officer.
If the officer lacks one or the other, the Bank is not bound to give him extension of service.
In this case, the Bank has shown to the High Court that the case of Respondent was considered and he did not fit in the said guidelines.
The High Court does not sit in an appeal against the decision.
The High Court under Article 226 cannot review that decision.
It was however, argued for the respondent that the Bank falls within the concept of State ' for the purpose ot enforcement of fundamental rights.
The Bank, therefore, cannot extend the service of some and reject the case of others similarly situated.
The concept of Article 14 of the Constitution is relied upon.
The argument in our opinion, proceeds on a wrong premise. 'The Bank has no obligation to extend the services of all officers even if they are found suitable in every respect.
The interest of the Bank is the primary consideration for giving extension of ' service.
With due regard to exigencies of service, the Bank in one year may give extension to all suitable retiring officers.
In another year, it may give extension to some and not to all.
In a subsequent year, it may not give extension to any One of the officers.
The Bank may have a lot of fresh recruits in One year.
The Bank may not need the services of all retired persons in another year.
The Bank may have lesser PG NO 1033 work load in a succeeding year.
The retiring persons cannot in any year demand that "extension to all or none".
If we concede that right to retiring persons, then the very purpose of giving extension in the interest of the Bank would be defeated.
We are, therefore, of opinion that there is no scope for complaining arbitrariness in the matter of giving extension of service to retiring persons.
In the result, we allow the appeal and set aside the judgment of the High Court.
In the circumstances of the case, we make no order as to costs.
P.S.S. Appeal allowed. | Regulation 19(1) of the State Bank of Bikaner & Jaipur (Officers ') Service Regulations 1979 requires the officers to retire from the service of the Bank on attaining the age of fifty eight years or on completion of thirty years of service whichever occurs first.
A note added below that regulation states that the existing practice of utilising the service of officers beyond 58 years will continue in respect of those who joined service before l9th July, 1969.
The proviso thereto, however, confers discretion on the competent authority to extend the period of service of such retiring officers in the interest of the bank.
The respondent, an officer of the said Bank, who retired from service on September 30, 1982 on attaining the age of superannuation of 58 years was not granted extension of service.
The sought relief from the High Court under Article 226 of the Constitution.
The Bank resisted the Petition on the ground that his continued utility in the service of the Bank was found restricted By the time the petition came up for consideration the respondent had attained 60 years of age.
The single Judge.
therefore, dismissed the petition without going into the merits.
The Division Bench, however, accepted the appeal and gave relief to the respondent on the view that the extension of the petitioner could have been refused only if he was found unsuitable on the ground of continued utility or good health or integrity and not whether it was desirable in the interest of the Bank.
Since the Bank applied a different criteria altogether it held the order arbitrary and based on collateral grounds.
Allowing the appeal of the Bank by Special leave, HELD: 1.1 The High Court has misconstrued the legal right claimed by the respondent.
[1031B] 1.2 In the scheme provided in Regulation 19(1) an officer of the Bank has a legitimate right to remain in PG NO 1026 PG NO 1027 service till he attains the age of superannuation.
But beyond that age, he has no such right unless his service is extended by the Bank.
The further rights of parties are regulated by the proviso thereto.
[1031F G] 1.3 The proviso preserves discretion to the Bank.
It is a discretion available with every employer, every management, State or otherwise.
If the Bank considers that the service of an officer is desirable in the interest of the Bank, it may allow him to continue in service beyond the age of superannuation.
If the Bank considers that the service of an officer is not required beyond superannuation, it is an end of the matter.
It is no reflection on the officer.
It carries no stigma.
[1032C D] State of Assam v Basanta Kumar Das, [1973] 3 SCR l58; Kailash Chandra vs Union of India, [1962] I SCR 374; B.N. Mishra vs State [1965] l SCR 693 and State of Assam v Pramadhar, [1971] l SCR 503,referred to. 2.
The Bank, however, is required to consider the case of individual officers with due regard to (i) continued utility, (ii) good health, and (iii) integrity beyond reproach of the officer.
If the officer lacks one or the other, the bank is not bound to give him extension of service.
11032D E] In the instant case the Bank had shown to the High Court that the case of the respondent was considered and he did not fit in the said guidelines.
The High Court does not sit in an appeal against that decision.
The High Court under Article 226 cannot review that decision.11032E] |
il Appeal No. 329 of 1962.
Appeal from the judgment and decree dated September 26. 1957 of the High Court in Appeal from Original Decree No. 253 of 1949.
656 Sarjoo Prasad and R.C. Prasad, for the appellants.
A.V. Viswanatha Sastri and D. Goburdhun.
for respondents nos.
1 to 4 and 6.
The Judgment of the Court was delivered by Sarkar, J.
This appeal arises out of a suit brought by the appellants in 1947 for a declaration that the defendants first party had acquired no right or title to a property under certain deeds and that the deeds were inoperative and void.
The suit was decreed by the trial Court but on appeal by the defendants first party to the High Court at Patna that decree was set aside.
The High Court having granted a certificate of fitness, the appellants have brought the present appeal.
The defendants first party have alone contested the appeal and will be referred to as the respondents.
The High Court held that as the appellants were not in possession of the property at the date of the suit as found by the learned trial Judge and the respondents were, their suit must fail under the proviso to s.42 of the Specific Relief Act as the appellants had failed to ask for the further relief of recovery of possession from the respondents.
In this view of the matter the High Court did not consider the merits of the case.
The fact however was that at the date of the suit the property was under attachment by a magistrate under powers conferred by section 145 of the Code of Criminal Procedure and was not in the possession of any party.
This fact was not noticed by the High Court but the reason why it escaped the High Court 's attention does not appear on the record.
The only point argued in this appeal was whether in view of the attachment, the appellants could have in their suit asked for the relief for delivery of possession to them.
If they could not, the suit would not be hit by the proviso to section 42.
The parties seem not to dispute that in the case of an attachment under section 146 of the Code as it stood before its amendment in 1955, a suit for a simple declaration of title without a prayer for delivery of possession is competent.
The respondents contend that the position in the case of an attachment under section 145 of the Code is different, and in such a case the magistrate holds possession for the party who is ultimately found by him to have been in possession when the first order under the section was made.
It was said that a suit for declaration of title pending such an attachment is incompetent under the proviso to section 42 unless recovery of possession is also asked for.
It appears that the attachment under section 145 in the present case is still continuing and no decision has yet been given in the proceeding 's resulting in the attachment.
In our view, in a suit for declaration of title to property filed when it stands attached under section 145 of the Code, it is not necessary to ask for the further relief of delivery of possession.
The fact 657 if it be so, that in the case of such an attachment, the magistrate holds possession on behalf of the party whom he ultimately finds to have been in possession is, in our opinion, irrelevant.
On the question however whether the magistrate actually does so or not, it is unnecessary to express any opinion in the present case.
The authoritie 's clearly show that where the defendant is not in possession and not in a position to deliver possession to the plaintiff it is not necessary for the plaintiff in a suit for a declaration of title to property to claim possession: see Sunder Singh Mallah Singh Sanatan Dharm High School, Trust vs Managing Committee, Sunder Singh Mallah Singh Rajput High School.(1) Now it is obvious that in the present case, the respondents were not in possession after the attachment and were not in a position to deliver possession to the appellants.
The magistrate was in possession, for whomsoever, it does not matter, and he was not of course a party to the suit.
It is pertinent to observe that in Nawab Humayun Begam vs Nawab Shah Mohammad Khan(2) it has been held that the further relief contemplated by the proviso to section 42 of the Specific Relief Act is relief against the defendant only.
We may add that in K. Sundaresa lyer vs Sarvajana Sowkiabil Virdhi Nidhi Ltd.(3), it was held that it was not necessary to ask for possession when property was in custodia legis.
There is no doubt that property under attachment under section 145 of the Code is in custodia legis.
These cases clearly establish that it was not necessary for the appellants to have asked for possession.
In Dukkan Ram vs Ram Nanda Singh(1) a contrary view appears to have been taken.
The reason given for this view is that the declaratory decree in favour of the plaintiff would not be binding on the magistrate and he was free inspite of it to find that possession at the relevant time was with the defendant and deliver possession to him.
With great respect to the learned Judge deciding that case, the question is not whether a declaratory decree would be binding on the magistrate or not.
The fact that it may not be binding would not affect the competence of the suit.
The suit for a declaration without a claim for the relief for possession would still be competent in the view taken in the cases earlier referred to, which is, that it is not necessary to ask for the relief of delivery of possession where the defendant is not in possession and is not able to deliver possession, which, it is not disputed, is the case when the property is under attachment under section 145 of the Code.
We think that Dukkan Ram 's(4) case had not been correctly decided.
We may add that no other case taking that view was brought to our notice.
(1) (1937) L.R. 65 I.A. 106.
(2) A.I.R. 1943 P.C. 94.
(3) I.L.R. (4) A.I.R. 1961 Pat.
658 For these reasons, we hold that the suit out of which this appeal has arisen was competent.
We, therefore, allow the appeal but as the merits of the case had not been gone into by the High Court, the matter must go back to that Court for decision on the merits.
The appellant will get the costs here and below.
Appeal allowed and case remanded. | There was dispute about the property in suit between theappellants and the respondents.
The property was attached by the Magistrate under section 145 of the Criminal Procedure Code.
Subsequently the appellants filed a suit for declaration of their title to the property but made no prayer for the cansequential relief of possession.
The suit was decreed by the trial court but the High Court set aside the decree on the ground that the suit was bad under section 42 of the Specific Relief Act for failure to sue for possession.
Appeal to this Court was filed with certificate of fitness.
HELD: In a suit for declaration of title to property, filed when it stands attached under section 145 of the Criminal Procedure Code, it is not necessary to ask for the further relief of delivery of possession.
The fact, if it be so, that in the case of such an attachment the Magistrate holds possession on behalf of the party whom he ultimately finds to have been in possession, is irrelevant.
[656H 657B] Moreover the further relief contemplated by the proviso to section 42 of the Specific Relief Act is relief against the defendant only.
In the present case the Magistrate was in possession and he was not a party to the suit.
[657C D] Further it is not necessary to ask for possession when the property is in custodia legis.
There is no doubt that property under attachment under section 145 of the Code is in custodia legis.
[657E3 Sunder Singh Mallah Singh Sanatan Dharam High School, Trust vs Managing Committee, Sunder Singh M.allah Singh Rajput High School, (2937)L.R. 65 I.A. 10,6 and Nawab Humayun Begum vs Nawab Shah Mohammad Khan, A.I.R. 1943 P.C. 94, relied on.
K. Sundarama Iyer vs Sarvajana Sowkiabil Virdhi Nidhi Ltd. I.L.R. , approved.
Dukhan Ram vs Ram Nanda Singh, A.I.R. 1961 Pat.
425, disapproved. |
minal Appeal No. 118 of 1964.
Appeal from the judgment and order dated March 2, 1964 of the Allahabad High Court in Criminal Appeal No. 2531 of 1963 referred No. 160 of 1963.
K. L. Sharma and Harbans Singh for the appellant.
O. P Rana, for the respondent.
LS5SCI 19(a) 266 The Judgment Of SARKAR, C.J. and MUDHOLKAR, J. was delivered by MUDHOLKAR, J. BACHAWAT, J. delivered a separate Opinion.
Mudholkar, J.
The Additional Sessions Judge, Kumaon, after convicting the appellant Sita Ram of an offence under section 302, Indian Penal Code for the murder of his wife Sindura Rani, has sentenced him to death.
The High Court of Allahabad affirmed his conviction but reduced the sentence to one of imprisonment for life.
The fact that Sindura Rani met with a homicidal death is not in dispute.
What is, however, contended on behalf of the appellant is that there is no evidence on the basis of which his conviction could be based.
Admittedly there are no eye witnesses to the occurrence.
The prosecution case against him rests on the following material: (1) motive; (2) opportunity; (3) subsequent conduct; (4) false explanation and (5) confessional statements.
There is ample evidence on record to show that the relations between the appellant and his wife were very much strained, that the two were living apart and that this was because the appellant suspected that his wife was a woman of loose character.
This evidence consists of the testimony of some near relatives and also of several letters written by the appellant to his wife Sindura Rani, to his mother in law Inder Kaur (P.W. 2) and to his brother in law Tilak Raj (P.W. 1).
The appellant had denied that the letters were in his hand writing but it has been found by both the courts below that they were in fact written by him.
The finding of each of the two courts below that the relations between the appellant and his wife were strained because the appellant not merely suspected the fidelity of his wife but also charged her with unchastised being one of fact cannot be lightly permitted to be questioned in an appeal by special leave.
No ground has been made out by learned counsel which would justify our looking into the evidence for ourselves.
Similarly, on the question of opportunity, Sindura Rani who had gone to stay with her people had been asked by the appellant to return home on the pretext that one of their children was ill and accordingly she arrived at Kashipur where the appellant lived only 5 or 6 days prior to the incident.
Since her return she and the appellant were the only two adult persons living in the house of the appellant.
The only other person living with them was their daughter about two years old.
When the Sub Inspector of Police arrived on the morning of September 15, 1962 after receiving a report that the appellant 's house was locked from outside and the cry of a child from inside could be heard, found the outer door of the house locked.
After breaking it open he found a lantern burning by the side of the dead body of Sindura Rani.
From these facts the courts below were justified in coming to the conclusion that the appellant had an 267 opportunity to commit the murder of his wife Sindura Rani.
The appellant 's defence that he had gone to Punjab along with one Pritam Singh on September 13, 1962 and could return from there on September 19, has not been accepted by the two courts below in the absence of any material to substantiate it.
In addition to these there is the fact that the appellant could not be found till September 19, on which date he surrendered him.
self before the court.
It would be reasonable to infer from this that he was absconding till this date.
The explanation which the appellant gave concerning his absence has been rightly rejected as false.
In the circumstances there was adequate material before the courts below upon which his conviction could be based.
In addition to this circumstantial evidence the prosecution placed reliance upon exhibit Ka 9.
This is a letter dated September 14, 1962 addressed to the 'Sub Inspector ' and bears the signature of the appellant in Urdu.
It reads thus: "I have myself committed the murder of my wife Smt.
Sindura Rani.
Nobody else perpetrated this crime.
I would appear myself after 20 or 25 days and then will state everything.
One day the law will extend its hands and will get me arrested.
I would surrender myself.
in Urdu).Sita Ram Naroola, 14th September, 1962.
" On the back of this letter is written the following: "It is the first and the last offence of my life.
I have not done any illegal act nor I had the courage to do that, but this woman compelled me to do so and I bad to break the law.
This letter was found on a table near the dead body of Sindura Rani.
It was noticed by the Sub Inspector Jagbir Singh, P.W. 16 and seized in the presence of three persons who attested the seize memo and were later examined as witnesses in the case.
The prosecution has established satisfactorily that the letter is in the had writing of the appellant and that the signature it bears is, also that of the appellant.
Learned counsel for the appellant has challenged, the admissibility of this letter on the ground that it amounts to a confession to a police officer and that, therefore, section 25 of the Evidence Act renders it inadmissible in evidence.
We, do not think that the objection is well founded.
No doubt, the letter contains a confession and is also addressed to a police, officer, The at cannot make it a confession made to a police officer which is within the bay created by section 25 of the Evidence Act, The police officer was not nearby when the letter was written or knew that it was being written.
In such circumstance quite obviously the letter would not,, 268 have been a confession to the police officer if the words "SubInspector" had not been written.
Nor do we think it can become one in similar circumstances only because the words "Sub Inspector" had been written there.
It would still have not been a confession made to a police officer for the simple reason that it was not so made from any point of view.
We agree with the High Court, therefore, that the confession contained in exhibit Ka 9 is admissible and that it is an additional circumstance which can be pressed in aid in support of the charge against the appellant.
However, as already stated, even without this confessional statement there was sufficient material before the courts below on the basis of which the appellant 's conviction could be sustained.
The appeal is without any merit and is accordingly dismissed.
Bachawat, J Section 25 of the reads: "No confession made to a police officer shall be proved as against a person accused of any offence.
" In my opinion, the letter, exhibit Ka 9, is a confession made to a police officer, and is not admissible in evidence against the appellant.
The letter contained a confession, and was addressed to the Sub Inspector.
The appellant wrote the letter with the intention that it should be received by the Sub Inspector, kept it on a table near the dead body of his wife and left the, house after locking it.
The lock wag broken open and the letter was recovered by the Sub Inspector, Kasipur, to whom the letter was written.
The Sub Inspector received the letter as effectively 'as if it was sent to him by post or by a peon.
It is said that the appellant made no confession to the sub Inspector, inasmuch as the officer was 'not present near the appellant when he wrote the letter.
I do not see why a confession cannot be made to a police officer unless he is present in the immediate vicinity of the accused.
A confession can be made to a police officer by an oral message to him over the telephone or the radio as also by a written message Communicated to him through post, messenger or otherwise.
The presence or absence 'of the police officer near the accused is not decisive on the question whether the confession is hit by section 25.
A confession to a stranger though made in the presence of a police officer is not hit by section 25.
On the other handful confession to a police officer is within the ban of section 25, though it was not made in his presence.
A confessional letter written to a police officer and sent to him by post, messenger or otherwise is not outside the ban of section 25.
because the police officer ignorant of the letter at the moment when it was being written.
269 In R.V. Hurribole(1) Garth,C.J. Said that s.25 is an enact Ment to which the Court should give 'the fullest effect.
He added: "I think it better in construing a section such as the 25th, which was intended as a wholesome protection to the accused, to construe it in its widest and most popular signification." In its widest and most popular signification, the phrase " confession Made to a police officer" includes a confession made to a police officer in a letter written to him and subsequently received by him.
We should not cut down the wholesome protection of section 25 by refined arguments.
I am,, therefore, of the opinion that the Courts below were in error in admitting exhibit Ka 9 against the appellant.
I however, agree that, apart from exhibit Ka 9 there are sufficient materials on the record establishing the guilt of the appellant.
The appeal must, therefore, fail.
The appeal is dismissed.
Appeal dismissed.
(1) [1876] I.L.R. I cal.
207 215 216. | The appellant was convicted for under under section 302 Indian Penal Code.
The prosecution relied on amongst other materials, a letter.
The letter contained a confession and was addressed to the Sub Inspector.
The appellant wrote the letter with the intention that it should be received by the Sub Inspector, kept it near the dead body and left the house after locking it.
The lock was broken open and the letter was recovered by the Sub Inspector.
In appeal to this Court the admissibility of this letter was challenged.
HELD: (Per Curium) There was sufficient material on the record, apart from this letter, establishing the guilt of the appellant.
Per Sarkar, C.J. and Mudholkar, J: The letter was admissible in evidence.
No doubt, the letter contained a confession and was addressed to a police officer.
That could not make it a confession made to the Police officer which is within the bar created by section 25 of the Evidence Act.
The Police Officer was not nearby when the letter was written or knew that it was being written.
In such circumstances quite obviously the letter would not have been a confession to the police officer if the words "Sub Inspector" had not been written.
Nor it can become one in similar circumstances only because the words "Sub Inspector" has been written there.
It would still have not been a confession made to a police officer for the simple reason that it was not so made from any point of view.
[267 H 268 B] Per Bachawat J., The letter was inadmissible in evidence and was a confession made to a police officer.
[268 D E] A confession to a police officer was within the bar of section 25, though it was not made in his presence.
A confessional letter written to a Police officer and sent to him by post, messenger or otherwise is not outside the ban of section 2,5 because the police officer was ignorant of the letter at the moment when it was being written.
[268 G].
R. V. Hurribole, Cal. 207, approved. |
Appeal No. 180 of 1963.
Appeal by special leave from the judgment and decree dated February 19, 1958 of the Patna High Court in Appeal from Appellate Decree No. 919 of 1954.
Sarjoo Prasad and B. P. tha, for the appellants, 159 A. V. Viswanatha Sastri, B. K. P. Sinha and A. G. Ratna parkhi, for the respondent.
The Judgment of the Court was delivered by Bachawat, J.
The plaintiffs appellants instituted Title Suit No. 91 of 1950, out of which this appeal arises, for redemption of two usufructuary mortgages created by plaintiff No. 1 and ancestors of plaintiffs Nos. 2 to 6 dated July 5, 1927 and April 15, 1928 in favour of the defendant for Rs. 1,000 and Rs. 1,300 respectively.
The mortgage dated July 5, 1927 was in respect of 7.20 acres of occupancy raiyati lands, consisting of four plots Nos.
149, 155, 955 and 957, in village Hichapur under the Tikari Raj.
The mortgaged lands were part of a larger holding of 23.69 acres under khata No. 59, and the annual rent of the entire holding was Rs. 153 3 0.
The mortgage deed provided that the mortgagee would pay Rs. 33 14 9 out of the total rent payable to the landlord and the mortgagors would pay the balance rent.
There was default in payment of rent for several years.
The landlord obtained a, decree for arrears of rent, and at the rent sale held on June 18, 1934, the mortgagee defendant purchased the Hichapur lands in the farzi name of Dwarkalal.
The mortgage dated April 15, 1928 was in respect of 7.20 acres of lands in village Utrain tinder kahas mahal.
The mortgaged lands were part of a larger holding of 1988 1/2 acres in khata No. 269.
The, rent of the entire holding was Rs. 155 4 0.
The mortgage deed provided that the mortgagee would pay Rs. 68 10 9 out of the total rent and the balance rent would be payable by the mortgagors.
There was default in payment of rent for several years.
Certificate proceedings were started for the recovery of the arrears of rent, and at a certificate sale held on January 22, 1934, the Utrain lands were purchased by the defendant in the farzi name of Deonarain.
It appears that out of the sum of Rs. 33 14 9 pay able by the mortgagee annually on account of the rent of the Hichapur lands, the mortgagee consistently paid Rs. 33 annually, but did not pay the balance sum of 14 annas 9 pies, whereas the mortgagors consistently defaulted in payment of the sum of Rs. 119 4 3 payable by them annually on account of the total rent.
It also appears that out of the sum of Rs. 68 10 9 payable by the mortgagee annually on account of the rent of the Utrain lands, the mortgagee consistently paid Rs. 68 annually but did not pay the balance sum of 10 annas 9 pies, whereas the mortgagors consistently defaulted 160 in payment of the sum of Rs. 86 9 3 payable by them annually on account of the total rent.
The trial Court decreed the suit.
The first appellate Court allowed the appeal in part, passed a decree for redemption of 3.93 acres of plot No. 955 only on the ground that this portion of the land was not sold at the rent sale and gave leave to the defendant to withdraw Rs. 1,000 deposited by the plaintiff in respect of the mortgage dated July 5, 1927.
The High Court dismissed a second appeal preferred by the plaintiffs.
The plaintiffs now appeal to this Court by special leave.
The plaintiffs contend that the purchases at the rent sale and the certificate sale were made by the mortgagee by availing himself of his position as such and having regard to section 90 of the and Illustration (c) to it, the purchases enured for the benefit of the plaintiffs and they are entitled to redeem the entire mortgaged lands.
The defendant mortgagee disputes this contention, and claims that the aforesaid sales extinguished the equity of redemption.
Section 90 of the and Illustration (c) to it are as follows : "Where a tenant for life, co owner mortgagee or other qualified owner of any property, by availing himself of his position as such, gains an advantage in derogation of the rights of the other persons interested in the property, or where any such owner, as representing all persons interested in such property, gains any advantage, he must hold, for the benefit of all persons so interested, the advantage so gained, but subject to repayment by such persons of their due share of the expenses properly incurred, and to an indemnity by the same persons against liabilities properly contracted, in gaining such advantage.
(c) A mortgages land to B, who enters into possession.
B allows the Government revenue to fall into arrears with a view to the land being put up for sale and his becoming himself the purchaser of it.
The land is accordingly sold to B. Subject to the repayment of the amount due on the mortgage and of his expenses properly incurred as mortgagee, B holds the land for the benefit of A." 161 In Basmat Devi vs Chamru Sao(1), a part of one entire hold ing was mortgaged, both the mortgagor and the mortgagee were liable to pay the rent of the holding, both of them defaulted in payment of the rent, the default of both contributed to the passing of a rent decree and the sale of the holding in execution of, the decree, the default of the mortgagee being substantial, and the mortgagee purchased the holding at the execution sale.
On these facts, this Court held that the mortgagee clearly gained an advantage by availing himself of his position as such, and having regard to section 90 of the his purchase must inure for the benefit of the mortgagor, and the mortgagor was entitled to redeem the mortcaged property.
In that case, Das Gupta, J. observed "Whether this would be true even where the portion which the mortgagee is liable to pay is so very small that the property is not ordinarily likely to be brought to sale for that amount, it is unnecessary for us to decide in the present case.
" The question left open by Das Gupta, J. arises for decision in the present case.
This is a case where the mortgaged property is part of a larger holding, the mortgagee agreed to pay a portion of the rent of the entire holding, and the mortgagors agreed to pay the balance rent payable in respect of it.
The mortgagors defaulted in payment of the rent payable by them.
The mortgagee paid almost the entire amount of the rent payable by him but defaulted in payment of a trifling sum.
The portion of the rent which the mortgagee failed to pay is so small that it is impossible to say that the property was brought to sale for it or that his default was in any real sense a contributory cause of the sale of the property.
it is not shown that non payment of the trifling sums by the mortgagee was made mala fide or with the ulterior object of the property being put up for sale and his becoming the purchaser of it.
The mortgagee did not gain any advantage by availing himself of his position as such or of a situation brought about by his own default.
The real effective cause of the sale was the default of the mortgagors alone.
In the circumstances, section 90 of the and Illustration (c) to it are not attracted, and the purchase by the mortgagee does not inure for the benefit of the mortgagors.
The rent sale and the certificate sale extinguished the right of redemption.
Consequently, the suit by the mortgagors for redemption of the mortgaged property is liable to be dismissed.
The first appellate Court, however, gave a decree for redemption of 3.93 acres of plot No. 955 in Hichapur village and gave (1) ; 162 liberty to the mortgagee to withdraw the entire sum of Rs. 1,000 deposited by the plaintiffs in respect of the mortgage of the Hichapur lands.
Before the High Court the plaintiffs contended, relying upon the last paragraph of section 60 of the , that they were entitled to redeem the aforesaid 3.93 acres of Utrain lands on payment of the proportionate amount of the mortgage money payable under the mortgage dated July 5, 1927.
The High Court negatived this contention.
The Courts below observed that 3.93 acres of plot No. 955 of the Hichapur lands were not sold at all at the sale held on June 18, 1934, but quite inconsistently, the Courts below also observed that the aforesaid sale held on June 18, 1934 was a rent sale and was made in execution of a rent decree.
Learned counsel on behalf of both parties conceded before us that there could be no rent sale in respect of a portion of the holding.
It may be that there was a rent sale, and by mistake, the sale certificate omitted to mention the 3.93 acres of plot No. 955.
The relevant documents are not printed in the paper book.
Having regard to the value of the subject matter in dispute, it is not worthwhile to call for a fresh finding on this point.
We, therefore, indicated to counsel on both sides in course of the argument that we shall decide this appeal on the footing that the sale held on June 18, 1934 was a rent sale and the entire Utrain lands were purchased by the defendant at the rent sale.
On this footing the last paragraph of section 60 of the can have no application.
The plaintiffs appellants do not now own the equity of redemption in any portion of the Hichapur lands.
The Courts below, therefore, should have dismissed the entire suit for redemption, and the question of redemption of a portion of the property on payment of a proportionate amount of the mortgage money does not properly arise in this case.
However, the first appellate Court gave a decree for redemption of the aforesaid 3.93 acres of land.
The High Court affirmed this decree, and there is no cross appeal by the defendant respondent.
In the circumstances, the decree passed by the Court below must be maintained.
In the result, the appeal is dismissed with costs.
Appeal dismissed. | The ancestors of the appellants created usufructuary mortgages in favour of the respondent.
The mortgaged property was a part of a larger holding.
The mortgagee respondent had agreed to pay a portion of the rent of the entire holding and the mortgagors agreed to pay The balance rent payable in respect of it.
The mortgagors defaulted for several years in payment of the rent.
The mortgagee paid almost the entire amount of the rent but defaulted in the payment of a trifling sum.
The landlord obtained a decree for arrears of rent, and at rent sales the mortgagee pur chased the lands.
The appellant s mortgagors filed a suit for redemption of the mortgage, which was decreed by the trial court.
The mortgagee appealed, which was allowed in part passing a decree for redemption of a small plot only on the ground that this portion of land was not sold at the rent sale.
The mortgagors ' appeal to the High Court was dismissed.
In appeal by special leave, the mortgagors contended that the purchases at the rent sale and the certificate sale were made by the mortgagee by availing himself of his position as such as having regard to section 90 of the and Illustration (c) to it.
the purchases enured for the benefit of the mortgaors and they were entitled to redeem the entire mortgaged lands.
HELD : The portion of the rent which the mortgagee failed to pay was so small that it was impossible to say that the property was brought to sale for it or that his default was in any real sense a contributory cause of the site of the property.
It was not shown that non payment of the titling sum by the mortgagee was made mala fide or with the ulterior object of the property being put up for sale and his becoming the purchaser of it.
The mortgagee did not gain any advantage by availing himself of his position as such or of a situation brought about by his default.
The real effective cause of the sale was the default of the mortgagor& alone.
L161 E G] In the circumstances, section 90 of the and Illustration (c) to it were not attracted, and the purchase by the mortgagee did not enure for the benefit of the mortgagors.
The rent sale and the certificate sale extinguished the right of redemption.
[161 G H] Basmat Devi vs Chamru Sao, ; , referred to. |
Appeal No. 276 of 1956.
Appeal from the judgment and decree dated October 15, 1954, of the Allahabad High Court in Execution First Appeal No. 224 of 1951.
section P. Sinha and Tiryugi Narain for the appellants.
G. C. Mathur, for respondent No. 1. 1961.
February 20.
The Judgment of the Court was delivered by DAS GUPTA, J.
This appeal raises a question of limitation in execution proceedings.
The decree sought to be executed was made by the Civil Judge, Kanpur, on September 2, 1938, in a suit for partition brought by two brothers Jumna Prasad and Devi Prasad and two minor sons of Jumna Prasad, against Gajju Lal, his son Jawala Prasad, the four minor sons of Jawala Prasad Sharda Prasad, Dharam Pal, Ram Pal and Krishna Pal, and one Smt.
Sundari.
By the decree one of the properties, a house formerly bearing No. 36/22 and now 36/58, Etawa Bazar, Kanpur, was awarded along with other properties to the defendants in the suit.
The present application for execution was made by the four brothers, Sharda Prasad, Dharam Pal, Ram Pal and Krishna Pal on Novem ber 23, 1949.
The prayer was that these applicants may be delivered possession over this Etawa Bazar house along with Gajju Lal, Jawala Prasad and Smt.
Sundari on dispossession of Jumna Prasad and Devi Prasad.
It is stated in the application that all these applicants had " up till now been minors and one of them is still a minor and so no question in respect of time arises.
" This ' it is important to note, was the first application for execution of the ' partition decree.
A number of objections were raised but the principal objection and the only one with which we are concerned in this appeal was that the application was barred by time.
The decision of this question depended on the answer to the question raised on behalf of the opposite parties that Jawala Prasad one of the persons entitled jointly 'with these applicants to make an application for the execution of the decree could have 877 given a discharge of the liability under the decree without the concurrence of his minor sons and so time ran under section 7 of the Limitation Act against them also from the date of the decree.
The Trial Court did not feel satisfied that Jawala Prasad could give a valid discharge and held accordingly that the application was within time.
on appeal the High Court held that Jawala Prasad as the Karta of the Hindu joint family could act on behalf of the entire joint family in taking possession of the house allotted to the defendants and delivery of such possession could discharge the liability qua the entire joint family and held accordingly that the application was barred by limitation.
The High Court however granted a certificate under article 133(1)(c) of the Constitution and on that certificate this appeal has been filed by the applicants for execution.
Two contentions were raised on behalf of the appellants in support of the plea that the High Court erred in holding that the application for execution was barred by limitation.
First, it is urged that section 7 of the Limitation Act does not apply at all to a partition decree.
The second contention is that in any case Jawala Prasad could not give a valid discharge of the liability under the decree in view of the provisions of O. 32 of the Code of Civil Procedure.
On the first contention the argument is that the word " discharge " is appropriate only in respect of a monetary claim and is wholly inappropriate in respect of any decree for possession whether on partition or otherwise.
There is, in our opinion no substance in this argument.
The mere fact that the two illustrations to section 7 are in respect of debts is no ground for thinking that the provisions of section 7 are limited to suits or decrees on monetary claims only.
Nor can we see any reason to think that the word " discharge " can refer only to debts.
Discharge means, to free from liability.
The liability may be in respect of monetary claims, like the debts; it may be in respect of possession of property; it may be in respect of taking some order as regards property it may be in respect of many other matters.
Except in the case of declaratory decrees or 878 decrees of a similar nature, the decree in favour of one person against another requires the person against whom the decree is made liable to do something or to refrain from doing something.
This liability is in a sense a debt which the party is in law bound to discharge.
The ordinary use of the word " judgment debtor " to denote a person against whom a decree has been made makes a clear recognition of this.
It is worth mentioning in this connection that the Code of Civil Procedure itself defines " judgment debtor " to mean " any person against whom a decree is passed or an order capable of execution has been made.
" It is helpful to notice in this connection the provisions of section 8 of the Limitation Act that " nothing in section 6 or section 7 applies to suits to enforce rights of preemption.
" If section 7 had been applicable merely to litigation for monetary claims it would have been unnecessary and indeed meaningless to take the special step of exempting suits to enforce rights of pre emption from the operation of section 7.
This is a further reason in support of the conclusion that the word " discharge" in section 7 is not limited to discharge of monetary claims only but also to discharge or satisfaction of all other liabilities as well.
We therefore hold that the first argument raised on behalf of the appellants has no substance.
Equally untenable is the second argument that the provisions of 0. 32 of the Code of Civil Procedure debar the manager of a Hindu joint family from giving discharge in respect of a liability to deliver properties.
Under the Hindu Law the Karta of a Hindu joint family represents all the members of the family and has the power and duty to take action which binds the family in connection with all matters of management of the family property.
Clearly, therefore, when in respect of a transaction of property possession has to be received by the several members of the family, it is the Karta 's duty and power to take possession on behalf of the entire family, including himself, the members of the family who are sui juris as well as those who are not.
879 When any minor member of a joint family is a party to a proceeding in a court he has however to be represented by a next friend appointed by the court and where somebody other than the managing member, of the family has been appointed a guardian ad litem there might be difficulty in the way of the managing member giving a discharge on behalf of the minor.
Where however the managing member himself is the guardian ad litem the only difficulty in the way of action being taken by him on behalf of a minor is to the extent as mentioned in 0.
32, rr. 6 and 7.
In Ganesha Row vs Tuljaram Row (1) the Judicial Committee pointed out that: " No doubt a father or managing member of a joint Hindu family may, under certain circum stances and subject to certain conditions, enter into agreements which may be binding on the minor members of the family.
But where a minor is party to a suit and a next friend or guardian has been appointed to look after the rights and interests of the infant in and concerning the suit, the acts of such next friend or guardian are subject to the control of the Court.
" In that case their Lordships held that in view of the provisions of section 462 of the then Code of Civil Procedure (which corresponds to 0.
32, r. 7 of the present Civil Procedure Code) the managing member who had been appointed a guardian in the suit had no authority to enter into any compromise or agreement purporting to bind the minor.
This principle has been applied also to cases where the provisions of 0. 32, r. 6 would apply and so it has been held in numerous cases in India that the Karta of a Hindu joint family though guardian in the suit cannot give a valid discharge in respect of a claim or a decree for is money or other movable property." (Parmeshwari Singh vs Banjit Singh (2) and Letchmana Chetty vs Subbiah Chetty (3)) In the present case however there is no scope for the application of either the provisions of 0. 32, r. 6 or O.32, r. 7 of the Code of Civil Procedure.
Neither is (1) (1913) L.R. 40 I.A. 132,138, (2) A.I.R. 1939 Pat.
(3) Mad.
920. 880 this a case of a receipt of any money or movable properties nor is there any question of entering into an agreement or compromise on behalf of the minor.
For, clearly acceptance of delivery of possession of property in terms of the decree in a partition suit can by no stretch of imagination be considered entering into any " agreement or compromise" We are therefore of the opinion that Jawala Prasad, the managing member of the family could have given a discharge of the liability under the partition decree by accepting delivery of possession on behalf of his minor sons without their consent and so time ran against them also under section 7 of the Limitation Act from the date of the decree.
The High Court was therefore right in its conclusion that the application for execution was barred by limitation.
The appeal is accordingly dismissed with costs.
Appeal dismissed. | A decree dated September 2, 1938, in a suit for partition of joint Hindu family property awarded a house to the share of one J and his four minor sons.
J failed to execute the decree.
On November 23, 1949, an application was made by the appellants, the four sons of J, for execution of the decree stating that three of them had been minors till then and one of them was still a minor and so no question of limitation arose.
The respondent objected that the application was barred under section 7 of the Indian Limitation Act.
The appellants contended that section 7 did not apply to a partition decree and that section 7 was no bar as j could not have given a valid discharge of the liability under the decree in view of the provisions of 0. 32 of the Code of Civil Procedure.
Held, that the application for execution was barred by limitation.
J, the managing member of the family could have given a discharge of the liability under the partition decree by accepting possession on behalf of his minor sons without their consent and so time ran against them under section 7 from the date of the decree.
Order 32, rr.
6 and 7 were no bar to j giving a discharge of the liability under the decree as it was neither a case of receipt of any money or movable property nor was there any question of entering into an agreement or compromise on behalf of the minors.
Ganesha Row vs Tuljaram Row (1913) L.R. 40 1.A. 132, Parmeshwari Singh vs Ranjit Singh, A.I.R. 1939 Pat.
33 and Letchmatsa Chetty vs Subbiah Chotty, Mad. 920, referred to. 876 |
iminal Appeal No. 26 of 1965.
Appeal by special leave from the judgment and order dated August 10, 1964 of the Patna High Court in Criminal Appeal No. 66 of 1962.
R.K. Garg, section C. Agarwala and D. P. Singh, for the appel lants.
D. Goburdhun, for the respondent.
The Judgment of the Court was delivered by Hidayatullah, J.
B in order pronounced on May 7, 1965, we ordered the dismissal of this appeal but reserved our reasons which we now proceed to give.
The five appellants were tried on a complaint by the respon dent Janardan Prasad before the Honorary Magistrate.
First Class, Jehanabad for offences under sections 420, 468, 406, 465/471, Indian Penal Code.
They were acquitted on August 31, 1962.
The complainant obtained special leave of the High Court at Patna under section 417(3) of the Code of Criminal Procedure and filed an appeal against their acquittal.
The High Court set aside the acquittal and remanded the case to the District Magistrate of Gaya with a direction that the case be inquired into under Chapter XVIII of the Code from the stage of taking evidence under section 208, with a view to their committal to the Court of Session.
The appellants now appeal by special leave against the judgment and order of the High Court.
The facts of the prosecution case may now be stated briefly.
Janardban Prasad and his brother Jangal Prasad were separate, having, prior to the present occurrence, partitioned their lands by metes and bounds.
Plots Nos.
1810 and 1811 in village Kalpa Kalan fell to the share of Jangal and plot No. 1699 in the same village fell to the share of Janardan.
Jangal Prasad 's plots lie close to the dalan of Matukdhari and his brothers Rameshwar Singh and Dhanukdhari Singh (the first three appellants) and they coveted them.
Janardhan alleged that they forged a sale deed in respect of half the area of those two plots and presented the documents for registration.
Janardhan was aggrieved but on the intercession of Deoki Lal and Chhedi Lal (appellants 4 and 5) 257 the dispute was compromised and it was agreed that Janardhan would execute a sale deed for plot No. 1699 and half of another plot No. 1491 while Matukdhari and his brother Dhanukdhari Singh agreed to sell in return O.10 acre in one of their plots (No. 1797) to him.
The complainant executed two sale deeds in respect of the two said plots and Dhanukdhari Singh executed a sale deed in respect of plot No. 1797 as it was in his name.
The latter sale deed was taken in favour of Janardhan 's son.
All documents were scribed by Deokilal with the help of Chhedi Lal and were presented for registration.
The receipts obtained from the Registration Office were left with Deokilal till the result of the first registration case (which was fixed for February 8, 1960) was known.
When Janardhan asked for the receipts he was put off.
He found later that the two documents had already been withdrawn by forging his signature.
Matukdhari had withdrawn the deed executed by Janardhan and Dhanukdhari the sale dead executed by himself.
The complainant was assured by Deokilal and Chhedilal that the deed executed in favour of his son would be returned by Rameshwar Singh with whom, it was said to be lying, but Rameshwar Singh refused to do so.
The complaint was, therefore, filed.
The Sub Divisional Officer, Jehanabad took cognizance under sections 468, 406 and 420, Indian Penal Code and sent the case to the Hony.
Magistrate for disposal.
The Hony.
Magistrate drew up charges against all the accused under section 420, Indian Penal Code.
In addition, Chhedilal and Deokilal were charged under section 468, Indian Penal Code and section 406, Indian Penal Code respectively.
Matukdhari was charged under sections 465/471, Indian Penal Code.
These charges could be tried by the Honorary Magistrate.
No charge under section 467, Indian Penal Code was framed against any of the appellants.
If it had been framed the case had to be committed to the Court of Session.
On March 29, 1962 the complainant, by a written application, asked that action under Chapter XVIII of the Code be taken but the Magistrate declined to commit the accused.
Another application dated June 28, 1962, for the same purpose was also rejected.
The learned Magistrate held that the evidence of entrustment of the receipts from the office of the Registrar was not satisfactory and Deokilal could not be convicted under section 406, Indian Penal Code.
He further held, mainly on the ground that no handwriting expert was examined, that it was not possible to say that there was forgery of the signatures or that Matukdhari had used the receipts knowing them to, be forged.
On these findings the appellants were acquitted.
258 In his appeal before the High Court the complainant con tended that the trial before the Magistrate was without jurisdiction as the Magistrate should have acted under Chapter XVIII with a view to committing the accused to the Court of Session for trial as the facts disclosed an offence under section 467, Indian Penal Code, which is triable exclusively by the Court of Session.
He contended that the offence was made out on his evidence and as registration receipts were valuable securities under section 30 of the Indian Penal Code a charge under section 467, Indian Penal Code should have been framed.
This argument found favour with the High Court and it was held that although section 467, Indian Penal Code was not mentioned in the complaint, a charge under that section ought to have been framed.
The High Court pointed out that it was the duty of the Magistrate to apply the correct law and if the facts disclosed an offence exclusively triable by the Court of Session he ought to have framed that charge and not assumed jurisdiction over the case by omitting it.
In the opinion of the High Court a prima facie case existed for framing a charge under section 467, Indian Penal Code, which meant that the case ought to have been committed to the Court of Session.
The acquittal was, accordingly, set aside and retrial ordered.
In this appeal the judgment is assailed as erroneous and against the principles laid down by this Court for dealing with appeals against acquittals.
Mr. Garg relies strongly upon two cases of this Court.
They are Abinash Chandra Bose vs Bimal Krishna Sen and Anr.(1) and Ukha Kolhe vs State of Maharashtra(1).
He contends that the trial before the Magistrate, in so far as it went, was with jurisdiction and it could not be set aside merely because the High Court thought that a charge under section 467, Indian Penal Code might have been framed.
He contends that such a proceeding is not contemplated under section 423(1)(a).
Criminal Procedure Code as explained by this Court in the two cases cited above.
He further refers to Barhamdeo Rai and others vs King Emperor(3), Balgobind Thakur and others vs King Emperor (4 ) and K. E. V. Razya Bhagawanta(5) as instances where, the trial being with jurisdiction, no retrial was ordered even though it was submitted to the High Court that some other offences triable exclusively by the Court of Session with which accused could be charged, were also disclosed.
These cases need not detain us.
They do not deny the power of the High Court to order a retrial.
The High Courts in those cases (1) ; (2) ; (3) A.I.R. 1926 Pat.
(4) A.I.R. 1926 Pat. 393.
(5) 259 did not order a retrial because the accused were convicted of lesser offences and the sentences imposed were considered adequate in all the circumstances of those cases.
The two cases of this Court were considered by us in Rajeshwair Prasad Misra vs State of West Bengal(1).
We have pointed out there that a retrial may be ordered for a variety of reasons which it is hardly necessary or desirable to state in a set formula and the observations of this Court are illustrative but not exhaustive.
The Code gives a wide discretion and deliberately does not specify the circumstances for the exercise of the discretion because the facts of cases that come before the courts are extremely dissimilar.
We pointed out that it would not be right to read the observations of this Court (intended to illustrate the meaning of the Code) as indicating in advance the rigid limits of a discretion which the Code obviously intended should be developed in answer to problems as they arise.
We gave some illustrations of our own which fell outside those observations but which might furnish grounds, in suitable cases, for an order of retrial.
This case also furnishes an example which may be added to that list.
The High Court pointed out that there was evidence that the endorsements on the receipts were not made by Janardhan.
Janardhan denied on oath that he had written them and stated that they were written by one of the respondents, with whose handwriting he claimed to be familiar.
There was prima facie evidence to show that the two deeds which were presented for registration were taken out on the strength of forged receipts.
No suggestion was made to Janardhan in cross examination that he had endorsed the receipts in favour of Matukdhari or Dhanukdhari.
If he had not written the endorsements, some one else must have done so.
No doubt handwriting experts could have been examined.
The Magistrate could have taken action under section 73 of the Indian Evidence Act but this was not done.
If the Magistrate had applied his mind to the problem he would have seen easily that a prima facie case of forgery was made out.
He should then have considered whether the receipts were valuable security or not.
If he had done that he would have seen that the main offence would prima facie be one under section 467, Indian Penal Code read with section 471 and the other offences were subsidiary.
It was thus not proper for him to choose for trial only such offences over which he had jurisdiction and to ignore other offences over which he had none.
His duty clearly was to frame a charge under section 467, Indian Penal Code (1)[1966] 1 S.C.R. 178. 260 and to commit the appellants to stand their trial before the Court of Session.
It was open to the High Court, while hearing an appeal under section 417(3) of the Code to direct the Magistrate to frame a charge for an offence which was prima facie established by the evidence for the prosecution and also to order that the accused be committed to the Court of Session.
It is wrong to contend that the High Court had no jurisdiction in the matter because the trial before the Honorary Magistrate (in so far as it went) was with jurisdiction.
If it were so there would be no remedy whenever a Magistrate dropped serious charges ousting him of his jurisdiction and tried only those within his jurisdiction.
The High Court followed a case of the Sind Chief Court reported in Dr. Sanmukh Singh Teja Singh Yogi vs Emperor(1) where retrial was ordered in very similar circumstances.
We were referred to that ruling and on reading it we do not think the High Court was wrong in accepting it as a correct precedent.
For, however hesitant the High Court may be to set aside an order of acquittal and to order retrial, it has jurisdiction under the Code to do so, if the justice of the case clearly demands it and a case of omission from the charge of a serious offence prima facie disclosed by evidence, is one of those circumstances in which the power can properly be exercised particularly when the charge for the offence, if framed, would have ousted the court of trial of its own jurisdiction.
Mr. Garg submitted finally that acquittals are not set aside in other jurisdictions and cited the example of English Criminal Law.
He submitted further that the setting aside of an acquittal with a view to holding a second trial robs the accused "of the reinforcement of the presumption of innocence which is the result of the acquittal".
As to the first submission it is sufficient to say that in our criminal jurisdiction a retrial is possible and we need not be guided by other jurisdictions.
No doubt the High Court must act with great care and caution and use the power sparingly and only in cases requiring interference.
As to the second it is not necessary to consider how the presumption of innocence is reinforced by an acquittal and to what extent.
The phrase in any event is hardly apt to describe a case where the accused is acquitted perversely, or without jurisdiction.
All that can be said is that these appellants were presumed to be innocent at their first trial (1) 261 and will not be thought less so at their second trial till their guilt is established legally and beyond all reasonable doubt.
In our judgment the High Court acted within its jurisdiction when it set aside the acquittal of the appellants and made an order for their retrial in the terms it did. | The appellants were tried on a complaint by the respondent before an Honorary Magistrate for offences under sections 420, 468, 406 and 465/471 Indian Penal Code and acquitted.
The Magistrate rejected the complainant 's request to frame a charge under section 467 Indian Penal Code, and commmit the accused to the Court of Sessions.
The complainant appealed to the High Court against the acquittal.
The High Court held that the evidence prima facie disclosed an offence under section 467 and even though the complaint did not mention that section it was the duty of the Magistrate to commit the case to sessions.
It accordingly set aside the acquittal, and ordered a retrial.
The appellants came to this Court by special leave.
It was contended on behalf of the appellants that the trial before the Magistrate, in so far as it went, was with jurisdiction and it could not be set aside merely because the High Court thought that a charge under section 467 might be framed, and that such a proceeding is not contemplated.
by section 423(1) of the Code of Criminal Procedure.
HELD: (i) If the Magistrate had applied his mind to the relevant evidence he would have seen that the main offence was under section 467 read with section 471and the other offences were subsidiary.
It was thus not proper for him tochoose for trial only such offences over which he had jurisdiction andto ignore the other offence over which he had none.
His duty clearly wasto frame a charge under section 467 and to commit the appellants to stand their trial before the Court of Sessions.
[259 G] (ii)It is wrong to contend that the High Court had no jurisdiction in the matter because the trial before the Honorary Magistrate (in so far as it went) was with jurisdiction.
If it were so there would be no remedy whenever a Magistrate dropped serious charges ousting him of his jurisdiction and tried only those within his jurisdiction.
[260 B C] Dr. Sanmukh Singh Teja Singh Yogi vs Emperor, , approved.
However hesitant the High Court may be to set aside an order of acquittal and to order retrial, it has jurisdiction under the code to do so if the justice of the case clearly demands it and a case of omission from the charge of a serious offence prima facie disclosed by the evidence, is one of those circumstances in which the power can properly be exercised particularly when the charge for the offence it framed would have ousted the jurisdiction of the trial court.
[260 D E] Abinash Chandra Bose vs Bimal Krishna Sen, A.I.R. 1963 S.C. 316, Ukha Kolhe vs State of Maharashtra, A.I.R. 1963 S.C. 1531, Barhamdeo 256 Rai and others vs King Emperor, A.I.R. 1926 Pat.
36 Balgobind Thakur and others vs King Emperor, A.I.R. 1926 Pat 393 and K.E.V. Razya Bhagwanta, , referred to. |
Appeal No. 890 of 1964.
Appeal by special leave from the order dated February 19, 1963 of the Foreign Exchange Regulation Appellate Board, New Delhi, in Appeal No. 52 of 1959.
A. V. Viswanatha Sastri and J. P. Goyal, for the appellant.
Bishan Narain, R. N. Sachthey and B. R. G. K. Achar, for the respondents.
652 The Judgment of the Court was delivered by Subba Rao, J.
This appeal by special leave raises the short question whether the appellant contravened the provisions of subss.
(1) and (3) of section 4 of the Foreign Exchange Regulation Act, 1947 (VII of 1947), hereinafter called the Act.
During the years 1951 to 1956 the appellant, Ram Rattan Gupta, visited the Far Eastern countries after obtaining the necessary foreign exchange from the Government of India.
During that period the appellant opened current accounts with the Chartered Bank of India, Australia and China, at Singapur, Hong Kong, Osaka and Tokyo, without the general or the special permission of the Reserve Bank of India.
In the different branches of the said Bank he deposited the unspent part of the foreign exchange given to him.
The balance of the said deposits made at the various branches of the Bank was pound 40 (sterling).
The appellant received payments from those accounts even after he returned to India.
The Director, Enforcement Directorate, Foreign Exchange Regulation Act, took proceedings against the appellant under section 19(2) of the Act and, after making the necessary enquiries, found him guilty of contravening the provisions of sub sections
(1) and (3) of section 4 of the Act and imposed on him a penalty of Rs. 2,500/ under section 23 (1) (a) of the Act.
On appeal, the Foreign Exchange Regulation Appellate Board agreed with the view expressed by the Director of Enforcement that the appellant contravened the said provisions of the Act and dismissed the appeal.
The appellant has preferred the present appeal, by special leave, against the judgment of the said Board.
Mr. A. V. Viswanatha Sastri, learned counsel for the appellant, contended that the total of the amounts kept by the appellant in the branches of the said Bank was a negligible balance of the free quota of foreign exchange given to him, that there was no relationship of creditor and debtor between the appellant and the Bank in regard to the said amounts, that the free quota of foreign exchange was given to him without any condition imposed thereon, and that on the said facts there was no scope to invoke either sub section
(1) or sub section
(3) of section 4 of the Act.
We will read the relevant provisions of the Act in order to appreciate the said contentions.
Section 4.
Restrictions on dealing in foreign exchange (1) Except with the previous general or special permission of the Reserve Bank , no person other than an authorised dealer shall in India and no 653 person resident in India other than an authorised dealer shall outside India, buy or borrow from, or sell or lend to, or exchange with, any person not being an authorised dealer, any foreign exchange.
(2). . . . . (3) Where any foreign exchange is acquired by any person other than an authorised dealer for any particular purpose, or where any person has been permitted conditionally to acquire foreign exchange, the said person shall not use the foreign exchange so acquired otherwise than for that purpose or, as the case may be, fail to comply with any condition to which the permission granted to him is subject, and where any foreign exchange so acquired cannot be so used or, as the case may be, the conditions cannot be complied with, the said person shall without delay sell the foreign exchange to an authorised dealer.
Section 4(1) of the Act was amended in the year 1964, but we are concerned only with the said sub section as it stood before the amendment.
To attract section 4(1), a resident in India other than an authorised dealer shall have lent to any person, not being an authorised dealer, any foreign exchange.
It is not disputed that the said Bank was not an "authorised dealer" within the meaning of the said sub section.
If so, the only question is whether the appellant, in depositing the said amounts in the current account ', of the various branches of the said Bank, lent the said amounts to the Bank.
What is the meaning of the expression "lend" ? It means in the ordinary parlance to deliver to another a thing for use on condition that the thing lent shall be returned with or without compensation for the use made of it by the person to whom it was lent.
The subject matter of lending may also be money.
Though a loan contracted creates a debt, there may be a debt created without contracting a loan; in other words, the concept of debt is more comprehensive than that of loan.
It is settled law 'that tie relationship between a banker and a customer qua moneys deposited in the bank is that of debtor and creditor.
This Court in Shanti Prasad fain vs Director of Enforcement(1) restated the principle in the following words: (1) ; , 324.
6 54 .lm15 "Now the law is well settled that when moneys are deposited in a Bank, the relationship that is constituted between the banker lad the customer is one of debtor and creditor and not trustee and beneficiary.
The banker is entitled to use the monies without being called upon to account for such user, his only liability being to return the amount in accordance with the terms agreed upon between him and the customer.
" But this Court qualified that general statement with the remark that "there might be special arrangement under which a Banker might be constituted a trustee, but apart from such an arrangement, his position qua Banker is that of a debtor, and not trustee".
It follows that ordinarily a deposit of an amount in the current account of a bank creates a debt; but it need not necessarily involve a contract of loan.
Whether a deposit amounts to a loan depends upon the terms of the contract whereunder the deposit is made.
In the context of section 4(1) of the Act, can it be said that the depositor in the present case lent money to the Bank ? When a person deposits free currency in the current account of a bank in order to draw it whenever necessary for the _purpose for which it was given, it is not possible to hold that he enter% into a contract of loan with the bank within the meaning of section 4(1) of the Act.
He only deposits the money for the said purpose.
Should we hold that such a transaction is a loan, many an honest man who deposits foreign exchange in a bank in a foreign country where he is staying for a short time to draw it for his requirements will be committing an offence.
That could not have been the intention of the Legislature.
If such a deposit is not a loan, it follows that the appellant cannot be held to have contravened the provisions of section 4(1) of the Act.
The next question is whether the appellant was guilty of contravening the provisions of sub section
(3) of section 4 of the Act.
Under the relevant part of that sub section, where any foreign exchange was acquired by a person for any particular purpose and where the foreign exchange so acquired cannot be used, the said person shall without delay sell the foreign exchange to an authorised dealer.
Admittedly the foreign exchange was acquired by the appellant for the purpose of meeting his expenditure during his tour of the Far East countries; but he had not used the entire foreign exchange for the said purpose.
If so, under the express provisions of sub section
(3) of section 4 of the Act, he should have without delay sold the same to an authorised dealer.
Instead he kept the 655 said amount in the current account of the various branches of the Bank for a number of years.
The tribunals were, therefore, right in holding that the appellant had contravened the said provision.
No other point arises for consideration in this appeal.
As we find the appellant guilty of an offence only under sub section (3) of section 4 of the Act, we think the ends of justice will be met if a fine of Rs. 1,000 only is imposed on him.
We, therefore, reduce the fine of Rs. 2,500/ imposed on the appellant to Rs. 1,000/ .
In the result, the order of the Foreign Exchange Regulation Appellate Board is modified accordingly.
The parties will bear their own costs.
Order modified. | The appellant visited Far Eastern countries during the years 1951 to 1956 after obtaining from the Government of India the necessary foreign exchange for the purpose of meeting his expenditure during his tour.
He deposited the unspent part of the foreign exchange in different branches of the Chartered Bank in those countries.
The Director, Enforcement Directorate, Foreign Exchange Regulation Act, took proceedings under section 19(2) of the Act and found him guilty of contravening section 4(1) and (3).
The order was confirmed on appeal by the Foreign Exchange Regulation Appellate Board.
In the appeal to this Court.
HELD : (i) The appellant could not be held to have contravened the provisions of section 4(1).
[654 F] To attract section 4(1), the appellant should have lent foreign exchange to a person who was not an authorised dealer.
The Bank, no doubt, was not an authorised dealer, but, when a person deposits free currency in the current account of a bank in order to draw it whenever necessary for the purpose for which it was given, it is not possible to hold that he enters into a contract of loan with the bank, within the meaning of section 4((1).
Ordinarily a deposit of an amount in the current account of a bank creates a debt, but it need not necessarily involve a contract of loan.
[653 E; 654 C. D E] Shanti Prasad Jain vs Director of Enforcement, , followed.
(ii) The tribunals were right in holding that the appellant had contravened section 4(3).
[655 A] Under this sub section, the appellant should have sold the unspent foreign exchange to an authorised dealer without delay.
Since he had kept the amount in the current account of various branches of the Bank for a number of years, he was guilty of contravening the provision.
[654 H; 655 A] |
Appeal No. 583 of 1962.
Appeal by special leave from the judgment and order, dated November 23, 1959, of the Allahabad High Court in Special Appeal No. 524 of 1958.
section V. Gupte, Solicitor General, Guru Dayal Srivastava and T. Satyanarayana, for the, appellant.
B. R. L. Iyengar and A. G. Ratnaparkhi, for respondents.
Nos. 1, 2, 4, 8 & 12 to 14.
C. B. Agarwal and O. P. Rana, for Intervener No. 1.
A. V. Rangam, for Intervener No. 2. G. C. Kasliwal, Advocate General, for the State of Rajasthan and R. N. Sachthey, for Intervener No. 3.
I. N. Shroff, for Intervener No. 4.
The Judgment of GAJENDRAGADKAR, C.J., HIDAYATULLAH, SHAH AND SIKRI, JJ was delivered by HIDAYATULLAH, J. WANCHOO, J.delivered a dissenting Opinion.
Hidayatullah J. The Municipal Board, Hapur (shortly the appellant Board) passed a Special Resolution (No. 296) on September 28, 1956 imposing water tax in Hapur from April 1, 1957 and a notification by the Government of Uttar Pradesh was.
Published in the Uttar Pradesh Gazette under section 135(2) of the U. P. Municipalities Act (Act 2 of 1916) dated December 11, 1956 notifying the resolution.
Fifteen house owners of Hapur who received notices from the appellant Board for the payment of the tax assessed in respect of their houses, petitioned to the High Court at Allahabad under article 226 of the Constitution and asked for a writ or order preventing the appellant Board from realising the tax.
Their contention was that the tax was illegal as it was imposed in contravention of the provisions of the Munici palities Act.
The main grounds of objection were (a) that the, resolution of the appellant Board framing the proposal was not published in a local paper of Hapur printed in Hindi, and (b) that the rules framed for the imposition of the tax did not accompany the resolution which was affixed on the notice board at the office of the appellant Board in purported compliance with the requirements for publication.
The imposition was also challenged on the ground that articles 14 and 19 of the Constitution were violated 954 The petition was heard by Mr. Justice James who decided all the points against the appellant Board.
He held that the tax was illegal inasmuch as the mandatory requirements of the Municipalities Act were not complied with by the appellant Board while imposing the tax, and that section 135(3) of the Act (which cures all defects in the imposition of tax by making the notification of Government conclusive evidence of the legality of the imposition) was ultra vires article 14 of the Constitution because it created a bar against proof and left no remedy to the tax payers thereby making a discrimination between them and other litigants.
He further held that the sub section, by making Government the sole judge of compliance with the Act conferred judicial power on Government contrary to the intendment of the Constitution.
The appellant Board was accordingly ordered not to collect the tax from the petitioners.
The appellant Board appealed under the Letters Patent.
The Divisional Bench hearing the special appeal agreed with Mr. Justice James.
The present appeal has been filed by special leave of this Court.
Since it will be necessary to 'consider whether the appellant Board complied with the requirements of the Municipalities Act or not and, if not, to what extent, it is necessary to analyse the provisions in the Municipalities Act for the imposition of a tax and then to follow that up with a nar ration of the steps taken by the appellant Board.
Section 128 of the Municipalities Act confers on the Munici palities in Uttar Pradesh the power to levy taxes and enumerates the kinds of taxes.
One such tax mentioned in cl.
(x) of sub section (1) of the section reads : "a water tax on the annual value of the building or land or both".
This was the tax which the Municipality had attempted to impose in Hapur.
There can be no question that the appellant Board had the competence to impose this tax and so the first question is whether it went about the business in the wrong way and, if it did, what is the effect.
Section 129 specifies certain restrictions on the imposition of water tax.
We need not refer to them because no objection was raised that the restrictions there prescribed had not been observed.
Sections 131 to 135 lay down the procedure for the imposition of the tax.
Section 131 provides that when a Board desires to impose a tax it shall, by special resolution, frame a proposal specifying the tax, the person or class of persons to be made liable and the description of the property or other taxable things or circumstances in respect of which they are to be made liable, the amount or rate leviable from such person or class of persons and any other matter which the State Government may require 955 by rules to be specified.
The same section requires the Board to prepare a draft of the rules which it desires the State Government to make and the Board is required to publish the proposal, the draft rules so framed, and a notice in the prescribed form, in the manner laid down by section 94.
That section says that every resolution passed by a Board at a meeting, shall, as soon thereafter as may be, be published in a local paper published in Hindi and where there is no such local paper, in such manner as the State Government may, by general or special order, direct.
After the notice etc. are published, section 132 enables any inhabitant of the Municipality to, submit to the Board an objection in writing to all or any of the proposals framed by it and the Board is required to consider the objection so submitted and to pass order thereon by special resolution.
If the Board decides to modify its proposals or any of them it must publish the modified proposals and (if necessary) the revised draft rules with a fresh notice, for objections.
Any new objection so received has to be dealt with in the same way.
After the Board has finally settled the proposals, it has to submit the proposals, the objections (if any) and the orders made in connection therewith, to the prescribed authority.
The prescribed authority under section 2(17) (ii) means an officer or a body corporate appointed by the State Government in this behalf by notification in the official Gazette, and, if no such officer or body corporate is appointed, the Commissioner.
It may be stated that the proposal we are considering was accepted by the Commissioner.
Then follows section 133 and it gives power to the State Government or the prescribed authority to reject, sanction or modify any proposal.
When the proposals are sought to be modified they have to be referred back to the Board for further consideration.
When the proposals are sanctioned by the State Government or the prescribed authority section 134 of the Act requires that the State Government, after taking into consideration the draft rules submitted by the Board, shall proceed to make such rules, under its powers under section 296 of the Act, in respect of the tax, as the Government may consider necessary.
After the rules have been made, the order of sanction and a copy of the rules are sent to the Board and thereupon the Board by special resolution directs the imposition of the tax with effect from a date which it specifies in the resolution.
This is stated in section 135 which may be reproduced here fully "135.
Imposition of tax, (1) A copy of the resolution passed under Section 134 shall be submitted to the State Government, 956 if the tax has been sanctioned by the State Government, and to the Prescribed Authority, in any other case.
(2) Upon receipt of the copy of the resolution the State Government, or Prescribed Authority, as the case may be, shall notify in the official Gazette, the imposition of the tax from the appointed date, and the imposi tion of a tax shall in all cases be subject to the condition that it has been so notified.
(3) A notification of the imposition of a tax under sub section (2) shall be conclusive proof that the tax has been imposed in accordance with the provisions of this Act.
" The appellant Board passed a special resolution in terms of section 131 (1) of the Act.
The publication of the resolution was made by affixing a copy of the resolution on the notice board as provided by a notification dated July 5, 1916 and by beat of drum in the town of Hapur.
The resolution was, however, not published in a local paper published in Hindi as required by section 94(3) of the Act.
It is admitted that two Hindi weeklies entitled "Janmat" and "Bharatvarsh" and one Hindi daily entitled "Vyapar" were published at that time at Hapur.
The appellant Board did not publish the notice etc.
in these journals because, in its opinion, none of these papers was a suitable local paper having wide circulation in the town at the time.
Notification of the 5th July, 1916 provides that, where, in a Municilpality, there is no local paper, a copy of every resolution passed by a Board at a meeting shall, within ten days from the date of the meeting, be pasted up and for thirty days be kept pasted up on a notice board to be exhibited for public information at the building in which the meetings of the Board are ordinarily held.
Two objections against the tax found favour with the High Court.
The first objection arose from the non observance of section 94(3) which, as already noticed, requires that the publication of the proposal etc.
should be in a local newspaper published in Hindi.
The High Court held that there was no need to take recourse to the notification of the 5th of July 1916, because the first part of section 94(3) could be complied with.
The next objection against the tax was that even if the special Resolution under section 131 was properly published, the rules which ought to accompany the Resolution were not exhibited.
The appellant Board claimed that the court was precluded from making an enquiry by reason of section 135(3) which made the notification conclusive evidence that 957 the tax was imposed in accordance with the provisions of the Municipalities Act.
The respondents met this by challenging the legality of the sub section.
They pleaded that it was discriminatory inasmuch as it did not allow one set of litigants to prove their allegations as against the general body of litigants and further that there was a conferral of judicial functions on the legislature which was contrary to the separation of powers under the Constitution.
The High Court accepted these contentions also.
There can be no doubt that the language of section 135(3) is as wide as it is peremptory.
Read literally it can lead to the conclusion that even an illegal tax cannot be questioned.
Prima facie, it appears that even if a Municipal Board goes outside the categories of taxes mentioned in section 128 and if the Government is persuaded to notify the imposition, all will be well. 'This cannot be the intent and hence not the meaning.
We must, therefore, see if the words are susceptible of another construction obvitating such a patently absurd result.
There is at the very start the fundamental fact that the power to tax in a State can only be exercised by the State Legislature, the extent of the power being fixed by the Constitution.
The taxes which the State Legislatures are allowed to raise are enumerated in the Seventh Schedule to the Constitution.
The State Legislature can impose all these taxes itself but it is usual to authorise the levy of some of them by local authorities for their own purpose.
Taxes so raised by it local authority are not imposed by it as a legislature but as a delegate of the legislature.
What is done is binding by the authority of the legislature and the tax is valid only if it is one of the, taxes the delegate can raise and the delegate imposes it in accordance with the conditions laid down by the legislature.
It is thus that we find an elaborate procedure prescribed by all the Municipal Acts.
In the U.P. Municipalities Act also, as we have seen, a Board must first pass a special Resolution framing a proposal and the draft rules, invite objections, consider them, and then get them approved by Government.
After this approval there must be a final special resolution imposing the tax from a particular date and the Government then notifies the imposition of the tax.
It is the duty of Government to see that the various steps laid down for the imposition of the tax are followed.
Before it notifies the resolution Government satisfies itself about the requirements.
The notification is made conclusive proof that the tax is imposed in accordance with the provi 958 sions of the Act.
The question arises : Is this rule of conclusive evidence such as to shut out all enquiry by courts ? We have no hesitation in answering the question in the negative.
There are certain matters which, of course, cannot be established conclusively by a notification under section 135(3).
For example, no notification can issue unless there is a special resolution.
The special resolution is the sine qua non for the notification. 'The State Government cannot impose, a tax all by itself by notifying the imposition of the tax, without a resolution by the Board.
Again, the notification cannot authorise the imposition of a tax not included in section 128 of the Municipalities Act.
Neither a Municipal Board nor a State Government can exercise such a power.
A tax can only be said to be imposed in accordance with the provisions of the Municipalities Act, if it is contemplated by the Act.
There is a difference between the tax and the imposition of the tax.
The former is the levy itself and the latter the method by which the levy is imposed and collected.
What the sub section does is Lo put beyond question the procedure by which the tax is imposed, that is to say, the various steps taken to impose it.
A tax not authorised can never be within the protection afforded to the procedure for imposing taxes.
Such a tax may be challenged, not with reference to the manner of the imposition but as an illegal impost.
It would thus appear that it the very start the selection of the tax must be with reference to the delegated powers.
The Municipal Board of the State Government cannot select a tax which the legislature has not mentioned in section 128 of the Municipalities Act.
As the State Government cannot itself impose the tax it must have before it, the special resolution of the Board before notifying the imposition.
Between the special resolution selecting a tax for imposition and the special resolution imposing it sundry procedure is gone through and section 135(3) say , that the notification by Government is conclusive proof that the pro cedure was correctly followed.
It is argued that sections 131 to 134 use mandatory language and it is the.intention of the Legislature to secure obedience to its wishes and therefore it is for the courts to say whether those provisions were followed by the Municipal Board and the State Government.
There can be no doubt that some of the provisions are mandatory.
But all provisions are not of the same character.
In Raza Bunland Sugar Co. Ltd. vs The Municipal Board, Rampur(1) sections 131 to 134 were considered in the light of the tests (1) ; 959 usually applied to determine whether a provision of law is mandatory directory.
It was there pointed out that all the sections in, spite of the language used in them were not mandatory.
The majority opinion considered that the first part of section 131(3) requiring publication of proposals was mandatory and thesecond part which required that publication should be in the manner required by section 94(3) was only directory.
In one of the minority opinions no such distinction was made but section 94(3) was held to be directory.
In the other minority opinion distinction was made between provisions for the protection of tax payers which were stated to be mandatory and provisions for promoting despatch, publicity and efficiency were stated to be directory requiring substantial but not literal compliance.
In that case the notice imposing water tax in Rampur was published in Hindi but in a news paper published in Urdu.
The majority treating the latter part of section 131 (3) as directory held that there was Substantial compliance.
The minority treating section 131(3) to be mandatory upheld the tax treating section 94(3) as directory.
One of the minority views relied upon section 135(3) as shutting out enquiry.
In Berar Swadeshi Vanaspati vs Municipal Committee Sheogaon & Anr.(1) the Municipality passed a resolution tinder section 67(1) of the C. P. & Berar Municipalities Act, 1922.
Sub sections (1) to (7) incorporated provisions similar to sections 131 135 of the U. P. Municipalities Act.
An attempt to question the tax on the ground that the procedure prescribed by section 67 was not followed was repelled.
It was observed: "This notification therefore 'clearly is one which directs imposition of octroi and falls within sub section (7) of section 67 and having been notified in the Gazette it is conclusive evidence of the tax having been imposed in accordance with the provisions of the Act and it can not be challenged on the ground that all the necessary steps had not been taken.
" The defect in the imposition of the tax here being of the same character as in the two cases of this Court above cited, the imposition would have the protection of section 135(3) and the tax must be deemed to be imposed according to the procedure laid down in the Act.
As observed already, some of the provisions controlling the imposition of a tax must be fully complied with because they are vital and therefore mandatory, and the others may be complied (1) 960 with substantially but not literally, because, they are directory.
In either case the agency for seeing to this compliance is the State Government.
It is hardly to be expected that the State Government would not do its duty or that it would allow breaches of the provision to go unrectified.
One, can hardly imagine that ,an omission to comply with the fundamental provisions would ever be condoned.
The law reports show that even before the ,addition of the provision making the notification conclusive ,evidence of the proper imposition of the tax complaints brought before the courts concerned provisions dealing with publicity or requiring ministerial fulfillment.
Even in the two earlier cases 'which reached this Court and also the present case, the complaint is of a breach of one of the provisions which can only be regarded as directory.
In cases of minor departures from the letter of the law especially in matters not fundamental, it is for the Govern ment to see whether there has been substantial or reasonable compliance.
Once Government condones the departure, the decision of Government is rightly made final by making the notification conclusive evidence of the compliance with the requirements of the Act.
It is not necessary to investigate whether a complete lack ,of observance of the provisions would 'be afforded the same protection.
It is most unlikely that this would ever happen and before we pronounce our opinion we should like to see such a case.
It was, however, contended that there has been excessive ,delegation, inasmuch as the State Government has been given the power to condone breaches of the Act and thus to set at naught the Act itself.
This is not a right reading of the relevant 'provisions.
We have already pointed out that the power to tax is conferred on the State Legislature but is exercised by the local authority under the control of the State Government.
The taxes with which we are concerned are local taxes for local needs and for which local inquiries have to be made.
They are rightly left to the representatives of the local population which would bear the tax.
Such taxes must vary from town to town, from one Board to another, and from one commodity to another.
It is impossible for the Legislature to pass statutes for the imposition of such taxes in local areas.
The power must be delegated.
Regard being had to the democratic set up of the municipalities which need the proceeds of the taxes for their own administration, it is proper to leave to these municipalities the power to impose and collect these taxes.
The taxes are, however, predetermined and a procedure for consulting the wishes of the people is devised.
But the 961 matter is not left entirely in the hands of the Municipal Boards.
As the State Legislature cannot supervise the due observance of its laws by the Municipal Boards, power is given to the State Government to check their actions.
The imposition of the tax is left to the Municipal Boards but the duty to see that the provisions for publicity, and obtaining the views of the persons to be taxed are fully complied with, is laid upon the State Government.
The proceedings for the imposition of the tax, however, must come to a conclusion at some stage after which it can be said that the tax has been imposed.
That stage is reached, not when the special resolution of the Municipal Board is passed, but when the notification by Government is issued.
Now it is impossible to leave the matter open so that complaints about the imposition of the tax or the breach of this rule or that may continue to be raised.
The door to objections must at some stage be shut and the Legislature considers that, if the State Government approves of the special resolution, all enquiry must cease.
This is not a case of excessive delegation unless one starts with the notion that the State Government may collude with the Municipal Board to disregard deliberately the provisions for the imposition of the tax.
There is no warrant for such a supposition.
The provision making the notification conclusive evidence of the proper imposition of tax is conceived in the best interest of compliance of the provi sions by the Boards and not to facilitate their breach.
It cannot.
therefore, be said that there is excessive delegation.
The matter may be looked at from another point of view Excessive delegation is most often found when the Legislature does not perform all the essential legislative functions and leaves them to some other agency.
The Legislature here performs all essential functions in the imposition of the tax.
The selection of tax for imposition in a Municipal area is by the legislative will expressed in section 128.
Neither the Municipal Board, nor the Government can go outside the List of taxes therein included.
The procedure for the imposition of the tax is also laid down by the Legislature for the Municipal Board to follow and the State Government is there to ensure due observance of that procedure.
We have already shown above that it would be impossible for the Legislature to legislate for the numerous Municipal Boards and local authoriteis with a view to raising taxes for them.
The provisions, such.
as they are, are the best means of achieving consultation of the local population and close scrutiny of the actions of their representatiaves in imposing the tax.
The notification which issues is given finality by the voice of the Legislature.
It would, there CI/65 18 962 fore, appear that in the selection of the ox and its imposition the Legislature plays a decisive part and also lays down the method by which the tax is to be imposed.
The Legislature does not make local enquiries, hear objections and decide them functions which are most inappropriate for the Legislature to perform.
This task is delegated to the appellant Board which is the representative body of the local population on whom the tax is levied.
In other words, all the essential functions of Legislation are performed by the State Legislature and only the minor functions necessary for the imposition of the tax and the enquiries which must be made to ascertain local opinion are left to the Municipal Boards.
An additional check is available as Government can veto the actions of a Board if it does not carry out the mandate of the Legislature.
In our judgment, there was no excessive delegation or a conferral of Legislative functions on the appellant Board or the State Government.
It remains to consider two other arguments in the case.
The first is the question of discrimination which is said to arise from the proviso which makes the notification conclusive in respect of the procedure by which the tax is imposed.
There are numerous statutes, including the Evidence Act, in which a fact is taken to be conclusively proved from the existence of some, other fact.
The law is full of fictions and irrebuttable presumptions which also involve proof of facts.
It has never been suggested before that when the Legislature says that enquiry into the truth or otherwise of a fact shall stop at a given stage and the fact taken to be conclusively proved, a question of discrimination arises.
The tax payers in the Municipality are allowed under the Municipalities Act to object to the proposal for the tax and the rules and to have their objections considered.
They cannot, of course, be allowed to keep on agitating and a stage must come when it may be said that the provisions of the Act have been duly observed.
That stage is reached after Government has scrutinized the proposal.
the rules, the objections and the orders and has approved of the proposal, a special resolution is passed by the Municipal Board and a notification is issued.
It cannot be said that sub section
(3) of s, 135 which leads to the conclusion that the imposition of the tax is according to the Municipalities Act is discriminatory because it only concludes objections against the procedure followed in the imposition of the tax.
The next objection that the impugned sub section involves the exercise of judicial functions not open to the Legislature, is wholly erroneous.
The sub section only shuts out further enquiry and 963 makes the notification final.
There is no exercise of a judicial function.
In our country there is no rigid separation of powers and the legislature often frames a rule such as is incorporated in the third sub section of section 135.
The Evidence Act is full of such Provisions.
In the United States of America where the separation of powers is extremely rigid in some of the constitutions of the States it may be open to objection that the Legislature in shutting out enquiry into the truth of a fact encroaches upon the judicial power of the State.
Such disability has never been found to exist in our country although legislation of this type is only too frequent The objection is, therefore without substance.
In the result we are "of opinion that the judgment of the High Court under appeal must be set aside.
We accordingly set it aside and order the dismissal of the petition under Art, 226 and 227 of the Constitution from which the present appeal has arisen.
In the circumstances of the case there shall be no order as to costs.
Wanchoo J.
I regret I am unable to agree.
This appeal by special leave from the judgment of the Allahabad High Court raises the question of vires of section 135(3) of the U.P. Municipalities Act, No. 2 of 1916, (hereinafter referred to as the Act).
the facts in the case are not in dispute and may be briefly stated.
The appellant, namely, the Municipal Board Hapur, decided to impose water tax from April 1, 1957.
In consequence, steps were taken under sections 131 to 135 of the Act to effectuate that purpose.
However, proposals and draft rules were never published as required by section 131(3) of the Act.
All that was done was that a notice in the form set forth in Sch.
III was pasted on the notice board and there was some beat of drum with respect to the notice.
Even so, the draft rules were not appended to the notice which was put up on the notice board and in effect there was more or less no compliance with the provisions relating to ;the publication of proposals and draft rules.
Eventually a notification was issued under section 135(2) of the Act by the relevant authority about the imposition of the tax from April 1, 1957.
Thereafter collection of tax began.
The respondents who are residents of Hapur received notices for payment of tax.
Thereupon they filed a writ petition in the High Court, and their main grievance was that the provisions of section 131 relating to publication of proposals and draft rules were not complied with and thus they were de.
proved of an opportunity to file objections as provided under section 132 of the Act.
They contended that the publication as pro 964 vided in section 131 of the Act was mandatory and as a mandatory provision of the Act was not complied with, the imposition of the tax was invalid.
The petition was heard by a learned Single Judge who found, as already indicated that the provisions of section 131(3) relating to publication had not been complied with, consequently, the residents of Hapur had no opportunity of making objections to the proposals and draft rules.
Reliance however was placed on behalf of the appellant on section 135(3) of the Act, which is in these terms : "A notification of the imposition of a tax under subsection (2) shall be conclusive proof that the tax has been imposed in accordance with the provisions of this Act.
" In reply to this, the respondents contended that section 135(3) was ultra vires, and this contention was accepted by the learned Single Judge.
He therefore allowed the petition and directed the appellant not to collect water tax from the respondents until such time as the tax was imposed in strict compliance with the provisions of the Act.
Then there was an appeal by the appellant to a Division Bench.
There also reliance was placed on section 135(3) of the Act. 'Me Division Bench upheld the order of the learned Single Judge, though its approach to section 135(3) was different.
It held that section 135(3) was not a provision for validating anything done without complying with the provisions of the Act and it could not protect the invalidity of a tax if it was invalid on account of its being imposed without following the legal procedure.
Then there was an application by the appellant for a certificate to appeal to this Court, which was refused by the High Court.
The appellant thereupon got special leave and that is how the matter has come up before this Court.
The main contention on behalf of the appellant before this court is that section 135(3) which lays down that the notification under section 135(2) would be conclusive proof that the tax had been imposed in accordance with the provisions of the Act bars any enquiry into the various procedural steps taken for the imposition of the tax, and the court where such a question is raised must hold that the tax has been imposed in accordance with the provisions of the Act.
Once the court comes to that conclusion it would mean that it must assume that the necessary procedural steps for imposing tax had all been properly complied with and 965 therefore there could not be any invalidity of the tax on the ground that all steps necessary for the valid imposition of the tax had not been taken.
It is further submitted that section 135(3) bars enquiry as to the procedural steps necessary for imposing the tax which are contained in sections 131 to 133 of the Act, and it is urged that what a court can enquire is whether the special resolution as required by section 134 has been passed by the municipality or not.
On the other hand, learned counsel for the respondents con tends that if section 135(3) is to be given the meaning for which the appellant contends it will be ultra vires because then there will be an abdication of its essential legislative functions by the legislatures with respect to imposition of tax and therefore section 135(3) would be bad on the ground of excessive delegation.
It is further urged on behalf of the respondents that section 135(3) read literally not only bars enquiry into procedural steps necessary for the imposition of the tax, which, according to learned counsel, are contained in sections 131 to 135(1) but also bar , enquiry as to whether the tax is in accordance with sections 128 to 130, which are substantive provisions with respect to taxes which can be imposed by municipal boards.
Learned counsel for the respondents thus urges that section 135(3) would give blanket power for the imposition of any tax whether it is contained in section 128 or not and would also permit violating the restrictions contained in sections 129 and 130; and if that be so, it would be a case of complete abdication of its essential functions by the legislature with respect to imposition of tax and a gross case of excessive delegation.
The question that falls for consideration therefore is about the scope of section 135(3) and whether on a true interpretation of that provision it can be said to amount to a case of excessive delegation and therefore liable to be struck down on that count.
Before I come to section 135(3) I may indicate the scheme of municipal taxation contained in sections 128 to 135 of the Act.
Section 128 mentions the taxes which a board may impose sub ject to any general rules or special orders of the State Government in this behalf.
Section 129 lays down certain restrictions on the imposition of water tax and section 130 lays down certain restrictions on the imposition of certain other taxes.
Section 130 A specifies the powers of the State Government to require a board to impose taxes.
Then comes section 131 to 135 which are obviously procedural provisions with respect to imposition of any tax mentioned in section 128.
That these are procedural provisions is clear from section 136 of the Act which lays down that the 966 procedure for abolishing a tax or for altering a tax in respect of certain matters shall, so far as may be, be the procedure prescribed by sections 131 to 135 for the imposition of a tax.
The essentials of the procedure contained in sections 131 to 135 may be briefly summarised thus.
When a board desires to impose a tax it has to pass a special resolution framing proposals specifying the tax, the persons or class of persons on whom the tax will be imposed, the amount or rate leviable and any other matter referred to in section 153 which the State Government requires by rules to be specified.
The board has also to prepare a draft of the rules which it desires the State Government to make in that behalf.
After the proposals and draft rules have been prepared the board is required to publish them along, with a notice in the form set forth in Sch.
III: (see section 1 3 1).
On the publication of the notice along with the proposals and draft rules any inhabitant of the municipality has the right to submit objections in writing and the board has to take such objections into consideration and pass orders thereon by special resolution.
If the board decides to modify its proposals, it shall publish the modified proposals and (if necessary) revised draft rules in the same manner as the original proposals and draft rules were published.
If any objections are received to the modified proposals they are again dealt with by the board which has to pass orders thereon by special resolution.
When the board has finally settled its Proposals, it has to submit them, along with the objections (if any) to the proper authority, section (132).
The proper authority may either refuse to sanction the proposals or return them to the board for further consideration or sanction them without modifications or with such modification not involving, an increase of the amount to be imposed, as it deems fit; (section 133).
When the proposals have been sanctioned by the proper authority, the State Government after taking into consideration the draft rules submitted by the board has to make such rules in respect of the tax as for the time being it considers necessary.
When the rule. , have been made, the order of sanction and a copy of the rules has to be sent to the board and thereupon the board has by special resolution to direct the imposition of the tax with effect from a date to be specified in the resolution : (section 134).
Thereafter a copy of the resolution passed under section 134 is submitted to the proper authority.
Upon receipt of the copy of the resolution the proper authority has to notify in the official gazette the imposition of the tax from the appointed day and the imposition of a tax shall in all cases be subject to the condition that it has been so notified.
967 It will be seen from the above procedural provisions that the legislature has taken great care to see that the tax is impose, after the inhabitants of a municipality have had a chance to make representations in that behalf and after the tax has been approved at all stages including the disposal of objections by means of special resolutions, which require a special quorum for the meeting in which they are passed.
Further the legislature has taken care to provide that the disposal of objections by a board even by special resolution is not sufficient and it has required that the objections shall be sent to the proper authority, presumably for its consideration before it sanctions the tax.
These provisions to my mind indicate the safeguards the legislature intended in a case of this kind where the legislature itself has not indicated the rate of tax but has merely indicated the heads of taxation and the fixation of rate of tax and all incidental matters have been delegated to the board subject to the supervision of the State Government.
It is after all this elaborate procedure has been gone through that a tax can be validly imposed by the delegate, namely the board.
This brings us to section 135(3) which has already been set out.
The first question that arises is the interpretation of this provision.
As I have already indicated two different submissions have been made in this connection on behalf of the parties.
The appellant submits that this section only bars enquiry by the court into the procedural provisions contained in section 131 to section 133.
On the other hand, the respondents contend that this provision bars enquiry into all matters contained in section 128 to section 135(1).
If the words of this provision were to be literally interpreted they lay down that the notification under section 135(3) shall be conclusive proof that the tax has been imposed in accordance with the provisions of the Act. 'Me last words are very wide and it is contended on behalf of the respondents that they would include all the provisions of the Act and once a notification is issued under section 135(2) the court is barred from inquiring whether the tax is against any of the provisions of the Act.
I feel however that even though the words may be capable of such a wide interpretation, as is being, put upon them on behalf of the respondents.
it would not be right to read them as if they provide that a notification under section 135(2) bars enquiry even into the question whether the tax is one which could be imposed by the board at all under section 128.
It would to my mind be proper to read the section in a restricted sense and to hold that when it speaks of tax being imposed "in accordance with the provisions of this Act" it refers only to 'the procedural provisions relating to the 968 imposition of tax by the board.
The legislature by these Words could not have intended that the board could impose any tax which was even not within the legislative competence of the State legislature and enquiry into that aspect would also be barred.
Therefore I must reject the extreme argument on behalf of the respondents that these words mean that the court is barred from enquiring even whether the tax imposed is such as can be properly imposed by a board under section 128 of the Act.
I must read down these words only to mean that they bar an enquiry as to compliance with the procedural provisions of the Act with respect to the imposition of a tax.
This brings me to the next question namely whether the bar created by this provision is only with respect to section 131 to section 133 as urged on behalf of the appellant or goes further.
I have already indicated that the procedural provisions for the imposition of a tax by the board are contained in sections 131 to 135(1).
It is after these procedural provisions are compeed with that a notification under section 135(2) is issued.
I can understand section 135(3) being restricted in its application to procedural provisions only with respect to the imposition of a tax; but I cannot understand how that provision can be read down further so that it bars enquiry only into some procedural provisions i.e. from section 131 to section 133, and not into the other procedural provisions i.e. section 134 and section 135(1).
I can see no way of reading section 135(3) in the manner suggested on behalf of the appellant.
1st therefore hold that section 135(3) bars enquiry by courts into all procedural provisions relating to imposition of taxes and therefore it bars enquiry into any matter covered by section 131 to section 135(1) of the Act.
This brings me to another question namely, what is the nature of the provision contained in section 135(3) of the Act.
Is it merely a rule of evidence as urged on behalf of the appellant or is it more than that and is a substantive provision in itself ? This Court had occasion to consider the question whether a rule of irrebuttable presumption was a rule of evidence or a substantive provision in Ishar Ahmad Khan vs Union of India(1) and observed that "the proper approach to adopt would be to consider whether fact A from the proof of which a presumption is required to be drawn about the existence of fact B is inherently relevant in the matter of proving fact B and has inherently any probative or persuasive value in that behalf or not.
If fact A is inherently relevant in proving the existence of fact B and to any rational (1) [1962] Supp. 3 S.C.R. 235.
969 mind it would bear a probative or persuasive value in the matter of proving the existence of fact B, then a rule prescribing either a rebuttable presumption or an irrebuttable presumption in that behalf would be a rule of evidence.
On the other hand, if fact A is inherently not relevant in proving the existence of fact B or has no probative value in that behalf and yet a rule is made prescribing for a rebuttable or an irrebuttable presumption in that connection, that rule would be a rule of substantive law and not a rule of evidence.
" It is on this principle that I must consider whether section 135(3) is merely a rule of evidence or a substantive provision.
To my mind it cannot be said from the mere fact that a notification has been published under section 135(2) that that fact is inherently relevant in showing that all the procedural provisions have been complied with; nor can it be said that that fact has inherent probative or persuasive value.
There is in my opinion no inherent connection between the publication of a notification under section 135(2) and the compliance with all the procedural provisions (namely, section 131 to section 135(1) ) of the Act.
It will all depend on whether the proper authority has been vigilant or not in seeing that all the provisions contained from section 131 to section 135(1) have been complied with.
I would therefore hold that section 135(3) is not a rule of evidence; it is a substantive provision which lays down in effect that once a notification under 135(2) is issued it will be conclusively presumed that the tax is in accordance with all the procedural provisions with respect to the imposition thereof In other words, the effect of the subs tantive provision contained in section 135(3) really comes to this.
namely, that all the provisions from section 1 3 1 to section 1 3 5 (1 ) are wiped out and the notification issued under section 135(2) becomes the sole basis of the imposition of tax.
It has been said that there is no reason to suppose that the proper authority will not see that the provisions of section 131 to section 135(1) are complied with and that there is no reason to presume that the provision of section 135(3) will be abused.
So far as the first aspect is concerned it is obvious in this very case that the proper authority has not seen that the provisions of section 131 to section 133 have been complied with.
As to the second I do not say that the proper authority will abuse the provisions of section 135(3); but that does not in my opinion make any difference to the devastating effect of that provision on compliance with the procedural provisions contained in section 131 to section 135(1) of the Act in the matter of imposition of tax.
The effect of section 135(3) which in my opinion is a substantive provision is that the procedural provisions are given a complete go by in the matter of imposition of tax and as soon as a notifi 970 cation under section 135(2) is shown to the court, the court is helpless in the matter, even though none of the provisions of section 131 to section 135(1) may have been complied with.
This in my opinion is the effect of section 135 (3), as it stands and there is no question of presuming that the proper authority would abuse that provision.
Irrespective of the abuse or otherwise of that provision.
, the effect thereof in my opinion is to wipe out all the procedural safeguards provided in section 131 to section 135(1) of the Act relating to imposition of tax and to make the tax a completely valid imposition so long as there is a notification under section 135(2).
On this interpretation of section 135(3) a serious question arises whether it is a provision which can be said to be intravires.
As I have already indicated, this is a case of delegation of power to impose tax in so far as its rate and incidence is concerned.
Generally speaking, I am of opinion that it is the duty of a legislature when imposing a tax to specify the rate at which the tax is imposed, for the rate of tax, again speaking generally, is one of the essentials of the taxing power given to the legislature.
But I cannot fail to recognise that there may be situations where the legislature may delegate to a subordinate authority the power to fix the rate under proper safeguards.
It is not necessary to specify all the situations where this can be done.
But there can be no doubt that in the matter of local taxation like taxation by municipal boards, district boards and bodies of that character there is pre eminently a case for delegating the fixation of the rate of tax to the local body, be it a municipal board or a district board or some other board of that kind.
The reason for this is that problems of different municipalities or districts may be different and one municipality may require one kind of tax at a particular rate at a particular time while another municipality may need another kind of tax at another rate at some other time.
Therefore, the legislature can in the case of taxation by local bodies delegate even the authority to fix the rate to the local body provided it has taken care to specify the safeguards in the form of procedural provisions or such other forms as it considers necessary in the matter of fixing the rate.
So far as I know practically all Municipal Acts provide safeguards of the nature contained in sections 131 to 135(1) of the Act or some other provisions which are equally effective in the matter of controlling the fixation of rate of tax by a delegate of the legislature.
In such a case where delegation of fixing the rate has been made by the legislature to a subordinate body with proper safeguards, it can ' not be said that the legislature has abdicated its essential functions in the matter of taxing legislation by delegating the rate 971 of taxation to be determined under proper safeguards by the delegate.
Nor can such delegation be struck down as a case of excessive delegation which means that the legislature has abdicated its essential legislative functions in the matter of the legislation concerned.
But there is ample authority for the view that where the legislature has abdicated its essential legislative functions and has made a delegation which may be called excessive such excessive delegation may be struck down.
I may in this.
connection refer to two decisions of this Court, namely, In re The Delhi Laws Act, 1912(1) and Rajnarain Singh vs The Chairman, Patna Administration Committee(2).
It has been held in these cases that an essential legislative function cannot be delegated ' by the legislature.
Exactly what constitutes essential function cannot be enunciated in general terms.
But the essential legislative function consists in the determination of the legislative policy and its formulation as a binding rule of conduct.
It cannot be said that an unlimited right of delegation is inherent in the legislative power itself.
This is not warranted by the provisions of the Constitution and the legitimacy of delegation depends entirely upon its being used as an ancillary measure which the legislature considers to be necessary for the purpose of exercising its legislative powers effectively and completely.
The legislature must retain in its own hands the essential legislative functions which consist in declaring the legislative policy and laying down the standard which is to be enacted into a rule of law and what can be delegated is the task of subordinate legislation which by its very nature is ancillary to the statute which delegates the power to make it.
Provided the legislative policy is enunciated with sufficient clearness or a standard is laid down, the courts should not interfere with the discretion that undoubtedly rests with the legislature itself in determining the extent of delegation necessary in a particular case.
In these two cases the question arose whether certain laws could be applied to certain areas with such modification as the executive authority deemed fit to make.
It was held that where three executive authority was permitted, at its discretion, to apply without modification (save incidental change, , such as name and place), the whole of any law already in existence in any part of India, that would be good.
Further the executive authority could even be authorised to select future laws in a similar way and to apply them to certain areas.
But where the authorisation was to repeal laws already in force in the area and either substitute other laws with or without modification, this was held (1) ; (2) ; 972 to be excessive delegation and ultra vires.
Further where the modification in a law to be applied did not affect any essential change in the law and alter its policy it could be modified to that extent and applied by the executive authority under delegated authority.
But where a modification affects a radical change in the policy of the law to be applied such an authority could not be delegated and would be ultra vires.
it is on the basis of these principles that I have to see whether section 135(3) can be upheld.
There is no doubt that the legislature delegated its power of imposing taxes, including the power to fix the rate, to the municipal board by section 128 with respect to taxes specified therein.
I have already said that generally speaking the fixation of rate of tax is one of the essential legislative functions but there may be situations where it may not be considered to be an essential legislative function and may be delegated by the legislature to subordinate authorities with proper safeguards.
I have also said that in the field of local taxation relating to municipal boards and district boards and similar other bodies there are reasons for delegating fixation of the rate to such bodies subject to proper safeguards.
This is exactly what has been done under the Act subject to the safeguards contained in sections 131 to 135(1).
if those safeguards are followed, the delegation in my opinion would be a proper delegation and could not be challenged as ultra vires on the ground of excessive delegation.
But if the legislature after laying down with great care safeguards as to the imposition of tax including its rate maker, a blanket provision like section 135 (3), which at one stroke does away with all those safeguards and this is what in my opinion section 135(3) has done in the present case the position that results after such provision is that there is delegation of even the essential function of fixing the rate to the subordinate authority with out any safeguard.
Such a delegation would in my opinion be excessive delegation and would be ultra vires.
The question then is whether in the present case I should save the delegation contained in section 128 read with the safeguards provided in section 131 to section 135(1) for the imposition of various taxes mentioned therein or uphold section 135(3) which in one sweep does away with all the safeguards.
In my opinion section 135(3) is severable and the legislature would have provided for various safeguards contained in section 131 to section 135(1) when it delegated the power to impose a tax including the fixation of rate to municipal boards.
It would therefore in my opinion be right to hold that sections 128 to 135(2) indicate proper delegation of the authority 973 of the legislature to impose taxes specified in section 128 and that it is sub section
(3) of section 135 which should be struck down because it is the only provision which makes the delegation excessive.
I would therefore hold that section 135(3) inasmuch as it makes the delegation contained in sections 128 to 135(2) excessive must be severed from the rest of the sections which are otherwise a proper exercise of delegation of legislative authority and should be struck down on the ground of excessive delegation.
I would therefore dismiss the appeal with costs and uphold the order of the High Court holding that the tax imposed by the appellant had not been validly imposed, though on a different ground.
ORDER BY COURT In accordance with the opinion of the majority the appeal is allowed.
No order as to costs. | The appellant Board passed a special resolution on September 28, 1956, imposing water tax in Hapur and a notification by the Uttar Pradesh Government was published in the Uttar Pradesh Gazette under section 135(2) of the U.P. Municipalities Act (2 of 1916) notifying the resolution.
Fifteen house owners of Hapur who received notices from the appellant Board for the payment of the tax petitioned to the High Court under article 226 ,of the Constitution and asked for a writ or order preventing the appellant Board from realising the tax.
The main objections were (a) that the resolution of the appellant Board framing the proposal was not pub lished in a local paper of Hapur published in Hindi and (b) that the rules framed for the imposition of the tax did not accompany the resolution which was affixed on the notice board at the office of the appellant Board in purported compliance with the requirements for publication.
The imposition was also challenged on the ground that articles 14 and 19 of the Constitution were violated.
A single judge of the High Court held that the tax was illegal inasmuch as the mandatory requirements of the Municipalities Act were not complied with by the appellant Board while imposing the tax and that section 135(3) of the Act (which cures all defects in the imposition of the tax by making the notification of Government conclusive evidence of the legality of the imposition) was ultra vires article 14 of the Constitution because it created a bar against proof and left no remedy to the tax payers thereby making a discrimination between them and other litigants.
He further held that the sub section by making Government the sole judge of compliance with the Act conferred judicial power on Government contrary to the intendment of the Constitution.
The appellant Board appealed under the Letters Patent.
The Divisional Bench upheld the order of the single judge.
The case was however certified as fit for appeal under article 133 and the Board appealed to this Court.
The contentions raised in appeal were: (i) s.135(3) shuts out all ,enquiry into the procedure by which a tax had been imposed and therefore suffered from excessive delegation of legislative function.
(ii) The tax had not been validly imposed a there had been non observance of mandatory provisions; (iii) section 135(3) was discriminatory; and (iv) the sub section was also bad because it conferred judicial functions on the State Government.
HELD : Per Gajendragadkar, C.J., Hidayatullah, Shah and Sikri.
JJ. (i) The rule of conclusive evidence in s.135(3) does not shut out all enquiry by courts.
There are certain matters which cannot be established by a notification under s.135(3).
For example no notification can issue unless there is a special resolution under section 134.
The special resolu 951 tion is a sine qua non for the notification.
Again the notification cannot authorise the imposition of a tax not included in section 128 of the Municipalities Act.
Neither the Municipal Board nor the State Government can exercise such power.
What the section does is to put beyond question the procedure by which the tax is imposed, that is to say the various steps taken to impose it.
A tax not authorised, can never be within the protection afforded to the procedure for imposing taxes.
Such a tax may be challenged, not with reference to the manner of imposition but as an illegal impost.
[958 A D] (ii) There can be no doubt that some of the provisions of sections 131 to 134 of the Act are mandatory.
But all of them are not of the same character.
In the present case, as in Raza Buland Sugar Co. Ltd. and in Berar Swadeshi Vanaspati, the provisions not observed were of a directory character and therefore the imposition had the protection of section 135(3).
[958 H] Raza Buland Sugar Co. Ltd. vs Municipal Board, Rampur.
; and Berar Swadeshi Vanaspati vs Municipal Committe, Committee Sheogaon & Anr. , relied on.
(iii) Mandatory provisions must be fully complied with, and directory provisions should be substantially complied with.
In either case the agency for seeing to this compliance is the State Government.
It is hardly to be expected that the State Government would not do its duty or that it would allow breaches of the provisions to go unrectified.
In cases of minor departure from the letter of the law especially in matters not fundamental, it is for the Government to see whether there has been substantial or reasonable compliance.
Once Government condones the departure, the decision of the Government is rightly made final by making the notification conclusive evidence of the compliance with the requirements of the Act.
[959 H 960 D] (iv) The power to tax belongs to the State Legislature but is exercised by the local authority under the control of the State Government.
It is impossible for the State Legislature to impose taxes in local areas because local conditions and needs must very.
The power must be delegated.
The taxes however are predetermined and a procedure for consulting the wishes of the people is devised.
But the matter is not left entirely in the hands of the Municipal Boards.
As the State Legislature cannot supervise the due observance of its laws by the municipal Boards power is given to the State Government to check their actions.
The proceedings for the imposition of the tax must come to a conclusion at some stage after which it can be said that the tax has been imposed.
That stage is reached, not when the special resolution of the Municipal Board is passed but when the notification by Government is issued.
After the notification all enquiry must cease.
This is not a case of excessive delegation unless one starts with the notion that the State Government may collude with the Municipal Board to disregard deliberately the provisions for The imposition of the tax.
There is no warrant for such a supposition.
The provision making the notification conclusive evidence of the proper imposition of the tax is conceived in the best interest of compliance of the provisions by the Board and not to facilitate their breach.
[960 F 961 E] Excessive delegation is most often found when the legislature does not perform all the essential legislative functions and leaves them to some other agency.
The Legislature here performs all essential functions in the imposition of the tax.
The selection of the tax for imposition in a municipal area is by the legislative will expressed in section 128.
Neither the Municipal Board, nor the Government can go outside the list of taxes therein included.
The procedure for the imposition of the tax is also, laid down 952 by the Legislature for the Municipal Board to follow and the State Government is there to ensure due observance of that procedure.
in view of all this there was no excessive delegation or conferral or legislative functions on the appellant Board or the State Government.
[961 F 962 C] (v) There are numerous statutes including the Evidence Act, in which a fact is taken to be conclusively proved from the existence of some other fact.
The law is full of fictions and irrebuttable presumptions which also involve proof of facts.
The tax payers in the Municipality are allowed to object to the proposal for the tax and the rules and to, have their objections considered.
They cannot be allowed to keep on agitating.
Section 135(3) which only concludes objections against the procedure followed in the imposition of the tax cannot be said to be discriminatory and viola tive of article 14.
[962 D H] (vi) The objection that the impugned sub section involves the exercise of judicial functions not open to the legislature is wholly erroneous.
The subsection only shuts out further enquiry and makes the notification final.
[962 H] Per Wanchoo, J. (dissenting) (i) Section 135(3) bars enquiry by courts into all procedural provisions relating to imposition of taxes and therefore it bars enquiry into any matter covered by section 131 to section 135(1) of the Act.
It cannot be read down as barring enquiry only into some procedural provisions i.e. from section 131 to section 133 and not into the other procedural provisions i.e. section 134 and section 135(1).
[968 D] Section 135(3) is not a rule of evidence; it is a substantive provision which lays down in effect that once a notification under section 135(2) is issued it will be conclusively presumed that the tax is in accordance with all the procedural provisions with respect to the imposition thereof.
[969 E] Ishar Ahmad Khan vs Union of India, [1962] Supp.
3 S.C.R. 235, referred to.
The effect of section 135(3) is that the procedural provisions are given the go by in the matter of imposition of tax and as soon as a notification under section 135(2) is shown to the court, the court is helpless, in the matter even though none of the provisions of section 131 to section 135(1) may have been complied with.
[969 H] (ii) In the field of local taxation relating to municipal boards and district boards and similar other bodies there are reasons for delegating :fixation of rate to such bodies subject to proper safeguards.
This is exactly what has been done under the Act subject to the safeguards contained in sections 131 to section 135(1).
If those safeguards are followed the delegation would be proper delegation and could not be challenged as ultra vires on the ground of excessive delegation.
But if the legislature after laying down with great care safeguards as to the imposition of tax including its rate makes a blanket provision like section 135(3), which at one stroke does away with all those safeguards and this is what section 135(3) has done in the present case the position that results is that there is delegation of even the essential function of fixing the rate to the subordinate authority without any safeguard.
Such a delegation would be excessive delegation and would be ultra vires.
[972 D F] (iii) Section 135(3) inasmuch as it makes the delegation contained in sections 128 to 135(2) excessive must be severed from the rest of the sections which are otherwise a proper delegation of legislative authority and should be struck down on the ground of excessive delegation.
[973 B] 953 |
Appeal No. 729 of 1964.
Appeal by special leave from the order dated February 1964 of the Rajasthan High Court in D.B. Civil Appeal No. 2 of 1963.
O. P. Varma, for the appellants.
Mohan Behari Lal, for the respondent.
The Judgment of the Court was delivered by Gajendradkar, C.J.
This appeal by special leave arises from an application made by the respondent Puniya in the Court of the Senior Civil Judge at Jhalawar under section 25 of the (No. 8 of 1890) (hereinafter called 'the Act '), for the custody of his daughter Mt. Chitra.
To this application, the 103 respondent had impleaded the two appellants, Gulab Bai and her, husband Onkar Lal.
The respondent is a Kumhar by caste, whereas the appellants are fat.
The respondent 's case was that the minor Chitra who was about 11 years of age at the date of the application, had been living with the appellants for the last 4 or 5 years with his consent.
Whilst the minor girl was living with the appellants, she used to come to spend some time with the respondent and his wife; but for some time past, the appellants did not allow Chitra to visit her parents.
That is why the respondent thought it necessary to move the Court for an order under section 25 of the Act.
The claim thus made by the respondent was disputed by the appellants.
They alleged that the respondent and his wife had lost some children in their infancy, and so, they decided to leave the minor in the custody of the appellants, in the hope that their custody would save the child.
Accordingly, the minor was entrusted to the appellants a few hours after her birth and in fact, she was given away by the respondent and his wife to the appellants to be looked after as if she was their adopted child.
During all these years, the appellants have looked after the minor as their own child, have taken fond care of her, and have looked after her education.
The appellants.
and the respondent and his wife are neighbours, and the appellants denied the allegation made by the respondent that they ever obstructed the minor from visiting her parents.
According to the appellants, recently an unfortunate incident had taken place between appellant No. 1 and the wife of the respondent and that was the real cause of the present application.
They pleaded that as a result of the ugly incident that took place between the two ladies, the minor was frightened and appeared to be disinclined to visit her parents any longer.
On these pleadings, the parties led evidence to support their respective contentions.
The learned trial Judge held that the child had been entrusted to the appellants soon after she was born, and that she was looked after by the appellants as if she was their daughter.
He felt satisfied that in case the child was removed from the homely atmosphere which she enjoyed in the house of the appellants, that would definitely be detrimental to her welfare and would also affect her health, because she had come to look upon the appellants as her parents.
The learned trial Judge examined the child in order to ascertain her own wishes, because he thought that she had attained the age of discretion and could express her wishes intelligently.
He was convinced that the child definitely preferred to stay with the appellants.
Having come to the conclusion that it would be inconsistent with the interests of the child to allow the application made by the respondent, the learned Judge ordered that 104 appellant No. 2 should be appointed the guardian of the person of the minor under sections 7 and 8 of the Act.
He directed that the said Guardian shall give an undertaking to the.
Court not to remove the child from the territorial jurisdiction of the Court and not to marry her without the permission of the Court.
A direction was also issued that the child shall not, of course, be married outside her caste without the consent of her parents even if she so desires.
Against this order, the respondent preferred an appeal before the Rajasthan High Court.
This appeal was heard by a learned single Judge of the said High Court who reversed the decision of the trial Judge.
He came to the conclusion that it would be in the interests of the minor to deliver her to the custody of the respondent and his wife.
He held that under section 6 (a) of the Hindu Minority and Guardianship Act, 1958, the respondent was entitled to be the guardian of his daughter in the absence of any allegation or proof that he was in any way unsuitable to be such a guardian.
The learned single Judge also took into account the fact that the appellants and the respondent belonged to different castes.
and he held that since the minor was then about 12 years of age, it was in her interest that she went back to be looked after by her own parents.
ion this view, the learned single Judge set aside the order passed by the learned trial Judge by which appellant No. 2 was appointed the guardian of the minor and directed him to deliver the minor to the custody of the respondent.
The order passed by the learned Judge further provided that if the appellants did not deliver the minor Chitra to her parents on the expiry of three months, the respondent shall apply for execution of the order and that it would be executed as a decree under section 25 (2) of the Act by issue of a warrant under section 100 of the Code of Criminal Procedure.
Against this decision, the appellants preferred an appeal under clause 18 of the Rajasthan High Court Ordinance, 1949 (No. 15 of 1949) (hereafter called 'the Ordinance ').
This appeal was dismissed by a Division Bench of the High Court on the ground that the appeal was incompetent having regard to the provisions of sections 47 and 48 of the Act.
The appellants then moved the High Court for certificate to prefer an appeal to this Court, but the said application was dismissed.
That is how the appellants applied for and obtained special leave from this Court, and it is with the said leave that this appeal has come before us.
The short question of law which arises for our decision is whether the High Court was right in holding that the appeal under clause 18 (1) of the Ordinance was incompetent and that raises the question about the construction of sections 47 and 48 of the Act.
105 Before dealing with this point, two relevant facts ought to be mentioned.
The Act was extended to Rajasthan by the Part B States (Laws) Act, 1951 (Act III of 1951) on the 23rd February; 1951; but before the Act was thus extended to Rajasthan, the Ordinance had already been promulgated.
Clause 18(1) of the Ordinance provides, inter alia, that an appeal shall lie to the High Court from the judgment of one Judge of the High Court; it excepts from the purview of this provision certain other judgments with which we are not concerned.
It is common ground that the judgment pronounced by the learned single Judge of the High Court on the appeal preferred by the respondent before the High Court, does not fall within the category of the exceptions provided by clause 1 8 ( 1 ) of the ordinance; so that if the question about the competence of the appeal preferred by the appellants before the Division Bench of the High Court had fallen to be considered solely by reference to clause 18(1), the answer to the point raised by the appellants before us would have to be given in their favour.
The High Court has, however, held that the result of reading sections 47 and 48 together is to make the present appeal under clause 18(1) of the Ordinance incompetent.
The question which arises before us is : is this view of the High Court right ? Section 47 of the Act provides that an appeal shall lie to the High Court from an order made by a Court under sections specified in clauses (a) to (j) thereof.
Clause (c) of the said section refers to an appeal against.
an order made under section 25, making or refusing to make an order for the return of a ward to the custody of his guardian.
It is thus clear that the order passed by the learned trial Judge in the present proceedings was an order under section 25 of the Act, and as such, is appealable under section 47; and when as a result of the rules framed by the Rajasthan High Court the present appeal was placed before a learned single Judge of the said High Court for hearing and was decided by him, his decision became appealable to a Division Bench of the said High Court under cl. 1 8 (1 ) of the Ordinance.
Thus far, there is no difficulty or doubt.
But the High Court has held that section 48 of the Act, in substance, amounts to a prohibition against an appeal to a Division Bench under cl.
18(1) of the Ordinance; and that makes it necessary to examine the provisions of section 48 carefully.
Section 48 reads thus "Save as provided by the last foregoing section and by section 622 of the Code of Civil Procedure, an order made under this Act I shall be final, and shall not be liable to be contested by suit or otherwise.
" 106 It is clear that what is made final by section 48 is an order made under this Act; and the context shows that it is an order made by the trial Court under one or the other provision of the Act.
This position is made perfectly clear if the first part of section 48 is examined.
The finality prescribed for the order made under this Act is subject to the provisions of section 47 and section 622 of the earlier Code which corresponds to section 115 of the present Code.
In other words, the saving clause unambiguously means that an order passed by the trial Court shall be final, except in cases where an appeal is taken against the said order under section 47 of the Act, or the propriety, validity, or legality of the said order is challenged by a revision application preferred under section II 5 of the Code.
It is, therefore, essential to bear in mind that the scope and purpose of 'section 48 is to make the orders passed by the trial Court under the relevant provisions of the Act final, subject to the result of the appeals which may be preferred against them, or subject to the result of the revision applications which may be filed against them.
In other words, an order passed on appeal under section 47 of the Act, or an order passed in revision under section II 5 of the Code, are, strictly speaking, outside the purview of the finality prescribed for the orders passed under the Act, plainly because they would be final by themselves without any such provision, subject, of course, to any appeal provided by law or by a constitutional pro vision, as for instance, article 136.
The construction of section 48, therefore, is that it attaches finality to the orders passed by the trial Court subject to the provisions prescribed by section 47 of the Act, and section 115 of the Code.
That is one aspect of the matter which is material.
The other aspect of the matter which is equally material is that the provisions of section 47 are expressly saved by section 48, and that means that section 47 will work out in an ordinary way without any restriction imposed by, section 48.
In considering the question as to whether a judgment pronounced by a single Judge in an appeal preferred before the High Court against one or the other of the orders which are made appealable by section 47 will be subject to an appeal under clause 1 8 (1) of the Ordinance, section 48 will have no restrictive impact.
The competence of an appeal before the Division Bench will have to be judged by the provisions of cl. 18 itself.
Section 48 saves the provisions of section 47, and as we have already indicated, considered by themselves the provisions of section 47 undoubtedly do not create any bar against the competence of an appeal under cl.
18(1) of the Ordinance where the appeal permitted by section 47 is heard by a learned single Judge of the High Court.
Therefore, we are satisfied that the High Court was in error in coming to the conclusion that an appeal before a Division Bench of the said High Court under clause 18 (1) of the Ordinance was incompetent.
107 It is true that in upholding the respondent 's plea that the appeal preferred by the appellants under clause 18(1) of the Ordinance was incompetent, the High Court has no doubt purported to rely upon and apply its earlier decision in the case of Temple of Shri Bankteshwar Balai Through Rampal vs The Collector, Ajmer(1).
The said decision, however, was concerned with the effect of the provisions prescribed by section 66(3) of the Ajmer Abolition of Intermediaries and Land Reforms Act (No. III of 1955) in relation to clause 18 of the Ordinance, and since we are not called upon to consider the correctness of the conclusion reached in that behalf, it is unnecessary for us to examine whether the High Court was right in holding that the provisions of the said section 66(3) created a bar against the competence of the appeal under cl.
18(1) of the Ordinance.
All that we are concerned to deal with in the present appeal is the effect of section 48 of the Act, and in our opinion, the High Court was in error in holding that section 48 excluded the application of clause 1 8 (1) of the Ordinance to the decision of the learned single Judge in the present proceedings.
In this connection, we may incidentally refer to the decision of this Court in Union of India vs Mohindra Supply Company(1).
In that case, this Court has held that an appeal against the appellate order of the single Judge was barred under section 39(2) of the Indian , because the expression "second appeal" in section 39(2) means a further appeal from an order passed in appeal under section 39 (1) and not an appeal under section 100 of the Code, and as such, the said expression "second appeal" includes an appeal under the Letters Patent.
In substance.
the effect of the decision of this Court in the case of Mohindra Supply Co.(2) is that by enacting section 39(2) the has prohibited an appeal under the Letters Patent against an order passed under section 39 (1).
This decision again turned upon the specific words used it section 39(1) & (2) of the and is not of any assistance in interpreting the provisions of section 48 of the Act with which.
we are concerned in the present proceedings.
The question a,, to whether an appeal permitted by the relevant clause of the Letters Patent of a High Court can be taken away by implication, had been considered in relation to the provisions of section 588 of the Codes of Civil Procedure of 1877 and 1882.
The first part of the said section had provided for an appeal from the orders specified by clauses (1) to (29) thereof, and the latter part of the said section had laid down that the orders passed in appeals under this section shall be final.
Before the enactment of (1) LL.R. (2) ; Sup CI/66 8 108 the present Code, High Courts in India had occasion to consider whether the provision as to the finality of the appellate orders prescribed by section 588 precluded an appeal under the relevant clauses of the Letters Patent of different High Courts.
There was a conflict of decisions on this point.
When the matter was raised before the Privy Council in Harrish Chunder Chowdhry vs Kali Sundari Debia(1), the Privy Council thus tersely expressed its conclusion: "It only remains to observe that their Lordships do not think that section 588 of Act X of 1877, which has the effect of restricting certain appeals, applies to such a case as this, where the appeal is from one of the Judges of the Court to the Full Court".
Basing themselves on these observations, the High Courts of Calcutta, Madras, and Bombay had held that section 588 did not take away the right of appeal given by clause 15 of the Letters Patent, vide Toolsee Money Dassee & Others vs Sudevi Dassee & Others(2), Sabhapathi Chetti & Others vs Narayanasami Chetti(3), and The Secretary of State for India in Council vs Jehangir Maneckji Cursetji (4 ) respectively.
On the other hand, the Allahabad High Court took a different view, vide Banno Bibi and others vs Mehdi Husain and Others(5), and Muhammad Naim ul Lah Khan vs Ihsan Ullah Khan(6).
Ultimately, when the present Code was enacted, section 104 took the place of section 588 of the earlier Code.
Section 104(1) provides that an appeal shall lie from the following orders, and save as otherwise expressly provided in the body of this Code or by any law for the time being in force, from no other orders.
It will be noticed that the saving clause which refers to the provisions of the Code, or to the provi sions of an law for the time being in force, gives effect to the view taken by the Calcutta, Madras and Bombay High Courts.
In fact, later, the Allahabad High Court itself has accepted the same view in L. Ram Sarup vs Mt. Kaniz Ummehani (7 ).
We have referred to these decisions to emphasise the fact that even where the relevant provision of section 5 8 8 of the earlier Code made certain appellate orders final, the consensus of judicial opinion was that the said provision did not preclude an appeal being filed under the relevant clause of the Letters Patent of the High Court.
In the present case, as we have already indicated, section 48 in terms saves the provisions of section 47 of the Act as well as those of section 115 of the (1) 10 I.A. 4 at p. 17.
(2) (3) (1902))5 Mad.
(4) (5) (1889) 11 Alld.
(6) (1892) 14 AIId.
226 (F.P.) (7) A.I.R. 1937 Alld.
109 Code, and that gives full scope to an appeal under clause 18 of the Ordinance which would be competent when we deal with the question about appeals under section 47 of the Act considered by itself.
The result is, the appeal is allowed, the order passed by the Division Bench of the High Court dismissing the appeal preferred by the appellants under cl.
18(1) of the Ordinance on the ground that it is incompetent, is set aside, and the said appeal is remitted to the High Court for disposal in accordance with law.
In view of the unusual circumstances of this case, we direct that parties should bear their own costs incurred so far. | The respondent 's application under section 25 of the Guardians and Wards Act for the custody of respondent 's daughter was rejected by the Civil Judge.
When the decision was reversed in appeal by a single Judge of the Rajasthan High Court, the appellants preferred an appeal to the Division Bench under cl. 18 of the Rajasthan High Court Ordinance.
This was dismissed on the ground that the appeal was incompetent having regard to sq. 47 and 48 of the Guardians and Wards Act.
In appeal to this Court, HELD:The appeal before the Division Bench of the Rajasthan High Court under cl.
18(1) of the Ordinance was competent.
[106 H] The competence of an appeal before the Division Bench will have to be judged by the provisions of cl. 18 of the Ordinance itself and section 48 of the Act has no restrictive impact.
Section 48 saves the provisions of section 47 of the Act and section 115 of the Code of Civil Procedure; and considered by themselves the provisions of section 47 do not create any bar against the competence of an appeal under cl.
18(1) of the Ordinance where the appeal permitted by section 47 is heard by a single Judge.
[106 G] Section 48 attaches finality to the order passed by the trial Court subject to the provisions prescribed by section 47 of the Act and section 115 of the Code of Civil Procedure.
[106 E] |
vil Appeals Nos. 89 93 of 1964.
Appeals by special leave from the judgment and orders dated August 30, 1961 and June 13, 1961 in Special Civil Application Nos. 440, 441,509, 510 and 7 of 1961.
K.S. Chawla and R.S. Sachthey, for the appellant (in C. As.
89/91 of 1964).
79 C.K. Daphtary, Attorney General, K.S. Chawla and R.N. Sachthey, for the appellant (in C.A. NO. 93/64).
N.N. Keshwani, for the respondents in all the appeals.
The Judgment of the Court was delivered by Sikri, J.
These five appeals by special leave raise a common question of interpretation of r. 19 of the Displaced Persons (Compensation & Rehabilitation) Rules, 1955 (hereinafter referred to as the Rules).
It is common ground that nothing turns on any dissimilarity in the facts of each appeal.
It will accordingly suffice if facts in Civil Appeal No. 93 of 1964 are set out.
The respondent, Lachman Hotchand Kriplani, is a displaced person from West Pakistan.
He has three brothers.
They owned 731 acres of agricultural land in District Nawabshah, Taluka Nawab Shah, Sind now in Pakistan.
The respondent submitted a claim under the Displaced Persons (Claims) Act, 1950 (XLIV of 1950) hereinafter referred to as the Claims Act.
The word 'claim ' was defined to mean "assertion of a right to the ownership of, or to any interest in (i) any immovable property in West Pakistan which is situated within an urban area, or (,ii) such class of property in any part of West Pakistan, other than an urban area as may be notified by the Central Government in this behalf in the official gazette".
It is common ground that agricultural land in Sind was so notified.
The respondent 's claim was that he owned 1/4 share of 731 acres and 14 ghuntas standing in the name, of Fatehehand.
The Claim Officer, by order dated October 7, 1952, accepted the claim and assessed his claim as 94 3 standard acres.
On July 2, 1955, the respondent applied for compensation under the (XLIV Of 1954) hereinafter referred to as the Compensation Act.
In the application he stated that he was not a member of a Joint Hindu Family in Pakistan, but his claim was as a co sharer alongwith three others, who had filed separate claims.
The Assistant Settlement Commissioner was, however, not satisfied with this assertion and after holding an enquiry, by order dated March 3, 1960, he held that the four alleged co sharers were members of a Joint Hindu Family, and the whole agricultural land claim was to be treated as joint property.
On August 29, 1960, a statement of account was issued to the respondent.
This statement showed that his claim was assessed as Rs. 10,701/ gross compensation.
This figure was arrived at, as stated in the affidavit of the Assistant Settlement Commissioner, thus: "The claim was assessed for 376 standard acres and 12 units out of which the petitioner had 1/4th share.
The compensation on 376 Standard Acres and 12 Units works out to 108 Standard Acres 0 3/10 Units as per 80 scale indicated in Rule 51.
This converted in terms of money as per Rule 56 comes to Rs. 42,806/ The petitioner 's 1/4th share would be Rs. 10,701/ ".
The respondent then on October 28, 1960, served a notice on the Regional Settlement Commissioner calling upon him to rectify the statement of account, failing which he will be constrained to move the High Court under articles 226 and 227 of the Constitution.
In this notice he claimed that r. 20 applied to his case; in the alternative he asserted that at least r. 19 should be applied to him.
In reply, the Assistant Settlement Commissioner informed him that the calculation had been done correctly.
Thereupon, he filed a petition under articles 226 and 227, in the Bombay High Court.
The High Court allowed the petition and set aside the statement of account furnished to the petitioner on August 29, 1960, and directed that the respondent shall give the benefit of r. 19 and determine the amount of compensation payable to him in accordance with the provisions of rr. 19, 51 and 56 and other rules of the Displaced Persons (Compensation and Rehabilitation) Rules, 1955.
The appellant having obtained special leave, the appeals are now before us.
We may mention at the outset that in the High Court the respondent 's counsel did not challenge the finding of the Assistant Settlement Commissioner that the respondent and his brothers were members of a joint family.
The High Court came to the conclusion that r. 19 applied to agricultural land.
It found nothing in the scheme of the Rules, or in the language of r. 19, to support the claim of the Department that r. 19 applied only to nonagricultural land.
The learned Attorney General, on behalf of the appellant, challenges the conclusion of the High Court.
He has taken us through various sections of the Compensation Act of 1954 and various rules to substantiate his contention.
Let us then look at the Compensation Act and the Rules.
The Compensation Act was enacted to provide for payment of compensation and rehabilitation grant to displaced persons and for matters connected therewith. 'Verified claim" is defined to mean, inter alia, a claim registered under the Displaced Persons (Claims) Act (XLIV of 1950).
It is not disputed that the claim of the respondent verified by order dated October 7, 1952, is a verified claim.
Section 4 provides for an application for the payment of compensation in the prescribed form to be made by a displaced person having a verified claim within a certain period.
Section 5 provides that on receipt of an application under section 4, the Settlement Officer shall determine the amount of public dues, if any, recoverable from the applicant and shall forward the application and the record to the Settlement Commissioner.
It will be noticed that a verified claim registered under the Claim Act, 1950, includes claims to urban as well as certain agricultural land.
Therefore, both sections 4 and 81 5 apply to such agricultural land as has been made the subjectmatter of claim and verification under the Claims Act of 1950.
Section 6 was referred to by the learned Attorney General but we have not been able to appreciate how it advances his case.
Section 6 gives relief to certain banking companies in this way.
If a banking company held a mortgage of an immovable property belonging to a displaced person in west Pakistan, and that mortgage was subsisting at the date when the claim of the banking company was registered under the Claim Act, 1950, and the displaced person is entitled to receive compensation in respect of any such property, the banking company was entitled to various reliefs, the appropriate relief depending on whether the compensation to the displaced person is payable (1) in cash or (2) in the form of transfer of any property, or (3) in any other form.
In this section immovable property would include agricultural land and it cannot be denied that the respondent is entitled to compensation at least in one of the three forms mentioned in sub.
section (2).
Section 7(1).directs the Settlement Commissioner on receipt of the application trader section 5 to ascertain the amount of compensation having due regard to the nature of the verified claim and other circumstances of the case.
Section 7(2) provides for the deduction of certain dues and the Settlement Commissioner then makes an order under section 7(3) ascertaining the net amount of compensation.
Section 8 provides the form and manner of payment of compensation of the net compensation determined under section 7(3) as being payable to a displaced person.
Subject to any rules that may be made, the net compensation is payable in cash, in government bonds, or by sale to the displaced person of any property from the compensation pool and setting off the purchase money against the compensation payable to him, etc.
Section 8(2) enables rules to be made by the Central Government on various matters, inter alia, the scales according to which, the form and the manner in which and the installments by which compensation may be paid to different classes of displaced persons.
Section 40 enables rules to be made to carry out by the purposes of the Compensation Act.
It is not necessary to refer to other sections of the Compensation Act.
Before we deal with the 1955 Rules, it is apparent that sections 4, 5, 6, 7 and 8 do not in any manner distinguish between urban land and agricultural land as long as the agricultural land is the subject matter of a verified claim.
If a person holding a verified claim in respect of agricultural land owes.public dues and "public dues" is defined very widely in section 2(d) to include all kind of loans not only from the Central Government but from a State Government also this has to be deducted under section 7(3).
It is suggested that the expression "net amount of compensation" in section 7(3) means only cash compensation but we are unable to limit the expression thus in view of the scheme of sections 4 to 8. 82 The Central Government in exercise of the power conferred by section 40 of the Compensation Act made the Displaced Persons (Compensation and Rehabilitation) Rules, 1955.
Chapter I contains various definitions; Chapter II deals with procedure for submission of compensation application and determination of public dues.
Rule 3 enables a displaced person having a verified claim to make an application for compensation.
Rule 4 deals with the form of application and Appendix I is the form prescribed, and Appendix II is the questionnaire which has to be answered.
One question is important for our purpose.
Under the heading "11.
Particulars of claims under Displaced Persons Claims Act, 1950" is mentioned: "(a) agricultural land, index no; Village/Tehsil/District; value assessed in standard acres; cosharers in each property with respective shares; if any property is mortgaged state mortgage money and name of the mortgagees".
The rest of the rules, upto r. 9, in this Chapter deal with the scrutiny of the application and the determination of public dues.
It is only necessary to notice r. 6(2) which requires a Settlement Officer to send a duplicate copy of the application to the Office of the Chief Settlement Commissioner for verification of the assessed value of the claim in respect of which the application has been made.
Under r. 10 the Settlement Officer is required to pass an order and send a copy of the order and the original application along with the records of the case to the Regional Settlement Commissioner.
It will be seen that Chapter II does not distinguish between verified claims relating to urban property and rural property.
Then we come to Chapter III which contains r. 11.
Under this rule the settlement Commissioner deals with the duplicate copy sent to him under r. 6(2).
He verities the assessed value of the claim, as stated in the application, with the final order in respect thereof, in the claims record and returns the duplicate copy to the Regional Settlement Commissioner with such remarks as may be relevant for the determination of the amount of compensation.
Chapter IV deals with determination of compensation.
It will be remembered that section 5 of the Compensation Act requires the Settlement Officer to determine the amount of public dues and forward the application and the record of the case to the Settlement Commissioner, and r. 11, which we have just noticed, requires the Settlement Commissioner (Headquarters) to send the duplicate copy to the Regional Settlement Commissioner.
Rule 12 directs the Regional Settlement Commissioner to consolidate all these papers.
Rule 12 obviously applies to application in respect of verified claims to agricultural land.
As we have already said, section 5 and r. 11 applied to such verified claims.
Rule 13 deals with determination of certain dues to banking companies under section 6 and any unsecured debt payable by an applicant in respect of which a communication has been received from any Tribunal under section 52 of the Displaced Persons (Debt Adjustment) Act, 1951 (LXX of 1951).
Rule 14 directs that the public dues and the amounts referred to in Rule 13 83 shall be deducted from the amount of compensation in a certain order of priority.
Rule 15 reads as follows: "Determination of net compensation; After deducting the amount referred to in rule 14, the Regional Settlement Commissioner or an Assistant Settlement Commissioner or a Settlement Officer, or an Assistant Settlement Officer, having jurisdiction and duly authorised by the Regional Settlement Commissioner, shall pass an order determining the net amount of compensation payable to the applicant in respect of his verified claim and shall prepare a summary in the form specified in Appendix VII (Abstract of particulars).
It is significant that Appendix Vii has a column for agricultural land and a column for remarks regarding application of r. 19.
Pausing here, it is difficult to hold that rr. 12, 13 and 14 do not apply to applications for compensation in respect of agricultural lands which are the subject matter of a verified claim.
There fore, we must reject the contention that Chapter IV, in which r. 19 occurs, does not deal with agricultural lands at all.
It may be conceded that r. 16 does not apply to agricultural lands.
The scale compensation in respect of agricultural lands which are the subject matter of a verified claim is expressly dealt with else where.
Rule 51 which provides that the scale of allotment of land as compensation in respect of a verified claim for agricultural land shall be the same as in quasi permanent land allotment scheme in the State of Punjab and Patiala, and the East Punjab States Union, as set out in Appendix XIV.
The explanation further provides that if any public dues are recoverable the allocable area shall be reduced correspondingly.
Rule 49 read with r. 56 enables the compensation due on the verified claim for agricultural land to be converted into cash if a person wishes to have his claim satisfied against property other than agricultural land.
Rule 18 expressly excludes agricultural land from its purview.
What emerges from a consideration of these rules in Chapter IV is that we must consider each rule and see whether it has application to a claim for compensation in respect of agricultural land.
Rule 19 reads thus: "Special Provision for payment of compensation to Joint families Where a claim relates to properties left by the members of an undivided Hindu family in West Pakistan thereinafter referred to as the joint family) compensation shall be computed in the manner hereinafter provided in this rule.
(2) where on the 26th Sept. 1955 (hereinafter referred to as the relevant date) the joint family consisted of: (a) two or three members entitled to claim partition, 84 the compensation payable to such family shall be computed by dividing the verified claim into two equal shares and calculating the compensation separately on each such share, (b) four or more members entitled to claim partition, the compensation payable to such family shall be computed by dividing the verified claim into three equal shares and calculating the compensation separately on each such share.
(3) For the purpose of calculating the number of the member of a joint family under sub rule (2), a person who on the relevant date: (a) was less than 18 years of age, (b) was a lenial descendant in the main line of another living member of joint Hindu family entitled to claim partition shall be excluded: Provided that where a member of a joint family has died during the period commencing on the 14th August 1947 and ending on the relevant date leaving behind on the relevant date all or any of the following heirs namely: (a) a widow or widows, (b) a son or sons (whatever the age of such son or sons) but no lenial ascendant in the main line, then all such heirs shall, notwithstanding anything contained in this rule, be reckoned as one member of the joint Hindu family.
Explanation For the purpose of this rule, the question whether a family is joint or separate shall be determined with reference to the status of the family on the 14th day of August, 1947 and every member of a joint family shall be deemed to be joint notwithstanding the fact that he had separated from the family after the date".
The heading "Special Provision for payment of compensation to joint families" is general.
So is sub rule (1).
The word properties ' is general and would include agricultural land.
That this is the meaning is also borne out if we consider the word "claim".
The word "claim" must have reference to the claim in the application to be made under section 4 read with rr. 3 and 4, and as we have already noticed, the application would include a claim in respect of agricultural land if it is the subject matter of a verified claim.
The learned Attorney General has not been able to point to any principle of construction which would enable us to limit the scope of the general words in r. 19(1).
His main argument that no rule in Chapter IV applies to claims in respect of agricultural land we have already rejected.
85 The learned Attorney General then urges that the scheme of the Rules is to provide in separate chapters for compensation in respect of various classes of properties, and he says that Chapter VIII provides for compensation in respect of verified claim for agricultural land situated in rural area and the rules contained in the chapter are the only rules that govern the grant of compensation.
But none of the rules in this chapter deals with what is t9 happen if the agricultural land was held by a joint family in West Pakistan or if the agricultural land was held by co owners in West Pakistan.
Even if a Joint Hindu Family is treated as a unit for some purposes in some laws, co owners are very rarely treated as a unit and it would require express language to treat co owners as a unit an.d award compensation to them as a unit.
However, r. 20 recognises the general rule and provides that where a claim relates to property left in West Pakistan, which is owned by more than one claimant as co owners, the unit for the assessment of compensation shall be the share of each co owner and the compensation shall be payable in respect of each such share as if a claim in respect thereof has been filed and verified separately.
The learned Attorney General, when asked, said that even r. 20 ' would not apply to a claim in respect of agricultural land, but we are unable to accede to this contention.
It would be the height of ' inequity to hold this.
In other words, rr. 19 and 20 enable the authorities to determine the unit for assessment of compensation.
This subject is not dealt with in Chapter VIII, which deals with how the unit, be it an individual, a member of Joint Hindu Family or a co owner, is to be compensated.
There is nothing in Chapter VIII which modifies or overrides rr. 19 and 20.
Accordingly, in agreement with the High Court, we hold that r. 19 will apply to the claim of the respondent in respect of agricultural land left by him as a member of the Joint Hindu Family.
In the result, the appeal fails and is dismissed with costs.
As stated in the beginning, it is common ground that if this appeal fails the other appeals must also fail.
They are accordingly dismissed with costs.
There will be one hearing fee in them.
Appeals dismissed. | The respondent who had a "verified claim" applied for compensation under the .
He alleged that he was a co sharer along with his brothers in agricultural property in West Pakistan and claimed his share of the compensation.
The Assistant Settlement Officer held that the alleged co sharers were members of a joint Hindu family and that t.he agricultural property was joint property.
He then calculated the compensation on the joint property as per rr.
51 and 56 of the Displaced Persons (Compensation and Rehabilitation) Rules 1955.
The respondent thereupon filed a petition in the High Court under articles 226 and 227 of the Constitution contending that on the finding that the respondent and his brothers constituted a joint family, the unit for assessment of compensation should first be determined according to r. 19, which makes special provision for payment of compensation to joint families, before compensation was calculated.
The High Court allowed the petition.
In the appeal to this Court it was contended that r. 19 was inapplicable as that rule does not apply to agricultural land.
HELD: The High Court was right in holding that the rule applied to the claim of the respondent in respect of the agricultural land.
Chapter IV of the Rules in which r.19 occurs contains some rules which apply to applications for compensation in respect of agricultural lands also.
Therefore it cannot be said that the Chapter does not deal with agricultural lands at all.
Each rule must be considered to see whether it has application to a claim for compensation in respect of agricultural land.
So considered, there is no principle of construction by which the scope of the general words in r. 19 could be limited, so as not to apply to agricultural land.
Chapter VIII of the Rules provides for compensation in respect of verified claims for agricultural lands in rural areas and only deals with how a unit that has been determined is to be compensated.
There is nothing in that Chapter which modifies or overrides r.19 which enables the authorities to determine the unit for assessment of compensation in the case of joint families.
[83 D E; 85 A F] |
Civil Appeal No. 535 of 1964.
Appeal by special leave from the judgment and order dated July 25, 1961 of the Allahabad High Court in Sales Tax Reference No. 460 of 1954.
A. V. Viswanatha Sastri and K. K. Jain for appellant.
C. B. Agarwala and 0.
P. Rana, for respondent.
The Judgment of the Court was delivered by Sikri, J.
This appeal by special leave is directed against the judgment of the High Court of Judicature at Allahabad passed 608 in a reference made to it under section II of the U.P. Sales Tax Act, 1948 (U.P. Act XV of 1948) hereinafter referred to as the Act.
In this reference the following question was referred by the Judge (Revision), Sales Tax at the instance of the appellant,Modi Sugar Mills Ltd., hereinafter called the assessee: "Whether a dealer who has been assessed to tax on the turnover of the previous year according to his election can change his option and elect the assessment year by filing quarterly returns without the previous sanction of Sales Tax Commissioner The High Court answered the question in the negative.
The answer to this question depends upon the interpretation of section 7(1) of the Act, and rr. 39, 40 and 41 of the U.P. Sales Tax Rules, and form IV prescribed under these rules.
These provisions are as under: "section 7 (1).
Subject to the provisions of section 18, every dealer whose turnover in the previous year is Rs. 12,000 or more in a year shall submit such return or returns of his turnover of the previous year within sixty days of the commencement of the assessment year in such form and verified in such manner as may be prescribed : Provided that the Provincial Government may prescribe that any dealer or class of dealers may submit, in lieu of the return or returns specified in this section, a return or returns of his turnover of the assessment year at such intervals, in such form and verified in such manner as may be prescribed, and thereupon all the provisions of this Act shall apply as if such return or returns had been duly submitted under this Section.
Provided further that the assessing authority may in his discretion extend the date of the submission of the return by any person or class of persons.
Rule 39 : Election of Assesment year.
(1) Any dealer may elect to submit returns of his turnover of the assessment year in lieu of the returns of the turnover of the previous year, and shall signify such election in the return filed by him in Form IV.
609 Provided that a dealer who did not carry on business during the whole of the previous year shall elect to submit his returns of the assessment year.
(2) A dealer who has once signified his election under sub rule (1) shall not again exercise his option so as to vary the basis of assessment Provided that the Sales Tax Commissioner may, for reasons to be recorded in writing and on such conditions as he deems fit permit a dealer to exercise a fresh option.
Rule 40.
Submission of returns Every dealer who elects to submit return of his previous year shall, within sixty days of the commencement of the assessment year, submit to the Sales Tax Officer a return in Form IV showing his turnover for the previous year Provided that no dealer whose turnover in the previous year was less than Rs. 15,000 shall be required to furnish such returns.
Rule 41.
Returns of assessment year.
(1) Every dealer whose estimated turnover during the assessment year is not less than Rs. 15,000 and who elects to submit returns of such year shall before the last day of July, October, January and April submit to the Sales Tax Officer, a return of his gross turnover for the quarters ending June 30, September 30, December 31 and March 31, respectively, in Form IV Provided that every dealer or firm, to whom the pro visions of sub section (3) of Section 18 are applicable shall submit such returns within seven days of the expiry of each month during the year in which the business is commenced.
" Before we deal with the interpretation of the section and the rules it is necessary to give a few relevant facts.
It appears that for the assessment year 1948 49, 1949 50 and 1950 51, the assessee was assessed on the basis of returns filled for the turnover of the previous year relev ant to each of these assessment years.
For the assessment year 1951 52, however, the assessee purporting to make an election under r. 39 of the rules filed returns of his turnover of the assessment year instead of the returns of the turn 610 over of the previous year.
The Judge (Revision) held that without sanction of the Sales Tax Commissioner the assessee was not entitled to do so.
Mr. Sastri, the learned counsel for the assessee, submits that the above rules should be interpreted as follows : Under sub rule (1) of r. 39 the election is to Me returns of the turnover of the assessment year instead of returns of the turnover of the previous year and not vice versa.
Sub rule (2) also deals with the same election, i.e., the election to file returns of the turnover of the assessment year instead of the turnover of the previous year.
Rule 40 does not displace the above reading of r. 39 because it covers the case of every dealer who wishes to submit a return of the turnover of the previous year.
There is no other rule which deals with such a dealer, and he says that the word 'elects ' may perhaps have reference to the election mentioned in form IV which we will presently consider.
At any rate, he says that sub r.
(2) of r. 39 has nothing to do with the election mentioned in r. 40.
He then submits that r. 41 is concerned with the dealer who has elected under r. 39(1) to submit returns of the turnover of the assessment year and this rule provides various matters in this connection.
The learned counsel for the State, Mr. C. B. aggarwala, on the other hand, contends that section 7 of the Act, read with the rules, gives a dealer an option to file returns in respect of the turnover of the previous year or returns of the turnover of the assessment year, and he says that this option is and can only be exercised in the first year when a dealer becomes taxable under the Act, and it is this option or election that is covered by sub rule (2) of r. 39.
He relies strongly on form IV in which the following lines occur "I have elected to submit return of my turnover of the previous year ending/month or months of the assessment year".
In the alternative he contends that even if r. 3 9 (2) does not cover the filing of the returns of the previous year, according to general principles the assessee having exercised an option to be assessed in respect of the turnover of the previous year cannot now change the basis of assessment.
In our opinion the Judge (Revision) was in error in holding that the assessee was not entitled to make an election under r. 39 (1) without the sanction of the Sales Tax Commissioner, and the answer to the question referred to the High Court should be in favour of the assessee.
Rule 39(2) specifically mentions an elec 611 tion under sub r.
(1) and there is only one kind of election under r. 39(1) and that is for a dealer to elect to submit returns of his, turnover for the assessment year in lieu of the returns of the turnover of the previous year.
In other words, under r. 39(1) the, dealer makes a choice that he will be assessed in respect of the turnover not of the previous year, which is normally the rule under section 7, but in respect of the return of the turnover of the assessment year.
It seems to us that r. 39(2) covers only the case where: election has been made by a dealer to be assessed in respect of the turnover of the assessment year.
It is true that r. 40 also uses the word 'elects ' but this may have reference to the lines in form IV which we have already reproduced above.
But assuming that when a dealer submits a return in respect of the previous year under r. 40 and he is treated to have elected within r. 40, yet there is no provision like r. 39(2) which debars him from exercising the option under r. 39(1).
In our opinion an express provision like r. 39(2) was necessary to prevent a dealer from exercising the option given to him under r. 39(1).
We do not express any opinion whether such a rule could validly be made under section 7 (1).
We are not impressed by the argument of Mr. Aggarwal that general principles debar the assessee from exercising the option under r. 39 (1).
It is a statutory right given to the assessee and the general principles, if applicable, cannot displace the statutory right.
We may mention that the reasoning in the judgment under appeal has been doubted in an unreported judgment of the Allahabad High Court in M/s Mahesh Company Kahoo Kothi Kanpur vs
The Commissioner of Sales Tax, Uttar Pradesh(1).
In the result we accept the appeal, and answer the question.referred to the High Court in the affirmative.
The appellant will have his costs here and in the High Court. | For the assessment years 1948 49, 1949 50 and 1950 51, the appellant was assessed on the basis of returns filed for the turnover of each relevant previous year.
For the assessment year 1951 52, the appellant, purporting to make an election under r. 39(1) of the U.P. Sales Tax Rules, filed returns of his turnover of the assessment year instead of the previous year.
The Judge (Revision) Sales Tax held that without the sanction of the Sales Tax Commissioner under r. 39(2), the appellant was not entitled to do so, and the High Court also, on a reference, held against the appellant.
In appeal to this Court, HELD : The answer of the High Court should have been in favour of the appellant.
[610 HI Under r. 39(1), the dealer makes a choice that he will be assessed in respect of the turnover not of the previous year, which is the normal position under section 7, but in respect of the turnover of the assessment year.
Rule 39(2), requiring the sanction of the Sales Tax Commissioner covers only the, case where such election has been made under r. 39(1), that is, where the election has been made by a dealer to be assessed in respect of the turnover of the assessment year, and the dealer wishes to exercise a fresh option.
Even assuming that, when a dealer submits a return in respect of the previous year under r. 40 be is treated to have elected within that rule, yet, there is no provision like r. 39 (2) which debars him from exercising the option under r. 39(1).
In the absence of an express provision like r. 39(2), general principles cannot debar an assessee from exercising a statutory right given to him.
[611 A E] |
DICTION: Civil Appeal Nos.
3797 3798 of 84 and 3926 of 1986.
From the Judgment and Order dated 2.12.1983 of the Allahabad High Court in Writ Petition Nos. 2451 and 2155 of 1983.
Anil Dev Singh, G.L.Sanghi, M.K. Ramamurthi, Mrs. S.Dikshit, S.K. Mehta, M.K. Dua, Aman Vachhar and S.C. Birla for the Appellants/Petitioners.
S.N. Kacker and R. B. Mehrotra for the Respondents.
The Judgment of the Court was delivered by RAY, J.
We allowed the Civil Appeal No. 3926 of 1986 and dismissed Civil Appeal No. 3797 of 1984 and writ petition No.3796 of 1986 filed by Dr. M.C. Bindal and Civil Appeal No. 3798 of 1984 filed by the State of Uttar Pradesh by our order dated December 19, 1986 and we indicated therein that the reasons for the above order would be given later on.
Accordingly, we are giving the reasoned judgment hereinbelow.
The U.P. Public Service Commission made an advertisement in various newspapers on September 13, 1981 inviting applications for the post of Food & Drug Controller, U.P. The qualifications for this post stated in the said advertisement are set out hereunder: "Necessary qualifications: (1) A degree from any recognised University in Medicine Science/Pharmaceutical Chemistry.
PG NO 39 (2) Experience of 5 years in Drug Standardization and problems relating to controlling of Drug standards or drug manufacturing or drug testing in a renowned institution.
Pursuant to the said advertisement Dr. M.C. Bindal, I)r.
S.K. Majumdar, Shri Ram Chander Singh and others filed applications.
The appellant Dr. Bindal stated in his application that he has seven years ' experience as per the advertisement.
He also stated that he had three and a half years ' specific experience i.e. experience in the field of drug testing and four years other experience namely experience in the field of teaching Pharma analysis including testing of transfusion fluids in the hospitals, pharmacy manufacturing units attached to LLRM Medical College, Meerut.
It has also been stated that in the four years of teaching experience in addition to his teaching responsibility he also conducted the laboratories in which drug testing was carried out.
Of the applicants, Dr. S.K. Majumdar was not called for interview.
The U.P. Public Service Commission after holding interview of the candidates recommended the following candidates for appointment to the post of Food & Drug Controller, U.P.: (a) In the main list .
Shri R.C. Singh (b) In the Reserve List .
Dr. M.C. Bindal (Prov.) The Commission also recommended for relaxation of age of Shri R.C. Singh.
The Commission also made it clear that "the word 'Provisional ' denoted that the recommendation was sub ject to the petitioner meeting the necessary qualification experience of 5 years for the appointment to the office of the Drug Controller." On December 5, l982, the State of Uttar Pradesh intimated the Commission that the candidate Shri R.C. Singh did not appear to be suitable in view of the fact that there had been a vigilance enquiry against him.
It was also pointed out in the said letter that the appointment of Shri R.C. Singh as Food & Drug Controller would not be in public interest.
The State further pointed out that Dr. Bindal had the requisite experience of 5 years and he had al60 excellent academic and other qualifications.
In reply to the said letter sent by the Secretary, Medical and Health, U.P. Government.
the U.P. Public Service Commission by its letter dated February 23, 1983 intimated to the State of U.P. that the right to appoint or not to PG NO 40 appoint a candidate vested with the State of U.P. and it was for the State Government to take a decision accordingly.
On eceipt on this letter the State Government appointed Dr. M.C. Bindal as Food & Drug Controller, U.P. by its letter dated April 6. 1983.
Thereafter two writ petitions were filed in the High Court at Allahabad, Lucknow Bench; one by Shri R.C. Singh and another by Dr. S.K. Majumdar challenging the appointment of Dr. M.C. Bindal on the ground that he had not the requisite experience as required for the said post of Food & Drug Controller, U.P.
These writ petitions are writ petition No. 2451 of 1983 and writ petition No. 2155 of 1983.These were heard together and were allowed in part by a common judgment on December 22, 1983.
The relevant portions of the findings are set out herein: "To sum up: ( I) The order appointing Dr. Bindal to the post finally was premature (2) Before final decisions taken in the matter, the State Government has to take a decision on: (a) whether to allow or reject Shri R.C. Singh s representation against the censure entry based on vigilance report and then to consider the question of his suitability for appointment.
(b) Whether to relax the age limit for Shri R.C. Singh (c) If Shri R.C. Singh was not to be considered suitable, then to consider in consultation with the Public Service Commission the question whether Dr. Bindal fulfilled the requisite qualification relating to practical experience in accordance with law (d) If Dr. Bindal is found not to fulfil the qualification, then to consider whether the qualification relating to practical experience has to be modified or not (e) As Dr. Bindal is not perse unsuitable or disqualified for the post, he will continue to hold the post provisionally till a decision is taken as above.
The final decision should however be taken at an early date, say within a period of three months from today.
Accordingly, the petitioners succeed in part.
The matter will have to be considered afresh by the State Government in some respects as set out above in consultation with the Commission.
Dr. Bindal 's appointment cannot, however, be held to be illegal because it is not in violation of any statutory provision.
Indeed, ii an I.A.S. Officer could hold the post for such a long time, Dr. Bindal being certainly better qualified can also hold the post.
PG NO 41 However, his appointment shall be treated as only provisional and will be subject to the final decision of the State Government as indicated herein above.
The writ petitions are, accordingly, allowed in part to the extent indicated above.
No order is made as to costs.
" Aggrieved by the said judgment Dr. Bindal who was one of the respondents in the said writ petitions filed a special leave petition being SLP (C) No. 10330 of 1984 which was numbered as Civil Appeal NO.
3797 of 1984 after the grant of special leave.
The State of Uttar Pradesh also filed SLP (C) NO.9084/84 and this was numbered subsequently as Civil Appeal NO.3798 of 1984 after grant of special leave.
The U.P. Public Service Commission however, in the meantime on March 15, 1984 directed one of its officers i.e. Deputy Secretary to verify whether Dr. Bindal fulfilled the qualifications relating to practical experience in drugs standardization or drug manufacturing or drug testing in a renowned institution.
The Deputy Secretary after enquiry sent a report to the U.P. Public Service Commission stating that the total period of experience of Dr. Bindal on the date of submission of his application was only 3 years 4 months and 9 days whereas the essential qualification required was experience should be for 5 years from any repute concern.
The U.P. Public Service Commission took a decision on April 17, 1984 to the effect "that the Commission withdraws and cancels the provisional recommendation and the candidature because Shri Bindal does not possess the requisite qualifications" and the same was sent to the Government on April 23, 1984.
Dr. Bindal moved a writ petition being writ petition No. 756 of 1986 against this impugned order made by the Public Service Commission withdrawing the candidature of Dr. Bindal and cancelling its recommendation of the petitioner for the post of Food and Drug Controller, U .
It is necessary to mention in this connection that on September 21, 1984 this Court while granting special leave made an order of stay of operation of the High Court judgment pending hearing of the appeal.
But subsequently on March 18, 1986 after hearing the learned counsels the interim order of stay was recalled in consideration of the fact that U.P. Public Service Commission had already cancelled the candidature of the appellant and withdrawn the recommendation made in his favour for the reason inter alia that he lacked in five years experience in Drug testing.
This Court also directed the State Government to appoint a member or one Indian Administrative Service to function as the Food & Drug Controller, U.P. PG NO 42 It has been urged on behalf of the appellant, Dr. Bindal that the order of the Public Service Commission in cancelling the candidature of the appellant and withdrawing the recommendation made in his favour is wholly illegal and bad in as much as the Government has considered the certificates produced by the appellant and found that the appellant had the requisite experience of five years in Drug testing and as such he was appointed by the Government as Food and Drug Controller, U.P.
The U.P. Public Service Commission was wrong and patently in error in withdrawing the candidature of the appellant and in cancelling its recommendation without properly considering the opinion of the Government to the effect that the appellant had the requisite experience of five years in drug testing.
It has been further contended in this connection that the Provision of Article 320 of the Constitution of India providing for consultation with the Union Public Service Commission or providing for consultation with the State Public Service Commission is not mandatory and as such the recommendation of the Commission was not binding on the State Government.
It has been submitted that the recommendation of the Commission is in the nature of advisory function and it is for the State to take the ultimate decision.
Some decisions of this Court have been cited at the bar on this score.
In the instant case, the advertisement for the post was made at the instance of the U.P. Public Service Commission and the requisite qualification for the post had been specified in the advertisement.
It is therefore, essential that a candidate in order to be considered for appointment for the said post must have to comply with the requisite qualification namely the educational qualification as well as the experience in drug testing etc.
for a period of five years.
If any of these essential qualifications is lacking then the candidate cannot claim to be appointed in the said post.
Undoubtedly, it is the Public Service Commission who has to receive the applications of the candidates and has to scrutinise them and then to decide which of the applicants have got the requisite qualifications and so be called for interview.
It is the duty of the Commission with the help of experts in the particular subject to hold interview and to find out and select the candidates having the requisite qualifications and experience fit to be recommended to the Government for appointment to the said post of Food & Drug Controller.
Therefore, under Article 320(3)(a) and (b), it is the duty of Public Service Commission to consider and to get itself satisfied as to which of the candidates has fulfilled the requisite qualifications specified in the advertisement.
The Commission in this particular case has duly got verified the certificate of the Dr. Bindal in regard to his experience of five years in drug testing by a Deputy Secretary of the Commission and after considering his PG NO 43 report as well as the certificates came to the conclusion that the appellant though fulfilled educational qualifications, lacked in the requisite experience of five years in drug testing.
The Commission, therefore, revised its earlier decision and withdrew the candidature of the appellant and also cancelled its recommendation earlier given in favour of the appellant.
This decision of the Public Service Commission, in our considered opinion cannot be faulted.
It is the constitutional requirement envisaged in Article 320 that the Commission will have to perform the duty of recommending the candidate fulfilling all the requisite qualifications for the post to the Government for being considered for appointment to the post concerned.
It is, of course, a well settled legal position that the duty to consult the Commission in the matter of appointment to civil posts by the Government is not mandatory but directory and as such the absence of consultation with the State Public Service Commission does not render any appointment made by the Government in Civil posts invalid or illegal.
It cannot also be contended that since the duty to consult the Public Service Commission in the matter of making appointments to Civil Services of the State is directory and not mandatory, the appointment of Dr. Bindal as Food & Drug Controller, U.P. by the Government of Uttar Pradesh cannot be questioned or interfered in by the Court in as much as the candidature of the appellant, Dr. Bindal for the post in question has already been withdrawn by the Public Service Commission and as such the question of validity or invalidity of the appointment of the appellant.
Dr. Bindal to the said post is no longer open to be considered by the Court.
In such circumstances the only course open for the Government is to re advertise the post.
If such advertisement is made the appellant.
Dr. Bindal will be free to apply for the same.
It has been brought to our notice by a subsequent affidavit sworn by Dr. S.K. Majumdar that the said post with a changed name as Drug Controller was advertised and Dr. Bindal 's name was recommended for the said post by the U.P. Public Service Commission and the deponant was not called for interview.
We do not think it proper to take notice of the subsequent fact and we refrain from expressing any opinion in this respect.
It is open to the parties to take appropriate steps in accordance with law.
For the reasons aforesaid the Civil Appeal No. 3926 of 1986 is allowed and Civil Appeal No. 3797 of 1984.
Writ Petition No. 756 of 1986 filed by Dr. M.C. Bindal and Civil Appeal No. 3798 of 1984 filed by the State of Uttar Pradesh are dismissed with costs. | The U.P. Public Service Commission made an advertisement in various newspapers inviting applications for the post of Food & Drug Controller, U.P. The requisite qualification for the said post were specified in the advertisement as: (l) a degree from any recognised University in Medicine/Science/Pharmaceutical Chemistry, and (2) experience of five years in Drug Standardization and problems relating to control of Drug standards or Drug manufacture or Drug testing in a renowned institution.
Pursuant to the said advertisement Dr. M.C. Bindal, Dr. S.K. Majumdar, the appellants in the two appeals C.A. No. 379/84 and C.A. No. 3926/84 respectively, and Ram Chander Singh.
the respondent in the first appeal along with others filed applications.
The Commission after holding interview recommended the appointment of (a) in the main list R.C. Singh and (b) in the reserved list Dr.
M.C. Bindal (Provisional) and made it clear that the word `Provisional ' denoted that the recommendation was subject to the candidate meeting the necessary qualification experience of five years.
The State of Uttar Pradesh intimated the Commission that the candidature of R.C. Singh did not appear to be suitable in view of the vigilance enquiry against him, and that Dr. Bindal had the requisite experience of five years.
In its reply the Commission intimated that the right to appoint or not to appoint a candidate vested with the State of U.P. and it was for the State Government to take a decision accordingly.
On receipt of this letter, the State Government appointed Dr. M.C. Bindal as Food & Drug Controller.
Two writ petitions were filed in the High Court, one by PG NO 36 PG NO 37 R.C. Singh and another by S.K. Majumdar challenging the appointment of Dr. M.C. Bindal on the ground that he had not the requisite experience.
The High Court by a common judgment allowed in part the writ petitions, and held that though Dr. Bindal is not per se unsuitable or disqualified for the post, his appointment was to be treated as only provisional and subject to the final decision of the State Government.
Dr. Bindal appealed to this Court.
In the meantime the Service Commission directed one of its officers to verify whether Dr. Bindal fulfilled the qualifications relating to practical experience of 5 years in Drug Standardization or Drug testing in a renowned institution.
The Deputy Secretary after enquiry sent a report that the total period of experience of Dr. Bindal on the date of submission of his application was only 3 years 4 months and 9 days whereas the essential qualification required was experience should be for 5 years.
The Commission thereafter took the decision: 'that the Commission withdraws and cancels the provisional recommendation and the candidature because Dr. Bindal did not possess the requisite qualification 'section In the appeal and the writ petition it was contended on behalf of Dr. Bindal that the Service Commission was wrong and patently in error in withdrawing the candidature of the appellant and in cancelling its recommendation.
Allowing C.A. No. 3926 of l986 filed by Dr. Majumdar, and dismissing C.A. No. 3797 of l984, W.P. No. 756 of 19X6 filed by Dr. Bindal and C.A. No. 3798 of l984 filed by the State of l .P., the Court, HELD: 1.
A candidate in order to be considered for appointment for the post must have to comply with the requisite qualification, namely the educational qualification as well as experience.
If any of these essential qualifications is lacking then the candidate cannot claim to be appointed in the said Post.
[42E] 2.
Under Article 320(3)(a) and (b), it is the duty of the Public Service Commission to consider and to get itself satisfied as to which of the candidates has fulfilled the requisite qualifications specified in the advertisement.
[42G] 3.
The Commission in the instant case has duly got verified the certificates of Dr. Bindal in regard to his experience of five years in drug testing by a Deputy Secretary of the Commission, and after considering his report as well as the certificates came to the conclusion that the appellant though fulfilled educational PG NO 38 qualification, lacked in the requisite experience of five years in drug testing.
The Commission therefore, revised its earlier decision and also cancelled the recommendation earlier given in favour of the appellant.
The decision of the Public Service Commission, cannot be faulted.
[42H; 43A B] 4.
It is the constitutional requirement envisaged in Article 320 that the Commission will have to perform the duty of recommending the candidate fulfilling all the requisite qualifications for the post to the Government for being considered for appointment to the post concerned.
[143B C] |
minal Appeal No. 177 of 1963.
Appeal from the judgment and order dated May 14, 1963 of the Calcutta High Court in Criminal Appeal No. 380 of 1962.
section C. Das Gupta and Sukumar Ghose, for appellants.
C. K. Daphtary, Attorney General, A. N. Sinha and P. K. Mukherjee, for the respondent.
The Judgment of MUDHOLKAR and SATYANARAYANA RAJU JJ. was delivered by MUDHOLKAR J. BACHAWAT J. delivered a separate Judgment.
Mudholkar, J. This is an appeal by certificate from a judg ment of the High Court of Calcutta setting aside the acquittal of M/s. Baburally Sardar of Steward Hogg Market, Calcutta, appellant No. 1 and of Abdul Razzak, a partner of that firm, appellant No. 2, in respect of an offence under section 16 (1) (a) (i) of the read with section 7(1) of that act.
The facts which are not in dispute are briefly these : On June 1, 1960 a Food Inspector of the Corporation of Calcutta visited the shop of the appellants.
At that time Abdul Razzak was in charge.
He took samples of Comela Brand condensed milk from the shop, one of which was sent to the Public Analyst.
Upon an analysis made by the Public Analyst the milk fat content of the condensed milk was found to be 3.4% which did not conform to the prescribed standard in respect of condensed milk.
A complaint was thereupon lodged against the firm before the Municipal Magistrate and Additional Chief Presidency Magistrate, 817 Calcutta.
Apart from the firm five other persons, including Abdul ' Razzak were also named as accused persons.
One of the accused persons, Mohd. Yasin did not appear but it was represented to the learned Magistrate that the person was not mentally fit.
Thereupon the counsel for the Corporation gave him up.
The other accused persons pleaded not guilty and were eventually acquitted by the Magistrate.
Against that order an appeal was preferred before the High Court under section 417 of the Code of Criminal Procedure.
The High Court, however, allowed the appeal only against the appellants but dismissed it against the remaining accused persons.
The defence of the appellants was based upon section 19(2) of the Act and was briefly this : The tins of condensed milk were purchased by the firm on May 3, 1960 from Messrs section Choudhury Brothers under a document of sale exhibit A.
At that time the firm had demanded a warranty from the traders, that is, Messrs. Choudhury Brothers, but they did not furnish a written guarantee on the ground that a certificate and a warranty had been given on each tin of condensed milk.
The appellants further pleaded that the tins were in the same condition in which they were when they were purchased from Messrs Choudhury Brothers and that they had no reason to believe that there was any alteration in their nature, substance or quality subsequent to the purchase of the tins.
It may be mentioned that an attempt was made to secure the appearance of section Choudhury of Messrs. Choudhury Brothers, but it failed because he could not be traced at the address given in the cash memo.
Section 16(1) (a) (i) of the Act, amongst other things, pro vides that if any person, whether by himself or by any person on his behalf stores or sells any article of food in contravention of any provisions of the Act or of the rules made thereunder he shall 'be punishable for the first offence with imprisonment for a term which may extend to one year and/or with fine which may extend to Rs. 2000 or both.
Section 2(i) defines the word "adulterated".
According to the definition an article of food shall be deemed to be adulterated in various circumstances, one of which is where the quality or purity of the article falls below the pres cribed standard.
In the Act "prescribed" means prescribed by the rules.
Rule 5 of the Rules framed by the Central Government under section 23(1) of the Act read with section 4(2) thereof runs thus "Standards of quality of the various articles of food specified in Appendix B to these rules as defined in that appendix.
" 818 The definition of standard of quality for condensed milk is give in A. 1 1.07 of Appendix B and runs thus : "Condensed milk means milk which has been con centrated from full cream milk by removal of part of its water with or without the addition of sugar, and includes the article commonly known as 'evaporated milk ' but does not include the article commonly known as 'dried milk ' or 'milk powder '.
It shall be free from preservatives other than sugar and contain at least 31 per cent of milk solids of which at least 9 per cent shall be fat.
" As already stated, the Public Analyst found that the fat content of the condensed milk was only 3.4% whereas the minimum prescribed in the Appendix is 9%.
It is, therefore, clear that the condensed milk stored by the appellants for sale was adulterated and, therefore, there was a breach of the provisions of section 16(1)(a) (i) of the Act.
In view of the provisions of section 19(1) it was not open to the appellants to contend that they were ignorant of the nature, substance and quality of the condensed milk sold by them.
Subsection (2) of section 19, however, furnishes a defence to a vendor ignorant of the nature, substance and quality of food sold by him provided he satisfies the requirements of that provision.
Omitting the second proviso thereto, which is not relevant in the present case, sub section
(2) of section 19 reads thus : " (2) A vendor shall not be deemed to have committed an offence if he proves (i) that the article of food was purchased by him as the same in nature, substance and quality as that demanded by the purchaser and with a written warranty in the prescribed form, if any, to the effect that it was of such nature, substance and quality; (ii) that he had no reason to believe at the time when he sold it that the food was not of such nature, substance and quality; and (iii)that he sold it in the same state as he purchased it : Provided that such a defence shall be open to the vendor only if he has submitted to the food inspector or the local authority a copy of the warranty with a written notice stating that he intends to rely on it and 819 specifying the name and address of the person from whom he received it, and has also sent a like notice of his intention to that person.
" The aforesaid defence was available to the appellants provided that they showed, in the first place, that what was stored by them for sale to purchasers demanding condensed milk was in fact milk which had been concentrated from full cream milk so as to conform to the standard of quality given in A. 1 1.07 of Appendix B. For, it would be milk which satisfies the standard prescribed therein which can be regarded as 'condensed milk ' under the Act.
Upon analysis, however, it was found that the so called condensed milk contained in the samples taken by the Food Inspector from the appellants was far inferior to that prescribed for "condensed milk".
It could, therefore, not be regarded as "the same in nature, substance and quality as that demanded by the purchaser".
Nor again, had the appellant obtained a warranty in the prescribed form.
Rule 12 A provides that every trader selling an article of food to a vendor shall deliver to the vendor a warranty in form 6 A, if required to do so by the vendor.
No such warranty was demanded by the appellants, nor given by Messrs. section Chaudhury Brothers.
No doubt, under the proviso to the aforesaid sub rule no warranty in the prescribed form is necessary if the label on the article of food or cash memo delivered by the trader to the vendor in respect of that article contains a warranty certifying that the food contained in the container or mentioned in the cash memo is the same in nature, substance and quality as demanded by the vendor.
Mr. Das Gupta for the appellants, says that the labels on the tins satisfy the requirements of the proviso and faintly suggested that the cash memo also satisfies the conditions.
The contents of the label upon which reliance is placed by him are as follows : " 'Comela ' Full Cream sweetened condensed milk made on formula of Holland Product. 'Comela Brand ' 'The contents of the tin are scientifically preserved, pure and produced from healthy Cow 's milk.
Comela full cream condensed milk easily digestable and are ideal food for babies.
Special care is taken to maintain freshness Prepared by Kwality Diary.
" This label contains no warranty of the kind referred to in the proviso.
Moreover, it is not even in the form given for a label 820 prescribed for "Sweetened condensed milk".
Under r. 42 B(b) the label prescribed is as follows CONDENSED FULL CREAM MILK (Sweetened) This tin contains the equivalent of . litres of milk with sugar added.
It may be that the inscription on the prescribed label "This tin contains an equivalent of. . litres of milk with sugar added" was meant to serve the purpose of a warranty though it is couched in different language.
For, it may be possible to ascertain by reference to standard tables the quantity of milk solids and fat from the quantity of milk condensed and from the quantity of condensed milk contained in the tin.
It would not be possible even to do this on the basis of the particulars given on the labels borne on the tins which were taken as samples by the Food Inspector from the appellants.
Mr. Das Gupta strongly relied upon the words "Full Cream" and said that where condensed milk is said to have been obtained from full cream the requirements of law must be deemed to have been satisfied.
For one thing "Full cream" has nowhere been defined in the Act or the rules.
Moreover, without knowing the quantity of "Full cream" which was condensed in the milk contained in each tin it is impossible even to calculate the quantity of milk solids and fat in each tin.
The label, therefore, is of little assistance to the appellants.
Moreover, when a vendor accepts from the trader tins purported to be of condensed milk bearing a label of this kind he cannot be said to have "had no reason to believe" that it was not condensed milk of the prescribed nature, substance and quality.
It may be that the appellants sold them in the same state as they purchased them.
But this fact is by itself not sufficient to absolve them.
As for the so called cash memo it is sufficient to point out that all that it specifies is : Quantity Description Rate Per Amount 1 C/C Comela Milk C 70/ Case Rs. 70 00 There is not a whisper of any warranty on it.
In the circumstances, therefore, the High Court was right in setting aside the acquittal of the appellants and convicting them of the offence under section 1 6 (1) (a) of the Act and sentencing them to pay fine of Rs. 2,000 each.
The appeal is without merit and is dismissed.
821 Bachawat, J.
The defence under section 19(2) of the cannot succeed, as the appellants failed to prove that they purchased the articles of food with a written warranty in the prescribed form.
The label on the tin container gave a description of the article of food, but it did not give a warranty certifying that the food is the same in nature, substance and quality as demanded by the vendor.
In the absence of such a warranty, the appellants have failed to establish the defence under section 19 (2) read with R. 12 (a) and Form VI A.
Had there been such a written warranty on the label, the appellants would have established the defence.
I agree that the appeal be dismissed.
Appeal dismissed. | Samples of a certain brand of tinned condensed milk were taken from the appellants ' shop by the Food Inspector.
The Public Analyst found the fat content of the condensed milk below standard.
When prosecuted under section 16(1) (a) (i) of the the appellants took a plea based on section 19(2) of the Act and claimed that the label on the tins was a warranty within the meaning of that section as well as of the proviso to Rule 12 A.
The label on the tins described the milk as "Full cream sweetened condensed milk made on formula of Holland product ' and inter alia said : "The contents of the tin are scientifically preserved, pure and produced from healthy cow 's milk." The trial Magistrate accepted the appellants ' plea and acquitted them but on appeal by the State the High Court convicted them.
They appealed to this Court with certificate.
HELD : (i) Defence under section 19(2) of the Act was available to the appellants provided they showed in the first place, that what was stored by them for sale to the purchasers demanding condensed milk was in fact milk which had been concentrated from full cream milk so as to conform to the standard of quality given in A 11.07 of Appendix B. For, it would be milk which satisfies the standard prescribed therein which can be regarded as 'condensed milk ' under the Act.
Since however the milk stored by the appellants was found to be below standard it could not be regarded as 'the same in nature, substance and quality as that demanded by the purchaser '.
Nor again had the appellants obtained a warranty in the prescribed form.
Thus the requirements of s.19 (2) (i) were not satisfied.
[819 B C] (ii) No doubt, under the proviso to Rule 12 A no warranty in the prescribed farm is necessary if the label on the article of food or cash memo delivered by the trader to the vendor in respect of that article contains a warranty certifying that the food contained in the container or mentioned in the cash memo is the same in nature, substance and quality as demanded by the vendor.
But the labels on the tins stared by the appellants contained no warranty of the kind referred to in the proviso.
The labels were not in the form prescribed under r. 42B(b) and it was not possible from the matter printed thereon to ascertain by reference to standard tables the quantity of milk solids and fat from the quantity of milk condensed and from the quantity of condensed milk contained in the tin.
[819 D 820 D] (iii)The words "Full cream" on the tin did not satisfy the requirements of the law either. 'Full cream ' has nowhere been defined in the Act or the rules.
Without knowing the quantity of 'full cream ' which 816 was condensed in the milk contained in each tin it was impossible even to calculate the quantity of milk solids and fat in each tin.
The label therefore was of little assistance to the appellants.
[820 D E] Similarly the cash memos carried no warranty whatsoever.
(iv) When a vendor accepts from the trader tins purported to be of condensed milk hearing a label of the above kind he cannot be said to have "had no reason to believe" that it was not condensed milk of the prescribed nature, substance and quality.
It may be that the appellants sold the tins in the same state as they purchased them.
But this fact was by itself not sufficient to absolve them.
[820 F] Per Bachawat, J The defence under section 19(2) of the Act could not succeed as the appellants failed to prove that they purchased the articles of food with a written warranty in the prescribed form.
The label on the tin container gave a description of the article of food but it did not give a warranty certifying that the food was the same in nature, substance and quality as demanded by the vendor.
In the absence of such a warranty.
the appellants had failed to establish the defence under section 19(2) read with r. 12 A and Form VI A. [821 A B.] |
Appeal No. 77 of 1957.
Appeal from the judgment and decree dated the August 6, 1954, of the Calcutta High Court in Appeal from Original Decree No. 73 of 1952.
M. C. Setalvad, Attorney General for India, W. section Barlingay and A. 0.
Ratnaparkhi, for the appellant.
A.V. Viswanatha Sastri and P. K. Chatterjee, for respondent No. 1. 1961.
March 1.
, J. This appeal arises from a suit filed by respondent 1 Durga Prosad Chamaria against respondent 2 the heirs of John Carapiet Galstaun and others in which he sought to recover Rs. 4 p 64,213 5 3 on the mortgaes in suit.
He had prayed for a preliminary mortgage decree according to 0.
XXXIV, r. 4 of the Code of Civil Procedure and had asked for the appointment of a receiver in that behalf. 'The said mortgages were created by delivery of documents of title to immovable properties by the mortgagor John Carapiet Galstaun who died pending the suit.
The properties mortgaged consisted of three items all of which are situated in Calcutta.
These items are 24, Amratolla Lane, 96, Karaya Road 142 and premises 167/1 and 167/5 Dhurrumtolla Street (Chandni Bazar).
In the present appeal we are concerned with premises 167/1.
Respondent 1 's case was that he had advanced several amounts on seven different occasions to the mortgagor between August 2, 1926, and November 27, 1931.
According to the terms of the transaction no specific time for payment of the mortgage dues had been fixed, and it was agreed that the monies advanced would become due and be repaid on demand being actually made by the mortgagee.
With this plea we are not concerned in the present appeal.
It was further pleaded by the mortgagee that the mortgagor had acknowledged his liability of the mortgagee 's claim by letters of March 5, 1932, and February 17, 1943, which were signed by him.
It is on the strength of these acknowledgments that the mortgagee purported to bring his claim within time the suit having been filed on May 18, 1944.
Pending the suit the appellant was added as a party defendant on August 23, 1944.
By his application made by respondent 1 in that behalf it was alleged that the appellant had become the auction purchaser of premises 167/1 at a sale held by the Sheriff of Calcutta on May 3, 1944, in execution of a decree passed in Suit No. 2356 of 1931 by the Calcutta High Court with notice of mortgage in favour of respondent 1.
Since the said sale had been confirmed on July 6, 1944, the appellant bad become a necessary party to the suit.
That is how the appellant became a party to the proceedings and was interested like the mortgagor in disputing the validity of the claim made by respondent1.
The principal issue which arose between the parties in the suit was one of limitation.
It was not seriously disputed that the letter written by the mortgagor on February 17, 1943, amounted to an acknowledgment and it helped to bring within time respondent 1 's claim in respect of the last advance of Rs. 2,500 made on November 27, 1931.
Respondent 1 's case that the earlier letter of March ' 5, 1932, amounted to an acknowledgment was, however, seriously disputed by the appellant.
If this letter is held to amount to a 143 valid acknowledgment two items of consideration pleaded by respondent I would be within time; they are Rs. 20,000 and Rs. 35,000 advanced on the same day , September 10, 1926.
Mr. Justice Banerjee, who tried the suit on the Original Side of the Calcutta High Court, held that the letter in question did not amount to an acknowledgment, and so he found that only the last item of Rs. 2,500 was in time.
In the result he passed a decree for Rs. 5,000 only in favour of respondent 1.
Then respondent 1 took the dispute before the Court of Appeal in the Calcutta High Court.
The Court of Appeal has upheld the case made out by respondent I in regard to the acknowledgment based on the letter of March 5, 1932, and in consequence it has been held that the principal amounts due to respondent 1 are Rs. 55,000 and Rs. 2,500, and at the rate of interest payable thereon at 8% simple, the total amount payable being subject to the maximum allowable under the Money lenders ' Act.
In accordance with these findings a preliminary decree has been drawn.
It is this decree which is challenged before us by the appellant who has brought his appeal to this court with a certificate issued by the Calcutta High Court; and the only point which is raised for our decision is whether the letter in question amounts to a valid acknowledgment under section 19 of the Limitation Act.
The decision of this question would naturally depend upon the construction of the letter on which respondent 1 relies; but before reading the said letter it would be relevant to consider the essential requirements of section 19 which provides for the effect of acknowledgment in writing.
Section 19(1) says, inter alia, that where before the expiration of the period prescribed for a suit in respect of any right, an acknowledgment of liability in respect of such right has been made in writing signed by the party against whom such right is claimed, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed.
It would be noticed that some of the relevant essential requirements of a valid acknowledgment are that it must be made before the relevant period of limitation has 144 expired, it must be in regard to the liability in respect of the right in question and it must be made in writing and must be signed by the party against whom such right is claimed.
Section 19(2) provides that where the writing containing the acknowledgment is undated oral evidence may be given about the time when it was signed but it prescribes that subject to the provisions of the , oral evidence of its contents shall not be received; in other words, though oral evidence may be given about the date oral evidence about the contents of the document is excluded.
Explanation 1 is also relevant.
It provides, inter alia, that for the purpose of section 19 an acknowledgment may be sufficient though it omits to specify the exact nature of the right or avers that the time for payment has not yet come, or is accompanied by a refusal to pay, or is coupled with &.,claim to a set off, or is addressed to a person other than the person entitled to the right.
It is thus clear that acknowledgment as prescribed by section 19 merely renews debt; it does not create a new right of action.
It is a mere acknowledgment of the liability in respect of the right in question; it need not be accompanied by a promise to pay either expressly or even by implication.
The statement on which a plea of acknowledgment is based must relate to a present subsisting liability though the exact nature or the specific character of the said liability may not be indicated in words.
Words used in the acknowledge judgment must, however, indicate the existence of jural relationship between the parties such as that of debtor and creditor, and it must appear that the statement is made with the intention to admit such jural relationship.
Such intention can be inferred by implication from the nature of the admission, and need not be expressed in words.
If the statement is fairly clear then the intention to admit jural relationship may be implied from it.
The admission in question need not be express but must be made in circumstances and in words from which the court can reasonably infer that the person making the admission intended to refer to a subsisting liability as at the date 145 of the statement.
In construing words used in the statements made in writing on which a plea of acknowledgment rests oral evidence has been expressly section excluded but surrounding circumstances can always be considered.
Stated generally courts lean in favour of a liberal construction of such statements though it does not mean that where no admission is made one should be inferred, or where a statement was made clearly G. without intending to admit the existence of jural relationship such intention could ' be fastened on the maker of the statement by an involved or far fetched process of reasoning.
Broadly stated that is the effect of the relevant provisions contained in section 19, and there is really no substantial difference between the parties as to the true legal position in this matter.
It is often said that in deciding the question as to whether any particular writing amounts to an acknowledgment as in construing wills, for instance, it is not very useful to refer to judicial decisions on the point.
The effect of the words used in a particular document must inevitably depend upon the context in which the words are used and would always be conditioned by the tenor of the said document, and so unless words used in a given document are identical with words used in a document judicially considered it would not ,serve any useful purpose to refer to judicial precedents in the matter.
However, since decisions have been cited before us both by the learned Attorney General and Mr. Viswanatha Sastri we propose to refer to them very briefly before turning to the document in question.
The question as to what is an acknowledgment has been answered by Fry, L., J., as early as 1884 A. D. in Green vs Humphreys (1).
This answer is often quoted with approval.
"What if; an acknowledgment", asked Fry, L.J., and he proceeded, "in my view an acknowledgment is an admission by the writer that there is a debt owing by him, either to the receiver of the letter or to some other person on whose behalf the letter is received but it is not enough that he refers to a debt (1) (1884) 26 Ch.
D 474, 481 146 as being due from somebody.
In order to take the case out of the statute there must upon the fair construction of the letter, read by the light of the surrounding circumstances, be an admission that the writer owes the debt".
With respect, it may be added, that this statement succinctly and tersely gives the substance of the provisions contained in section 19 of the Limitation Act.
Mr. Sastri has relied on the decision of the Privy Council in Beti Maharani vs Collector of Etawah (1) in which the Privy Council has recognised that it would be legitimate for the purpose of construing a document to look at the surrounding circumstances and that oral evidence about the intention of the maker of the statement cannot be admitted for the purpose of construing the said statement.
"Their Lordships", observed Lord Hobhouse, who spoke for the Board, "cannot follow the learned judges of the High Court in admitting the Collector to give oral evidence of his intentions for the purpose of construing the notice.
But they may for that purpose properly, look at the surrounding circumstances".
In Sukhamoni Chowdhrani vs Ishan Chunder Roy (2) the statements on which reliance was placed by the creditor was contained in the directions given by the debtor to apply surplus income "to the payment of the ijmali debts of us three co owners of which a list is given below".
It was held that by this statement the defendant acknowledged a joint debt and "from that follow the legal incidents of her position as a joint debtor with the plaintiff, one of which is that he may sue her for contribution".
In other words, admission about a joint debt amounted to an acknowledgment though the liability to be sued for contribution is a matter of legal inference from the said admission and it had not been specifically included in the statement in question.
Mr. Sastri has also relied on the decision of the Full Bench of the Allahabad High Court in Munshi Lal vs Hira Lal (3) where it has been held that a document said to constitute an acknowledgment has to be construed in the context in which it is given and that (1) (1894) 22 I.A. 31, 41 (2) (1897) 25 I A 95 (3) I.L.R. [1947] All. 11. 147 where its language is not clear in itself the context must be examined to see what it is to which the words referred.
The Court, however, added that its decision She did not mean that any equivocation in an acknowledgment can be cured by ascertaining what the probable intention of the acknowledger was.
Similarly in L Swaminatha Odayar vs Subbarama Ayyar (1) the Madras High Court has held that an acknowledgment for liability under section 19 need not be express but may be implied from facts and circumstances under which a statement in a deposition was made but it cannot be implied as a matter of law.
On the other hand, the learned Attorney General has strongly relied on an earlier decision of the Bombay High Court in Dharma Vithal vs Govind Sadvalkar (2).
In that case certain statements made in the receipt given for the delivery of the land to the officer of the Court were relied upon as amounting to an acknowledgment.
The said receipt referred to the suit and decree and the decree to which reference was thus made had set forth in ordinary course the then plain.
tiff 's claim as resting on a mortgage.
The contention was that the reference to the decree made the decree a part of the receipt and since the decree referred to the plaintiff 's claim as resting on a mortgage the receipt itself served as an acknowledgment of a mortgage subsisting in 1827.
This plea was rejected by the High Court.
The High Court held that all that the receipt admits by implication is that the land had been awarded by the decree to the party who passed the receipt. "To extend it", observed West, J., "so as to make it an admission of the reasoning and legal grounds stated in the decree, would be to go beyond what probably was present at all to the consciousness of the recipient when he acknowledged having been put into possession".
The learned judge then added that "the intention of the law manifestly is to make an admission in writing of an existing jural relation of the kind specified equivalent for the purposes of limitation to a new contract".
As we will make it clear when we deal with the document before us it would be realised (1) Mad.
(2) Bom.
99. 148 that this case cannot assist the appellant.
The receipt itself did not contain any admission about the jural, relation between the parties.
It merely referred to the decree which had set out the material allegations made in the plaint.
Now 5 it would be plainly unreasonable to attribute to the party passing the receipt an intention to make the admissions which may be inferred from the averments made in the plaint which were incidentally recited, and so the Bombay High Court naturally rejected the plea that the receipt amounted to a valid acknowledgment.
Incidentally we may add that when West, J. referred to a new contract file had perhaps in mind the definition of acknowledgment under section 4 of Act XIV of 1859 which required a promise to pay in addition to the subsistence of jural relationship.
The element of promise was omitted in the subsequent Act XV of 1877, and it continues to be omitted ever since.
As we have already indicated, under the present law acknowledgment merely renews the debt and does not create a fresh cause of action.
It is now necessary to consider the document on which the plea of acknowledgment is based.
This document was written on March 5, 1932.
It, however, appears that on November 26, 1931, another letter had been written by respondent 2 to respondent 1; and it would be relevant to consider this letter before construing the principal document.
In this letter respondent 2 had told respondent 1 that the Chandni Bazar property was being sold the next morning at the Rekistrar 's sale on behalf of the first mortgagee and that the matter was urgent.
, otherwise the property would be sacrificed.
It appears that the said property was subject to the first prior mortgage and respondent 2 appealed to respondent 1 to save the said threatened sale at the instance of the prior mortgagee.
It is common ground that respondent 1 paid to respondent 2 Rs. 2,500 on November 27, 1931 and the threatened sale was avoided.
This fact is relevant in construing the subsequent letter.
The said property was again advertised for sale on March 11, 1932, and it was about this sale that the 149 letter in question came to be written by respondent 2 to respondent 1 on March 5, 1932.
This is how the letter reads: "My dear Durgaprosad, Chandni Bazar is again advertised for sale on Friday the 11th instant.
I am afraid it will go very cheap.
I had a private offer of Rs. 2,75,000 a few days ago but as soon as they heard it was advertised by the Registrar they withdrew.
As you are interested why do not you take up the whole.
There is only about 70,000 due to the mortgagee a payment of 10,000 will stop the sale.
Yours sincerely, Sd.
J. C. Galstaun.
" Does this letter amount to an acknowledgment of respondent 1 's right as a mortgagee? That is the question which calls for our decision.
The argument in favour of respondent 1 's case is that when the document refers to respondent 1 as ' being interested it refers to his interest as a puisne mortgagee and when it asks respondent 1 to take up the whole it invites him to acquire the whole of the mortgage interest including the interest of the prior mortgagee at whose instance the property was put up for sale.
On the other hand, the appellant 's contention is that the word "interest" is vague and indefinite and that respondent 1 may have been interested in the property in more ways than one.
In that connection the appellant relies on the statements made by respondent 1 in his evidence.
He stated that he was interested in the property in many ways and he clarified by adding that in the first instance he was a mortgagee having a charge on the property so that if the mortgagor was not able to pay him the money then he could have given him the property or the appellant could have got the property from him.
He also stated that at one time he was thinking of buying or taking lease of the property in order to liquidate the debt but he added that negotiations in regard to the lease had taken place in 1926 and they bad ended in failure.
According to him no such negotiations had taken place in 150 1932.
It is urged that when the letter refers to the interest of respondent 1 in the property in question it may be interest as an intending purchaser or as an intending lessee.
In construing this letter it would be necessary to bear in mind the general tenor of the letter considered as a whole.
It is obvious that respondent 2 was requesting respondent 1 to avoid the sale as he did on an earlier occasion in November, 1931.
The previous incident shows that when the property was put to sale by the first mortgagee the mortgagor rushed to the second mortgagee to stop the sale, and this obviously was with a view to persuade the second mortgagee to prevent the sale which would otherwise affect his own interest as such mortgagee.
The theory that the letter refers to the interest of respondent 1 as an intending lessee or purchaser is far fetched, if not absolutely fantastic.
Negotiations in that behalf had been unsuccessful in 1926 and for nearly five years thereafter nothing was heard about the said proposal.
In the context it seems to us impossible to escape the conclusion that the interest mentioned in the letter is the interest of respondent 1 as a puisne mortgagee and when the said letter appeals to him to take, up the whole it can mean nothing other than the whole of the mortgagee 's interest including the interest of the prior mortgagee.
An appeal to respondent 1 to stop the sale on payment of Rs. 10,000, as he in fact had stopped a similar sale in November, 1931, is an appeal to ensure his own interest in the security which should be kept intact and that can be achieved only if the threatened sale is averted.
We have carefully considered the arguments urged before us by the learned Attorney General but we see no reason to differ from the conclusion reached by the Court of Appeal below that this letter amounts to an acknowledgment.
The tenor of the letter shows that it is addressed by respondent 2 as mortgagor to respondent 1 as puisne mortgagee, it reminds him of his interest as such mortgagee in the property which would be put up for sale by the first mortgagee, and appeals to him to assist the avoidance of sale, and thus acquire the 151 whole of the mortgagee 's interest.
It is common ground that no other relationship existed between the parties at the date of this letter, and the only subsisting relationship was that of mortgagee and mortgagor.
This letter acknowledges the existence of the.
said jural relationship and amounts to a clear acknowledgment under a. 19 of the Limitation Act.
It is conceded that if this letter is held to be an acknowledgement there can be no other challenge against the decree under appeal.
In the result the appeal fails and is dismissed with costs.
Appeal dismissed. | In a mortgage suit brought by him, the respondent 1, the mortgagee, pleaded that limitation was saved by a letter written to him by the mortgagor, the respondent 2, which amounted to acknowledgment under section 19 of the Indian Limitation Act.
There was a prior mortgage and before writing the letter in question the mortgagor had written another letter appealing to respondent 1 to save the property from being sold at the instance of the prior mortgagee.
Thereupon the respondent No. 1 paid the required amount and the threatened sale was averted.
The property was again advertised for sale and that was why the letter in question was written; it ran as follows, "Chandni Bazar is again advertised for sale on Friday the 11th instant.
I am afraid it will go very cheap.
I had a private offer of Rs. 2,75,000 a few days ago but as soon as they heard it was advertised by the Registrar they withdrew.
As you are interested why do not you take up the whole.
There is only about 70,000 due to the mortgagee a payment of Rs. 10,000 will stop the sale".
The question was whether this letter amounted to an acknow ledgment of the respondent 1 's right as mortgagee under section 19 of the Indian Limitation Act.
The trial judge held that it did not, but the Court of appeal took the contrary view.
The auction purchaser appealed to this Court.
Held, that it was obvious that the interest mentioned in the letter in the context of the previous one was none other than that of respondent 1 as a puisne mortgagee and the appeal to take up the whole meant the entirety of the mortgagee 's interest including that of the prior mortgagee.
Since admittedly the only subsisting relation between the parties at the date of the letter was that of mortgagee and mortgagor and the letter acknowledged the existence of that jural relationship, it clearly amounted to an acknowledgment under section 19 of the Act.
Held, further, that the essential requirement for sustaining a plea of acknowledgment under section 19 of the Act is that the statement on which it is sought to be founded must relate to a 141 subsisting liability, indicate the existence of the jural relationship between the parties and must be intended, either expressly or impliedly, to admit that jural relationship.
The words used in a particular statement must be construed in the light of its own tenor and according to the context and unless the words used are identical and the interest is similar, previous decisions interpreting somewhat similar documents are not of much help.
Green vs Humphreys,, , referred to.
Beti Maharani vs Gollector of Etawah, (1894) L.R. 22 I.A. 3,, Sukkamoni Choudhrani vs Ishan Chunder Roy, (1897) L.R. 25 I.A. 95, Munshi Lal vs Hira Lal, I.L.R. 1947 All.
II and Swaminatha Odayar vs Subbarama Ayyar, Mad. 548, considered.
Dharma Vithal vs Govind Sadvalkar, Bom.
99, held inapplicable. |
vil Appeal No. 160 of 1950.
Appeal against the judgment and Decree dated the 30th March, 1951, of the High Court of judicature at Bombay (Chagla C. J. and Tendolkar J.) in Income Tax Reference No. 34 of 1950.
C. K. Daphtary, Solicitor General for India, (Porus A. Mehta, with him) for the appellant.
R. J. Kolah for the respondent.
December 18.
The judgment of the Court ,was delivered by MAHAJAN J. This is an appeal from the Judgment of the High Court of Judicature at Bombay delivered on a reference under section 66 (1) of the Indian Income tax Act, 1922, whereby the High Court answered the first referred question in the negative.
The assessment in question concerns the year 194344.
A Hindu undivided family was carrying on business in Bombay.
, Madras and the Mysore State.
Its business was taken over by a registered firm on 17th March, 1942.
For the purpose of this appeal however this circumstance is not material.
The case has been dealt with on the assumption that a single assessee carried on, business from 10th October, 1941 to 8th November, 1942, the relevant accounting year.
According to the accounts of the assessee, during this period the Mysore branch purchased goods from the Bombay head office and the Madras Branch of the value of Rs. 2,45,455.
The Income tax officer estimated these purchases of the Mysore branch in British India at Rs. 3,00,000 and its profits at Rs. 75,000 on the sale of these goods in Mysore.
In view of the provisions of section 42 of the Act, half of this profit, i.e., to the extent of Rs. 37,000, was deemed to accrue or arise in British India, because of the business connection of the non resident, branch in British India.
It was contended that the assessee being a person resident in India, section 42 could not be invoked in the case, because that section had application only to 446 cases of non residents.
The Income tax Tribunal following the decision of the Bombay High Court, in Commissioner of Income tax 'V. Western ,India Life, Insurance Co. Ltd.(1), upheld this contention, 'and ruled that no part of the Mysore profit could be taxed in British India.
At the instance of the Commissioner of Income tax/Excess Profits Tax, Bombay City, three questions were referred to the High Court under section 66 (1), the first of these being "Whether in the circumstances of the case can the profits on the sale of goods in the Mysore State be deemed to accrue or arise in British India under ' section 42 (1) of the Indian Income tax Act" The High Court returned an answer to the question ' in the negative after resettling it in these terms : "Whether on the facts and in the circumstances of the case the Income tax Officer was right in applying the provisions of section 42 (1) of the Income tax Act, and holding that Rs. 37,500 were profits deemed to accrue in British India and in including in the assesment a portion thereof.
" This appeal is before us on a certificate granted by the High Court, and the only question canvassed here is whether section 42 (1) of the Indian Income tax Act has application to the case of a resident assesses or whether its scope is limited to a non resident assessee alone.
It is common ground that if section 42 of the Act has no application to the case of a resident assessee, the whole of the Mysore profit, namely Rs. 75,000, cannot be included in the assessment of the year 1943 44.
On the other hand, if such an assessee is within the ambit of the section, in that event the sum of Rs. 37,000 or any part of it would be liable to assessment during the assessment year in question.
Section 42 of the Act is in these terms: "(1) All income, profits or gains accruing or arising, whether directly or indirectly, through or from any business connection in the taxable territories ' (1) [1945]13I.T.R.465. 447 or through or from any money lent at interest and brought into the taxable territories in cash or in kind or through or from the sale, exchange or transfer of a capital asset in the taxable territories, shall be chargeable to income tax either in his name or in the name of his agent, and in the latter case such agent shall be deemed to be, for all the purposes of this Act, the assessee in respect of such income tax : Provided that where the person entitled to the income, profits or gains is not resident in the taxable territories, the income tax so chargeable may be recovered by deduction under any of the provisions of section 18 and that any arrears of tax may be recovered also in accordance with the provisions of this Act from any assets of the non resident person which are, or may at any time come within the taxable territories Provided further that any such agent, or any person who apprehends that he may be assessed as such an agent, may retain out of any money payable by him to such non resident person a sum equal to his estimated liability under this sub section, and in the event of any disagreement between the non resident person and, such agent or person as to the amount to be so retained, such agent or person may secure from the Income tax Officer a certificate stating the amount to be so retained pending final settlement of the liability, and the certificate so obtained shall be his warrant for retaining that amount Provided further that the amount recoverable from such agent or person at the time of final settlement shall not exceed the amount specified in such certificate except to the extent to which such agent or person may at such time have in his hands additional assets of such non resident person.
(2) Where a person not resident or not ordinarily resident in the taxable territories carries on business ,with a person resident in the taxable territories, and it appears to the Income tax Officer, that owing to the close connection between such persons the course 448 of business is so arranged that the business done by the resident person with the person not resident or not ordinarily resident produces to the resident either no profits or less than the ordinary profits which might be expected to arise in that business, the profits derived therefrom or which may reasonably be deemed to have been derived therefrom, shall I* chargeable to income tax in the name of the resident person who shall be deemed to be, for all the purposes of this Act, the assessee in respect of such income tax.
(3) In the case of a business of which all the operations arc not carried out in the taxable territories the profits and gain 's of the business deemed under this section to accrue or arise in the taxable territories shall be only such; profits and gains as are reasonably attributable to that part of the, operations carried out in the taxable territories.
" Before its amendment in the year 1939 the first part of the section tin thus: "42(1).
In the of any person residing out of British India, all profits or gains accruing or arising to such person, whether directly or indirectly, through or from any business connection or property in British India, shall be deemed to be income accruing or arising within British India, and shall be chargeable to income tax in the name of the agent of any such person, and such agent shall, be deemed to be, for all the purposes of this Act, the assessee in respect of such income tax:" The rest of the section was substantially in the same terms.
Inspite of its amendment in 1939 the marginal note to the section continued to refer to "non resident" as before, though the words 'residing out of British India" were deleted from the body of subsection (1).
The retention of this marginal note gave rise to conflicting decisions on the question whether the section, in spite of the change made in its language in 1939 still continued to have application to cases of " non residents" alone.
In order to clarify this matter, by Act XXII, of 1947, the marginal note was amended and it now is in these terms: 449 "Income deemed to accrue or arise within British India.
" It is significant that the changes made in section 42 in the year 1939 were consequential to the entire recasting of section 4 of 'the Act., Section 4 as it stood prior to 1939 charged income tax on all income, profits or gains, from whatever source derived, accruing or arising or received in British India or deemed under the provisions of the Act to ' accrue, or arise, or ' to be received in British India.
It further ' provided that the"income,profits and gains accruing or arising , without British India to a person resident in British, ' India, shall, 'if they are received in or brought into British India, be ' deemed to have accrued or arisen in British India and to be income, profits and gains, of the year in which they are so received or brought, notwith standing the fact that they did not so, accrue or arise in that year.
By the amendment in the year 1939, the total income of any previous ' year of any person was defined as including 'all income, Profits and gains from whatever source derived which a) are received or are deemed to be received in British(a) India in such year by or on behalf of such person, or (b) if such person is resident in British India during such year, (1) accrue or arise or are deemed to accrue or arise to him in British India during such year; or (ii) accrue or arise to him without British India during such year ; or. . (c) if such person is not resident in British India during such year, accrue or arise or are deemed to accrue or arise to him in British India during such year;. " This legislative change in the Act made all income accruing or arising or deemed to accrue or arise in British India during the previous year to a resident the subject of a charge, apart from income accruing or arising without British India during the previous year.
450 The term "deemed" brings within the net of chargeability income not actually accruing but which is supposed notionally to have accrued.
It involves a number of concepts.
By, statutory fiction income which can in no sense be said to accrue at all may be considered as so accruing.
Similarly, the fiction may relate to the place, the person or be in respect of the year of taxability.
Section 42(1) defines what income is deemed to accrue within the taxable territories.
It is only by application of this definition that one class of income "deemed to accrue to a resident within taxable territories" within the meaning of section 4(1) (b) () can be estimated.
The words "In the case of any person residing out of British India" were deleted from section 42(1) during the pendency of the amendment.
Bill of 1939 in the Council of State presumably with the object of making the section applicable to any person who had any income which in a primary sense arose in British India, even though technically it had arisen abroad, irrespective of the circumstance whether that person was resident, ordinarily resident or not ordinarily resident.
By section 8 of Act XXIII of 1941, clause (c) was added to section 14 of the Act.
No effect was to be given to this amendment before the year ending 31st March, 1943.
The relevant part of section 14, after this amendment is in these terms: "The tax shall not be payable by an assessee in respect of any income, profits or gains accruing or arising to him within, a Part B State, unless such income, profits or gains are received or deemed to be received in or are brought into the taxable territories in the previous year by or on behalf of the assessee, or are assessable under section 12 B or section 42.
" In view of these legislative changes in the provisions of sections 4, 14 and 42 of the Act, the conclusion is irresistible that the object of recasting section 41(1) in general terms was to make the definition of "deemed income" given in the section generally applicable to all classes of assessees.
This sub section has been drafted in the widest terms and there is nothing whatsoever in 451 its language residents only.
Wherever the legislature intended to limit the operation of any part of this section to non residents alone, it said so in express terms.
Sub section (2) and the latter portion of sub section (1) expressly concern themselves with the case of nonresidents, while sub sections (1) and (3) are so framed that they cover both residents and non residents.
A Bench of the Bombay High Court in Commissioner ,,of Income tax vs Western India Life Insurance Co.(1), held that notwithstanding its amendment in 1939 the section applied only to non residents.
Reliance was placed, inter alia, on the circumstance that the marginal note appended to the section indicating that it applied to non residents alone, had not been deleted.
To avoid this criticism and to remove doubts the legislature by Act XXII of 1947 changed the marginal note also.
It seems to us that any other construction of the section would create an anomaly, inasmuch as the Part B State income failing under section 42 would not be assessable in the hands of a resident, but it would be assessable in the, hands of a non resident, because the Income tax Act while it ropes in world income of a resident, exempts income accruing within the Part B States from its ambit except when such income is received or is brought into taxable territory or comes within the ambit of section 42.
Such a construction would be contrary to the policy of the Act.
It is unnecessary to dwell on, this point at any great length in view of the circumstance that the decision in 'Commissioner of Income tax vs Western India Life Insurance Co.(1), has been dissented from and for good reasons, in subsequent cases.
In Sutlej Cotton Mills Ltd. vs Commissioner of Income tax, West Bengal(2 ) a Bench of the Calcutta, High Court considered this matter at some length and reached the ,decision that sub sections (1) and (3) of section 42 ,covered cases of both residents as well as non residents.
The same view was taken by a Bench of the Madras High Court in Commissioner of Income tax/Excess (1) [1945]13 I.T.R.405.
(2) A.I.R. 1950 Cal.
452 Profits Tax, Madras,v,.
Parasuram Jethanand (1).
Again the matter was discussed in this court in Commissioner of Income tax, Bombay vs Ahmedbhai Umarbhai & Co.(2) by, Patanjali Sastri J., as he then was, and also by Mukherjea J. in the same case.
This is what Patanjali Sastri J. said on this point: "It is noteworthy that the first part of sub section (1) of section 42 providing that certain classes of ' income,, are to be deemed accrue or arise in British India is not confined in its application to nonresidents, but is in general terms so as to be applicable to both residents and non residents.
Before its amendment in 1939 the subsection began with the words 'in the case of any person residing out of British India ' which obviously restricted the application of the provision to non resident person but in its amended form the sub section has been recast into two distinctparts, the first of which is not so restricted, and the second part alone, which begins with the words 'and, where the person entitled to the income profits and gains is not resident in British India, is made applicable 'to non resident persons, thereby showing that the former part applies to both residents and non residents.
The opening words of the first proviso also point to the same conclusion, for these words would be surplusage if the sub section as a whole applied only to non residents.
A contrary view has, no doubt, been expressed by a Division Bench of the Bombay High Court, in Commissioner of Income tax vs Western India Life Insurance Co. Ltd.(3).
Though reference was made in that case to the alteration in the structure of subsection (1) its significance, as it seems to me, was not properly appreciated.
The facts that the marginal note to the whole section refers to 'non reside ' and that the section itself finds a place in Chapter IV headed 'Liability in special cases ' were relied upon as supporting the view that sub sections (1) as a whole applies only to non residents.
As pointed out 'by the Privy Council in Balraj Kunwar vs Jagatpal Singh(4), marginal notes in an Indian statute, as in an (1) A.I.R. 1950 Mad.
(2) ; (3) (4) 26 All. 393, 406.
453 Act of Parliament, cannot be referred to for the pur pose, of construing the statute, and it may be mentioned in this connection that the, marginal note relied on has since been replaced by the words 'Income deemed to accrue ;or arise within ', British India which makes it clear that the 'main object, of sub section (1) was to define that expression (see section 12 (a) of Act XXII Of 1947).
Nor can the title of a chapter be legitimately used to restrict the plain terms of an enactment.
" The same view was expressed by Mukherjea J. ,Nothing that has been said by Mr. Kolah before us justifies reconsideration of these opinions.
Mr. Kolah argued that when the world income of a resident was, brought within the net of chargeability by section 4 in 1939 it was then wholly unnecessary to include such an assessee in the ambit of section 42.
In our judgment, this contention is fallacious.
Whatever income arises in a primary sense to a resident in taxable territories is chargeable under section 4 (1) (b) (1).
Hence it was necessary to make section 42 applicable to such a case.
Whatever other consideration may arise in estimating the foreign income of a resident will not be applicable to income deemed to accrue within taxable territory.
Moreover, as above pointed out, in view of the provisions of section 14 (c) resident assessees but for section 42(1) would not be liable to assessment regarding income accruing to them in Part B States, even if there is a business connection in taxable territory.
Mr. Kolah was unable to suggest any reasonable explanation for the deletion of the words "any person residing out of British India" from section 42(1) as it stood before 1930.
The Only purpose in deleting these words could be to bring residents within the a ambit of the section.
There is no reason whatsoever for not giving to the plain words of the section the meaning that on the face of it they bear.
For the reasons given above we are of the that the answer by the High of Bombay to the first question referred to it was wrong.
We therefore allow this appeal with costs and answer 7 93 S.C.India/59 454 this question referred to the High Court in the affirmative.
Appeal allowed. | A Hindu undivided family was carrying on business in Bombay, Madras and the Mysore, being treated as a single assessee and its relevant accounting period was 10th October, 1941, to 8th November, 1942.
During this period, the Mysore branch purchased goods from the Bombay head office and the Madras branch of the value of Rs ' 2 lakhs odd.
The In tax 'Officer estimated these purchases of the Mysore in British India at Its. 3 lakhs and its profits at Rs 75,000 on the sale of these goods in Mysore.
In view of the provisions of section 42 of the Indian Income tax Act, half of this profit, i.e., to the extent of Rs. 37,500, was deemed to accrue or arise in British India because of the business connection of the L non resident branch in British India: Held, that, on the facts and circumstances of the case, the Income tax Officer was right in applying the provisions of section 42 1 of the Income tax Act and holding that RS.
37,500 were deemed to accrue in British India and in including in the assessment a portion thereof.
Held also, that section 42 sub sections
(1) and (3), cover Cases of both residents as well as non residents.
Commissioner of Income tax vs 'Western India Life Insurance Co. dissented from.
Sutlej Cotton Mills Ltd. V. Commissioner of Income tax, West Bengal (A.I.R. 1950 Cal.
551), Commissioner of Income tax/Excess Profits Tax, Madras vs Parasuram Jethanand (A.I.R 1950,Mad. 631), Commissioner of Income tax.
Bombay V. Ahmedbhai Umarbhai & Co. ([1950] S.C.R. 335), referred to. 445 |
Appeal No. 975 of 1964.
Appeal by special leave from the judgment and order December 12, 1962, of the Mysore High Court in W.P. No. 531 of 1961.
Bishan Narain, Naunit Lal and B.R.G.K. Achar, for the appellant.
section K. Venkataranga Iyengar and R. Gopalakrishnan, for the respondent.
The judgment of the Court was delivered by Satyanarayana Raju, J.
This appeal, by special leave, raises a somewhat important question of all, which is whether the reversion of a Government servant from an officiating post to his substantive post, while his junior is officiating in the higher post, does not, by itself, constitute a reduction in rank within the meaning of article 311(2) of the Constitution.
For the purpose of deciding the point raised in the appeal, it would be necessary to state the material facts.
The Southern Railway has two grades of Train Examiners, one in the scale of Rs. 100 5 125 6 185 and the other in the scale of Rs. 150 225.
The respondent was employed in the lower scale as a Train Examiner.
By an order dated April 7, 1959, the respondent was promoted to officiate in the higher scale with a starting salary of Rs. 150 per month.
That order read as follows : "2.
Sri section Raghavendrachar, TXR YPR in scale Rs. 100 185 is promoted to officiate as TXR in scale Rs. 150 225 on Rs. 150 per month and retained YPR as TXR IC. 185 is promoted to officiate as TXR in scale Rs. 150 225 on Rs. 150 per month and transferred to SBC BG vide item above.
Sanction endorsed by D.S. for promotion of items 2 and 3.
" 108 There is a note appended to the order which is important "Note: 1.
The promotion of items 2 and 3 are purely provisional subject to revision when Divisional Seniority lists are drawn up.
" By an order dated November 27, 1959, the respondent was reverted. ]Mat order was as follows : "Sri section Raghavendrachar, TXR/YPR (officiating) in scale Rs. 150 225 is reverted to scale Rs. 100 185 on Rs. 130 per month and transferred to SBC/MG.
" On receipt of this order, the respondent made representations to the appellant.
The appellant sent to the respondent communication dated May 25, 1960 : "As per the existing instructions an officiating employee with less than 18 months of service in the higher grade may be reverted to lower scale without assigning any reason for such reversion by a competent authority.
Since the period of your officiating in scale Rs. 150225 was less than 18 months and since your reversion from scale Rs. 150 225 to Rs. 100 185 has been ordered by a competent authority, no reasons need be assigned as requested in your representation dated 8th/9th December 1959.
As regards the confirmation of TXRs in scale Rs. 150 225, who were your juniors while you were officiating in scale Rs. 150 225, 1 have to advise you that consequent on your reversion to scale Rs. 100 185, all your juniors, in scale Rs. 150 225, have become your seniors and their confirmations in preference to you are in order.
Regarding your re promotion to scale Rs. 150 225, it will be considered in the normal course according to your, seniority and suitability to hold the post in scale Rs. 150 225." The respondent made a further appeal to the Divisional Superintendent, Mysore, on July 2, 1960 and sent him two reminders.
Not having got any response, he filed an appeal on January 31, 1961, to the General Manager, Southern Railway.
The respondent sent a reminder to the latter on March 31, 1961.
In reply, 109 the Divisional Personnel Officer wrote to the respondent as follows by letter dated April 30, 1961 : Rs. 150 225 (PS) was not a penalty as presumed by you, in your above representations.
The vacancy thus released by you in scale Rs. 150 225 (PS) and the vacancies which existed on the date of your reversion were filled up on 14th February 1960.
You are therefore eligible to be considered for promotion against a vacancy which occurred after the date of your reversion and not against the vacancies which existed on the date of your reversion and also the vacancy caused by your reversion.
No regular vacancy (other than short term leave vacancy) in scale Rs. 150 225 has occurred from the date of your reversion till date.
You will therefore be considered for promotion against the next vacancy, subject to the condition of seniority cum suitability, on the basis of which only promotions to non selection posts are to be ordered.
As regards seniority, all those hitherto promoted to scale Rs. 150 225 (PS) will automatically rank seniors to you and your seniority if promoted will be reckoned only from the date of your promotion in future vacancy.
Your contention that, when you were promoted to officiate for 2 months against the leave vacancy of Shri Venkataraman, as per this office order No. M. 542/PI of 14th November 1960, you should have been continued even after the expiry of the leave vacancy, and that Shri Varghese should have been reverted, is not correct, for the reasons stated in paragraph 2 above.
Your representation of 30th January 1961 to GM(P) Madras is therefore withheld.
" Aggrieved by the order dated November 27, 1959, the res pondent moved the Mysore High Court, on the failure of his representations to the hierarchy of Departmental Heads, for a writ of certiorari to quash the impugned order made by the appellant.
By judgment dated December 12, 1962, a Division Bench of the High Court quashed the order of reversion.
The High Court observed that it was not necessary to express any opinion on the question whether the reversion of the respondent on the ground that his work was unsatisfactory amounted to a reduction 110 in rank within the meaning of that expression occurring in article 311(2) of the Constitution.
But the High Court held that the reversion of the respondent amounted to a reduction in rank because he was reverted from the higher post to the lower post notwithstanding the fact that his juniors were still retained in the higher posts.
In reaching this conclusion the High Court purported to follow the decision of this Court in Madhav Laxman Vaikunthe vs State of Mysore(.).
The Divisional Personnel Officer, Southern Railway, Mysore,obtained special leave from this Court against the order of the High Court.
It is contended by Mr. Bishan Narain, learned counsel for the appellant, that the High Court misunderstood the ratio of the judgment of this Court in Vaikunthe 's case(1), that there is no right in a Government servant to promotion as of right, that the mere reversion of a Government servant from an officiating post to his substantive post, notwithstanding that his juniors are retained in the higher posts, does not amount to a reduction in rank and the provisions of article 311(2) are not attracted.
On the other hand, it is contended by Mr. section K. Venkataranga lyengar, learned counsel for the respondent, that the circumstances of the case clearly indicated that the reversion of the respondent amounted to a reduction in rank and since the procedure prescribed by article 311(2) was not complied with, the order of reversion was bad in law.
It may be taken to be settled by the decisions of this Court that since article 311 makes no distinction between permanent and temporary posts, its protection must be held to extend to all government servants holding permanent or temporary posts or officiating in any of them, but that protection is limited to the imposition of three major penalties contemplated by the Service Rules, viz., dismissal or removal or reduction in rank.
The first of the cases which may be considered is the decision in Parshotam Lal Dhingra vs Union of India(2), Commonly known as Dhingra 's case.
In this case, Das C.J., who spoke for the majority, considered comprehensively the scope and effect of the relevant constitutional provisions, service rules and their impact on the question as to whether reversion of Dhingra offended against the provisions of article 311(2).
Dhingra was appointed as a Signaller in 1924 and promoted to the post of Chief Controller in 1950.
Both these posts were in Class III Service.
In (1) ; (2) ; 111 1951, he was appointed to officiate in Class II Service as Assistant Superintendent, Railway Telegraphs.
On certain adverse remarks having been made against him, he was reverted as a subordinate till he made good his 'short comings.
Then, Dhingra made a representation.
Subsequently, the General Manager gave him notice reverting him to Class III appointment.
It was this order which was challenged by Dhingra by a writ petition, in the High Court and, eventually, in this Court.
The question for decision was whether the order of the General Manager amounted to reduction in rank within the meaning of article 311(2) of the Constitution, and Dhingra was entitled to a reasonable opportunity to show cause against the order.
This Court held that the reversion of an officiating officer to his substantive post did not attract the provisions of article 311(2) and that Dhingra was not entitled to the protection of that article.
It is however true that even an officiating government servant may be reverted to his original rank by way of punishment.
It was therefore observed in Dhingra 's case(") at p. 863 : "Thus if the order entails or provides for the forfeiture of his pay or allowances or the loss of his seniority in his substantive rank or the stoppage or postponement of his future chances of promotion, then that circumstance may indicate that although in form the Gov ernment had purported to exercise its right to terminate the employment or to reduce the servant to a lower rank under the terms of the contract of employment or under the rules, in truth and reality the Government has terminated the employment as and by way of penalty.
" One test for determining whether the termination of service was by way of punishment or otherwise is to ascertain whether under the Service Rules, but for such termination, the servant has the right to hold the post.
It was held in Dhingrads case(1) that he was holding an officiating post and had no right under the rules of the Railway Code to continue in it, that under the general law such appointment was terminable at any time on reasonable notice and the reduction could not operate as a forfeiture of any right, that the order of the General Manager visited him with no evil consequences and that the order therefore did no", amount to a reduction in rank.
(1) (1958] S.C.R. 828.
112 Vaikunthe 's case(1) was relied upon by the High Court in support of its conclusion that the reversion of the respondent amounted to a reduction in rank.
It is therefore necessary to scrutinize the facts of that case.
The appellant Vaikunthe, who held the rank of a Mamlatdar in the first grade, and was officiating as District Deputy Collector, was alleged to have wrongly charged travelling allowance for 59 miles instead of 51 and was, as the result of a Departmental enquiry, reverted to his substantive rank for three years and directed to refund the excess he had charged.
He made a representation to the Government which was of no avail although the Accountant General was of the opinion that the appellant had not over charged and committed no fraud.
Ultimately, the appellant was promoted to the Selection Grade but the order of reversion remained effective and affected his position in the Selection Grade.
After retirement he brought a suit for a declaration that the order of reversion was void and for recovery of a certain sum as arrears of salary and allowances.
The trial Court held that there was no compliance with the provisions of section 240(3) of the Government of India Act, 1935, granted the declaration but refused the arrears claimed.
Vaikunthe filed an appeal and the State a cross objection.
The High Court dismissed the appeal and allowed the cross objection, holding that the order of reversion was not a punishment within the meaning of section 240(3) of the 1935 Act.
This Court held that the matter was covered by the observations in Dhingra 's case(1) and the tests of punishment laid down by this Court viz., (1) whether the servant had a right to the rank or (2) whether he had been visited with evil consequences of the kind specified therein, and that the second test certainly applied.
This Court concluded that Vaikunthe might or might not have the right to hold the higher post, but there could be no doubt that he was visited with evil consequences as a result of the order of reversion.
It was there held : "Mere deprivation of higher emoluments, however, in consequence of an order of, reversion could not by itself satisfy that test which must include such other consequences as forfeiture of substantive pay and loss of seniority." Since the requirement of section 240(3) of the 1935 Act, which corresponds to article 311(2) of the Constitution, had not been found to have been fully complied with, the order of reversion was held to be void.
(1) ; (2) ; 113 There was an important aspect of this decision which was lost sight of by the High Court.
The impugned order there ran as follows : "After careful consideration Government have decided to revert you to Mamlatdar for a period of three years. .
It was pointed out in Dhingra 's case( ) that if the order of reversion entailed or provided for the forfeiture of the pay or allowances of the Government servant or loss of his seniority in his substantive rank or the stoppage or postponement of his future chances of promotion, then that circumstance might 'Indicate that although in form the Government had purported to exercise its right to terminate the employment or to reduce the servant to a lower rank under the terms of the contract of employment or under the rules, in truth and reality the Government had terminated the employment as and by way of penalty.
At p. 891, Sinha, C.J., who spoke for the Court, pointed out: he would have continued as a Deputy Collector but for the Order of the Government, dated August 11, 1948, impugned in this case, as a result of the enquiry held against him, and that his reversion was not as a matter of course or for administrative convenience.
The Order, in terms, held him back for three years.
(Italics ours).
Thus his emoluments, present as well as future, were adversely affected by the Order aforesaid of the Government.
In the ordinary course, he would have continued as a Deputy Collector with all the emoluments of the post and would have been entitled to further promotion but for the set back in his service as a result of the adverse finding against him which finding was ultimately declared by the Accountant General to have been under a misapprehension of the true facts.
It is true that he was promoted as a result of the Government Order dated March 26, 1951, with effect from August 1, 1950.
But that promotion did not entirely cover the ground lost by him as a result of the Government Order impugned in this case.
" Again, at p. 893, the learned Chief Justice pointed out"If the loss of the emoluments attaching to the higher rank in which he was officiating was the only consequence of his reversion as a result of the enquiry against him, the appellant would have no cause of (1) 114 action.
But it is clear that as a result of the Order dated August 11, 1948 (exhibit 35), the appellant lost his seniority as a Mamlatdar, which was his substantive post.
That being so, it was not a simple case of reversion with no evil consequences; it had such consequences as would come within the test of punishment as laid down in Dhingra 's case.
" Finally, it was pointed out : "If the reversion had not been for a period of three years, it could not be Said that the appellant had been punished within the meaning of the rule laid down in Dhingra 's Case.
It cannot be asserted that his reversion to a substantive post for a period of three years was not by way of punishment.
From the facts of this case it is clear that the appellant was on the upward move in the cadre of his service and but for this aberration in his progress to a higher post, he would have, in ordinary course, been promoted as he actually was some time later when the authorities realised perhaps that he had not been justly treated.
The real ground on which Vaikunthe 's reversion to his original post of Mamlatdar was held to be a violation of his Constitutional grantee was that his chances of promotion were irrevocably barred for a period of three years.
If this aspect of Vaikunthe 's case(1) is borne in mind, it will be found that there is no basic inconsistency between the decisions which have a bearing on the question as to in what cases reversion would amount to a reduction in rank.
Even so, it is contended by learned counsel for the respon dent that the real reason which operated on the mind of the appellant was that the respondent 's work in his officiating capacity was unsatisfactory.
Assuming that to be so, the question is whether his reversion to his original post, because he was found unsuitable for the higher rank to which he had been given the officiating chance, is valid.
In State of Bombay vs F. A. Abraham(2) the respondent held the substantive post of Inspector of Police and had been officiating as Deputy Superintendent of Police.
He was reverted to his original rank without being given an opportunity of being heard in respect of the reversion.
His request to furnish him with reasons for his reversion was refused.
Later, a departmental (1)[1962]1 S.C.R.886.
(2) [1962] Supp. 2 S.C.R. 92. 115 enquiry was held behind his back in regard to certain allegations of misconduct made against him in a confidential communication from the District Superintendent of Police to the Deputy Inspector General of Police, but these allegations were not proved at the enquiry.
The Inspector General of Police, however, thereafter wrote to the Government that the respondent 's previous record was not satisfactory and that he had been promoted to officiate as Deputy Superintendent of Police in the expectation that he would turn a new leaf.
The High Court held, following its earlier decision in M. A. I. Waheed vs State of Madhya Pradesh(1) that if a person officiating in a higher post is reverted to his original post in the normal course, that is, on account of cessation of the vacancy or his failure to acquire the required qualification, the reversion did not amount to a reduction in rank but if he is reverted for unsatisfactory work, then the reversion would amount to a reduction in rank.
This Court did not agree with the ob servations in Waheed 's case(1) that when a person officiating in a post s reverted for unsatisfactory work, that reversion would amount to a reduction in rank.
This Court took the view that the Government had a right to consider the suitability of the respondent to hold the position to which he had been appointed to officiate and that it was entitled for that purpose to make inquiries about his suitability and that was all what the Government had done in that case.
Two more cases cited at the Bar now require to be consider ed.
In The High Court, Calcutta vs Amal Kumar Roy (2) this Court held that the word 'rank ' in article 311(2) referred to classification and not to a particular place in the same cadre in the hierarchy of service.
The facts of the case were as follows.
The respondent was a Munsif in the West Bengal Civil Service (Judicial).
When the cases of several Munsifs came up for consideration before the High Court for inclusion in the panel of officers to officiate as Subordinate Judges, the respondent 's name was excluded.
On a representation made by him, the respondent was told by the Registrar of the High Court that the Court had decided to consider his case after a year.
As a result of such exclu sion, the respondent, who was then the senior most in the list of Munsifs, lost eight places in the cadre of Subordinate Judges before he was actually appointed to act as an Additional Subordinate Judge.
His case mainly was that this exclusion by the High Court amounted in law to the penalty of 'withholding of promotion ' without giving him an opportunity to show cause.
He pray (1) (2) ; 116 ed that a declaration might be made that he occupied the same position in respect of seniority in the cadre of Subordinate Judges as he would have done if no supersession had taken place and claimed arrears of salary, in a suit filed by him.
The trial Court decreed the suit.
On behalf of the appellants a preliminary objection was taken in this Court that the controversy raised was not justiciable.
This Court held that there was no cause of action for the suit and the appeal must succeed.
It was there contended on behalf of the respondent that even though there, might not have been any disciplinary proceed ings taken against him, the effect of the High Court 's order was that he was reduced by eight places in the list of Subordinate Judges and that in law amounted to a reduction in rank within the meaning of article 311 (2) of the Constitution.
At p. 453 it was pointed out as follows : "In our opinion, there is no substance in this contention because losing places in the same cadre, namely, of Subordinate Judges does not amount to a reduction in rank within the meaning of article 311(2).
The plaintiff sought to argue that 'rank ', in accordance with dictionary meaning, signifies 'relative position or status or place, according to Oxford English Dictionary.
The word 'rank ' can be and has been used in different senses in different contexts.
The expression 'rank ' in article 3 1 1 (2) has reference to a person 's classification and not his particular place in the same cadre in the hierarchy of the service to which be belongs.
Hence, in the context of the Judicial Service of West Bengal, 'reduc tion in rank ' would imply that a person who is already holding the post of a Subordinate Judge has been reduced to the position of a Munsif, the rank of a Subordinate Judge being higher than that of a Munsif.
But Subordinate Judges in the same cadre hold the same rank though they have to be listed in order of seniority in the Civil List.
Therefore, losing some places in the seniority list is not tantamount to reduction in rank.
Hence, it must be held that the, provision , of article 311 (2) of the Constitution are not attracted to this case.
" This decision therefore is authority for the position that losing some places in the seniority list is not tantamount to reduction in rank 117 The respondent relied upon the decision of this Court in P. C. Wadhwa vs Union of India(1).
There, the appellant, a member of the Indian Police Service and holding the substantive rank of Assistant Superintendent of Police (a post in the junior time scale of pay) in the State of Punjab, was promoted to officiate as Superintendent of Police, which was a post carrying a higher salary in the senior time scale, and posted as Additional Superintendent of Police.
After he had earned one increment in that post, he was served with a charge sheet and before the enquiry, which had been ordered, had started, he was reverted to his substantive rank of Assistant Superintendent of Police, the ground suggested for reversion being unsatisfactory conduct.
No details of the unsatisfactory conduct were specified and the appellant was not asked for any explanation.
At the time when the appellant was reverted officers junior to him in the I.P.S. Cadre of the State were officiating in the senior scale.
The order entailed loss of pay as well as loss of seniority and postponement of future chances of promotion.
It was held that the order of reversion made against the appellant was in effect a 'reduction in rank ' within the meaning of article 311(2) of the Constitution and inasmuch as he was given no opportunity of showing cause against the said order of reversion, there was violation of article 311.
On a consideration of the circumstances of the case, this Court reached the conclusion that the action of the Government reverting the appellant was mala fide.
But that was not the sole ground on which the order of reversion was held to be bad.
After an examination of the legal position from the large body of rules to which reference was made, it was held that in so far as the Indian Police Service is concerned there was only one cadre, that appointment to posts borne on that cadre were to be made by direct recruitment except to the extent of 25 per cent of the senior posts which may be filled by promotion from the State Police Service.
A special feature of the All India Services like the Indian Police Service and the Indian Civil Service is that pro motion is a matter of right.
It was for this reason that this Court, by a majority pointed out at p. 622 that in the case of ' those services there was no rule which, specifically provided that an officer had to be freshly appointed to a post carrying a salary in the senior scale of pay.
(1) 118 At p. 627 it was said "In our opinion, the whole scheme of the rules indicates that a person borne on the junior scale of pay has a right to hold a post on the senior scale of pay depending upon the availability of, a post and his seniority in the junior scale of pay.
If a person hold ing a post in the senior scale, though in an officiating capacity, is found to be unfit to hold that post, action will have to be taken against him as required by r. 5 of Discipline and Appeal Rules because his reversion to a post in the lower scale would amount to reduction in rank within the meaning of article 311 of the Constitution.
" On a consideration of the circumstances of that case, it is clear that the decision itself proceeded on the basic fact that for members of All India Services like the Indian Police Service, promotion was a matter of right and special considerations would have to be applied to them.
Now, in the light of the principles established by the above decisions, we may consider the respondent 's case.
The Southern Railway has two grades of Train Examiners.
The respondent and one James Blazey were promoted from the lower grade to officiate in the higher grade.
The respondent was shown at item No. 2 and James Blazey at item No. 3 in the promotion list.
A note was appended to the order that the promotion of the respondent and Blazey were 'purely provisional subject to revision when seniority lists were drawn up for the Division '.
By reason of the order dated November 27, 1959, the respondent was reverted to the lower grade while Blazey was retained in the higher grade.
The case of the respondent is that Blazey was junior to him and that since he was reverted while Blazey was not, it would amount to a reduction in rank so far as he was concerned.
It is plain that what he complains of is that he lost his seniority by reason of the retention of Blazey in the officiating higher post.
The respondent 's rank in the substantive post i.e., in the lower grade, was in no way affected by this.
In the substantive grade, the respondent retained his rank.
It may also be added that he was visited with no penal consequences.
It is no doubt true that it is not the form but the substance that matters, but once it is accepted that the respondent has no right to the post to which he was provisionally promoted, there can be no doubt that his reversion does not amount to a reduction in rank.
119 None of the decisions considered above lends support to the contention for the respondent.
It was finally argued that the procedure prescribed by rr. 1609 to 1619 of the rules contained 'in the Indian Railway Establishment Code, Vol.
I., were contravened.
Rule 1609 reads "As a general rule, in no circumstances, should a gazetted railway servant be kept in ignorance for any length of time that his superiors, after sufficient experience of his work, are dissatisfied with him; where a warning might eradicate a particular fault, the advantages of prompt communication are obvious.
On the other hand, the communication of any adverse remarks removed from their context is likely to give a misleading impression to the gazetted railway servant concerned.
The procedure detailed in rule 1610 should therefore be followed.
" Rules 1609 to 1618 apply only to gazetted railway servants. 'Me respondent is not a gazetted railway servant and there is no question of his claiming that he is entitled to the right given under the above rules.
Rule 1619 refers to non gazetted railway servants.
That rule Provides that in general conformity with the principles laid down in the preceding rules applicable to Gazetted Railway Servants, a General Manager may frame detailed rules for the preparation, submission and disposal of confidential reports on non gazetted railway servants.
Learned counsel for the respondent could not place before us those rules, if any.
The contentions raised by the respondent having been nega tived, this appeal must succeed, and it is accordingly allowed, but, in the circumstances of the case, there will be no order as to costs.
Appeal allowed. | The respondent was employed in the Southern Railway as Train Examiner in the scale of Rs. 100 5 125 6 185.
He was promoted to officiate in the next higher scale of Rs. 150 225.
Subsequently he was reverted to the lower scale, and his departmental representations and appeals having failed, he filed a writ petition under article 226 of the Constitution.
The High Court held that the reversion of the respondent amounted to a reduction in rank because he was reverted from the higher post to the lower post notwithstanding the fact that his juniors were still retained in the higher posts.
As this reduction of rank was in violation of article 311(2) the High Court granted the writ prayed for.
The Divisional Personnel Officer, Southern Railway appealed to this Court by special leave.
It was contended on behalf of the appellant that the High Court had misunderstood the ratio of the judgment of this Court in Vaikunthe 's case and that the respondent had not suffered any reduction in rank within the meaning of article 311(2).
HELD : (i) The reversion of a Government servant from an officiating post to his substantive post, while his junior is officiating in higher post, does not, by itself, constitute a reduction in rank within the meaning of article 311(2) of the Constitution.
[110 D] (ii) An important aspect of the decision in Vaikunthe 's case was lost sight of by the High Court.
The real ground on which Vaikunthe 's reversion to his original post of mamlatdar was held to be a violation of his constitutional guarantee was that his chances of promotion were irrevocably barred for a period of three years.
There was no such bar on promotion in the present case.
[114 E] Madhav Laxman Vaikunthe vs State of Mysore, [1962] 1 S.C.R. 886, distinguished.
(iii) The respondent 's complaint was that he had lost his seniority by reason of the retention of his juniors in the officiating higher post.
But his rank in the substantive post i.e. in the lower grade, was in no way affected by this.
In the substantive grade the respondent retained his rank and was not visited with any penal consequences.
The respondent had no right to the post to which he was provisionally promoted.
His reversion in these circumstances did not amount to reduction in rank.
[118 G 119 A] 107 Parshotam Lal Dhingra vs Union of India, ; , State of Bombay vs F. A. Abraham, [1962] Supp. 2 S.C.R. 92 and The High Court, Calcutta vs Amal Kumar Roy, ; , 'relied on.
P. C. Wadhwa vs Union of India, , distinguished.
M. A. Waheed vs State of Madhya Pradesh, [1954] Nag.
L. J. 305, referred to. |
Appeal No. 236 of 1965.
Appeal from the judgment and order dated August 30, 1961.
of the Bombay High Court in Income tax Reference No. 12 of 1959.
A. V. Viswanatha Sastri, N. D. Karkhanis, R. H. Dhebar and R. N. Sachthey, for the appellant.
N. A Palkivala, T. A. Ramachandran, J. B. Dadachanji, O. C. Mathur and Ravinder Narain for the respondent.
The Judgment of the Court was delivered by Sikri, J.
This appeal by certificate granted by the High Court of Judicature at Bombay under section 66 A(2) of the Indian Income Tax Act, 1922, hereinafter referred to as the Act, is directed against its judgment in a reference made to it by the Income Tax Appellate Tribunal.
The following two questions were referred (1)Whether on the facts and in the circumstances of the case, the surplus or difference arising as a result of devaluation in the process of converting dollar currency in regard to the sum of $36,123/02 repatriated to India was profit which was taxable in the hands of the assessee ? (2)Whether the said sum of $36,123/02 having been taxed in the relevant earlier years, the surplus or difference in dollar exchange account arising by reason of the repatriation thereof as a result of devaluation was rightly taken as profit taxable ? The relevant facts and circumstances, as stated in the Statement of the Case, are as follows : The respondent, Tata Locomotive and Engineering Co. Ltd., hereinafter referred to as the assessee, is a limited company registered under the Indian Companies Act (VII of 1913), and has its registered office at Bombay.
The main business of the assessee is the manufacture of locomotive boilers and locomotives.
For the purpose of this manufacturing activity the assessee had to make purchases of plant and machinery, etc., in various countries including the U.S.A.
The assessee 2 3 7 appointed M/s Tata Inc., New York, as its purchasing agent in the U.S.A. With the sanction of the Exchange Control Authorities a remittance of $33,830 was made in 1949 to Messrs. Tata Inc., New York for the purpose of purchasing capital goods from the U.S.A. and meeting other expenses connected therewith.
The assessee was also the selling agent of Baldwin Locomo tive Works, for the sale of their products in India, and in connection with the sale of the products of Baldwin Locomotive Works in India the assessee had to incur expenses on their behalf in India.
These expenses were re imbursed to the assessee by Baldwin Locomotive Works in the U.S.A. by paying the amount due to Messrs. Tata Inc., New York.
The amount so paid to Tata Inc. was retained in the assessee 's account with Messrs. Tata Inc. for purchase of capital goods.
As the sole selling agent the assessee was entitled to com mission from Baldwin Locomotive Works.
The commission pay able to the assessee in dollars was not actually sent from the U.S.A. to India, but with the sanction of the Exchange Control Authorities was made over to the assessee 's purchasing agents, Messrs. Tata Inc., New York.
The reason why this was done was explained in the assessee 's letter dated October 26, 1948, to the Reserve Bank of India.
In it the assessee stated, inter alia, as follows : "It would be more convenient if the amount of commission payable to us periodically be deposited into our account with our representative, Messrs. Tata Inc., New York, opened with reference to your letter FC.BY.
7031/74/46 dated 2nd October, 1946, as the same would go to reduce the amount of remittance to be made from here in recoupment of that amount from time to time.
These amounts will be utilised solely for the purposes detailed in our letter to you TC 679 dated 15th August, 1946.
" The purposes referred to in the said letter of August 15, 1946, were purchase of capital goods.
The amount received as commission was taxed in the relevant assessment years on the accrual basis and tax has been paid.
On September 16, 1949, there was a balance of $48,572/30 in the assessee 's account with Messrs. Tata Inc. made up as under (1) Remittances from Bombay $33,850 00 Less : Dollars spent in the U.S.A. for capital $30,282.
96 purposes $3,567.04 238 (2) Amount reimbursed by Baldwin Loco $8,882.24 motive Works against funds made available to its representatives in India (3) Commission actually received from Baldwin Locomotives Works and retain $36,123.
ed in the U.S.A. TOTAL $48, 572.30 On September 16, 1949, the pound sterling was devalued.
Prior to the devaluation the rate of exchange between rupee and dollar was Rs. 3.330 per dollar and on devaluation the rate became Rs. 4.775 per dollar.
The result was that the assessee found it more expensive to buy American goods and as the Government of India also imposed some restrictions on imports from the U.S.A., the assessee decided to repatriate the dollars and for the purpose applied to the Reserve Bank of India on December 17, 1949.
The Reserve Bank of India gave permission and a sum of $40,000 was repatriated to India.
Under similar circumstances in October, 1950, a sum of $9,500 was repatriated to India.
Though the two remittances from the U.S.A. to India of $40,000 and $9,500 fell into different accounting years, the case proceeded before the Income tax authorities as well as before the Tribunal on the footing that the two remittances be considered as falling in the accounting year ended March 31, 1950 for the purpose of the appeal before the Tribunal.
The remittances of $49,500 includes the sum of $48,572/30 that was held by the assessee on September 16, 1949.
This repatriation of the sum of $48,572/30 gave rise to a sum of Rs. 70,147 as surplus in the process of converting dollar currency into rupee currency.
The Income tax Officer assessed the amount of Rs. 70,147 on the ground that it represented profits that arose to the assessee "incidentally to its carrying on the business".
The Income tax Officer observed : "Whether the funds were sent to America with the object of purchasing of capital equipment or for the purchase of stores, or for reimbursement of revenue expenditure there need not be distinction that only such portion of the profits arising on funds remitted for revenue expenditure only has to be treated as revenue and the balance should be treated as capital.
" The Appellate Assistant Commissioner substantially affirmed the odrer of the Income tax Officer except that he reduced 239 the amount by Rs. 6,894.
He was of the view that the permission of the Reserve Bank by itself did not convert the true nature of the amount lying there.
He was further of the view that the amounts available for remittance consisting of the commission and the reimbursement of expenses by Baldwin Locomotive Works were acquired in the ordinary course of business of the sole selling agency of Baldwin Locomotive Works, and, therefore.
any exchange profit on such amounts which formed part of the assets employed as circulating capital in trade did arise directly in the course of business and formed part of the trading receipts.
The Tribunal held that the sums of $3,567/04 and $8,882/24 included in the sum of $48,572/30 were held by the assessee for capital purposes and hence any profit that arose to it as a result of its conversion into rupee currency on account of appreciation of the dollar, in relation to the rupee, must be held on capital account and, ' accordingly, the Tribunal excluded ' profits attributable to these amounts.
But regarding the sum of $36,123/02 the Tribunal held that it would not be justified in coming to the conclusion that there was any constructive remittance, first in the direction the U.S.A. to India and then of an equivalent sum from India to the U.S.A.
It further held that "the amount was earned as commission.
It was received in dollars and was retained in that form for the changed purpose under the authority of the Reserve Bank of India.
When the Company found that the purpose for which it was to be used failed, viz., acquisition of capital equipment etc.
, it requested the Reserve Bank of India to permit it to bring to India, vide assessee 's letter dated 17 12 1949 where it sought Reserve Bank 's permission to bring $40,000 to India and referred to in paragraph above.
This permission was granted by the Reserve Bank.
Dollars were changed into rupees and money received here.
Hence before there was actual remittance of $40,000 from the U.S.A. to India, there was reconversion, the purpose having failed, of the sum if there was initial conversion as contended by Mr. Chokshi.
" In the alternative, the Tribunal held that "as and when the commission was earned in dollars, the Company did bring it into its account books in the rupee currency at the then prevailing rate of exchange but the commission amount physically remained in the U.S.A. and when occasion arose to bring it physically to India it had to be converted into rupee currency and this conversion was necessarily incidental to the asssessee 's business as selling agents of the foreign entity the Baldwins.
Hence whatever the profit the Company made on such exchange of the commission earned by it in the course of its 2 4 0 selling agency business must be brought to tax as a trading profit made by it incidentally in the course of that business.
" The High Court answered the two questions in the negative.
It held that although the character of the commission earned was at the inception that of income, but when the assesee appropriated that sum for the specific purpose of purchasing capital goods with the permission of the Reserve Bank of India, the initial character of this sum underwent a change and it assumed the character of fixed capital of the Company.
This character was retained right up to September 16, 1949 when the pound sterling was devalued, and it did not undergo any change till the benefit accrued on this amount to the assessee company as a result of change in the exchange rate.
The High Court further held that "there is no evidence in this case nor a finding recorded by the Tribunal that the assessee company had at any time decided not to utilise these amounts for the purpose of purchasing capital goods, and, therefore, repatriated these amounts to India." The High Court further held that the sum of $36,123 02 was "part of its fixed capital and remained so till the date it was repatriated to India.
The surplus or difference arising as a result of devaluation in the process of converting these dollars into rupee currency in repatriating them to India was an accretion to its fixed capital and was not, therefore, liable to tax.
" The High Court felt that the ratio of the decision in Davies vs The Shell Company of China(1) supported the view it had taken.
The learned counsel for the revenue, Mr. A. V. Viswanatha Sastri, contends that if the commission had been allowed to remain in the U.S.A. up to September 16, 1949, and it had been repatriated on September 17, 1949, the assessee would have been liable to tax on the profits received as a result of devaluation.
He says that if this is so, the permission of the Reserve Bank and the decision of the Company to hold it to buy capital goods does not make any difference.
He further says that the fact that the assessee credited the rupee equivalent of this sum in his books and paid tax on the basis of accrual does not also make, any difference.
The learned counsel for the assesee, Mr. Palkhiwala, on the other hand contends that the assessee is not a dealer in foreign exchange and it had not acquired or held foreign exchange for revenue purposes or for purposes incidental to trading operations.
He says that "when foreign currency is kept or used on capital account e.g. to acquire capital assets, and not as circulat (1) 22 I.T.R. Supp.
1. 2 4 1 ing capital, the profit made on realisation is capital appreciation, even though the foreign currency may have been originally acquired as a revenue receipt.
" A number of cases have been cited before us, but it seems to us that the answer to the questions depends on whether the act of keeping the money, i.e. $36,123 02 for capital purposes after obtaining the sanction of the Reserve Bank was part of or a trading transaction.
If it was part of or a trading transaction then any profit that would accrue would be revenue receipt; if it was not part of or a trading transaction then the profit made would be a capital profit and not taxable.
There is no doubt that the amount of $36,123.02 was a revenue receipt in the assessee 's business of commission agency.
Instead of repatriating it imme diately the assessee obtained the sanction of the Reserve Bank to utilise the commission in its business of manufacture of locomotive boilers and locomotives for buying capital goods.
That was quite an independent transaction and it is the nature of this transaction which has to be determined.
In our view it was not a trading transaction in the business of manufacture of locomotive boilers and locomotives; it was clearly a transaction of accumulating dollars to pay for capital goods, the first step to the acquisition of capital goods.
If the assessee had repatriated $36,123.02 and then after obtaining the sanction of the Reserve Bank remitted $36,123.02 to the U.S.A., Mr. Sastri does not contest that any profit made on devaluation would have been a capital profit.
But, in our opinion, the fact that the assessee kept the money there does not make any difference especially, as we have pointed out, that it was a new transaction which the assessee entered into, the transaction being the first step to acquisition of capital goods.
In the view we have taken it is really not necessary to discuss cases cited at the Bar because none of the cases are exactly in point.
In our view the High Court was right in answering the questions in the negative.
In the result the appeal fails and is dismissed with costs.
Appeal dismissed. | The assessee was a limited company with its registered office at Bombay.
Its main business was the manufacture of locomotive boilers and locomotives, and for that purpose the assessee had to make purchases of plant and machinery, in various countries including the U.S.A. The assessee appointed M/s. Tata Inc., New York, as its purchasing agent in the U.S.A.
The assessee was also the selling agent of Baldwin Locomotive Works, U.S.A., for the sale of their products in India, and the commission payable to the assessee as their sole selling agent was made over to the assessee 's purchasing agent in Now York with the sanction of the Reserve Bank and for the purchase of capital goods.
This amount was taxed in the relevant assessment years on the accrual basis and the ix was paid.
On 16th September 1949, the pound sterling was devalued and the rate of exchange between rupee and dollar which was Rs. 3.33 per dollar before devaluation, became Rs. 4.775 per dollar thereafter, On 'hat date, there was in the assessee 's account with the purchasing agent a sum of $ 36,123.02 representing the commission received from Baldwin locomotive Works.
With the permission of the Reserve Bank this sum was repatriated to India in 1950 and the change in the exchange rate gave these to a surplus in rupees.
The Income tax Officer, the Appellate Assisant Commissioner and the Appellate Tribunal held that this surplus amount was liable to tax.
The High Court, on a reference, held that the sum was not taxable in the hands of the assessee.
In appeal to this Court, it was contended that the assessee was liable 3 tax because; (i) if the commission bad been allowed to remain in the J.S.A. up to 16th September 1949 and had been repatriated on 17th September, the assessee would have been liable to tax and therefore the Permission of the Reserve Bank and the decision of the assessee to hold to buy capital goods did not make any difference; and (ii) the fact hat the assessee credited the rupee equivalent of the sum in his books and paid tax on the basis of accrual did not also make any difference to the ssessee 's liability.
HELD:The High Court was right in deciding in favour of the assessee.
The assessee 's liability to tax would depend on whether the 'act of seeping the money for capital purposes after obtaining the sanction of he Reserve Bank was part of or a trading transaction.
The amount no doubt, was a revenue receipt in the assessee 's business of commission agency.
But instead of repatriating it immediately, the assessee obtained the sanction of the Reserve Bank to utilize the commission for buying capital goods, and that was an independent transaction.
It was not a 236 trading transaction but was a transaction of accumulating dollars to pay for capital goods, the first step to the acquisition of capital goods.
if the assessee had repatriated the amount and then, after obtaining the sanc tion of the Reserve Bank, remitted it to the U.S.A. any profit made on devaluation would only be a capital profit.
therefore, the fact that the assessee kept the money b e n the U.S.A. did not make any difference under the circumstances.
[241 B P] |
minal Appeal No. 214 of 1963.
Appeal by special leave from the judgment and order dated September 18, 1963 of the Patna High Court in Criminal Appeal No. 368 of 1961.
644 Nur ud din Ahmed and D. Goburdhun, for the appellants.
The respondent did not appear.
The Judgment of the Court was delivered by Ramaswami, J.
This appeal is brought, by special leave, from the judgment of the High Court of Patna dated September, 1963 in Criminal Appeal No. 368 of 1961.
The appellant, alongwith 13 others, was tried by the Additional 'Sessions Judge of Patna who by his judgment dated April 22, 1961 convicted all the accused under sections 302/149, Indian Penal Code and sentenced them to undergo rigorous imprisonment for life.
Lakhan and Indo were convicted under section 148, Indian Penal Code and sentenced to undergo rigorous imprisonment for two years and Gopi was convicted under section 147, Indian Penal Code and sentenced to rigorous imprisonment for one year.
Indo was also convicted under section 326, Indian Penal Code and Gopi was convicted under section 326/109, Indian Penal Code and were sentenced to undergo rigorous imprisonment for eight years.
Appellant Lakhan was convicted under sections 326/149, Indian Penal Code but no separat sentence was awarded on this charge.
Lakhan and Indo were convicted under section 19(f) of the Arms Act and sentenced to undergo rigorous imprisonment for two years each.
Five of the accused persons were acquitted and 8 of them were convicted on charges The appellants alongwith 8 others who were so convicted, appealed to the High Court of Patna which allowed the appeal of the 8 persons but dismissed the appeal of the appellants with the following modifications: The conviction of the appellants under sections 302/149, Indian Penal Code, section 148, section 147 and sections S26/149, Indian Penal Code was set aside and the appellants were acquitted of those charges.
The conviction of Lakhan under section 302/149, Indian Penal Code was altered into a minor offence under section 326, Indian Penal Code, but the sentence of life imprisonment imposed upon him was maintained.
The conviction and sentence of Indo under section 326, Indian Penal Code and of Gopi under sections 326/109, Indian Penal Code were upheld.
The conviction and sentence of Lakhan and Indo under section 19(f) of the Arms Act were also upheld.
The case of the prosecution is that on October, 7, 1959 at about 10 a.m. deceased Sheosahay Mahto went to look after his paddy field in Belwa Khandha.
On arriving at the spot, he found appellant Lakhan and one Ishwar putting up a net for catching fish in his field after cutting one of its ridges.
Sheosahay protested and there was an altercation between the parties.
Sheosahay threw aside the net and Ishwar and appellant Lakhan went away towards the village.
Sheosahay then repaired the ridge of the 645 field and after weeding some grass he was returning to the village along the Bazerachak Road.
While he was passing by the side of a brick kiln, appellant Lakhan suddenly emerged from behind it with a pistol in his hand and fired at Sheosahay hitting him on his chest.
Sheosahay staggered for a few steps and fell down at the house of one Baiju.
There were 15 or 20 other persons variously armed in the company of Lakhan.
Akhji P.W. 3 wife of Jitu P.W.7 heard the report of a gunfire while she was in her house situated near the house of Baiju.
She came out of her house and saw Sheosahay lying fallen in the village lane.
She protested to Gopi who became furious and ordered that she should be assaulted.
Upon his order, Rajendra who was carrying a gun fired at Akhji, P.W.3 on her left arm.
After committing the assault all the members of the mob fled away.
On the same evening, at about 5 p.m. a first information report was drawn up by the Assistant SubInspector of Police, P.W. 14 on the statement of Sheosahay and both the injured persons were forwarded to Nawadah hospital where Sheosahay died early next morning.
The appellants pleaded not guilty to the charges and alleged that they were falsely implicated on account of previous enmity.
The trial court held that it was unsafe to convict appellant Lakhan on the specific charge under section 302, Indian Penal Code for causing the death of Sheosahay as it appeared from the dying declaration of the deceased (exhibit 8) that accused Ishwar had also shot at him and as such appellant Lakhan was entitled to benefit of doubt.
The trial court accordingly acquitted Lakhan on the charge under s.302, Indian Penal Code but convicted him and 2 other appellants under section 148, Indian Penal Code and sections 302/149, Indian Penal Code.
The State Government did not prefer an appeal to the High Court against the acquittal of Lakhan on the charge under section 302, Indian Penal Code but on appeal preferred by the appellant against the judgment of the Sessions Judge, the High Court altered the conviction of Lakhan from section 302/149, Indian Penal Code to a minor offence under section 326, Indian Penal code and maintained the sentence of life imprisonment imposed upon him.
The view taken by the High Court was that the evidence of P.Ws. 1, 6, 7 and 8 should be accepted as true and it must he held that it was Lakhan who fired the pistol at the deceased and it was Lakhan alone who fired the pistol shot and not Ishwar.
The High Court held that it was competent to it in the appeal preferred by the appellant to alter the conviction of Lakhan from the constructive offence under section 302/149, Indian Penal Code to the substantive offence under s.302, Indian Penal Code, but "in order to obviate any technical objection" the High Court altered the conviction under s.302 read with section 149 to a minor offence under section 326, Indian Penal Code and regard being had to the gravity of the offence, the High Court maintained the sentence imposed upon Lakhan. 646 On behalf of appellant Lakhan learned Counsel submitted that he had been acquitted by the trial court on the specific charge under section 302, Indian Penal Code for the overt act of shooting at the deceased Sheosahay and he was convicted under sections 302/149, Indian Penal Code for being a member of an unlawful assembly, the common object of which was to kill deceased Sheosahay.
It was pointed out that the State Government had not preferred an appeal against the acquittal of Lakhan on the charge under section 302, Indian Penal Code.
It was submitted that the High Court cannot, in the absence of an appeal preferred in this behalf, convict Lakhan again under section 302, Indian Penal Code or under section 326, Indian Penal Code for the overt act of shooting.
It was also pointed out for the appellant that there was the finding of the High Court that there was no unlawful assembly and consequently Lakhan was acquitted of the charge under section 302, I.P.C. read with section 149, I.P.C. The argument, therefore, presented on behalf of appellant Lakhan is that the conviction and sentence of Lakhan for a substantive offence under section 326, I.P.C. was illegal and must be quashed.
The powers of the appellate court in disposing of an appeal are prescribed by section 423 of the Criminal Procedure Code which states "423.(1) The Appellate Court shall then send for the record of the case, if such record is not already in Court.
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 an appeal under section 41 1 A, subsection (2) or section 417, the accused, if he appears, the Court may, if it considers that there is no sufficient ground for interfering, dismiss the appeal, or may (a) in an appeal from an order of acquittal, reverse such order and direct that further inquiry be made, or that the accused be retried or committed for trial, as the case may be, or find him guilty and pass sentence on him according to law; (b) in an appeal from conviction, (1) reverse the finding and sentence, and acquit or discharge the accused, or order him to be retried by a Court of competent jurisdiction sub ordinate to such Appellate Court or committed for trial, or (2) alter the finding maintaining the sentence 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 same;" Section 423 (1)(a) expressly deals with an appeal from an order of acquittal and it empowers the Appellate Court to reverse the 647 order of acquittal and direct that further inquiry be made or that the accused may be tried or committed for trial, as the case may be, or it may find him guilty and pass sentence on him according to, law.
Section 423(1)(b) in terms deals with an appeal from a conviction, and it empowers the Appellate Court to reverse the finding and sentence and acquit or discharge the accused or order a retrial by a Court of competent jurisdiction subordinate to such Appel late Court or committed for trial.
It has been held by this Court in The State of Andhra Pradesh vs Thadi Narayana(1) that section 423(1)(b), Criminal Procedure Code is clearly confined to cases of appeals prefeffed against orders of conviction and sentence, and that the powers conferred by this clause cannot be exercised for the purpose of reversing an order of acquittal passed in favour of a party in respect of an offence charged while dealing with an appeal preferred by him against the order of conviction in respect of another offence charged and found proved.
It was also pointed out in that case that where several offences are charged against an accused person the trial is no doubt one; but where the accused person is acquitted of some offences and convicted of others the character of the appellate proceedings and their scope and extent is necessarily determined by the nature of the appeal preferred before the Appellate Court.
If an order of conviction is challenged by the convicted person but the order of acquittal is not challenged by the State then it is only the order of conviction that falls to be considered by the Appellate Court and not the order of acquittal.
In exercising the powers conferred by section 423(1)(b) the High Court cannot therefore convert the order of acquittal into one of conviction and that result can be achieved only be adopting procedure prescribed under section 439 of the Criminal Procedure Code.
In our opinion, the principle of this decision applies to the present case and it must accordingly be held that the High Court acted without jurisdiction in altering the finding of acquittal of Lakhan on the charge under section 302, Indian Penal Code and convicting him on the charge under section 326, Indian Penal Code and imposing a sentence of imprisonment on that charge.
In this connection the High Court has taken the view that section 149, I.P.C. does not constitute a substantive offence and it was only an enabling section for imposition of vicarious liability and the conviction on vicarious liability can, therefore, be altered by the appellate court to conviction for direct liability, though there was an acquittal by the trial court of the direct liability of the offence.
In our opinion, the view taken by the High Court is not correct.
There is a legal distinction between a charge under section 302, I.P.C. and a charge of constructive liability under sections 302/149, I.P.C., i.e., being a member of an unlawful assembly, the common object of which was to kill the deceased Sheosahay.
In Barendra Kumar Ghosh vs Emperor (2) Lord Sumner dealt with (1) ; (2) I.L.R. 648 the argument that if section 34 of the Indian Penal Code bore the meaning adopted by the Calcutta High Court, then sections 114 and 149 of that Code would be otiose.
In the opinion of Lord Sumner, however, section 149 was certainly not otiose, for in any case it created a specific and distinct offence.
It postulated an assembly of five or more persons having a common object, as named in section 141 of the Indian Penal Code and then the commission of an offence by one member of it in prosecution of that object.
Lord 'Sumner referred, in this connection, to the decision of the Calcutta High Court in Queen vs Sabid All and Others(1).
The observation of Lord Sumner was quoted with approval by this Court in Nanak Chand vs The State of Punjab(2) in which it was pointed out that by framing a charge under section 302, read with s.149, Indian Penal ,Code against the appellant it was not charging the appellant with the offence of murder and to convict him for murder and sentence him under section 302 of the Indian Penal Code was to convict him of an offence with which he had not been charged.
It was accordingly held that the conviction of the appellant under section 302, I.P.C. was illegal.
The same view has been reiterated by this Court in a 'later case in Suraj Pal vs The State of Uttar Pradesh.(3) For these reasons we hold that the conviction and sentence imposed by the High Court on Lakhan under section 326, Indian Penal Code is illegal and must be set aside.
On behalf of the appellants it was also contended that the prosecution had not been able to establish the other charges of which they have been convicted, but having heard learned Counsel we are not satisfied that the convictions on the other charges are vitiated by any illegality and we see no reason for interfering with the judgment of the High Court.
As already pointed out, we set aside the conviction and sentence imposed on Lakhan on the charge under section 326, Indian Penal Code; otherwise we affirm the decision of the High Court as regards Lakhan and also as regards the other two appellants and dismiss ,this appeal.
Appeal dismissed.
Conviction and sentence modified.
(1) [1873] 20 W.R. (Cr.) 5. | The trial court acquitted L, one of the appellants of the charge under section 302 I.P.C. but convicted him and the other appellants under section 149 I.P.C. and sections 302/149 I.P.C.
The State Government did not prefer an appeal to the High Court against the acquittal of L under section 302 but on appeo preferred by L against his conviction, the High Court altered the conviction from a. 302/149 to a minor offence under section 326 and maintained the sentence of life imprisonment imposed upon him.
In appeal to this Court : HELD : The High Court acted without jurisdiction in altering the finding of acquittal of L on the charge under section 302 I.P.C. and convicting him on the charge under section 326 I.P.C. and imposing a sentence of imprisonment on that charge.
If an order of conviction is challenged by the convicted person but the order of acquittal is not challenged by the State then it is only the order of conviction that falls to be considered by the Appellate Court and not the order of acquittal.
In exercising the powers conferred by section 423(1)(b) of Code of Criminal Procedure the High Court could not convert the order of the acquittal into one of conviction and that result can be achieved only by adopting procedure prescribed under section 439 of the Criminal Procedure Code.
[647 D F] State of Andhra Pradesh vs Thadi Narayana, A.I.R. 1962 section C. 240, applied.
The High Court erred in taking the view that section 149 I.P.C. did not constitute a substantive offence and that it was only an enabling section for imposition of vicarious liability and that the conviction on vicarious liability could, therefore, be altered by the appellate court to conviction for direct liability even though there was an acquittal by the trial court of the direct liability for the offence.
There is a legal distinction between a charge under section 302 I.P.C. and a charge of constructive liability under section 302/149, I.P.C., I.e., being a member of an unlawful assembly, the common object of which was to kill a person.
(647 G, H] Barendra Kumar Ghosh vs Emperor, I.L.R. , Queen vs Sabid Ali and Ors.
[1873] 20 W.R. (Cr.) 5 Nanak Chand vs State of Punjab; , and Suraj Pat vs State of Uttar Pradesh, (19551 1 S.C.R. 1332.
referred to. |
Appeal No. 424 of 1960.
Appeal from the judgment and order dated March 25, 1958, of the Madras High Court in case Referred No. 62 of 1957.
A.V. Viswanatha Sastri, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellant.
252 H. N. Sanyal, Additional Solicitor General of India, K. N. Rajagopala Sastri and D. Gupta, for the respondent.
March 13.
The Judgment of the Court was delivered by KAPUR, J.
This is an appeal against the judgment and order of the High Court of Judicature at Madras.
The assessee is the appellant and the Commissioner of Income tax is the respondent.
A partnership consisting of four persons was formed by a deed of partnership dated March 31, 1949.
On July 27, 1951 another partner was taken into partnership and a new deed was drawn up.
The previous partnership deed was considered as the principal deed.
The new partnership like the old one was to end on March 31, 1954.
On March 29, 1954, a new partnership was entered into and a sixth partner was taken and a new deed was executed.
The new partner contributed Rs. 40,000 as his share to the capital but in the partnership deed no express provision was made as to the manner in which profits and losses were to be divided between the partners.
In order to rectify this, a deed of rectification was executed on September 17, 1955, which was after the close of the account year 1954 55.
This deed recited that an error had crept in in typing the partnership deed dated March 29, 1954 by omitting to type el.
21 of the old partnership deed in the new deed.
The parties had therefore agreed to rectify the error by adding cl.
20 A as follows: "We hereby agree that for purpose of clarification the following clause shall be added as clause 20 A in the Partnership Instrument, dated 29th March, 1954: "The parties shall be entitled to shares in the profits and losses of the firm in proportion to the contribution of the capital of each of the partners and whenever fresh capital is required for the business, each partner shall be liable to contribute the additional capital in the same proportion as the 253 paid up capital referred to in clause 4 of the deed, dated 29th March 1954".
" This is signed by all the partners.
Up to the end of assessment year 1954 55 the old firms i.e., the one constituted of four partners and the other constituted of five partners were registered under section 26A of the Income Tax Act (hereinafter termed the 'Act ').
The appellant firm then applied for registration for the assessment year 1955 56.
The Income Tax Officer pointed out to the appellant firm that there was no specification of shares of the partners in the deed of partnership.
Thereupon the appellant submitted the deed of rectification dated September 17, 1955, above mentioned and submitted that the original deed did specify the shares of the partners and the deed of rectification only clarified the position.
But the registration was refused by the Income tax Officer and an appeal taken against that order to the Assistant Commissioner was dismissed.
Further appeal was taken to the Income tax Appellate Tribunal which also failed.
At the request of the appellant the following question was referred to the High Court for its opinion: "Whether the assessee firm is entitled to registration section 26 A of the Income tax Act for the assessment year 1955 56." The High Court held that under section 26 A of the Act the factual existence in the year of account of an instrument of partnership was necessary, a requisite which, in the present case, was lacking and therefore the provisions of section 26 A were not satisfied and that the specification of shares only took place on September 17, 1955 when the deed of rectification was executed.
The question was therefore answered in the negative.
Against this judgment and order the appellant has come in appeal to this Court by certificate of the High Court.
It was contended that cls.
9, 11, 34 and 41(a) sufficiently specified the shares of the partners and satisfied the requirements of the law.
These clauses were as follows: 254 Cl.
9 "Such extra contribution made by the partners shall be credited to the respective partners under an account called "Extra Capital Subscription Account" and for the period of the utilisation of the whole or part thereof during the course of the year or years, it shall be treated as capital con.
tribution only for the purpose of dividing profit but it shall otherwise in no circumstances be added to the paid up capital.
" Cl. 11.
"In addition to the shake of profits in proportion to the contribution to the extra, capital subscription account, the amount, so advanced shall carry an interest equal to the highest rate at which the company may have to pay in the event of borrowing the same from Multani money market and shall carry twice the said rate of interest in the year or years of loss.
" Cl. 34.
"The senior partner may at any time during the subsistence of the partnership bring in one or more of his other sons other than partners of the 5th and the 6th part herein to the partnership and in the event of their so becoming partners they will be liable for the same duties as the other partners herein and shall be entitled to remuneration and profits in proportion to their capital contribution.
41(a).
"In the event of the dissolution of partnership the capital available for distribution as per the balance sheet, except for debts outstanding for collection and reserve fund, shall be paid off to the outgoing partner in proportion of the capital contribution of the outgoing partner to the total contribution of all the partners, including extra capital subscription paid, if any, under clause 9.
" None of these clauses specify the shares of the partners.
Clause 9 has reference to extra contribution made by the partners which was to be treated as capital contribution for the purpose of dividing profits but was not otherwise taken to be paid up capital.
Clause 11 provides for interest on the extra capital subscribed .
Clause 34 authorises the senior partner during the subsistence of the partnership to bring in 255 one or more of his sons as partners who on being so brought in were entitled to remuneration and profits in proportion to their capital contribution.
Clause 41(a) provides that in the event of dissolution of partnership the capital available except for debts etc.
was to be paid to the outgoing partners in proportion to the capital contribution of the outgoing partner.
But in none of these clauses is it stated what the shares of the partners in the profits and losses of the firm were to be and that in our opinion was requisite for registration of the partnership under section 26 A of the Act and as that was wanting, registration was rightly refused.
Registration under section 26 A of the Act confers a benefit on the partners which the partners would not be entitled to but for section 26 A.
The right can be claimed only in accordance with the statute which confers it and a person seeking relief under that section must bring himself strictly within the term of that section.
The right is strictly regulated by the terms of that statute: Ravula Subba Rao vs The Commissioner of Income tax, Madras Section 26 A provides: S.26A(1) "Application may be made to the Income tax Officer on behalf of any firm, constituted under an instrument of partnership specifying the individual shares of the partners for registration for the purpose of this Act and of any other enactment for the time being in force relating to income tax or super tax.
" For the purpose of this case the relevant words of that section are "constituted under an instrument of partnership specifying the individual shares of the partners".
Therefore unless the instrument of partnership specified the individual shares of the partners the instrument of partnership does not conform to the requirements of the section.
In B. C. Mitter & Sons V. Commissioner of Income tax (2) it was held that the instrument of partnership to be registered should have been in existence in the accounting year in respect of which an assessment is being made.
At page 202, Sinha J., (as he then was) said: (1) [1956] S.C.R. 577,588.
(2) 256 "It is, therefore, essential, in the interest of proper administration and enforcement of the relevant provisions relating to the registration of firms, that the firms should strictly comply with the requirements of the law, and it is incumbent upon the Income tax authorities to insist upon full compliance with the requirements of the law." In the present case an instrument of partnership was in existence but it did not specify the shares which was one of the requirements for registration and that condition was fulfilled by the deed of rectification dated September 17, 1955.
Therefore it cannot be said that there was the requisite instrument of partnership specifying the individual shares of the partners during the year of account.
The High Court, in our opinion, was right in answering the question in the negative.
We therefore dismiss this appeal with costs.
Appeal dismissed. | A partnership consisting of four persons was formed on March 31, 1949, which was to come to an end on March 31, 1954.
On July 27, 1951, a fifth partner was taken into the partnership.
On March 29, 1954, a new partnership was entered into taking in a sixth partner will) contributed Rs. 40,000 as his share to the capital.
In the partnership deed no express provision was made as to the manner in which profits and losses were to be divided.
A deed of rectification was executed on September 17, 1955, after the close of the account year 1054 5 5, adding a clause to the partnership deed that the partners shall share in the profits and losses in proportion to their contributions to the capital.
Upto the end of the assessment year 1954 55, the old firms were registered under section 26A of the Income tax Act.
The new firm applied for registration for the assessment year 1955 56, but registration was refused on the ground that there was no specification of shares of the partners.
Held, that registration was rightly refused.
Section 26A requires that for registration in a particular year there must be an instrument of partnership specifying the shares of the partners in the profits and losses.
Though in the present case there was an instrument of partnership in the year of assessment 1955 56, it did not specify the shares.
The right of registration can be claimed only in accordance with section 26A and the assessee must bring himself strictly under the terms of that section.
Ravula Subba Rao vs The Commissioner of Income tax, Madras, [1956] S.C.R. 577 and R. C. Mitter & Sons vs Commissioner of Income tax, E1959] , referred to. |
Appeal No. 102 of 1964.
Appeal by special leave from the judgment and order dated July 30, 1962 of the Punjab High Court (Circuit Bench) at Delhi in Civil Writ No. 402 D of 1962.
D. Goburdhan for the appellants.
section G. Patwardhan and B. R. G. K. Achar for the respondents.
The Judgment of the Court was delivered by Wanchoo, J.
The only question raised in this appeal by special leave from the judgment of the Punjab High Court is the interpretation of section 9 (1) of the Evacuee Interest (Separation) Act, No. LXIV of 1951 (hereinafter referred to as the Act).
The question arises in this way.
The appellants were mortgagees of certain properties, including a house, on the basis of a, mortgage bond dated July 19. 1928.
The consideration of the bond was Rs. 25,000 and interest was provided at nine per cent per annum compoundable annually.
Out of the properties covered by the bond, one of the properties was sold to Bibi Chand Tara on October 23, 1937 subject to the earlier mortgage of 1928.
In October 1949, Bibi Chand Tara was declared an evacuee.
In 1939 the appellant filed a suit against the orignal mortgagors and others including Bibi Chand Tara for the amount due under the mortgage.
A preliminary decree was passed in their favour in March 1942 and the final decree followed in April 1945.
It appears that certain sums were received by the appellants before they had filed the suit.
Certain other sums were also received after the preliminary and final decrees.
It further appears that certain Zamindari properties which were also included in the mortgage had been sold after the final decree and the money appropriated towards the decree.
Another house which was also included in the mortgage bond was sold later and the sale money was again appropriated towards the decree.
Eventually the appellants put the decree in execution in November 1952 against the house in dispute for a sum of Rs. 60,000 and odd,.
There was a sale in that execution proceeding, but it was set aside on the application of the Assistant Custodian, Patna.
Thereafter the appellants made an application before the Assistant Custodian for the recovery of the mortgage money claimed by them.
and in this application their claim was for Rs. 40.000 and.
This application was also dismissed as it was filed before a wrong authority.
Eventually the.
appellants filed a claim for the same.
amount before the Competent Officer under the Act. inasmuch As the property in dispute was composite property in Which, the evacuee had mortgagor 's interest while the appellants who are non evacuee 's had mortgagees ' interest which had ripened into a decree for sale.
This application was resisted by the Custodian on a number of grounds.
In the present appeal we are only.
57 concerned with one ground based on section 9 (1) of the Act.
, The contention of the Custodian was that the appellants were not entitled to any interest higher than five per cent per annum simple from the date of the mortgage under section 9 (1) of the Act.
Therefore the Custodian claimed that the entire transaction should be reopened from the date of the mortgage and the amounts already received by the appellants should be taken into account after allowing interest at five per cent per annum simple to them and if, more interest had been paid that should be credited towards the principal and after such accounting the sum if any due on the mortgage could be claimed by the appellants.
The Competent Officer held that though the provisions of section 9 (1) were retrospective to a certain extent they could not be stretched to mean that if a mortgagee had already realised interest at a rate exceeding five per centum Per annum simple even before the Act came into force the excess would go to liquidate the principal amount proportionately.
He therefore held that in the absence of special provision to the effect that past accounts should be reopened, the amount received as interest prior to the decree could not be taken into account.
The Competent Officer further held that the principal money could not be reduced on account of any excess realisation of interest when such excess was realised before the Act came into force.
He therefore ordered that (1) the amount of interest exceeding five per cent per annum before the institution of the suit would not reduce the principal amount, (2) the appellants would be entitled to simple interest at six Per cent per annum, i.e. the rate at which interest was decreed in their favour in the mortgage suit from the date of the institution of the suit till November 26, 1952 on the principal sum only, (3) the appellants would be entitled to interest at five per cent per annum simple from November 27, 1952, and (4) the appellants would also be entitled to costs of the suit decreed in their favour.
The actual amount due was ordered to be worked out on these principles.
The Custodian took the matter in appeal to the Appellate Officer.
The Appellate Officer held that on the words of section 9 (1) the entire account must be made afresh on the basis of interest being ,,allowed at five per cent per annum simple on the principal amount from . ' the date; of the.
mortgage and that any sums received over above this would go to reduce the principal.
He therefore allowed the appeal and set aside the order of the Competent Officer and ordered account to be taken in the manner indicated by him.
The appellants,then applied to the punjab High Court by a writ petition, which was dismissed in limine.
Their application for a leave to Appeal to this Court was also dismissed.
Thereafter they ,obtained special leave from this: Court, and, that is how the matter has come before us L/S5SCI 6 58 The Act deals with separation of the interest of an evacuee from the interest of a non evacuee in composite properties.
Under section 2 (d) "composite property" inter alia means any property which, or any property in which an interest, has been declared to be evacuee property and in which the interest of the evacuee is subject to mortgage in any form in favour of a person, not being an evacuee.
Under section 2 (h), "principal money" in relation to a mortgage deed executed by an evacuee inter alia means in the case of mort gage deed which has not been executed by way of renewal of a prior mortgage deed, the sum of money advanced by way of loan at the time of the execution of the mortgage deed.
Under section 3 the Act and the rules and orders made thereunder have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any such law, save as otherwise expressly provided in the Act.
Sections 4 to 8 provide for machinery for separation of the claims of evacuees and non evacuees in composite properties.
Then we come to section 9(1) which is in these terms: "(1) Notwithstanding anything to the contrary in any law or contract or any decree or order of a civil court or other authority, where the claim is made by a mortgagee, no mortgaged property of an evacuee shall, subject to the provisions of subsection (2) be liable for the payment of interest at a rate exceeding five per cent per annum simple on the principal money advanced or deemed to have been advanced.
" It is unnecessary to refer to section 9(2) for we are not concerned with that provision in the present appeal.
We may however refer to section 8(3) which is material and in these terms: "(3) If there is any dispute as to whether a liability is a mortgage debt or not or whether any claim submitted under section 7 exists, the Competent Officer shall decide such dispute : Provided that a decree of a civil court '(other than an ex parte decree passed after the 14th day of August, 1947) shall, subject to the provisions of sections 9 and 10, be binding on the Competent Officer in respect of any matter which has been finally decided by such decree , and where any matter was decided by an ex parte decree passed by a civil court after the 14th day of August, 1947, the Competent Officer may decide such matter afresh and on such decision being made the ex parte decree shall be deemed to have no effect." 59 Section 10 provides for separation of the interest of evacuee from the interest of claimants in composite properties and lays down how that will be done.
Clause (b) specially provides for the manner in which the claim of a mortgagee will be dealt with by the Competent Officer, but we are not concerned with the details of that provision.
It will be seen from a consideration of these provisions that the Competent Officer is bound by the decree of a civil court except an ex parte decree passed after August 14, 1947 in respect of a mortgage subject to the provisions of sections 9 and 10.
Section 10 indicates how the Competent Officer is to separate the interest of an evacuee from the interest of a non evacuee, even in the case of a decree except an ex parte decree passed after August 14, 1947.
Section 9(1) provides for interest at five per cent per annum simple, and the decree in a mortgage suit except an ex parte decree passed after August 14, 1947 which is otherwise binding on the Competent Officer is subject to the provisions of section 9(1) as to interest.
It will also be noticed that there is no provision in the Act which specifically provides for reopening of transactions relating to mortgage and taking accounts from the date of the mortgage on the basis of interest provided in section 9(1) and for crediting anything paid as interest over and above the rate provided in section 9(1) to wards principal.
Prima facie therefore in the absence of such a provision it cannot be assumed that the legislature intended that a mortgage transaction should be reopened from the date of the mortgage and accounts taken afresh and anything paid in excess of five per cent per annum simple interest applied towards reduction of the principal amount.
We have therefore to see whether there is anything in the words of section 9(1) which leads to this result in the absence of a specific provision to that effect in the Act.
Section 9(1) begins with a non obstante clause and lays down that it will apply notwithstanding anything to the contrary in any law or contract or any decree or order of a civil court or other authority.
It then provides that where a claim is made by a mortgagee, as in the present case, no mortgaged property of an evacuee shall be liable for the payment of interest at a rate exceeding five per cent per annum simple on the principal money advanced.
The key words in the provision are "no mortgaged property shall be liable".
These words indicate that the Competent Officer when he comes to deal with a liability under a mortgage must calculate this liability on the basis that interest should be allowed only on the principal amount and only at the rate of five per cent per annum simple.
, The liability which the Competent Officer has to determine is with respect to the amount still due to the non evacuee.
Further as the non obstante clause includes any decree of a civil court and as such decree is subject to section 9(1) in view of the proviso to section 8(3), the Competent Officer would not be bound by the calculation of interest made by the civil court and would have to determine the 60 liability still due on the mortgage himself on the basis of simple interest at the rate of five per cent per annum on the principal sum advanced.
Any calculation made by the civil court in arriving at the sum decreed by it on the basis of interest at more than five per cent per annum so far as the liability still due is concerned would not be binding on the Competent Officer and he will have to make his own calculations on the basis of simple interest at the rate of five per cent per annum.
Similarly in a case where there is no decree and there is still some liability on the mortgage, the Competent Officer would not be bound by the rate of interest mentioned in the mortgage deed and will calculate the liability still due on the basis of simple interest at the rate of five per cent per annum on the principal amount advanced.
But section 9(1) clearly shows that it applies only where the liability is still due and there is nothing in the words of section 9(1) which gives power to the Competent Officer to reopen the account under the mortgage from the date of the mortgage and for that purpose treat anything paid as interest under the contract over and above five per cent per annum simple interest as payment towards reduction of the principal amount Section 9(1) in our opinion only deals with liability still due and does not contemplate that any payments made already under the contract as interest should be taken partly towards interest and partly towards principal if they are above five per cent per annum simple interest.
As section 9(1) speaks only of the liability of the mortgaged property it can only take in liability still due, for whatever has been paid in accordance with the contract towards interest is no longer a liability.
This conclusion based on the words of section 9(1) is enforced by the fact that there is no specific provision in the Act for reopening all accounts under the mortgage from the date of the mortgage, treating any interest paid already at a rate higher than five per cent per annum simple as going towards reduction of the principal sum.
Two situations may arise before the Competent Officer in such circumstances when calculating the liability under a mortgage.
In one case there may be no decree already passed in favour of the mortgagee.
In such a case in calculating the liability still due on the mortgage, the Competent Officer will calculate that liability on the basis of simple interest at the rate of five per cent per annum on the principal money advanced and may ignore the rate of interest mentioned in the contract.
But even so, the words of section 9(1) do not give him power to reopen the accounts and what ever has been paid towards interest, if it is not in excess of the contractual rate of interest though it may be in excess of the rate of five per cent per annum simple interest, cannot be taken into account in reducing the principal amount.
But whatever is still due under the mortgage will have to be worked out on the basis of simple interest at the rate of five per cent per annum on the prin cipal amount advanced.
We may illustrate this by an example, 61 Suppose a mortgage was entered into on January 1, 1949 and the interest therein is nine per cent per annum.
Suppose that interest for the years 1949 and 1950 has been paid at the contractual rate but nothing has been paid thereafter.
in such a case, the amount paid in excess of five per cent per annum for 1949 and 1950 will not go to reduce the principal; but thereafter interest will be calculated at five per cent per annum to arrive at the liability on the mortgaged property or what is still due.
The second case which may arise before the Competent Officer would be a case where a decree has been passed on the mort gage bond except an ex parte decree passed after August 14, 1947.
In such a case also the Competent Officer cannot take into account anything paid in excess of five per cent per annum simple interest before the date of the suit provided it is not at more than the contractual rate; but as the decree is subject to section 9(1), the Competent Officer will have to calculate interest at five per cent per annum simple from the date of the suit and cannot award more interest in calculating the liability still due under the mortgage.
Of course in both the cases if before the suit nothing has been paid towards interest or if something has been paid but it is less than five per cent per annum simple interest on the principal amount advanced.
the Competent Officer in calculating the liability still due on the mortgage will have to allow five per cent per annum simple interest from the date of the mortgage to make up the deficiency, if any.
As we read section 9(1), we find no provision in it for reopening the account from the very beginning and utilising any interest paid in excess of five per cent per annum simple but within the contractual rate towards reducing the principal amount.
Section 9(1) only deals with the liability of the mortgaged property which may still be due when the claim is made before the Competent Officer.
Though the provision is retrospective in the sense that where the liability is still there, interest has to be calculated at five per cent per annum simple there is nothing in the words of section 9(1) which authorises the reopening of accounts and utilising the excess over five per cent per annum towards reduction of principal provided the payment of interest already made is within the contractual rate.
In this view the order of the Appellate Officer by which he ordered the reopening of the accounts and which was upheld by the High Court is incorrect.
At the same time we are of opinion that the order of the Competent Officer is also not quite correct, though it is more in accord with the interpretation of section 9(1) which we have indicated above.
On the view we have taken the liability will be calculated thus: Any amount paid before the date of the suit i.e. December 11, 1939, provided it is not more than the contractual rate of interest though it may be above five per cent per annum simple will not go to reduce the principal amount.
From the date of the suit till the date of the final decree i.e. April 25.
62 1945, the appellants will only be entitled to simple interest at the rate of five per cent per annum on the principal amount advanced for the decree though binding on the Competent Officer is subject, under the proviso to section 8 (3), to section 9 (1).
Further from the date of the final decree also the appellants will be entitled to simple interest at the rate of five per cent per annum on the principal amount only.
Any payments made after the date of the suit will be adjusted first towards interest at the ' rate of five per cent per annum simple and any payment made in excess thereof will go to reduce the principal.
The appellants will also be entitled to the costs of the suit which was decreed in their favour, but there will be no interest on such costs.
The account will be made up accordingly to determine the liability due under the mortgage.
Thereafter it will be for the Competent Officer to deal with the matter as provided under section 10(b) or (c).
We therefore allow the appeal.
The writ petition is allowed and the order of the Appellate Officer is set aside and the order of the Competent Officer varied in the manner indicated above.
The appellants will get their costs from the Custodian Evacuee Property.
Appeal allowed. | The appellants were mortgagees of properties including a house on the basis of a mortgage bond executed in 1928.
The interest provided in the bond was 9 % per annum compoundable annually.
In 1937 the house above referred to was sold to B subject to the earlier mortgage.
In 1939 the appellants filed a suit against the original mortgagors and others including B for the, amount due under the mortgage.
Certain amounts towards the discharge of the liability under the mortgage were received by the appellants before as well as after the filing of the suit.
A preliminary decree was passed in favour of the appellants in 1942 and the final decree in 1945.
In 1949, B was declared an evacuee.
When in 1952 the appellants put their decree in execution the property was treated as "composite property" and the Custodian of Evacuee Property contended before the Competent Officer that the appellants were not entitled to any interest higher than five per cent per annum simple from the date of the mortgage under section 9(1) of the Evacuee Interest (Separation) Act, 64 of 1951.
The Custodian accordingly claimed that the entire transaction should be rib opened from the date of the mortgage and if more than five per cent simple interest had been received by the appellants the excess should be credited towards the principal amount.
The Competent Officer held that the limit of five per cent could not apply before the Act came into force.
The Appellate Officer however upheld the contention of the Custodian.
The appellants thereupon filed a writ petition in the High Court which was dismissed in limine.
By special leave they appealed to this Court.
HELD:Section 9(1) only deals with the liability of the mortgaged property which may still be due when the claim is made before the competent officer.
Though the provision is retrospective in the sense that where the liability is still there, interest has to be calculated at five per cent per annum simple, there is nothing in the Words of section 9(1) which authorises the reopening of the accounts ,and utilising the excess over five per cent per annum simple.
towards reduction of principal provided the payment of interest al ready made in within the contractual rate.
[61 F] On the above view the maximum rite of interest laid down in s.(1) was not applicable before the date of the suit.
But under section 8(3) the decree of the Court was subject.
to section 9 and therefore after the date of the suit the said rate was applicable.
Directions 'given accordingly [61 H] L/S5SCI 6 56 |
Appeal No. 274 of 1964.
Appeal from the judgment and decree dated November 3, 1960 of the Madras High Court in C.C.C. Appeal No. 61 of 1957.
A. K. Sen, V. Bhagat and D. N. Gupta, for the appellant.
section T. Desai, Kesawlal and R. Ganapathy Iyer, for the respondent.
The Judgment of the Court was delivered by Subba Rao, J.
The appellant, Ellerman Bucknall Steamship Company Ltd., hereinafter called the shipowners, are a limited liability company incorporated under the law in the United Kingdom carrying on business as common carriers by sea.
They own a ship named "CITY OF LUCKNOW".
Messrs. Best & Co., Ltd., having their office at Madras, are the local agents of the shipowners.
Sha Misrimal Bherajee, the respondent herein, hereinafter called the buyer, entered into two contracts with the British Mercantile Company Limited, New York, herein after called the seller, for the purchase of Fresh Monsanto Polystyrene Injection Moulding Power (not reground) in granueles manufactured by Monsanto Chemical of New York.
In respect of the first contract, the purchaser placed two indents dated December 26, 1950, and December 27, 1950, for the said stuff of value of Rs. 13,500/ and Rs. 6,750/ respectively.
The buyer entered into a second contract with the seller for the purchase of 24 drums of the same material of the value of Rs. 16,000/ under an indent dated January 23, 1951.
In respect of the first contract and indents the 94 buyer opened and confirmed an irrevocable Letter of Credit No. 4748 dated December 28, 1950, for U.S. $4535 plus war risk with the Eastern Bank Limited.
In regard to the second contract he opened another irrevocable Letter of Credit No. 5012 dated January 31, 1951 for U.S. $3,330.
As the said Bank had no branch of its own at New York, it arranged with the Marine Midland Trust Company of New York for payment of the bills that might be presented by the seller in New York.
Pursuant to the said contracts, the seller delivered to the shipowners certain consignments in reused fibre drums.
The bills of lading issued by the shipowners described the drums simply as drums.
After taking a letter of indemnity to cover against any loss, the shipowners issued clean bills of lading.
The seller negotiated the bills of lading with the Marine Midland Trust Company, New York and obtained payment of U.S. $6,998.75 under the letters of credit.
Thereafter, the bills of lading were forwarded to the Eastern Bank Limited, Madras, and the buyer paid to the said Bank a sum of Rs. 33,012 5 9 against the said letters of credit.
When the shipment arrived it was discovered that the goods sought to be delivered did not answer the description given in the documents.
Indeed ', the drums contained only coal dust and factory shavings.
The buyer took appropriate proceedings against the seller in the American, courts and realized a sum of Rs. 13,604 9 0.
Thereafter, he instituted the present suit in the City Civil Court, Madras, for the re covery of a sum of Rs. 23,760 15 6 against the Bank as well as the shipowners.
To that suit the Bank was made the 1st defendant and the shipowners, the 2nd defendant.
Broadly stated, the basis of the claim against the Bank was that, though under the letters of credit the Bank had the authority to pay only against clean bills of lading, it paid against unclean bills of lading.
The cause of action against the shipowners was that they made a misrepresentation that the bills of lading were clean whereas in fact they were not so, with the result, acting on that misrepresentation, the agent of the Bank paid against the said bills of lading which it would not have done had it known the real facts.
The learned City Civil Judge held that the bills of lading were clean ones but in respect of one of the letters of credit the Bank should not have accepted the shipping documents which related only to a part of the goods contracted for.
On that finding the learned Judge held that the Bank was liable to refund the amount paid only under one of the letters of credit.
As against the shipowners he came to the conclusion that even if the bills were not clean, the Bank would nevertheless have paid the amount, as the terms of the letters of credit were comprehensive enough to authorize such payments.
In the result, he dismissed the suit against the shipowners but decreed it in part against the Bank.
The Bank and the shipowners preferred appeals to the High Court against the said decree insofar as it went against each of them.
95 The appeals were heard by a Division Bench of the Madras High Court.
The learned Judges of the High Court came to the conclusion that the shipowners with the knowledge that the bills of lading would be negotiated gave, at the request of the seller, clean bills of lading while as a matter of fact only unclean bills of lading should have been given.
They further held that the purchaser was damnified, as on the basis of the misrepresentation found in the bills of lading the Bank paid the amount against the shipping documents which it would not have done if it had known that the bills of lading were unclean.
In the result, they gave a decree for the entire suit claim against the shipowners.
They allowed C.C.C.A. No. 61 of 1957 against the shipowners but dismissed it against the Bank.
C.C.C.A. No. 54 of 1957, the appeal filed by the Bank, was allowed.
The shipowners have preferred the present appeal against the decree given by the High Court against them.
The argument of Mr. A. K. Sen, learned counsel for the appellant, may broadly be placed under the following three heads: (1) While the respondent based his cause of action on a breach of contract, the High Court gave the relief founded on deceit; (2) under common law or contract the appellant had no duty or obligation to make a statement in the bills of lading that the drums were old ones and, therefore, the non mention of that fact could not have misled the Bank into paying against the shipping documents under the letters of credit; and (3) the bills of lading were clean ones, for the oldness or newness of drums had no real impact on the contents thereof, for both, were equally suitable containers of the articles to be supplied.
Mr. section T. Desai.
learned counsel for the respondent, while made a faint attempt to sustain the decree of the High Court on the basis of breach of contract, seriously sought to support it on the doctrine of deceit.
He argued that there was a fraudulent misrepresentation by the appellant in collusion with the seller to the effect that the bills of lading were clean while in fact they were not and that, acting on that misrepresentation, the Bank, through its agent at New York, paid the amount to the seller under the letters of credit against the shipping documents, which it would not have done if such a misrepresentation had not been made.
He countered the contentions of the learned counsel for the appellant that the High Court gave a decree on a cause of action different from that on which the plaint was based.
The first contention turns upon the pleadings as well as on the conduct of the parties during the trial and the appeal.
A perusal of the plaint discloses that the 2nd defendant was sought to be made liable both in contract and in tort.
Paragraph 9 of the plaint reads thus: "if the first defendants state that they acted on the terms of the bills of lading and are therefore protected, the plaintiffs 96 also charge that in any event the second defendants are liable, for issuing the bills of lading without disclosing the true state of facts and for inserting statements in the bills of lading which are now admitted to be untrue.
The plaintiffs also charge that the defendants are precluded from denying the correctness of the statement in the bills of lading as regards the apparent good order and condition as mentioned in the bills, of lading.
The plaintiffs charge that the second defendants and the shippers acted collusively with a view to enable if possible the shippers to obtain moneys against goods which were not the goods agreed to be sold and which were not consigned according to the contract.
The very fact that the second defendants have obtained an indemnity for issuing the bills of lading without disclosing the real state of facts would show their consciousness that they were not right in issuing the bills of lading in the terms they did and whatever their rights as against the shippers may be on the indemnity, the plaintiffs are not concerned with the same, but the second defendants are liable to the plaintiffs to make good the loss resulting by reason of a representation acted on by which the plaintiffs have been damnified".
This passage in the plaint contains all the necessary allegations to sustain a claim in tort.
It is clear, therefore, that the claim of the buyer against the shipowners was also based upon the misrepre.
sentation made by the latter in the bills of lading.
In the written statement the appellant denied the allegations in para 9 of the plaint and stated that there was no secret arrangement between them and the seller in regard to the goods or the containers.
The shipowners also denied that they inserted any untrue statement in the bills of lading acting in collusion with the seller to enable the latter to obtain money against the bills of lading.
Issue 6 framed by the learned City Civil Judge reads: "Did the second defendant act bona fide throughout in issuing the bills of lading and in taking an indemnity from the shippers?".
The judgment of the learned City Civil Judge discloses that the question of misrepresentation by collusion was argued and the learned Judge held that the Bank was not misled, as under the letters of credit it had to pay the amount against the bills of lading, whether clean or unclean.
Before the High Court also the question of misrepresentation by the shipowners was expressly raised and was accepted by it.
We cannot, therefore, agree with the contention of the learned counsel for the appellant that the High Court had made out a new case which was not raised in the plaint: indeed, the claim on the basis of misrepresentation was made in the plaint, denied by the appellant in the written statement and argued in both the courts below.
There are, therefore, no merits in the first contention.
97 On the question of the appellant 's liability to the buyer in contract, we are satisfied that there is no basis for it.
Indeed, learned counsel for the respondent did not seriously press the point, though he did not give it up altogether.
A bill of lading serves three purposes, viz., (i) it is receipt for the goods shipped containing the terms on which they have been received; (ii) it is evidence of the contract for carriage of goods , and (iii) it is a document of title for the goods specified therein.
The contract of the shipowners in the bill of lading is that they will de.liver the goods at their destination "in the like good order and condition" in which they were when shipped.
In terms of the contract the shipowners delivered the goods to the buyer in the drums.
The consignee incurred damages not because of any defect in the drums but because the seller sent goods different from those he had agreed to sell to him.
Therefore, the shipowners were not liable for any damages to the purchaser on the basis of breach of any of the terms of the contract.
No further elaboration on this point is called for, as finally this point was not seriously pressed by the learned counsel for the respondent.
Now we shall consider the main point raised in the appeal, namely, the liability of the appellant in tort.
Before we advert to the question of law it would be convenient to notice the relevant facts.
Exhibit A 1 dated December 26, 1950, the indent placed by the buyer with the seller in respect of Fresh Monsanto Polystyrene Injection Moulding Powder of value of Rs. 13,500/ .
The packing was to be in new fibre drums each containing 250 lbs.
Exhibit A 2 is another indent dated December 27, 1950, placed by the buyer with the seller.
The quantity required thereunder was of the value of Rs. 6,750/ and the packing was to be in new fibre drums each containing 250 lbs.
Exhibit A 5 is the third indent dated January 23, 1951, for the same goods worth Rs. 16,500/ with similar terms.
The buyer opened two letters of credit, Exs.
B 1 and B 2, with the Eastern Bank Limited, Madras, for U.S. $ 7,625.
Exhibits B 28 and B 29 are the letters written by the Eastern Bank Limited, Madras, to the Marine Midland Trust Company, New York, to open letters of credit for payment of the bills that might be presented by the seller.
Exhibit B 1 reads: "We hereby authorise and request you and/or your Agents and/or Representatives at New York to open a confirmed and irrevocable bank credit in favour of Messrs. British Mercantile Company Limited etc., and to make payment or payments thereunder on our behalf. . against documents purport ing to be invoices, shipping specifications, Bills of Lading and Policies and/or Certificates of Insurance covering Marine and War Risks. .
We agree that this credit is subject to U.S.A. regulations and practice." 98 Exhibit B 2 is also a similar letter of credit.
Clause 3 of exhibit 28 reads: " Clean on Board" Bills of Lading in complete sets of at least two signed copies to be made out to the order of the Eastern Bank Limited.
or to order blank endorsed and marked by the shipping company 'Freight paid '.
" Exhibit B 29 also contains similar recitals.
It will be seen that though the words "clean on board" bills of lading are not found in exhibit B 1 and B 2, but in the directions given to the Marine Midland Trust Company, New York, the said words are clearly found.
The following relevant recitals are found in a sample of the bills of lading: "Received in apparent good order and condition from British Mercantile Company, Limited, City of Lucknow, to be transported by the good Vessel City of Lucknow to sail from the Port of New York for the East Indies. . . . .
Total 21 packages, said to weigh 9,920 lbs.
said to be marked and numbered as below (weight, gauge, measurement, contents, conditions, quality and value unknown, statements of same herein being made solely on shipper 's declaration and this bill of lading not to be deemed any evidence thereof) to be delivered as provided hereunder (liability as carrier to end without notice) in like good order and condition at Madras or so near thereto as the vessel may safely get unto order of the Mercantile Bank of India, Limited, or to his or their Assigns. . . . . . " The bill of lading gives the number of packages as 21 drums and under the column "description of goods" it states "Polystyrene, Powder".
The Mate 's receipt given to the seller on the arrival of the goods at the wharf for being carried by S.S. City of Lucknow describes them is being packed in refused drums.
The seller gave an indemnity bond to the shipowners and the material part of it reads: "We shall be obliged by your granting us Clean Bills of Lading for the under mentioned goods, Mate 's receipt being claused Reused Drums and in consideration of your so doing we undertake to pay on demand all freight and/or General and particular Average and/or charges there may be thereon, to indemnify you and each of you against all claims and/or demands which may be made against you or any of you in respect of the undermentioned goods and to hold you harmless from any and all consequences that may arise by your granting such clean B/L and acting thereon including losses, damages, costs or any other expenses which you or any of you may sustain or incur by reason of the premises or in any way relating thereto.
" 99 After obtaining the said indemnity bond, the shipowners issued the bill of lading wherein instead of "reused drums" only "drums" was mentioned.
It will be seen from the said documents that according to the indents the seller had to pack the goods in new fibre drums.
that the Bank opened letters of credit for payment against bills of lading, that the Marine Midland Trust Company of New York, the agent of the Eastern Bank Limited, Madras, opened letters of credit whereunder payments could be made only against clean bills of lading, that in the Mate 's receipt given to the seller on the arrival of the goods at the wharf for being carried by S.S. City of Lucknow the drums were described as reused drums and that thereafter, after giving indemnity against any loss to the shipowners, in the bill of lading the drums were not described as reused drums but only as drums.
The learned City Civil Judge on the said documents gave the following findings: .lm0
Thus, if the Bills of Lading were unclean certainly the banks would not have paid the money to the shippers.
In fact it was for the very purpose of enabling the shippers to obtain monies from the banks that they wanted clean Bills of Lading and were prepared to give letters of indemnity to the shipping company.
With such description in the Bills of Lading it is extremely doubtful whether even the under writers would have insured the goods as required under the letters of credit.
If the shippers had not produced either clean Bills of Lading or Certificates of Insurance as required under the letters of credit then certainly the shippers could not have realised the money from the bank.
Thus the second defendants have certainly helped the shippers in this matter by suppressing the real condition of the goods from the Bills of Lading.
" The High Court, agreeing with that finding, held "the shipowner with the knowledge that the bills of lading would be negotiated, gave at the request of the seller clean bills of lading, while as a matter of fact only unclean bills of lading should have been given".
The question is whether on the said facts and the findings given by the courts below the purchaser could maintain an action for deceit against the shipowners.
"Deceit is a false statement of a fact made by a person knowingly or recklessly with the intent that it shall be acted upon by another who does act upon it and thereby suffers damage"; see "A Text book of the Law of Tort" by Winfield; 5th Edn., at 6. 379.
In order to make the shipowners liable for deceit, the first ingredient to be satisfied is that they knowingly issued a clean bill of lading, when it should not have been given, with intent that on that basis payment would be made to the holder of the bill under the letters of credit.
In order to come to a correct conclusion whether the ingredients of the definition of "deceit" have been satisfied in the present case, it is necessary to know the exact scope of the following three terms: "letters of credit", "bill of lading", and "clean bill 100 of lading".
The said three expressions are evolved in the law merchant to facilitate international trade.
The origin and importance of letters of credit in the international commerce has been stated by Denning, L. J., in Pa via & Co., A.P.A. vs, Thurmann Neilsen(1) as follows: "The sale of goods across the world is now usually arranged by means of confirmed credits.
The buyer requests his banker to open a credit in favour of the seller and in pursuance of that request the banker, or his foreign agent, issues a confirmed credit in favour of the seller.
This credit is a promise by the banker to pay money to the seller in return for the shipping documents.
Then the seller, when he presents the docu ments, gets paid the contract price.
The conditions of the credit must be strictly fulfilled, otherwise the seller would not be entitled to draw on it." But when issuing banker has no branch in the relevant country where the beneficiary operates, the services of an intermediary banker may be requisitioned.
The intermediary banker may be asked to advise the beneficiary of the credit or may be asked to add his confirmatory undertaking to it.
In the latter event the beneficiary has the promise of both the bankers.
As letters of credit are issued or opened on conditions on which the request is made, the banker can only negotiate the shipping documents if the conditions are strictly complied with.
If, for instance, the mandate of the buyer is that the banker shall pay on a clean bill of lading, the banker can only honour a clean bill and not an unclean one.
When a purchaser specifically directs the banker to pay against a clean bill of lading, the condition for payment is an obvious one.
But, when a credit calls for bills of lading without any qualification, in normal circumstances it means clean bills of lading: see British Imex Industries Ltd. vs Midland Bank Ltd.(2).
A clean bill of lading is defined in Halsbury 's Laws of Eng land, 3rd Edn., Vol. 2, at p. 218, as "one which does not contain any reservation as to the apparent good order and condition of the goods or the packing".
Carver in his book "British Shipping Laws", Vol. 2, Part 1, in para.
82, explains the expression "good order and condition" thus: "The general statement in the bill of lading that the goods have been shipped "in good order and condition" amounts (if it is unqualified) to an admission by the shipowner that, so far as he and his agents had the opportunity of judging, the goods were so shipped.
If there is no clause or notation in the bill of lading modifying or qualifying the statement that the goods were "shipped in good order and condition" the bill is known as a clean bill of lading.
" Decisions have held that the "condition" refers to external and apparent condition, and quality, to some thing which is usually not (1) , at 88.
(2) , a 551. 101 apparent at all events to an unskilled person: see Compania Naviera Vasconzada vs Churchill & Sim(1).
The words like "quality and measure unknown" found in Compania Naviera Vasconzada vs Churchil & Sim(1) "weght, contents and value unknown" in The Peter der Grosse(1); "weight, quality, condition and measure unknown" in The Tromp(3) were held to be not qualifying words.
In The Restitution Steamship Co., Ltd., vs Sir John Pirie and Co.(1) it was held "if you insert in the margin of a bill of lading weights, quantities, or anything that is not contained in the bill of lading itself, that is not a clean bill of lading".
If such words found a place in the body of a bill of lading, they would not have the effect of making the bill an unclean one, we do not see how their mention in the margin would make a difference.
But we need not express our final opinion thereon, as in the present case the words are found in the body of the bill itself.
But it is said that the omission of the adjective "new" qualifying the word "drums" or indeed the addition of the adjective "old" to qualifying the same would not necessarily make the bill any the less a clean bill, if old drums were suitable vehicles for conveying the articles supplied therein.
The newness or the oldness of the container, the argument proceeded, was not decisive of its suitability, for in the main it depended upon its condition and contents.
This argument as a proposition of law appears to be sound.
In The Tromp(3) potatoes, to the knowledge of the defendants ' master who signed the bill of lading, were shipped in wet bags and in a damaged condition.
The court held that as in the bill of lading the potatoes were described as shipped in good order and condition, which rep resented the external condition of the bags, the defendants were estopped from denying that the bags were dry when shipped.
But it would be noticed that the packing in that case was defective and that was the main cause for the rotting of the potatoes and, therefore, the bill of lading was not a clean one.
In Silver vs Ocean Steamship Co., Ltd.(1), damage was caused to frozen eggs as the can wherein they were packed were gashed, perforated or punctured and the eggs were insufficiently packed.
So the court held that having given a clean bill of lading the shipowner was estopped from proving that the cans were not in apparent good order and condition.
In Brown Jenkinson & Co., Ltd. vs Percy Dalton (London) Ltd.(1) orange juice was shipped in barrels.
Some of the barrels were old and frail and some were leaking.
Yet the shipowners gave a clean bill of lading.
They were estopped from denying that the barrels were in apparent good order and condition.
These decisions establish that good order and condition of packages depends upon the suitability of the packages for the (1)L.R. (2) L.R.[1876]lp.414.
(3)L.R. [1921] p. 337.
(4) (5)L.R.[1930]1 K.B.416.
(6) 102 particular goods or articles packed therein and other relevant circumstances of each case.
What is the real scope and legal effect of the statement in the bill of lading that the goods were shipped in good order and condition? We have already noticed that a bill of lading with such a statement, which does not contain any further reservation or qualification, is known as a clean bill of lading.
The said words are affirmation of a fact.
It is an admission creating an estoppel as between the shipowners and an endorsee, who on the faith of that admission has become endorsee for value of the bill of lading.
The shipowners are estopped from denying that the goods and the packages were not in good order and condition.
The estoppel applies only where the bad condition is discernible on a reasonable examination of the containers, having regard to their contents.
Any qualification of the said affirmation must only refer to the external and apparent condition of the containers: see The Skarp(1), Silver vs Ocean Steamship Co., Ltd.(") Companies Naviera Nazconzada vs Churchill & Sim(1), and The Tromp(4).
It is not necessary to consider the said decisions in detail as the principle is well settled.
Now let us look at the relevant facts of the present case.
It was one of the terms of the contract between the seller and the buyer that the goods should be packed in new fibre drums.
The standard of good order and condition of the packages was agreed upon by the parties to the contract.
The shipowners knew that condition as the Mate 's receipt disclosed the same.
If the drums had been mentioned as old in the bill of lading, the said bill would not have been a clean bill.
Though the apparent condition of the drums was old, the shipowners made an assertion that they were not old drums, i.e., they gave a clean bill.
This representation was obviously intended, in collusion with the seller, to enable him to operate upon the credit with the Bank.
This collusion is also apparent from the indemnity bond they took from the seller to guard themselves against the consequences of the said representation.
All the elements of deceit are present.
The decision in Brown Jenkinson & Co., Ltd. vs Percy Dalton (London) Ltd.(1) is apposite.
There, the defendants had a quantity of orange juice which they wish to ship to Hamburg.
The plaintiffs, as agents of the owners of the vessel on which the orange juice was to be shipped, informed the defendants that the barrels containing the orange juice were old and frail and that some of them were leaking and that a claused bill of lading should be granted.
The defendants required a clean bill of lading, and the shipowners, at the defendants ' request and on a promise that the defendants would give to them an indemnity, signed bills of lading (1)L.R.[1935]134.
(2) (3) (4) (5) 103 stating that the barrels were "shipped in apparent good order and condition".
The defendants, pursuant to their promise, entered into an indemnity whereby they undertook unconditionally to indemnify the master and the owners of the vessel against all losses which might arise from the issue of clean bills of lading in respect of the goods.
The barrels when delivered at Hamburg, were leaking and the shipowners had to make good the loss.
The plaintiffs sued the defendants under the indemnity, the benefit of which had been assigned to them.
The defendants refused to pay, alleging that the contract of indemnity was illegal, because it had as its object the making by the shipowners of a fraudulent misrepresentation.
The court held that the shipowners by making in the bill of lading a representation of fact that they knew to be false with intent that it should be acted upon were committing the tort of deceit, and that the defendants ' promise to indemnify the shipowners against loss resulting from the making of that representation was accordingly unenforceable.
The only difference on facts between that case and the present one is that in that case the barrels were not only old and frail but also some of them were leaking.
But there, as here, the shipowners made a representation of fact which they knew to be false with intent that it should be acted upon.
If so, it follows that the High Court was right in holding that the appellant was liable in damages for the loss incurred by the respondent.
Learned counsel for the appellant sought to raise three fur ther points, namely, (i) the shipowners were not bound by the representation made by the ship 's mate; (ii) the bill of lading was governed by the American law and not by common law; and (iii) the plaintiff buyer, having obtained a decree against the seller in the American court, could not maintain the present suit for damages.
The first point was not raised till now and, therefore, we can.
not permit the learned counsel to raise it for the first time before us.
The second point, namely, what is the American law? is a question of fact.
We have not got sufficient material on the record to know what the American law on the subject is.
We cannot, therefore, permit the appellant to raise this point either.
The third point is also one not pressed in the courts below and, therefore, does not call for our decision.
In the result, the appeal fails and is dismissed with costs.
Appeal dismissed. | The respondent entered into two contracts with the B Company (sellers) of New York to purchase certain chemicals and in pursuance of the contracts placed three indents for the material in December 1950 and January 1951.
The indents specified that the materials were to be packed in new fibre drums.
The respondent thereafter opened and confirmed irrevocable letters of credit to be negotiated by his bankers ' agents in New York.
These agents were authorised to make payment to the sellers against "clean on board" bills of lading.
When the sellers shipped the, goods by one of the appellant 's vessels, the Mate 's receipt given to the sellers on the arrival of the goods at the wharf described them as being packed in refused drums.
The sellers then approached the appellant with a request to grant them a clean bill of lading as against the reference in the Mate 's receipt to refused drums.
Upon the sellers furnishing the appellant with an indemnity bond against any claims etc., the appellant issued them a clean bill of lading which described the drums simply as drums.
The sellers then negotiated the bills of lading against the letters of credit and obtained payment of the contract price.
When the shipment arrived in India it was discovered that the drums contained only coal dust and not the chemicals ordered.
The respondent took appropriate proceedings against the sellers in the American Courts and recovered part of his loss.
He then instituted the present suit against the bank and the appellant.
The Trial Court dismissed the claim against the appellant but decreed the suit in part against the bank.
However, the High Court, on appeal, held that the appellant, with the knowledge that the bills of lading would be negotiated, gave at the request of the seller, clean bills of lading though only unclean bills of lading should have been given.
It therefore held the shipowners responsible for the loss caused to the respondents and allowed a separate appeal filed by the bank.
On appeal to this Court it was contended on behalf of the appellants that while respondent had based his cause of action on a breach of contract, the High Court had given relief founded on deceit.
that under common law or contract the appellant had no duty or obligation to make a statement in the bills of lading that the drums were old ones; and that the bills of lading were clean ones, for the oldness or newness of drums had no real impact on the contents thereof, as both were equally suitable containers for the materials to be supplied.
93 HELD:(i) There was no merit in the contention that the High Court gave relief founded on deceit whereas the respondents cause of action was based on a breach of contract.
It was clear from the pleadings that a claim on the basis of misrepresentation was made in the plaint, denied by the appellant in the written statement and argued in the Courts below.
[96 G H] (ii)The High Court was right in holding that the appellant was liable in damages for the loss incurred by the respondent.
It was one of the terms of the contract between the seller and the buyer that the goods should be placed in new fibre drums.
The standard of good order and condition of the packages was agreed upon by the parties to the contract.
The shipowners knew that condition as disclosed by the Mate 's receipt.
If the drums had been mentioned as old in the bill of lading, that bill would not have been a clean bill.
Though the apparent condition of the drums was old, the shipowners made an assertion that they were not old drums, i.e., they gave a clean bill.
This representation was obviously intended, in collusion with the sellers, to enable them to operate upon the credit with the Bank.
This collusion was also apparent from the indemnity bond they took from the sellers to guard themselves against the consequences of the said representation.
All the elements of deceit were therefore present.
[102 D F] Case law reviewed. |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.