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Civil Appeal No 757 of 1988.
From the Judgment and Order dated 14.8.1986 of the Allahabad High Court in F.A. No. 448 of 1978.
G. Ramaswamy, Additional Solicitor General, Pramod Swarup and P. Parmeshwaran for the Appellants.
R.P. Gupta for the Respondent.
The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J.
Special leave granted.
The appeal is disposed of by the judgment hereunder.
It appears that on or about 18th September, 1969, four agreements were entered into between M/s. L.K. Ahuja & Co. and Union of India, represented by the Executive Engineer, Northern Railway, Allahabad, for the construction of certain quarters.
It was followed by supplementary agreement entered into sometime in 1972.
It is stated that all the four contracts were executed and completed by the first respondent on diverse dates.
The last one was on 30th May, 1971.
Between 29th May, 1972 to 19th June, 1972, the respondent accepted the four final bills and gave no claim declaration in respect of the four contracts.
The respondent wrote a letter to the Additional Chief Engineer, R.E.N.R. Allahabad, stating that Rs.1,91,137 were due on account of the work executed and requested him to refer the dispute to the Arbitrator.
On 4th June, 1976 a reply was sent to the above letter stating that there was no dispute between the parties and, hence, no question of appointment of any Arbitrator arose.
On 13th December, 1976, an application was filed by the respondent in the Court of Civil Judge, Allahabad, for appointment of an Arbitrator under Section 20 of the (hereinafter called `the Act ').
That application was dismissed on 10th February, 1978 as being barred by limitation.
There was an appeal from the said decision to the High Court of Allahabad and the High Court by its impugned Judgment and Order dated 14th August, 1986 allowed the appeal.
Hence, this appeal.
The sole question, involved in this appeal, is whether the High Court was right in dismissing the application.
In matters of this nature, the main question is whether the application under Section 20 was within time.
Though there was some doubt before but now it is well 405 settled in view of the decision of this Court in Kerala State Electricity Board, Trivandrum vs T.P.K.K. Amson & Beson, Kerala, ; that Article 137 would apply to any petition or application filed under any Act to a Civil Court.
The Words "any other application" this Court held under Article 137, cannot be read on the principle of ejusdem generis to be applications under the Civil Procedure Code other than those mentioned in part I of the third division.
The aforesaid view has to be harmonised with the view of this Court in Wazirchand Mahajan & Anr.
vs Union of India, ; There this Court found that the second appellant had purchased from the Himachal Pradesh Government the right to extract and collect certain medicinal herbs from the forests of Chamba District.
The period of agreement was one year from September 1, 1960.
Under an arbitration clause in the agreement all disputes between the parties were to be referred to the Deputy Commissioner, Mandi District Himachal Pradesh.
The second appellant transferred all his rights under the agreement to the first appellant with the consent of the State of Himachal Pradesh.
Disputes arose between the parties in October, 1950.
On May 30, 1952 the appellants addressed a letter to the Chief Conservator of Forests, Himachal Pradesh requiring that officer to submit the matters in difference to the arbitration of the Deputy Commissioner, Mandi Distt.
By a letter dated June 23, 1952, the Chief Conservator declined to agree to a reference contending that the matters desired to be referred were outside the arbitration clause.
On June 22, 1955 the appellants applied to the District Court of Chamba for an order that the agreement be filed in Court and the disputes between them and the State be referred to the sole arbitration of the Deputy Commissioner of Mandi Distt.
The State of Himachal Pradesh contended, inter alia that the application for filing the arbitration agreement was barred by law of limitation as the right to apply if any arose in 1950 and not in June, 1952 as alleged.
The Court of First Instance held in favour of the appellants.
In appeal the Judicial Commissioner reversed the order of the Trial Court.
In the view of the Judicial Commissioner an application for filing an arbitration agreement under Section 20 of the Act was governed by Article 181 of the Limitation Act, 1908 and since the period of three years prescribed thereby commenced to run from the date on which the differences arose between the parties from the month of September, 1950 and in any case on September 1, 1951, the application of the appellants was held to be barred.
The Judicial Commissioner was in error, hence, according to this Court in rejecting the application of the appellants for filing the arbitration agreement as barred under Article 181 of the Limitation 406 Act.
It was reiterated that the terms of Article 181, though general and apparently not restricted to applications under the Code of Civil Procedure have always been interpreted as so restricted.
In the aforesaid background this Court directed the arbitration agreement to be filed.
This question was again considered by this Court in Mohd. Usman Military Contractor, Jhansi vs Union of India, Ministry of Defence, There the appellant had entered into a contract with the Government of India.
The contract contained an arbitration clause.
For certain supplies made under the contract the appellant made representations to the Government for payment and for arbitration of disputes.
On or about July 10, 1958 Government refused to refer the matter for arbitration.
On July 11, 1961 the appellant filed an application in the Court of District Judge under Sections 8 & 20 of the Act, for filing the arbitration agreement and for an order of reference of the disputes to an arbitrator appointed by the Court.
The respondent contended that the application was barred by Limitation.
The learned District Judge allowed the application, holding that there was no limitation for making an application under Sections 8 & 20 of the Act.
The defendant 's appeal was dismissed by the High Court as incompetent insofar as it challenged the order under Section 8 but was allowed insofar as it challenged the order under Section 20 of the Act.
The High Court held that an application under Section 20 was governed by Article 181 of the Indian Limitation Act, 1908.
In coming to this conclusion the High Court took into account the settled judicial view that the operation of Article 181 was limited to applications under the Code of Civil Procedure and reasoned that Article 181 should be construed as if the words `under the Code ' were added in it.
The repealed para 17 of the second schedule to the Code and re enacted it in Section 70 with minor modifications.
That being so Section 8(1) of the applied and the implied reference in Article 181 to para 17 of the second schedule to the Code should be construed as a reference to Section 20 of the Act.
In the appeal by certificate this Court held that by the the Legislature amended Articles 158 and 178 of the Limitation Act and made them applicable to the relevant proceedings under the but no similar change was made in Article 181.
It was manifest that save as provided in Articles 158 & 178 there would not be any limitation for other application.
In the circumstances the Court found it impossible to construe the implied reference in Article 181 as a reference to the , or to hold that Article 181 applied to applications under that Act.
In the premises the Court held that an application under Sections 8 & 20 of 407 the was not governed by Article 181 of the Limitation Act.
In that view of the matter the application was held to be barred by limitation.
The question is now concluded as mentioned hereinbefore vide this Court 's decision in Kerala State Electricity Board, Trivandrum vs T.P.K.K. Amsom & Besom, (supra).
It appears that these questions were discussed in the decision of the Calcutta High Court in Jiwnani Engineering Works P. Ltd. vs Union of India, where (one of us Sabyasachi Mukharji) was a party and which held after discussing all these authorities the question whether the claim sought to be raised was barred by limitation or not, was not relevant for an Order under Section 20 of the Act.
Therefore, there are two aspects.
One is whether the claim made in the arbitration is barred by limitation under the relevant provisions of the Limitation Act and secondly, whether the claim made for application under Section 20 is barred.
In order to be a valid claim for reference under Section 20 of the , it is necessary that there should be an arbitration agreement and secondly differences must arise to which the agreement in question applied and, thirdly, that must be within time as stipulated in Section 20 of the Act.
In the instant case it appears that there was an arbitration agreement as found by the High Court covering the disputes.
It is also obvious that differences existed.
There was an assertion of claim and denial of the same.
It is stated in the judgment of the High Court that under the agreement the appellants had claimed a sum of Rs. 1,91,636 and, as such, the dispute was liable to be referred to arbitration in terms of the agreements entered into between the parties.
Further, for the purpose of getting an arbitrator appointed, a letter dated June 4, 1976 was sent by the appellant to the Additional Chief Engineer, Allahabad.
The respondent did not take any step in time.
The appellant filed an application on 4.6.1976 under Section 20 of the Act.
It was contended before the learned Trial Judge that the work under all the four contracts had been fully executed by the appellant on different dates and the respondents claimed that the appellant had accepted full and final payment of the agreements which had been executed by it and no claim declaration in respect of the same had been given by the appellant.
It was, therefore, submitted that since there was no dispute, the application filed under Section 20 of the Act, was misconceived.
The Trial Court held that the Court had no jurisdiction under Section 20 of the Act.
The respondent came up in appeal before the High Court.
The question, therefore, was whether there was a valid claim under section 20 of the Act to be referred in accordance with law.
408 In view of the well settled principles we are of the view that it will be entirely a wrong to mix up the two aspects, namely, whether there was any valid claim for reference under Section 20 of the Act and, secondly, whether the claim to be adjudicated by the arbitrator, was barred by lapse of time.
The second is a matter which the arbitrator would decide unless, however, if on admitted facts a claim is found at the time of making an Order under Section 20 of the , to be barred by limitation.
In order to be entitled to ask for a reference under Section 20 of the Act, there must be an entitlement to money and a difference or dispute in respect of the same.
It is true that on completion of the work, right to get payment would normally arise and it is also true that on settlement of the final bill, the right to get further payment gets weakened but the claim subsists and whether it does subsist, is a matter which is arbitrable.
In this case the claim for reference was made within three years commencing from April 16, 1976 and the application was filed on December 18, 1976.
We are, therefore, of the view that the High Court was right in this case.
See in this connection the observations of this Court in Major (Retd.) Inder Singh Rekhi vs D.D.A., ; In the aforesaid view of the matter this appeal must fail and is accordingly dismissed.
The costs of this appeal would be the costs in the arbitration proceedings.
S.L. Appeal dismissed.
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% Four agreements were entered into between the respondent and the appellant Union of India through the Executive Engineer, Northern Railway, followed by a supplementary agreement.
All the four contracts were executed and completed by the respondent on diverse dates.
The respondent accepted four final bills and gave no claim declaration in respect of the four contracts.
Thereafter, the respondent wrote to the Additional Chief Engineer, R.E.N.R., that Rs.1,91,137 were due on account of work executed and asked for a reference of the dispute to the Arbitrator.
A reply was sent to the respondent that there was no dispute between the parties and no question of appointment of any Arbitrator arose.
The respondent then filed an application in the Court of Civil Judge for the appointment of an Arbitrator under Section 20 of the (`the Act ').
The application was dismissed as being barred by limitation.
An appeal from the decision of Civil Judge was allowed by the High Court.
The appellants then moved this Court for relief by this appeal.
Dismissing the appeal, the Court, ^ HELD: The sole question involved in this appeal was whether the Civil Judge was right in dismissing the application and whether the application under section 20 was within time.
[404H] It is well settled in view of the decision of this Court in Kerala State Electricity Board, Trivendrum vs T.P.K.K. Amsom and Besom, Kerala, ; that Article 137 would apply to any petition or application filed under any Act in a Civil Court.
The words "any other application", this Court held under Article 137, cannot be read on the principle of ejusdem generis to be applications under the Civil Procedure Code other than those mentioned in Part I of the third division.
[405A B] 403 There are two aspects of the matter.
One is whether the claim made in the arbitration is barred by limitation under the relevant provisions of the limitation Act, and secondly, whether the claim made for application under section 20 is barred.
To be a valid claim for reference under section 20 of the , it is necessary that there should be an arbitration agreement and secondly, differences must arise to which the agreement in question applied, and thirdly, that must be within time as stipulated in section 20 of the Act.
In this case, there was an arbitration agreement as found by the High Court, covering the disputes.
It was also obvious that differences had existed.
There was assertion of claim and denial of it.
As such, the dispute was liable to be referred to arbitration in terms of the agreements between the parties.
The question was whether there was a valid claim under section 20 of the Act to be referred in accordance with law.
[407C E, G H] In view of the well settled principles, it would be entirely wrong to mix up the two aspects, namely, whether there was any valid claim for reference under Section 20 of the Act and, secondly, whether the claim to be adjudicated by the arbitrator was barred by lapse of time.
The second is a matter which the arbitrator would decide unless on admitted facts a claim is found at the time of making an order under Section 20 of the Act, to be barred by time.
To be entitled to ask for a reference under section 20 of the Act, there must be entitlement to money and a difference or a dispute in respect of the same.
It is true that on completion of work the right to get payment would normally arise and it is also true that on settlement of the final bill, the right to get further payment gets weakened but the claim subsists, and whether it does subsist is a matter which is arbitrable.
In this case, the claim for reference was made within three years commencing from April 16, 1976, and the application was filed on December 18, 1976.
[408A D] The High Court was right in this case.
See in this connection the observations of this Court in Major (Retd.) Inder Singh Rekhi vs D.D.A., ; The appeal failed.
[408D] Kerala State Electricity Board, Trivandrum vs T.P.K.K. Amsom and Besom, Kerala, ; ; Wazirchand Mahajan & Anr.
vs Union of India, ; ; Mohd. Usman Military Contractor, Jhansi vs Union of India, Ministry of Defence, ; Jiwnani Engineering Works P. Ltd. vs Union of India, and Major (Retd.) Inder Singh Rekhi vs D.D.A., ; referred to. 404
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Civil Appeal No. 2295 of 1968.
From the Judgment and order dated 3 2 1967 of the Madhya Pradesh High Court in Misc.
Petition No. 26 of 1966.
Harbans Singh for the Appellant.
Raghunath Singh and Manojswarup for Respondent No.1.
S.K. Gambhir for Respondents 3 5 and 7.
U. P. Lalit,B.P.Muheshwari and Suresh Sethi for Respondent No. 6.
The Judgment of the Court was delivered by UNTWALTA, J.
In this appeal by certificate granted by the Madhya Pradesh High Court the question of law which Lalls for our determination is whether conferral of Bhumiswalnli rights on Shri Khushi Lal respondent No. 1 in respect of the lands in question in accordance with Section 190 of the Madhya Pradesh Land Revenue Code, 1959, hereinafter referred to as the M.P. Code of 1959, by the Revenue Authorities is correct and sustainable.
Maulana Shamsuddin, the sole appellant in this appeal, was a Muafidar in the erstwhile State of Bhopal of the disputed lands in accordance with the Bhopal State Land Revenue Act, 1932 (for brevity, the Bhopal Act of 1932) .
The first respondent claimed to be a Shikmi of the appellant in respect of the lands in question.
His case was that the appellant was the occupant of the lands within the meaning of the Bhopal Act of 1932.
On the coming into force of the M.P. Code of 1959.
the appellant became a Bhumiswami under clause (c) of section 158 and the respondent became an occupancy tenant under section 185 (1)(i)(iv)(b).Thus he became entitled to conferment of Bhumiswami rights under Section 490.
He applied before the Tahsildar, Huzur, respondent No. 5 for mutation of his name as a Bhumiswami in the Revenue records.
The Tahsildar by his order dated the 24th June, 1963 directed Khushi Lal to deposit compensation equivalent to 15 times of the land revenue on the payment of which his name was to be recorded as a Bhumiswami of the holdings.
It appears his name was so recorded on the deposit of the compensation money.
The appellant filed an appeal before the Sub Divisional officers Huzur, respondent No. 4 from the order of the Tahsildar.
His appeal was dismissed by the Sub Divisional officer on the 12th of December, 1963.
The appellant failed before the Additional Commissioner, Bhopal, respondent No. 3 on the dismissal of his second appeal on the 25th August 1996.
He went in revision before the Board of Revenue, (respondent No. 2 ) .
The revision was allowed on the 6th of July, 1965.
The 584 Board held that the appellant was not an occupant within the meaning of Section 2(15) of the Bhopal Act of 1932 and consequently the first respondent was not a Shikmi under the said Act.
He did not become an occupancy tenant under the M.P. Code of 1959 and, therefore, conferral of Bhumiswami rights on him was erroneous in law.
The first respondent filed a Writ Petition in the High Court and succeeded there.
The High Court held that the Board was not right in its view of the law.
The appellant was an occupant and the respondent No. 1 was a sub tenant (Shikmi) under the Bhopal Act of 1932.
Conscquently he became an occupancy tenant entitled to conferment of Bhumiswami rights under the M.P. Code of 1959.
The appellant has preferred this appeal in this Court to challenge the decision of the High Court and for restoration of the order of the Board of Revenue.
Mr. Harbans Singh, appearing for the appellant, Advanced a very fair and able argument to advocate his cause.
He could now and did not dispute that if the appellant was an occupant, the first respondent was a Shikmi under the Bhopal Act of l932 and if that be so then the order of the High Court is unassailable.
But he vehemently contended that the appellant was not an occupant.
Learned counsel for the respondents controverted his argument.
Prima facie the argument, as presented, for the appellant appeared to have substance and force but on a close scrutiny we had no difficulty in rejecting it.
Section 2 of the Bhopal Act of 1932 is the definition section and as usual at the outset it uses the phrase "in this Act, unless there is nothing repugnant in the subject or context,".
Sub section (5) defines "Alienated land" to mean "land in respect of which, pursuant to a grant made by His Highness the Ruler, Government has, in whole or in part, assigned or relinquished its right to receive land revenue, and includes such village waste and forest as are mentioned in the sanad of the grant " Thereafter the sub section says: "If the land revenue is assigned the person to whom such assignment is made is called a "Jagirdar".
If the land revenue is relinquished the person in whose favour such relinquishment is made is called "Muafidar";".
Subsection ( l S) provides: " "occupant" means a person who holds land direct from the Government or would do so but for the right of collecting land revenue having been assigned or relinquished.
" It would thus be seen that if pursuant to the grant made by His Highness the Ruler of Bhopal, Government 's right to receive land revenue was assigned to the grantee then he was called a Jagirdar and 585 it was relinquished then the person in whose favour such relinquishment was made was called Muafidar.
Under the first part of the definition of "occupant" given in sub section (IS) a person who holds land direct from Government would be an occupant and being not a person in whose favour the right to receive land revenue has either been assigned or relinquished will be required to pay to the Government land revenue or rent.
We are using both the words revenue ' and 'rent ' on the assumption that such an occupant being neither a Jagirdar nor a Muafidar would be required to pay some money to the Government for being in occupation of the land.
Under the second part of the definition a Jagirdar or a Muafidar would also be holding land direct from Government but because the right of collecting land revenue has either been assigned or relinquished, strictly speaking, he does not hold land direct from the Government in the sense of paying any land revenue or rent to it because the Government has parted with the right to collect land revenue from him.
We are of the opinion, in agreement with the High Court, that on a careful analysis of the definition of the term "occupant" in section 2(15), it is legitimate to conclude that even a Jagirdar or a Muafidar is an occupant.
He holds land under the Government; on the resumption of the Jagir or the Muafirights by the Government the land reverts back to it.
Payment of land revenue or rent for holding land under the Government was not a sine qua non for making the holder of the land an occupant.
"Rent" is defined in sub section (19) of Section 2 of the Bhopal Act of 1932 to mean "whatever is payable to an occupant in money, kind or service by a shikmi for the right to use land.
" This would show that strictly speaking a person holding the land direct from the Government within the meaning of the first part of the definition in sub section (IS) is not to pay any money to the Government in the shape of rent but what he will be required to pay would be the land revenue.
But a Jagirdar or a Muafidar holding the land under the Government is not required to pay any land revenue.
sub section (21) defines "Shikmi" to mean "a person who holds land from an occupant and is, or but for a contract, would be liable to pay rent for such land to that occupant, but does not include a mortgagee or a person holding land directly from Government.
" Respondent No. 1 was inducted upon the land by the appellant in the year 1958.
Since then he had been cultivating the land.
He could not but be a Shikmi within the meaning of sub section (21 ) .
Mr. Harbans Singh was not right in saying that he was a mere cultivator and was cultivating the land not as a sub tenant or a Shikmi but must be doing so under some special arrangement of cultivating the land as a servant of the appellant or the like.
There is no warrant for such a contention.
586 Section 46 of the Bhopal Act of 1932 runs thus .
"(l) All land to whatever purpose applied and wherever situate, is liable to the payment of revenue to the Government, except such land as has been wholly exempted from such liability by a special grant on His Highness the Ruler or by a contract with the Government, or under the provisions of any law or rule for the time being in force.
(2) Such revenue is called "Land Revenue"; and that term includes moneys payable to the Government for land, notwithstanding that such moneys may be described as premium, rent, quit rent, or in any other manner in any enactment, rule, contract or deed." This section lends support to the view which we have expressed above that a person holding land directly under the Government and not being a Jagirdar or a Muafidar will be liable to pay land revenue to the Government in whatever name the payment of money may be described such as premium, rent, quit rent etc.
The High Court in its judgment has adverted to some sections contained in Chapter VI of the Bhopal Act of 1932.
Section 51 provided for disposal of unoccupied land.
Sub section (1) of section 52 says that a person acquiring the right to occupy land under section 51 will be called an occupant of such land and under sub section (2) all persons who, prior to the commencement of this Act, had been entered in settlement records as responsible for the payment of land revenue to the Government, or who, but for a special arrangement, would have been to responsible, would be deemed to be occupants within the meaning of Section 52.
In our opinion this special arrangement mentioned in sub section (2) cannot be squarely equated with the assignment or relinquishment of the right to receive land revenue envisaged by the Bhopal Act of 1932.
We do not feel inclined to agree with the High Court that the appellant became occupant under section 52(2) of the Bhopal Act of 1932 because he was a person who was entered into settlementt records prior to the coming into force of that Act.
Firstly it is not clear whether the facts so stated in the judgment of the High Court are (quite correct, and, secondly, it is admitted on all hands that the appellant was a Muafidar and, therefore, in our opinion he was an occupant within the meaning of Section 2(15).
Section 54 provided that the rights of an occupant, meaning thereby the occupant as mentioned.
in Section 52, were to be permanent, transferable and heritable.
Ordinarily and generally the rights of a Jagirdar 587 or a Muafidar being occupants within the meaning of Section 2(15) A read with Section 167 were neither transferable nor heritable and in that sense the rights were not permanent.
In our opinion, therefore, the type of occupant who is dealt with in Chapter VI of the Bhopal Act of 1932 is not the type of occupant having the same kind of incidence as defincd in Section 2(15).
As we have already indicated it is a well established principle of law that a particular term defined in the definition section is subject to anything repugnant in the contact of the other provisions of the Statute.
The provisions of Chapter VI being at variance with the definition clause cannot make the occupant described in that Chapter the same occupant as defined in Section 2(15).
Our attention was drawn by the learned counsel for the appellant to Section 167 of the Bhopal Act of 1932 dealing With the restriction ill the rights of the Jagirdars and Muafidar to transfer such rights or create encumbrances on them.
According to the said Section no Jagirdar or Muafidar could "transfer his rights as Jagirdar or muafidar, or, except for such period as he is in possession of his jagir or muafi create an encumbrance on the income thereof." But inducting a person as Shikmi on the land was not prohibited under Section 167.
On the other hand, Section 194 provide(l that all occupant could make a lease of his holding and under certain circumstances it could n(lt be for a term of more than 12 years.
It was then argued that the right of a Muafidar being in the nature of a life grant was valid only for the Life time of the Muafidar.
So the Muafidar could not induct a person as Shikmi who ultimately could become an occupancy tenant entitled to conferment of Bhumisavami rights later on.
This argument has to be staled merely to be rejected.
It may well be that the right of a Shikmi would not have lasted beyond the duration of the right of the Muafidar.
But then, his rights were enlarged by operation or the welfare legislation enacted by the State Legislature for the benefit of the cultivators of the soil in the year 1959.
Section 185(1)(iv)(b) of the M.P. Code of 1959 says: "(1) Every person who at the coming into force of this Code holds (iv) in the Bhopal region (b) any land as a shikmi from an occupant as defined in the Bhopal State Land Revenue Act, 1932 (IV of 1932): 588 shall be called an occupancy tenant and shall have all the rights and be subject to all the liabilities conferred or imposed upon an occupancy tenant by or under this Code.
" As held by us above the appellant was an occupant as defined in the Bhopal Act of 1932 and thus under clause (c) of Section 158 on the coming into force of the Code he became a Bhumiswami.
But his Bhumiswami rights were liable to be conferred, under certain conditions, on the occupancy tenant under Section 190.
As a matter of fact in accordance with the said provision the Bhumiswami rights were conferred on respondent No. 1 on payment of compensation being in the amount of 15 times of the land revenue for payment to the appellant.
Our attention was drawn to a recital of facts in the Statement of the case of some of the respondents that the appellant had withdrawn the said amount of compensation.
But we are not resting our judgment on that ground as in our opinion, whether he has withdrawn the amount of compensation or not, he cannot challenge the conferment of his Bhumiswami rights on respondent No. l. which have been validly and legally conferred.
We may now briefly deal with a few more short submissions of the appellant.
In section 185(1)(iv)(a) of the M.P. Code of 1959 it is provided that if a person who at the time of coming into force of tba said Code was holding any land as a sub tenant as defined in the Bhopal State Sub tenants Protection Act, 1952 shall also be called an occupancy tenant.
A copy of this Act could not be made available for our perusal.
But what we get from the order of the Board of Revenue is that a Sub tenant as defined in the Bhopal Act of 1952 means a person who holds a parcel of khud kasta land from a Jagirdar.
Along with this our attention was also drawn to the Bhopal State Sub Tenants (of occupants) Protection Act.
In this Act, section 2(b) runs thus: "The expression "occupant" shall have the same meaning as in the Bhopal State Land Revenue Act, 1932 (IV of 1932) and, for the purposes of this Act, it should also include a muafidar, as defined in Bhopal State Land Revenue Act, 1932 (IV of 1932)".
In other sections of the said Act protection against ejectment was given to the Shikmis.
The argument was that protection to the sub tenants of Jagirdars was given in the Bhopal Act of 1952 and protection to such persons was given in case of sub tenants of Muafidar under the Bhopal Act of 1954 by including Muafidar in the expression 'occupant ' occurring in the said Act.
Counsel, therefore, submitted that if the 589 term 'occupant ' in the Bhopal Act of 1932 had included a Muafidar then there was no necessity of expressly and separately including a Muafidar in the definition of the said expression.
in the Act of 1954.
In our opinion this argument has no substance.
It may be by way of abundant precaution or for putting the matter beyond any shadow of doubt that the expression 'occupant ' was defined in a comprehensive manner in the Bhopal Act of 1954.
Section 3 of the said Act shows that even a Muafidar could sub let a land to a person and induct hi as a Shikmi prior to the coming into force of this Act.
Such a Shikmi got the protection against ejectment by operation of law engrafted in the Bhopal Act of 1954.
After the passing of this Act? he no longer could be said to be a Shikmi only during the life time of the Muafidar but was so even beyond it.
The counsel for the appellant called our attention to a decision of this Court in Begum Suriya Rashid and others vs Stale of Andhra Pradesh(l).
In this case it was held that the muafi grants to the predecessor in interest of the appellants before the Supreme Court were not hereditary or perpetual and the appellants could not claim title as Muafidars even though some contradictory arabic expressions had keen used in the document of grant.
This decision does not advance the case of the appellant any further.
For the reasons stated above, we dismiss this appeal but make no order as to costs.
M.R. Appeal dismissed.
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The appellant was a Muafidar of the disputed land, in the erstwhile Bhopal State, while the first respondent cultivated the said lands as his tenant.
When the M. P. L. R. Code, 1959, came into force, the first respondent claimed that the appellant, as the occupant of the lands within the meaning of S.2 (15) of the Bhopal State Revenue Act, 1932, had become a Bhumiswami u/s 158(C) of the Code of l959, while he himself had become an occupancy tenant u/s 185(1)(iv)(b) and as such, was entitled to conferment of Bhumiswami rights u/s 190 of the same Code.
He ' applied to the Tahsildar, Huzur, for mutation of his name as a Bhumiswarni in the Revenue records.
and was directed to deposit compensation equivalent to 15 times of the land revenue.
Thereafter his name was recorded as a Bhumiswami of the holdings, on the deposit of the compensation money.
The Muafidar appellant 's appeal to the sub Divisional officer, against the Tahsildar 's order, and a second appeal to the additional Commissioner.
were dismissed, but the Board of Revenue allowed his revision application holding that he was not an occupant within the meaning of section 2(15) of the Bop Act of ]932.
and that consequently the first respondent was neither a Chime, nor did he become an occupancy tenant under the M.P. Code of 1959, and therefore conferment of Bhumiswami rights on him was erroneous in law.
, The first respondent filed a writ petition against the Revenue Board 's order, which was allowed by the High Court.
Dismissing the appeal by certificate, the Court ^ HELD: 1.
Under section 2(15) of the Bhopal State Land Revenue Act 1932, a person who holds and direct under the Government would be an ` 'occupant", in whatever name the payment of money may be described such as premium, rent, quit rent etc.
On a careful analysis of the definition, it is legitimate to conclude that a Jagirdar or Muafidar is an occupant.
He holds lands under the Government.
On the resumption of the Jagir or the Muafi rights by the Government, the land reverts back to it.
Payment of land revenue or rent for holding land under the Government was not a sine qua non for making the holder of the land an revenue.
[585 A D, 586 D] Begum Suriya Rashid and Ors.
vs State of Madhya Pradesh [19691] 1 SCR 869 held inapplicable.
The rights of Shikmis were enlarged by operation of tile Madhya Pradesh Land Revenue Code.
Under section 185(l)(iv)(b) a Shikmi became an occupancy tenant, while u/s 190, as an occupancy tenant, he became entitled, under certain conditions, to conferment of Bhumiswami rights of the occupant of he holdings.
A B] 583
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Civil Appeal No. 82 of 1971.
From Judgment and Decree dated 26.2.65 of Allahabad High Court in first appeal No. 457 of 1952.
J.P. Goyal and S.K. Jain for the appellants.
V.C. Mahajan and A. Subhashini for the respondents.
The Judgement of the Court was delivered by SEN, J.
This appeal on certificate brought from the judgment and decree of the Allahabad High Court dated February 26, 1965 reversing the judgment and decree of the Civil Judge, Agra dated August 25, 1952 and dismissing the plaintiffs ' suit for recovery of Rs. 26,000 raises a question of some importance upon s.80 of the Code of Civil Procedure, 1908.
The facts giving rise to this appeal may be shortly stated.
On November 12, 1949, the plaintiffs Ghanshyam Dass and his two minor brothers Shree Ram and Mohan Lal brought the suit out of which this appeal arises, in the Court of the Civil Judge, Agra for recovery of a sum of Rs. 26,000 against the Dominion of India through the Defence Secretary, New Delhi.
It was pleaded that their late father Seth Lachman Dass Gupta entered into a contract with the Governor General in Council for the supply of charcoal to the Military Supply Depot at Agra during the period from April 1, 1943 to March, 31, 1944.
In pursuance thereof, he made necessary supplies and received payments for the same at the contractual rates from time to time.
It was pleaded that tho contract contained an escalation clause viz. clause 8, to the effect that in case the price of charcoal increased by more than 10% of the stipulated rate during the subsistence of the contract, the contractor would be entitled to the price at the higher rate.
It was alleged that from 232 the date of the contract, the rate of charcoal went up continuously to 44.8% in July, August and September 1943, 93.1% in October November and December 1943 and 82.7% in January, February and March 1944.
Accordingly Seth Lachman Dass made a demand for payment of price at the increased rate.
The military authorities paid at the enhanced rate for part of the supplies while for the rest they refused to pay at more than the contractual rate.
Seth Lachman Dass served a notice exhibit A 8 on the Dominion of India through the Defence Secretary under s.80 of the Code of Civil Procedure 1908.
lt appears that before his death,.
On or about September 15, 1948 he received a letter from the military authorities rejecting his claim for payments at the enhanced rate but before he could institute any suit he died on October 28, 1949.
Thereafter, on November 12, 1949 the plaintiffs who ale his three sons, brought the suit as his legal heirs and successors claiming the amount.
The defendants contested the claim inter alia on the ground that the notice exhibit A 8 given by Seth Lachman Dass could not inure for the benefit of the plaintiffs and therefore the suit was bad for want of a notice under s.80 of the Code.
The learned Civil Judge, however, held that no further notice under s.80 was necessary as the notice exhibit A 8 served by the plaintiffs ' father Seth Lachman Dass must enure for their benefit.
He found that the plaintiffs were entitled in terms of clause 8 of the contract to receive a sum of Rs. 20,710.50 p. being the difference between the enhanced rate and the contractual rate for the supplies paid for and accordingly decreed the plaintiffs claim to that extent.
But on appeal the High Court, his decision on the point was reversed upon the view that the notice exhibit A 8 given by the plaintiffs ' father was insufficient and was nota valid notice under s.80 of the Code of Civil Procedure insofar as the plaintiffs were concerned.
The short question involved in this appeal is whether the notice exhibit A 8 given by the plaintiffs ' father Seth Lachman Dass Gupta before his death under s.80 of the Code of Civil Procedure, 1908 would enure for the benefit of the plaintiffs.
Section 80 of the Code as it stood on the date of the institution of the suit, insofar as material, is reproduced below: "80.
Notice: No suit shall be instituted against (the Government) or against a public officer in respect of any act purporting to be done by such public officer in his official 233 capacity, until the expiration of two months next after notice in writing has been delivered to, or left at the office of (a) in the case of suit against the Central Government . . . a Secretary to that Government: ** ** ** ** and, in the case of a public officer, delivered to him or left at his office, stating the cause of action, the name, description and place of residence of the plaintiff and the relief which he claims; and the plaint shall contain a statement that such notice has been so delivered or left.
" In the celebrated case of Bhagchand Dagadusa & Ors.
vs Secretary of State for India in Council & Ors., the Judicial Committee of the Privy Council held that this section is express, explicit an mandatory and it admits of no implications or exceptions.
The words of Viscount Summer delivering the judgment of the Privy Council have become classical : "Section 80 is express, explicit and mandatory, and it admits of implications or exceptions.
A suit in which (inter alia) an injunction is prayed still "a suit" within the words of the section, and to read any qualification into it is an encroachment on the function of legislation.
Considering how long these and similar words have been read throughout most of the Courts in India in their literal sense, it is reasonable to suppose that the section has not been found to work injustice, but, if this is not so, it is a matter to be rectified by an amending Act.
The Privy Council rejected the contention put forward before them that the section deals with mere procedure and held that the requirements of s.80 are to be strictly complied with and are applicable to all forms of action and all kinds of relief.
It further held that s.80 imposes a statutory and unqualified obligation upon the Court and in the absence of compliance with s.80, the suit was not maintainable, either as to the declaration sought or injunction prayed for.
234 Earlier, in some cases, a liberal construction was put upon the section and it was held that a notice is sufficient if it substantially fulfils its objection in informing the parties concerned of the nature of the suit to be filed, and that a notice is not invalid merely because it is given by two out of three plaintiffs But since the Privy Council judgment in Bhagchand 's case, supra, strict compliance with the terms of s.80 has been enforced and a notice given by one of two plaintiffs has been held to be insufficient.
Again, in a case where the plain tiffs ' father gave notice and then plaintiffs filed a suit after the father 's death, the notice given by the father in respect of the same cause of action was held insufficient : Mahadev Dattatraya Rajarshi vs Secretary of State for India following Buchan Singh vs Secretary of State.
It is plain from the terms of s.80 that the notice must fulfil the requirements set out therein.
It is essential that the notice must state the names, descriptions and places of residence of all the plaintiffs.
A notice must be such as to enable the addressee or the recipient to indentify the claimant.
In Vallayan Chettiar & ors.
vs The Government of the Province of Madras & Anr.
Lord Sumner delivering the judgment of the Privy Council referred to the observations of Lord Sumner in Bhagchand 's case that s.80 is explicit and mandatory and admits of no implications or exemptions, and observed that: "There should be identity of the person who issues the notice and who brings the suit.
To hold otherwise would be to admit an implication or exception for which there is no justification. " .
There, the question was whether a suit brought by two plaintiffs was competent when notice under s.80 was given by only one of them.
The Privy Council having regard to the mandatory requirements of s.80 of the Code held that there was no valid notice and accordingly upheld the judgment of the High Court dismissing the plaintiff 's suit.
So also in Government of the Province Bombay vs Pestonji Ardeshir Wadia & Ors., the Privy Council reiterated the same principles where no notice had been served under s.80 specify 235 ing the names and addresses of all the trustees and therefore the provisions of the section had not been complied with and it was accordingly held that the suit was incompetent.
As to the requirement that the notice must state the cause of action and the reliefs claimed, there is a large body of decisions laying down that a notice under the section should be held to be sufficient if it substantially fulfils its object in informing the parties concerned of the nature of the suit to be filed.
In consonance with this view, this Court in Dhian Singh Sobha Singh & Anr.
vs Union of India, Union of India vs Jeewan Ram, State of Madras vs C.P. Agencies and Amar Nath vs Union of India has held that though the terms of the section have to be strictly complied with, that does not mean that the notice should be scrutinized in a pedantic manner or in a manner divorced from common sense.
On this principle, it has been held that notice which states the cause of action and the reliefs described in the annexed copy of the plaint (which forms part of the notice) though defective in form, complies substantially with the section.
The point to be considered is whether the notice gives sufficient information as to the nature of the claim such as would enable the recipient to avert the litigation.
The relevant passage from the judgment in Dhian Singh Sobha Singh 's case, supra, is set out below: "We are constrained to observe that the approach of the High Court to this question was not well founded.
The Privy Council no doubt laid down in Bhugchand Dagadusa vs Secretary of State that the terms of this section should be strictly complied with.
That does not however mean that the terms of the notice should be scrutinized in a pedantic manner or in a manner completely divorced from common sense.
As was stated by Pollock C.B. in Jones vs Nicholls ; "We must import a little common sense into notices of this kind. ' ' Beaumont C.J. also observed in Chandu Lal Vadilal vs Government of Bombay, ILR "one must construe section 80 with some regard to common sense and to the object with which it appears to have been passed 236 The question as to whether notice under s.80 was invalid for want of identity of the plaintiffs directly arose in the case of S.N. Dutt vs Union of India.
There, a notice was served by the appellant who was the sole proprietor of a business styled S.N. Dutt & Co., (in the name of S.N. Dutt & Co.) and thereafter he filed a suit against the Union of India describing the plaintiff as "Surendra Nath Dutt sole proprietor of a business carried on under the name and style of S.N. Dutt & Co.".
This Court upheld the decision of the Calcutta High Court dismissing the plaintiff 's suit holding that the person who issued the notice was not the same as the person who filed the suit.
The contention that the appellant was carrying on business under an assumed name and therefore the notice was valid as S.N. Dutt & Co. was merely the name and style of the business which he was carrying on, was rejected.
The Court held that since no suit could be filed by S.N. Dutt & Co in that name as it was not a partnership firm, it could not give a valid and legal notice in that name, and a valid notice could only be given in the name of S.N. Dutt.
The decision merely reiterates the rule laid down by this Court in Bhagchand that 'section 80, according to its plain meaning, requires that there should be identity of the person who gives the notice with the person who brings the suit".
The Court distinguished the decisions in Dhian Singh Sobha Singh and C.P. Agencies on the ground that the Court was dealing with defect in describing the cause of action and the relief claimed and where it Concerns the relief and the cause of action, it may be necessary to use common sense to find out whether s.80 of the Code has been complied with, and stated: "But where it is a question o f the name of the plaintiff, there is in our opinion (little scope for the use of common sense,) for either the name of the person suing is there in the notice or it is not.
No amount of common sense will put the name of the plaintiff there, if it is not there." In the case of Raghunath Dass.
v Union of India & Anr.
the same question arose but the Court struck a discordant note there.
There, the notice emanated from M/s Raghunath Dass Mulkhraj and in the body of the notice at several places the expression "we" was used.
Further, the plaintiff had purported to sign for M/s Raghunath Dass Mulkhraj but at the same time he signed the notice as proprietor of M/s Raghunath Dass Mulkhraj.
The Court held 237 that was a clear indication of the fact that M/s Raghunath Dass Mulkhraj was a proprietary concern and the plaintiffs was its proprietor.
In repelling the contention that there was no identity of the person who gave the notice with the person who filed the suit the Court observed: "Whatever doubts that might have been possibly created in the mind of the recipient of the notice, after going through the body of the notice as to the identity of the would be plaintiff, the same would have been resolved after going through the notice as a whole.
" There, the plaintiff had averred in the plaint that he was carrying on his business under an assumed name and style of M/s Raghunath Dass Mulkhraj meaning thereby that the concern was a proprietary concern and that the name given to it was only a trade name.
Me had also stated in the plaint that he had given a notice under s.80 of the Civil Procedure Code.
In the written statement filed on behalf of the Dominion of India, the validity of the notice issued was not challenged.
Regarding the notice in question there was only an averment in the written statement that suit was barred by s.80 of the Code as no notice under that section appears to have been served on the Administration.
In repelling the contention That the suit was bad for want of notice under s 80 of the Code, the Court said: "The object of the notice contemplated by that section is to give to the concerned Governments and public officers opportunity to reconsider the legal position and to make amends or settle the claim, if so advised without litigation.
The legislative intention behind that section in our opinion is that public money and time should not be wasted on unnecessary litigation and the Government and the public officers should be given a reasonable opportunity to examine the claim made against them lest they should be drawn into avoidable litigations.
The purpose of law is advancement of justice.
The provisions in s.80, Civil Procedure Code are not intended to be used as bootstraps against ignorant and illiterate persons.
In this case we are concerned with a narrow question.
Has the person mentioned in the notice as plaintiff brought the present suit or is he someone else ? This question has to be decided by reading the notice as a whole in a reasonable manner.
" 238 In the ultimate analysis, the question as to whether a notice under s.80 of the Code is valid or not is a question of judicial construction.
The Privy Council and this Court have applied the rule of strict compliance in dealing with the question of identity of the person who issues the notice with the person who brings the suit.
This Court has however adopted the rule of substantial compliance in dealing with the requirement that there must be identity between the cause of action and the reliefs claimed in the notice as well as in the plaint.
As already stated, the Court has held that notice under this section should be held to be sufficient if it substantially fulfils its object of informing the parties concerned of the nature of the suit to be filed.
on this principle, it has been held that though the terms of the section have to be strictly complied with, that does not mean that the notice should be scrutinized in a pedantic manner divorced from common sense.
The point to be considered is whether the notice gives sufficient information as to the nature of the claim such as would the recipient to avert the litigation.
In the present case, in the notice exhibit A 8 the name, description and place of residence of the plaintiff Seth Lachman Dass, the father of the plaintiffs, was given but unfortunatory before filing the Suit he died and thereafter within the period of limitation the suit was instituted by his sons on the basis of the said notice.
The notice exhibit A 8 undoubtedly fulfils the requirement of s.80 insofar as the cause of action and the relief claimed are concerned as they are absolutely the same as set out in the plaint.
As stated in Dhian Singh Sobha Singh, the notice must substantially fulfil its work of intimating the parties concerned generally of the nature of the suit intended to be filed and if it does so, it would be sufficient compliance of the section as to the requirement that it should state the name, description and place of residence of the plaintiff, there must be identity of the person who issues the notice with the person who brings the suit Now so far as the name and description of the plaintiff concerned the notice gives the name as Seth Lachman Dass Gupta.
The notice exhibit A 8 duly reached the concerned department and they dealt with the notice.
It is not that the Government had no opportunity to examine the nature of the claim and decide whether its should accept or contest the claim The military authorities served a reply on Seth Lachman Dass before his death that his claim was not acceptable.
There was no other alternative for Seth Lachman Dass but to have brought a suit for the enforcement of his claim.
239 If he could not file a suit due to his death, his right to file the suit A devolved upon his heirs i.e. the plaintiffs.
If the view taken by the High Court is allowed to stand, great injustice would be done to the litigants in the matter of filing suits against the Government.
If fresh notice is insisted upon in such cases, the period of limitation to file a suit may expire in the meantime.
Such a situation is not intended by the Code.
The authorities relied upon by the High Court in non suiting the plaintiffs are of ancient vintage.
In Mahadev Dattattraya Rajarshi 's case, supra, the Bombay High Court relying upon the decision of the Allahabad High Court in Buchan Singh, held that the language of s.424 of the Code of 1882, the predecessor of s.80 of the present Code which was substantially in the same terms, was imperative and absolutely debarred the Courts from entertaining a suit without complying with the provisions of the section.
In Buchan Singh 's case, supra it was observed by the Allahabad High Court at p.191: "If we acceded to this contention, it appears to us that we should be adding words to s.424 which find no place in it.
It would be necessary to add after the words "name and place of abode of the intending plaintiff" some such words as "or of the party through whom such intending plaintiff claims.
" The Court of first instance here tried to distinguish the decision in Buchan Singh on the ground that the word "intending" appearing in s.424 of the 1882 Code had been omitted from s.80 of the present Code, and therefore the word "plaintiff ' j should be construed in a generic sense.
The High Court however following the decision of the Bombay High Court in Mahadev Dattaraya Rajarshi held that the notice must contain the name of the actual plaintiff who could bring the suit adding that "the notice must be given by the person who becomes the plaintiff and by no other".
We are afraid, that is taking too technical a view of the matter.
S.80 of the Code is but a part of the Procedure Code passed to provide the regulation and machinery, by means of which the Courts may do justice between the parties.
It is therefore merely a part of the adjective law and deals with procedure alone and must be interpreted in a manner so as to subserve and advance the cause of justice rather than to defeat it.
In Sangram Singh vs Election Tribu 240 nal, Kotah & Anr., Vivian Bose, J. in his illuminating language dealing with the Code of Civil Procedure said: "It is procedure, something designed to facilitate justice and further its ends: not a penal enactment for punishment and penalties; not a thing designed to trip people up.
Too technical a construction of sections that leaves no room for reasonable elasticity of interpretation should therefore be guarded against (provided always that justice is done to both sides) lest the very means designed for the furtherance of justice be used to frustrate it.
Our laws of procedure are based on the principle that "as far as possible, no proceeding in a court of law should be allowed to be defecated on mere technicalities".
Here, all the requirements of s.80 of the Code were fulfilled.
Before the suit was brought, the Dominion of India received a notice of claim from Seth Lachman Dass.
The whole object of serving a notice under 5.80 is to give the Government sufficient warning of the case which is going to be instituted against it was that the Government, if it so wished, settle the claim without litigation or afford restitution without recourse to a court of law.
That requirement of s.80 was clearly fulfilled in the facts and circumstances of the present case.
It is a matter of common experience that in a large majority of cases the Government or the public officer concerned make no use of the opportunity afforded by the section In most cases the notice given under s 80 remains unanswered till the expiration of two months provided by the section.
It is also clear that in a large number of cases.
as here, the Government or the public officer utilised the section merely to raise technical defences contending either that no notice had been given or that the notice actually given did not comply with the requirements of the section.
It is unfortunate that the defendants came forward with a technical plea that the suit was not maintainable at the instance of the plaintiffs, the legal heirs of Seth Lachman Dass on the ground that no fresh notice had been given by them.
This was obviously a technical plea calculated to defeat the just claim.
Unfortunately, the technical plea so raised prevailed with the High Court with the result that the plain tiffs have been deprived of their legitimate dues for the last 35 years, 241 The Law Commission in the Fourteenth Report, volume 1 on the Code of Civil Procedure, 1908 at p.475 made a recommendation that s.80 of the Code should be deleted.
It was stated as follows: "The evidence disclosed that in a large majority of cases, the Government or the public officer made no use of the opportunity afforded by the section.
In most cases the notice given under section 80 remained unanswered till the expiry of the period of two months provided by the section.
It was also clear that in a large number of cases, Governments and public officers utilized the section merely to raise technical defences contending either that no notice had been given or that the notice actually given did not comply with the requirements of the section.
These technical defences appeared to have succeeded in a number of cases defeating the just claims of the citizens.
" The Law Commission in the Twenty Seventh Report on the Code at pp.21 22 reiterated its earlier recommendation for deletion of s.80 and in the Fifty Fourth Report at p.56 fully concurred with the recommendation made earlier.
In conformity with the recommendation of the Law Commission, s.80 has undergone substantial changes.
By s.27 of the Code of Civil Procedure (Amendment) Act, 1976 which was brought into effect from February 1, 1977, the existing s.80 has been re numbered as s.80(1) and sub ss.(2) and (3) have been inserted.
Sub s.(2).
as inserted has been designed to give an urgent and immediate relief against the Government or the public officer with the leave of the Court.
But the Court shall not grant relief in the suit, whether interim or otherwise, except after giving to the Government or public officer, as the case may be, a reasonable opportunity of showing cause in respect of the relief prayed for in the suit.
Proviso to sub s.(2) enjoins that the Court shall, if it is satisfied, after hearing the parties that no urgent or immediate relief need be granted in the suit, return the plaint for presentation to it after complying with the requirements of sub s.(1).
Sub s.(3) as inserted by s.27 of the Code of Civil Procedure (Amendment) Act.
1976 reads as follows : "80(3).
No suit instituted against the Government or against a public officer in respect of any act purporting to be done by such public officer in his official capacity shall be 242 dismissed merely by reason of any error or defect in the notice referred to in sub section (1) if in such notice (a) the name, description and the residence of the plaintiff had been so given as to enable the appropriate authority or the public officer to identify the person serving the notice and such notice had been delivered or left at the office of the appropriate authority specified in sub section (1), and (b) the cause of action and the relief claimed by the plaintiff had been substantially indicated," By sub.s.(3), Parliament has brought in the rule of substantial compliance.
The present suit would be directly covered by sub s.(3) of s.80 so introduced if the suit had been brought after February 1, 1977.
Unfortunately for the plaintiffs, s.97 of the Amendment Act provides that the amendment shall not apply to pending suit and the suits pending on February 1, 1977 have to be dealt as if such amendment had not been made.
Nevertheless the Courts must have due regard to the change in law brought about by sub s.(3) of s.80 of the Code introduced by the Amendment Act w.e.f. February 1, 1977.
Such a change has a legislative acceptance of the rule of substantial compliance laid down by this Court in Dhian Singh Sobha Singh and Raghunath Dass.
As observed in Dhian Singh Sobha Singh 's case, supra, one must construe s.80 with some regard to common sense and to the object with which it appears to have been enacted.
The decision in S.N. Dutt vs Union of India 's case, supra, does not accord with the view expressed by us and is therefore overruled .
Before parting with the case we consider it necessary to refer to one more aspect.
It has frequently come to our notice that the strict construction placed by the Privy Council in Bhagchand 's case, supra, which was repeatedly reiterated in subsequent cases, has led to a peculiar practice in some Courts.
Where urgent relief is necessary the practice adopted is to file a suit without notice under s.80 and obtain interim relief and thereafter to serve a notice, withdraw the suit and institute a second suit after expiry of the period of the notice.
We have to express our strong condemnation of this highly objectionable practice.
We expect that the High Courts will take necessary steps to put a stop to such practice.
243 The result therefore is that the appeal succeeds and is allowed.
The judgment and decree passed by the Allahabad High Court dated February 26, 1965 are set aside and those of the learned Civil Judge, Agra dated August 25, 1952 are restored with costs throughout.
The plaintiffs shall be entitled to further interest on the decretal amount at 6% per annum from August 25, 1952, the date of the decree passed by the Civil Judge, Agra, till realization.
S.R Appeal allowed.
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The plaintiff 's father Seth Lachhman Dass Gupta entered into a contract with the Governor General in Council for the supply of charcoal to the Military Supply Depot, Agra and received payments for the same at the contractual rate from time to time.
The contract contained an escalation clause viz. cl.8 to the effect that in case the price of charcoal was increased by more than 10% of the stipulated rate during the subsistence of the contract, the contractor would be entitled to the price at the higher rate.
During the period of the contract, the rate of charcoal went up continuously.
The military authorities paid at the enhanced rate for the part of supplies while for the rest they refused to pay more than the contractual rate.
He accordingly served a notice to the Government under section 80 of the Code of Civil Procedure, 1908 making a claim for payment of a sum of Rs. 20,710.50 p. in terms of clause 8 of the contract being the difference between the enhanced rate and the contractual rate for the supplies paid for.
But before he could bring the suit against the Government, he died.
Thereupon, the respondents brought a suit as his legal heirs and successors claiming the amount.
The defendants contested the claim inter alia on the ground that the notice given by Seth Lachhman Dass could not ensure for the benefit of the plaintiff 's and therefore the suit was bad for want of notice under section 80 of the Code.
The Court of first instance held that no further notice under section 80 was necessary as the notice served by the plaintiff 's father Seth Lachhman Dass must inure to their benefit.
on appeal, the High Court reversed his decision on the point and held that the notice given by the plaintiff 's father was insufficient and was not a valid notice under section 80 of the Code insofar as the plaintiff 's were concerned.
Against the judgment, the plaintiff 's preferred an appeal by special leave.
Allowing the appeal, the Court 230 ^ HELD: 1.
The question as to whether a notice under section 80 is valid or not is a question of judicial construction.
section 80 of the Code is but a part of the .
Procedure Code passed to provide the regulation and machinery, by means of which the courts may do justice between the parties.
It is therefore merely a part of the adjective law and deals with procedure alone and must be interpreted in a manner so as to subserve and advance the cause of justice rather than to defeat it.
As far as possible, no proceedings in a court of law should be allowed to be defeated on mere technicalities.
This is the principle on which ours laws of procedure are based.
[238A, 239G H, 240A C] 2.
The whole object of serving a notice under section 80 is to give the Government sufficient warning of the case which is going to be instituted against it and that the Government, if it so wished can settle the claim without litigation or afford restitution without recourse to a court of law.
Though the terms of section 80 have to be strictly complied with, that does not mean that the notice should be scrutinised in a pedantic manner divorced from common sense.
The point to be considered is whether the notice gives sufficient information as to the nature of the claim such as would enable the recipient to avert the litigation.
If the notice substantially fulfills its work of intimating the parties 'concerned generally of the nature of the suit intended to be filed, it would be sufficient compliance of the section.
While interpreting the pre amended section the courts must have due regard to the change in law brought about by sub section
(3) of section 80, which shows legislative acceptance of the rule of substantial compliance instead of strict compliance.
[240D E, 242C E] Sangram Singh vs Election Tribunal Kotah relied on.
In the present case the requirement of section 80 that there must be identity between the cause of action and the relief claimed in the notice as well as in the plaint, 15 fulfilled.
As regards the requirement of identity of the person who issues the notice with the person who brings the suit, in this case the notice contained the name of the original claimant i.e. the father of the plaintiffs.
The . notice reached the concerned department of the Government where the Government had opportunity to ' examine the nature of the claim and decide whether it should accept or contest the claim.
The concerned Government authorities served a reply on the plaintiff 's father that his claim was not acceptable.
There after he died and his right to file the suit for enforcement of the claim having devolved upon his heirs i.e. the plaintiff 's, the plaintiffs filed the suit for enforcement of the same claim.
In the circumstances, if section 80 is held to have not been complied with, as done by the High Court, great injustice would be done to the plaintiffs in the matter of filing suits to the Government inasmuch as in case of insistence on fresh notice, the period of limitation to file the suit would expire in the meantime.
Such a situation is not intended by the Code.
Thus the requirement of section 80 was clearly fulfilled in this case but the High Court having allowed the technical plea of the defendants, the plaintiffs have been deprived of their legitimate claim for at least 35 years.
[238D H, 239A C, 240G H] S.N. Dutt vs Union of India, [1962]1 S.C.R. 560; Mahadev Dattatraya Rajshri vs Secretary of States for India ; and Bachchu Singh vs Secretary of State for India in Council, , overruled.
231 Raghunath Dass vs Union of India, ; ; Union of India vs A Jeewan Ram A.I.R. 1958 S.C. 905; State of Madras vs C.P. Agencies, A.I.R. 1960 S.C. 1309 and Amar Nath Gogra vs Union of India,[1964]1 S.C.R. 651, affirmed.
Bhagchand Dagadusa vs Secretary of State of India in Council, [1927] I.A. 338; Vallayan Chettiar vs Government of the Province of Madras [1947] I.A. 74: and Government of the Province of Bombay vs Pestonji Ardeshir Wadia [1949] 76 I.A. 57; referred to.
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il Writ Petition 747 of 1985.
(Under Article 32 of the Constitution of India).
S.R. Rangarajan and K.B. Rohtagi for the Petitioner.
Manoj Swarup and Miss Lalita Kohli Advocates for the Respondents.
The Judgment of the Court was delivered by PATHAK, CJ.
This writ petition under Article 32 of the Constitution has been filed by Baldev Raj Sharma against an order of the Bar Council of Punjab and Haryana rejecting his application for enrolment as an advocate.
On 4 March, 1972 the petitioner passed the Bachelor of Arts examination from the Punjabi University, Patiala.
In 1978 he joined the Bachelor of Laws (Academic) course in Kurukshetra University.
The course is of two years ' dura tion.
The petitioner completed the course and on 1 January, 1981 he was awarded the degree of Bachelor of Laws (Academ ic) by the Kurukshetra University.
During the year 198 1 the petitioner joined the LL.B. (Professional) course in the third year in Kanpur University as a regular student.
The Kanpur University confers two distinct degrees, LL.B. (General), which is a two year course, and LL.B. (Profes sional), which is a three year course.
A person who has been awarded the LL.B. (General) degree is eligible for admission to the LL.B, (Professional) third year.
The petitioner says that there is no distinction in the Rules and Regulations of the Kanpur University on whether LL.B. (General) course should be pursued by regular attendance or as a non collegi ate student.
It is urged that the LL.B. degree of the Kanpur University is recognised by the Bar Council of India for the purpose of enrolment as an advocate.
The petitioner attended classes as a regular student of the LL.B 864 (Professional) Course third year of the Kanpur University as required by the Rules and Regulations framed by that Univer sity.
He appeared in the final examination and was declared successful.
On 22 July, 1982 the degree of LL.B. (Profes sional) was issued by the Kanpur University to him.
Thereaf ter, on 4 August, 1982 the petitioner applied to the State Bar Council of Punjab and Haryana with the necessary enrol ment fee for enrolment as an advocate under the .
On 26 April, 1983 the Bar Council of Punjab and Haryana denied enrolment to the petitioner as an advocate on the ground that the petitioner has not fulfilled the conditions laid down in Rule 1(1)(c) of the Rules of the Bar Council of India framed under section 7(h) and (i), section 24(1)(c)(iii) and (iiia) and section 49(1)(d).
The detailed grounds of refusal supplied to the petitioner by the Bar Council of Punjab and Haryana state that the petitioner had obtained his Bachelor of Laws degree from the Kurukshetra University as a result of the examination held in April, 1980 as a private candi date.
It was an LL.B. (Academic) degree obtained in two years ' study as a private candidate.
The third year of law was pursued by him as a regular student from V.S.S.D. Col lege, Kanpur of the Kanpur University from which institution he obtained the professional degree.
It was further stated that the petitioner had not fulfilled the conditions laid down in the provisions detailed earlier as he had passed his two years ' law course as a private candidate from Kurukshe tra University and the third year law only by regular at tendance at the V.S.S.D. College, Kanpur.
It appears that the State Bar Council, upon receiving the application of the petitioner for enrolment as an advocate, obtained the opin ion of the Bar Council of India and in conformity with that opinion the State Bar Council has refused enrolment.
Section 24(1)(c) provides as follows: "24.
Persons who may be admitted as advocates on a State roll(1) Subject to the provisions of this Act, and the rules made thereunder, a person shall be qualified to be admitted as an advocate on a State roll, if he fulfils the following conditions, namely: (c) he has obtained a degree in law (i) . . (ii) . . 865 (iii) after the 12th day of March, 1967, save as provided in sub clause (iiia), after under going a three year course of study in law from any University in India which is recognised for the purposes of this Act by the Bar Coun cil of India; or (iiia) after undergoing a course of study in law, the duration of which is not less than two academic years commencing from the academ ic year 1967 68, or any earlier academic year from any University in India which is recog nised for the purposes of this Act by the Bar Council of India.
" Sub clause (iii) of clause (c) of section 24(1) entitles a person to be admitted as an advocate on a State roll if he has obtained a degree in law after 12th March, 1967 after under going three years ' of study in law in any University in India recognised for the purposes of the by the Bar Council of India.
An exception to this is provided by sub cl.
(iii) of cl.(c), under which a person is quali fied for admission as an advocate if he has obtained a degree in law after undergoing a course of study in law, the duration of which is not less than two academic years com mencing from the academic year 1967 68, or any earlier academic year from any University in India recognised for the purposes of the Act by the Bar Council of India.
The petitioner obtained a degree of Bachelor of Laws (Profes sional) from the Kanpur University in the examination of 1981.
He had pursued the third year course only of study pertaining to that degree as a regular student ,of the V.S.S. 'D. College, Kanpur in Kanpur University.
The Bar Council of India has framed Rules under the .
Rule 1(1)(c) of of the Bar Council of India Rules, 1975 provides that except as provided in section 24(1)(c)(iiia) of the a degree in law obtained from any University in the territory of India after 12th March, 1967 shall not be recognised for the purposes of section 24(1)(c)(iii) of the Act unless the conditions specified there are fulfilled, including the condition "that the course of study in law has been by regular, attendance at the requisite number of lectures, tutorials and moot courts in a college recognised by a University".
These rules were replaced by a fresh set of rules in 1984 and the new Rule 1(1)(c) is almost identical.
The Rule clearly requires that the course of study in law should have been by regular attendance for the requisite number of lectures, tutorials and moot courts and practical training.
The Rule envisages that for the entire period of the law course there must be a regular attendance of the student before he can satisfy the conditions necessary for enrolment as an advocate under the .
The Rules amplify what is intended in section 24(1)(c)(iii) 866 of the Act.
The three years ' course of study envisaged by that subclause in the Act intends that the three years ' course of study in law must be pursued by maintaining regu lar attendance.
We are unable to say that there is any inconsistency between the Act and the Rule.
So also in a case falling under cl.
(iii) of section 24(1)(c) of the Act, a course of study in law must be pursued for not less than two academic years in terms of that sub clause and Rule 1(1)(c) will apply to such a case also.
There is a substantial difference between a course of study pursued as a regular student and a course of study pursued as a private candi date.
The policy underlying the relevant provisions of the Bar Council Rules indicates the great emphasis laid on regular attendance at the law classes.
The conditions are specifically spelt out when the Act is read along with the Rules.
When so read, it is plain that a candidate desiring enrolment as an advocate under the must fulfil the conditions mentioned in section 24(1)(c)(iii) or section 24(1)(c)(iiia) read with Rule 1(1)(c) of the Bar Council of India Rules, 1975.
In the present case the petitioner failed to do so.
His application for enrolment was rightly reject ed.
The writ petition is dismissed, but in the circum stances, there is no order as to costs.
P.S.S. Petition dismissed.
|
Sub clause (iii) of cl.
(c) of section 24(1) of the entitles a person to be admitted as an advocate on a State roll if he has obtained a degree in law after 12th March, 1967 after undergoing three years ' of study in law.
Under sub cl.
(iii) of cl.
(c) a person is considered quali fied for admission as an advocate if he has obtained a degree in law after undergoing a course the duration of which is not less than two academic years commencing from the academic year 1967 68 or any earlier academic year.
Rule 1(1)(c) of of the Bar Council of India Rules, 1975 requires that the course of study in law should have been by regular attendance for the requisite number of lectures, tutorials and moot courts and practical training.
The petitioner had obtained his Bachelor of Laws (Aca demic) degree in 1980 as a private candidate.
He then pur sued the third year of law as a regular student from the Kanpur University and obtained the professional degree in 1982.
Thereafter, he applied to the State Bar Council of Punjab and Haryana for enrolment as an advocate under the Act.
The State Bar Council denied enrolment on the ground that he had not fulfilled the conditions laid down in Rule 1(1)(c) of the Rules.
Dismissing the writ petition, HELD: A candidate desiring enrolment as an advocate under the must fulfil the conditions mentioned in section 24(1)(c)(iii) or section 24(1)(c)(iiia) read with Rule 1(1)(c) of the Bar Council of India Rules, 1975.
In the instant case, the petitioner failed to do so.
His applica tion for enrolment was, therefore, rightly rejected.
[866C] Sub clause (iii) of section 24(1)(c) when read along with Rule 1(1)(c) 863 intends that the three years course of study in law must be pursued by maintaining regular attendance.
So also, in a case failing under sub cl.
(iiia) of section 24(1)(c) a course of study in law must be pursued for not less than two academic years and Rule l(1)(c) will apply to such a case also.
The petitioner had passed his two year 's law course as a private candidate and the third year law only by regular attendance.
He was, therefore, not entitled to be enrolled as an advo cate.
[865H 866A, 864E]
|
Appeal No. 104[NT] of 1979.
From the Judgment and Order dated 3.10.1978 of the Punjab and Haryana High Court in 1.]".
Reference No. 60 of 1974.
191 WITH Civil Appeal Nos. 1801 to 1804/89 & 6254 (NT)/90 Dr. V.Gauri Shankar, S.Rajappa, Ms. A. Subhashini and Manoj Arora for the Appellants.
T.A.Ramaehandran and Ms. Janki Ramachandran for the Respond ents.
The Judgement of the Court was delivered by RANGANATHAN, J. These appeals involve a common question and hence can be disposed of by a common order.
The respond ent assessees are steel rolling mills engaged in the manu facture of M.S. (Mild Steel) rods, bars or rounds.
The question for consideration is whether they are entitled to a higher rate of development rebate specified in s.33(1) (b) (B) (i)(a) and to relief under s.80 I (as it stood at the relevant time) of the Income tax Act, 1961.
The answer to this question entirely turns on whether the assessees are engaged in the manufacture or production of any one or more of the articles or things specified in the relevant Schedule to the Act.
They claim that the articles manufactured by them fail under item 1 of the list of articles and things set out in the relevant Schedule which reads: "Iron and steel (Metal), ferro alloys and special steels".
This contention was rejected by Income Tax Officer but has been accepted by the Appellate Assistant Commissioner, the Tribunal and the High Court.
Hence these appeals by the Revenue.
It has been brought to our notice that there is a dif ference of judicial opinion on this issue among the High Courts.
The Calcutta High court in Indian Steel and Wire Products Ltd. vs Commissioner of Income Tax, , and the Allahabad High Court in Commissioner of Income Tax vs Kay Charan Pvt. Ltd., have answered the question in the negative and against the assessee.
On the other hand, the Kerala High Court in C.I. T.v.
Mittal Steel Re rolling and Allied Industries (1 ') Ltd. and CIT vs West India Steel Co. Ltd. , FB.
The Madras High Court in the judgment under appeal, reported as Addl.
Commissioner of Income tax v, Trich Steel Rollling Mills Ltd., , the Punjab & Haryana High Court in C.I.T. vs Krishna Copper and Steel Rolling Mills, (1979) 119 I.T.R. 256; (hereunder appeal) C.I.T.v.
Ludhiana Steel Rolling Mills, ; and the Allahabad High Court in Singh Engineering Works Pvt. Ltd. vs C.I.T., have taken a view in favour of the assessee.
This controversy needs to be resolved.
192 It may be useful, at this stage, to refer to three decisions of this Court, the decisions or observations in which have influenced the High court.
(1) The first of these is State of Madhya Bharat vs Hiralal, (1966) 17 S.T.C. 313.
This case arose under the Madhya Bharat Sales Tax Act.
Under section 5 of the said Act, two notifications had been issued.
The first notifica tion exempted from sales tax certain listed goods, one of which was "iron and steel", while the second notification specified the rates and stages lot levy of sales tax on a number of articles, one of which was"goods prepared from any metal other than gold and silver".
Hiralal, who owned a re rolling mill, purchased scrap iron locally and imported iron plates from outside and, after converting them into bars, flats and plates in his mills, sold them in the market.
He claimed exemption under the first of the above notifications.
This claim was upheld by this Court The judgment of the Court is a short one, the relevant paragraph of which reads as follows: "Learned cournsel for the State contends that the expression "iron and steel means iron and steel in the original condition and not iron and steel in the shape of bars, flats and plates.
In our view, this contention is not sound.
A comparison of the said two Notifica tions brings out the distinction between raw materials of iron and steel and the goods prepared from iron and steel; while the former is exempted from tax, the latter is taxed.
Therefore, iron and steel used as raw material for manufacturing other goods are exempted from taxation.
So long as iron and steel continue to be raw materials, they enjoy the exemption.
Scrap iron purchased by the re spondent was merely re rolled into bars, flats and plates.
They were processed for conven ience of sale.
The raw material were only re rolled to give them attractive and acceptable forms.
They did not in the process lose their character as iron and steel.
The dealer sold "iron and steel" in the shape of bars, flats and plates and the customer purchased "iron and steel" in that shape.
We, therefore, hold that the bars, flats and plates sold by the assessee are iron and steel exempted under the Notification.
The conclusion arrived at by the High Court is correct." (2) The second decision referred to is Devidass Gopal Krishnan vs State of Punjab, (1967) 20 S.T.C. 430.
Here, one batch of appellants before the Court carried on business in rolling steel.
They purchased steel scrap and steel ingots and converted them into rolled steel sections.
They 193 contended that the levy of a purchase tax on the steel scrap and ingots side by side with a sales tax on the rolled steel sections constituted double taxation of the same commodity contrary to the provision of section 15 of the .
This contention was rejected.
It was held that the process by which the steel scrap (or ingot) lost its identity and became rolled steel sections was a process of manufacture and that, since the goods purchased and those sold were different, no question of double taxation arose: (3) The third decision, Hindustan Aluminium Corporation Ltd. vs State of U.P., (1981) 48 S.T.C. 411, involved the interpretation of certain notifications issued under section 3A(2) of the U.P. Sales Tax Act, 1948.
The two notifications with which the Court was concerned prescribed rates of tax at which certain goods were taxable.
item no.6 in the notification of 1973 described the goods as: "All kinds of minerals and ores and alloys except copper, tin, zinc, nickel or alloy of these metals only.
" Item No. 1 of the second notification read: All kinds of minerals, ores, metals, and alloys including sheets and circles used in the manufacture of brass wares and scraps containing only any of the metals, copper, tin, zinc, or nickel except those included in any other notification 'issued under the Act.
" The appellant Corporation, which carried on the business of manufacturing and dealing in aluminium metal and vations aluminium products, claimed the benefit of these notifica tions for its products.
The High Court held that, while aluminium ingots, wire bars and billets would fall in the category of "metals and alloys", rolled products prepared by rolling ingots and extrusions manufactured from billets must be regarded as different commercial commodities from the ingots and billets and therefore outside the category of "metals and alloys".
Such rolled products included plates, coils, sheets, circles and strips.
The extrusions were manufactured in the shape of bars, rods, structurals, tubes, angles, channels and different types of sections.
This conclusion was upheld by this Court The Court referred to the history of the notifications issued by the State Govern ment from time to time in this behalf and came to the con clusion that the inference was irresistible that when such a notification referred to a metal, it referred to the metal in the primary or original form in which it was saleable and not to any subsequently fabricated form.
The Court rejected the contention that the word "all" used in the notification in referring to 194 "all kinds of minerals, ores, metals and alloys" should be given its fullest amplitude so as to include even subse quently fabricated forms of the metal.
The Court felt that this construction was inconsistent with the scheme of the earlier notifications to which reference had been made and observed: "While broadly a metal in its primary form and a metal in its subsequently fabricated form may be said to belong to the same genus, the distinction made between the two constitutes a dichotomy of direct significance to the con troversy before US." After referring to its earlier decisions in State of M.P.v.
Hiralal, (1966) 17 S.T.C. 313, Devi Dass Gopal Krish nan vs The State of Punjab, (1967) 20 S.T.C. 430 and State of Tamil Nadu vs Pyarelal Malhotra, (1976) 37 S.T.C. 3 19, the Court concluded: "We are of the definite opinion that the only interpretation possible is that aluminium rolled products and extrusions are regarded as distinct commercial items from aluminium ingots and billets in the notification issued under the U.P. Sales Tax Act.
" The above decisions were rendered in the context of the Sales Tax Acts and notifications thereunder.
They, however, bring out two points.
First, they make it clear that there is a real and clear dichotomy between "iron and steel" and "products or goods made of iron and steel" and, indeed, between any metal as such and the products or goods fabri cated therefrom.
This is also clear from the various entries in the relevant schedules under the Income Tax Act itself.
For instance, item 2 in the List is: "Aluminium, copper, lead and zinc (Metal).
While ingots and sheets manufactured from scrap have been held to fall under item 2, finished commercial products like alumimum pigments, aluminium arti cles and aluminium caps have been held to tall outside it.
See C.I. T.v.
Rashtriya Metal Industries Ltd., a case under the ; Indian Aluminium Co. Ltd. vs CI.T., ; (1983)140 I.T.R 114 (Cal); Jeewanlal, (1929)Ltd.
vs CI.T. and CI.T. vs Fitwell Caps P. Ltd. 'So also, item 7 refers, inter alia, to "cables" which is only a type of thick copper wire used for the transmission of electricity.
It has been held that insulated copper wires of a type known as winding wires will not fall under item 7 as they are not used for the above purpose and that an industry engaged in its manufacture is not an industry eligible for the reliefs of the kind presently under consideration: See: Hindustan 195 Wire Products vs C.I.T., This deci sion is of no direct relevance here except to point out that no atttempt was made in the case to contend that they will fall under item 2 of the Schedule which covers "aluminium, copper, lead and zinc (metals)".
Item 11 in the Schedule refers to "steel castings and forgings and malleable iron and steel castings".
The expressions "casting" and "forging" refer to processes used in the manufacture or production of articles of iron and steel and also mean, particularly when used in the plural, the articles produced by the process (vide: Glossary of Tenns published by the Bureau of Indian Standards and relating to Iron and Steel: , "Forging").
Item 21 which refers to "Seamless Tubes" also furnishes a similar indication.
There is, therefore, a distinction between the article or thing referred to in the Schedule as "iron and steel (metal)" and articles or things manufactured from "iron and steel".
Secondly, the decision in State of MB.
vs Hiralal, (1966) 17 S.T.C. 313 shows that even the expression "iron and steel" which is wider than the expression we are concerned with as it is not further qualified by the word "metal" was held to mean iron and steel used as raw material for the manufacture of other goods.
The Court held that bars, flats and plates only represented such raw material in attractive and acceptable forms.
Sri Gauri Shankar, for the Revenue, contended that the use of the appellation "metal" in the entry we are concerned with further restricts the nature of the qualify ing industry but we are not inclined to agree.
Obviously it is not used to denote the metal in its pristine form as an ore or as an extraction from the ore.
In the context of a manufacturing industry it is used, we think, for emphasising the distinction between the metal used as a raw material in the manufacture of various articles and the commercial articles made therefrom.
We would, therefore, attach the same meaning to the expression as Hiralal (supra) did.
In that case, the Court held that the bars, flats and pieces turned out by the assessee from the scrap metal were not products manufactured from the raw material but only repre sented the raw material rolled out in attractive and accept able forms.
Per contra, in Devidass Gopal Krishnan, [1962] 20 S.T.C. 430 rolled steel sections were held to be products manufactured from steel scrap and ingots.
But that will not be conclusive here because the relevant provision here contemplates something manufactured out of iron ore or iron scrap.
The question really therefore is: having regard to the nature of the iron and steel industry and its processes, do M.S. bars, rods and rounds represent the raw material for the manufacture of the articles of iron and steel or are they themselves articles made of iron and steel? For deciding the above issue, learned counsel on both sides have placed before us a good deal of literature about the iron and steel industry as well as the glossary of terms used therein: 196 (a) A succinct summary of the processes involved, illus trated by a figurative chart, is given in the very first page of "The Making, Shaping and Treating of Steel", edited by Lankford and others (10th Edition),.
page 1.
It is unnec essary to set out the process in detail here except to note that molten pig iron coming out of the blast furnace and iron scrap are fed into steel making furnaces, wherefrom by a basic oxygen process or electric process or open hearth process, molten steel is ladled out into moulds to form ingots.
There are three stages in the manufacture of the steel: (i) the first stage when ingots are obtained by Lapping and then teeming the molten steel into rectangular moulds; (ii) the second stage where semi finished steel is cast in the form of blooms, billets and slabs by reheating the ingots to an appro priate temperature and rolling or forging them into shapes; and (iii) the production from blooms, billets and slabs again by process of hot rolling, cold rolling, forging, extruding, drawing etc. of finished steel products; bars, plates, structural shapes, rails, wire, tubular products, coated and uncoated sheet steel etc.
all in the many forms required by users of steel.
The third of the processes involves heating the blooms, billets and slabs in heating furnaces and then processing them through various types of mills: (i) Structural mills : for obtaining structural shapes like beams, angles, tees, zees, channels, piling etc.
(ii) Rail mills : for producing standard rails, crane rails and joint bars; (iii) Bar mills : for producing bars which may be flat, round, halfround, triangular, square, haxagonal or octagonal; (iv) Seamless pile mills: for producing pipes and tubes and skelp mills and other tubular products; continuous Butt weld pipe mills (v) Plate mills : for manufacturing plates; and (vi) Hot strip mills : for producing sheets, strips and coils.
and cold reduction mills 197 (b)The Explanatory Not to Chapter 72 (iron and Steel) of the Harmonised Commodity Description and Coding Nomenclature (HCCN) are also on the same lines.
The chapter covers the ferrous metals (pig iron, spilgeleisen, ferro alloys and other materials) as well as certain products of the iron and steel industry (ingots and other primary products and the principal products derived therefrom) of iron or non alloy steel, of stainless steel and of other alloy steel.
It is pointed out that iron ore, waste, scrap metal, pre reduced iron ore and other ferrous waste is converted by reduction in blast furnaces or electric furnaces into pig iron or sponge iron or lump iron.
Electrolysis or other chemical processes are used only when iron of exceptional purity is required for special use.
Most of the pig iron is converted into steel in steel works but some are used in foundries (iron works) for manufacture of ingot moulds, cast iron tubes and pipes and castings and the remainder are cost into the forms of pigs or blocks, m casting machines or sand beds or produced in the form of irregularly shaped lumps (plate iron) or granulated.
Pig iron, cast iron, sponge iron waste and scrap constitute the primary steel making materials.
Steel making processes are either pneumatic or hearth proc esses and the steel produced,by these and other processes are classified in various ways.
Although molten steel may be cast (in foundries) into its final shape in,_ moulds (steel castings), most molten steel is cast into ingots in moulds.
_At the casting, pouring and solidification stages, steel is classified as 'rimming ' or effervescent, 'killed ' or:non effervescent and 'semi killed ' or balanced steel.
After they have solidified and their temperature has been equalised, the ingots are rolled into semi finished productrs (blooms, billets, rounds, slabs, sheet bars) on primary cogging or roughing mills (blooming, slabbing etc.) or converted by drop hammer or on a forging press into semi finished forg ings.
Semi finished products and, in certain cases, ingots are subsequently converted into finished products.
These may be flat products (such as wide flats, universal plates, wild coil, sheets, plates and strip) or long products (such as bars and rods, hot rolled, in irregularly wound coils, other bars, and rods, angles, shapes, sections and wire).
These products are obtained by plastic deformation, hot or cold.
The hot processes are hot rolling, forging or hot drawing and the cold processes.
, are cold rolling, extrusion, wire drawing, bright drawing, centreless grinding or precision turning.
The chapter proceeds to classify the various products in considerable detail. (c) Reference has also been made to the tariff classi fications under the and the Central Excise Tariff Act, 1975.
Our attention was also invited to the Specification and Glossary prepared for the Bureau of Indian Standards by expert Products Sectional Committees on the subject of Iron and Steel.
Extracts were also furnished 198 from the New Encyclopaedia Brittanica Macropaedia (15th Edn., Vol.21), Webster 's Third New International Dictionary, the Encyclopaedia of Chemical Technology by Kirk Othmer (3rd en., Vol.21) and a book on small scale steel making by R.D. Walker.
We do not, however, propose to discuss these ex tracts and definitions as we do not think they can assist us in coming to nay conclusion on the issue before us.
Basically the argument of counsel proceed on the following lines: Sri Ramachandran, learned counsel appearing for the assessee, contends that, in the steel making industry, the manufacture of ingots, billets, blooms, etc. represents only an intermediate stage at which the iron and steel metal becomes semi finished steel.
The semi finished steel is converted into plates, bars or rods which are described as "finished steels.
According to him, the bars, rods and rounds continue to be iron and steel_ m a finished form.
It is only finished steel that is subsequently used to manufac ture, by various processes such as rolling, cutting, shear ing, forging, hammering and so on into various kinds of products, which can be described as products of iron and steel in contrast with 'iron and steel (metal) ', the item covered under the relevant entry of the schedules.
He also draws our attention to a decision of the Calcutta High Court in Indian Aluminium Co. vs CIT, where, while following the earlier decision in Indian Steel and Wire Products Ltd. vs CIT, (1977)108 I.T.R. 802, the court observed that there is really no divergence in view between the Calcutta and Kerala views and that the real question for consideration in each case is whether the articles in ques tion constitute finished products and represent articles of iron and steel or merely represent the raw material viz. iron and steel (metal) in a different form and shape.
On the other hand, Dr. Gauri Shankar, learned counsel for the Department, submits that iron and steel ceases to be a metal when it comes out of the furnace in the primary steel mills in the form of ingots.
At the best, the next stage at which the ingots become semi finished products in the shape of billets, blooms and slabs may also be said only to convert the raw material into a different form or shape.
But, he says, by no stretch of imagination can the next stage during which the billets, blooms and slabs are heated/and passed through various types of mills enumerated earlier be considered as involving not any manufacture but only a conversion of the raw material into other forms or other shapes.
According to the learned counsel, the expres sion "iron and steel (metal)" only comprehends the iron and steel as it emerges in the form of billets, blooms and slabs from the steel mills and that all subsequent products wheth er in the form of 199 rails, rods (including wire rods), bars, angles, channels, tees, zees, pipes, tubes, sheets, strips, plates and coils turned out by the various other types of mills would consti tute articles made of iron and steel.
He also invited our attention to a clarification by the Central Board of Taxes, in response to a query from the Federation of Indian Cham bers of Commerce and Industry, that "rolling mills making bars and rods are not covered by item 1 of the Fifth Sched ule".
We have considered the arguments addressed by both counsel.
In our opinion, Sri Ramachandran is right in con tending that in interpreting the provisions under considera tion, we would do well to keep in mind the background in which concessions to certain basic industries were intro duced in the Income tax Act.
The process started with the introduction of a rebate for exporters under the Finance Act of 1963 which continued till 1966.
The Budget speech of the Finance Minister vide: (1963) 48 I.T.R. (St.) 34 indicates that the incentive was granted to assessees engaged in the manufacture of any articles in an industry specified in the First Schedule to the Industries (Development & Regulation) Act, 1951.
Item 1 of the said Schedule reads: "1.
Metallurgical Industries: A. Ferrous: (1) Iron and Steel (Metal) (2) Feno alloys (3) Iron and Steel castings and forgings (4) Iron and Steel structurals (5) Iron and Steel pipes (6) Special Steels (7) Other products of iron and steel B. Non ferrous (1) Precious metals including Gold and Silver, and their alloys; (IA) Other non ferrous metals and their alloys; (2) Semi manufactures and manufactures.
Again, in 1964,hen the Finance Act of 1964 decided to grant a rebate in the corporation tax payable by companies in order to encourage development of certain industries which occupy an important place in our economy, the list of indus tries named in the Finance Act was similar to and included many of the items, including items 1 to 3, of the list we are concerned with now.
The reliefs were given to strengthen the reserves and augment the capacity of the corporate sector to develop.
This process was 200 continued under the Finance Act of 1965: Vide, (1965) 55 I.T.R. (St.) 57 and 122 which introduced a higher develop ment rebate for machinery or plant installed for the pur poses of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule.
The Finance Act of 1966 substituted a new concession to these priority industries basic to the commercial development of the community.
This historical background reflects the intention of the legislature to grant progressively certain exemptions, reliefs or conces sions for certain types of industries which were considered important for na tional development / The industry in iron and steel and other metals figures in all these lists_) The only relevance of this background to the issue before us is that it gives an indication that the incentive, concession or relief granted under these provi sions has to be construed in a broad and comprehensive manner so as to cover all manufacturing activities legiti mately pertaining to specified core industry with no limita tion save what may be called for by the wording of a partic ular entry.
So far as items 1 and 2 are concerned, as earli er pointed out, the wording points to a distinction between the metal which is used as the base and other articles manufactured therefrom.
We have earlier pointed out that pig iron and iron scrap are fed into furnaces to produce ingots, billets and blooms.
But both are iron and steel in different form, the latter being referred to as "semi finished steel".
Likewise, we think, the bars, rods, rounds, wife rods and the like constitute the second stage in which one gets only "finished" forms of iron and steel.
Having regard to the nature and weight of the metal, it has to be "finished" to assume these forms before manufacturers of iron and steel articles can take over and proceed to manufacture articles from them by drawing wires or converting them into rails or shaping them into tees, zees, pipes, tubes and the like see CI.T. vs Tensile Steel Ltd., or, again, producing articles of iron like ploughs, shovels, pickaxes, lathes, blowers, surface guiders and drills as in C.I.T. vs Ludhiana Steel Rolling Mills, (1989) 180 I.T.R. 155 (P&H).
Whether the article produced is the raw material or an article made of iron and steel has to be decided on the basis of the nature of the article and not the kind of mill which turns it out.
It is significant that these items do not draw distinction between basic steel mills, integrated steel mills and the various other types of mills that are used in the industry which have been referred to earlier.
The Board 's clarification, referred by Dr. Gaurishankar, that the machinery and plant in "rolling mills" will not be eligible for the higher development rebate would not, there fore, seem to be justified if it intends to draw a distinc tion between the same machinery and plant when used in rolling mills and when used in other mills in the industry.
If machinery and plant installed in steel mills where the process 201 includes not merely the production of ingots, billets and the like but also the production of bars and rods are eligi ble for the higher development rebate, it is difficult to see why the same plant and machinery, when installed in rolling mills which proceed, from the stage of ingots or billets, to manufacture bars and rods should not be eligible for the higher rate of development rebate.
In considering the issue before us, we should not be classifications of stages of manufacture that may be carried away by classifi cation of stages of manufacture that may berelevant forother purposes.
We would like to emphasise, at the cost ofrepeti tion, that what we should examine is not the nature of the mill which yeilds the article but the nature of the article or thing that is manufactured and ask ourselves the question whether such article or thing can be considered as raw material for manufactrure of other articles made of the metal or is it itself an article made of the metal.
On this issue our view is, as we have already stated, that the goods in the present case fall in the former category.
We think Sri Ramachandran is right in pointing out that the mild steel rods, bars or rounds which are manufactured by the assessees here are only finished forms of the metal and not articles made of iron and steel.
They only constitute raw material for putting up articles of iron and steel such as grills or windows by applying to them processes such as cutting or turning.
The rod or the wire rods (with which some of the decisions were concerned) are likewise not products of iron and steel but only certain finished or refined forms of the metal itself.
We do not think much assistance can be derived for the interpretation of the provision before us from the Central Excise & Salt Act or the various classifications statutorily or commercially drawn up for that purpose.
They are more refined and intricate classifications for the purposes of excise duty and cannot be imported into the present context.
As we have mentioned earlier, some guidance as to inter pretation of item 1 to the schedule can be derived from item no.11, which refers to "forgings and castings".
These ex pressions obviously refer to articles obtained from the raw material iron and steel by forging and casting.
The argument in some of the decisions referred to before us that item No. 1 should be interpreted strictly because of the existence of item No. 11 seems to proceed on an erroneous basis.
It would be more appropriate to say that forging and castings are not covered by item 1 being articles made of iron and steel but that since the legislature definitely intended to give relief even in respect of such articles, item 11 and (also item 21) were introduced.
In fact, there is some force in the contention urged on behalf of the assessees that even if MS steel rods, bars and rounds cannot be taken as iron and steel (metal), they would fall under the category of "forg ings and castings" referred to in item 11.
We do not, howev er, wish to express any 202 concluded opinion on this aspect because item No. 11 was not relied upon by the assessee at any earlier stage.
In C.A. No. 1404/79, the assessee, Krishna Copper and Steel Rolling Mills, manufactured iron rods and girders out of scrap metal initially converted into billets.
Before the High Court the argument seems principally to have turned on the question whether an assessee manufacturing these arti cles out of iron scrap would be entitled to the higher development rebate.
The assessee cited a circular of the Board that, under item 2 of the schedule, the higher devel opment rebate would be available to an assessee who manufac tured articles from aluminium scrap [vide, circular no.25 D (XIX 16) dated 10th October, 1966].
The High Court, on this basis, answered the question by saying that the assessee before it was also entitled to the higher development rebate though it produced articles only from iron scrap.
This does not really answer the real question but, for the reasons we have already given, we agree with the conclusion drawn by the High Court.
For the reasons stated above we are of the opinion that the view taken by the High Courts in the present cases does not call for any interference.
The appeals, therefore, fail and are dismissed.
But in the circumstances we make no order regarding costs.
V.P.R. Appeal dismissed.
201 includes not merely the production of ingots, billets and the like but also the production of bars and rods are eligi ble for the higher development rebate, it is difficult to see why the same plant and machinery, when installed in rolling mills which proceed, from the stage of ingots or billets, to manufacture bars and rods should not be eligible for the higher rate of development rebate.
In considering the issue before us, we should not be carried away classi fications of stages of manufacture that may be relevant for other purposes.
We would like to emphasise, at the cost of repetition, that what we should examine is not the nature of the mill which yeilds the article but the nature of the article or thing that is manufactured and ask ourselves the question whether such article or thing can be considered as raw material for manufactrure of other articles made of the metal or is it itself an article made of the metal.
On this issue our view is, as we have already stated, that the goods in the present case fall in the former category.
We think Sri Ramachandran is right in pointing out that the mild steel rods, bars or rounds which are manufactured by the assessees here are only finished forms of the metal and not articles made of iron and steel.
They only constitute raw material for putting up articles of iron and steel such as grills or windows by applying to them processes such as cutting or turning.
The rod or the wire rods (with which some of the decisions were concerned) are likewise not products of iron and steel but only certain finished or refined forms of the metal itself.
We do not think much assistance can be derived for the interpretation of the provision before us from the Central Excise & Salt Act or the various classifications statutorily or commercially drawn up for that purpose.
They are more refined and intricate classifications for the purposes of excise duty and cannot be imported into the present context.
As we have mentioned earlier, some guidance as to inter pretation of item 1 to the schedule can be derived from item No. 11, which refers to "forgings and castings" These expressions obviously refer to articles obtained from the raw material iron and steel by forging and casting.
The argument in some of the decisions referred to before us that item No. 1 should be interpreted strictly because of the existence of item No. 11 seems to proceed on an erroneous basis.
It would be more appropriate to say that forging and castings are not covered by item 1 being articles made of iron and steel but that since the legislature definitely intended to give relief even in respect of such articles, item 11 and (also item 21) were introduced.
In fact, there is some force in the contention urged on behalf of the assessees that even if MS steel rods, bars and rounds cannot be taken as iron and steel (metal), they would fall under the category of "forgings and castings" referred to in item 11.
We do not, however, wish to express any 202 concluded opinion on this aspect because item No. 11 was not relied upon by the assessee at any earlier stage.
In C.A. No. 1404/79, the assessee, Krishna Copper and Steel Rolling Mills, manufactured iron rods and girders out of scrap metal initially converted into billets.
Before the High Court the argument seems principally to have turned on the question whether an assessee manufacturing these arti cles out of iron scrap would be entitled to the higher development rebate.
The assessee cited a circular of the Board that, under item 2 of the schedule, the higher devel opment rebate would be available to an assessee who manufac tured articles from aluminium scrap [vide, circular no.25 D (XIX 16) dated 10 th October, 1966].
The High Court, on this basis, answered the question by saying that the assessee before it was also entitled to the higher development rebate though it produced articles only from iron scrap.
This does not really answer the real question but, for the reasons we have already given, we agree with the conclusion drawn by the High Court.
For the reasons stated above we are of the opinion that the view taken by the High Courts in the present cases does not call for any interference.
The appeals, therefore, fail and are dismissed.
But in the circumstances we make no order regarding costs.
V.P.R. Appeals dismissed.
|
The respondents assessees were engaged in the manufacture of mild steel rods, bars or rounds.
They claimed that as the articles manufactured by them fell under item 1 of the list set out in the Fifth Schedule, they were entitled to a higher rate of development rebate specified in section 33(1) (b) (B) (i) (a) and to relief under section 80 1 of the Income Tax Act, 1961.
The Income Tax Officer rejected the claim of the assessees, whereas the Appellate As sistant Commissioner, the Tribunal and High Court accepted their claim.
Hence the Revenue filed appeals before this Court.
The contentions of the appellant Revenue were that iron and steel ceased to be a metal when it came out of the furnace in the primary steel mills in the form of ingots.
In the next stage the ingots became semi finished products in the shape of billets, blooms and slabs.
It was said to be the stage where the raw materi als were converted into.
In different form or shape; that the expression "iron and steel (metal)" meant the iron and steel as it emerged in the form of billets, blooms and slabs from the steel mill and that all subse quent products whether in the form of rails, rods (including wire rods), bars, angles, channels, tees, sees, pipes, tubes, sheets, strips, plates and coils would constitute articles made of iron and steel, and that rolling mills making bars and rods were not covered by item 1 of the Fifth Schedule.
188 On the other hand, the respondents asses sees contended that in the steel industry the manufacture of ingots, billets, blooms, etc.
represented only an intermediate stage at which the iron and steel metal became semi finished steel.
When the semi finished steel was converted into plates, bars or rods, they became finished steel.
The bars, rods and rounds, which were continued to be iron and steel in a finished form, were used to manu facture the products of iron and steel by various processes, such as, rolling, cutting, shearing, forging, hammering, etc.
and that the products of iron and steel were different from that of iron and steel (metal).
Dismissing the appeals filed by the Revenue, this court, HELD: 1.
In interpreting the provisions in S.33(1)(b)(B)(i)(a), S.80 I of the Income Tax Act, 1961, the Court would do well to keep in mind the background in which concessions to certain basic industries were introduced in the Income Tax Act.
The historical background reflects the intention of the legislature to grant progressively certain exemptions, re liefs and concessions for certain types of industries, which were considered important for national development.
The industry in iron and steel and other metals figured in all the lists.
[199 C, 200 B] 2.
The incentive concession or relief granted under the provisions has to be con strued in a broad and comprehensive manner so as to cover all manufacturing activities legitimately pertaining to the specified core industry with no limitation save what may be called for by the wording of a particular entry.
So far as items 1 and 2 are concerned, the wording points to a distinction between the metal which is used as the base and other articles manufactured therefrom.
Pig iron and iron scrap are fed into furnaces to produce ingots, billets and blooms.
But both are iron and steel in different forms, the latter being referred to as "semi finished steel".
Like wise, the bars, rods, rounds, wire rods and the like constitute the second stage in which one gets only "finished" forms of iron and steel.
Having regard to the nature and weight of the metal, it has to be "finished" to assume these forms before manufacturers of iron and steel articles can take over and proceed to manufacture articles from them by drawing wires or converting them into rails or shaping them into tees, zees, pipes, tubes and the like.
[200 C E] 3.
Whether the article produced is the raw material 01, an article made of iron and steel has to be decided on the basis of the 189 nature of the article and not the kind of mill which turns it out.
It is significant that these items do not draw distinction between basic steel mills, integrated steel mills and the various other types of mills that are used in the industry.
[200 G] 4.
The departmental instructions that machinery and plant in "rolling mills" will not be eligible for the higher development rebate would not seem to be justified if it intends to draw a distinction between the same machinery and plant when used in rolling mills and when used in other mills in the industry.
If machinery and plant installed in steel mills where the process includes not merely the production of ingots, billets and the like but also the production of bars and rods are eligible for the higher development rebate, it is difficult to see why the same, plant and machinery, when installed in rolling mills which proceed, from the stage of ingots or billets, to manufacture bars and rods should not be eligible for the higher rate of devel opment rebate.
[200 G 201 B] 5.
In considering the issue, the court should not be carried away be classifications of stages of manufacture that may be relevant for other purposes.
What the court should examine is not the nature of the mill which yields the article but the nature of the article or thing that is manufactured and ask the question whether such articles or things can be considered as raw material for manufac ture of other articles made of the metal or is it itself an article made of the metal.
[201 B C] 6.
The goods in the present case fail in the former category.
The mild steel rods, bars or rounds which are manufactured by the asses sees are only finished forms of the metal and not articles made of iron and steel.
They only constitute raw material for putting up arti cles of iron and steel such as grills or windows by applying to them processes, such as cutting or turning.
The rod or the wire rods are likewise not products of iron and steel but only certain finished or refined forms of the metal itself.
[201 C D] 7.
Forging and castings are not covered by item 1 being articles made of iron and steel but that since the legislature definite ly intended to give relief even in respect of such articles, item 11 and also item 21 were introduced.
Even if MS steel rods, bars and rounds cannot be taken as iron and steel (metal), they would fail under the category of "forgings and castings" referred to in item 11.
[201 G H] 190 8.
The conclusion drawn by the High Court that the assessee was entitled to the higher development rebate, though, it produced arti cles only from iron scrap, does not call for any interference.
[202 C, D] C.I. T. vs Mittal Steel Re tolling and Allied Industries (P) Ltd., ; CI.
West India Steel Co. Ltd., (Kerala); Addl.
Commissioner of Income Tax vs Trichy Steel Rolling Mills Ltd., ; C.I.T.v.
Krishna Copper Steel Roll ing Mills, & Har yana); CI.T.v.
Ludhiana Steel Rolling Mills, & Haryana) and Singh Engineering Works Pvt. Ltd. vs CI.T., , approved.
Indian Steel and Wire Products Lid vs Commissioner of Income tax, and Commissioner of Income Tax vs Kay Charan Pvt. Ltd., ; over ruled.
State of Madhya Bharat vs Hira Lal, (1966) 17 STC 313 (S.C.) Devi Dass Gopal Krishnan vs State of Punjab, (1967) 20 STC 430 (SC); Hindustan A1uminium Corporation Ltd. vs State of (U.P., (1981) 48 STC 411 (S.C.) State of Tamil Nadu vs Pyarelal Malhotra, (1976) 37 STC 319 (SC); C.I.T.v.
Rashtriya Metal Industries Co. Ltd., ; Indian A1uminium Co. Ltd vs
C.I.T, Cal.
and Cal; Jeewanlal vs CI.T., ; C.I.T vs Fitwell Caps P. Ltd., ; Hindustan Wire Products vs CI.T 1 ; Indian Steel and Wire Products Lid vs C.I.T. ; C.I.T.v.
Tensile Steel Lid, and CI.
Ludhiana Steel Rolling Mills, & H) referred to.
Speci 'fication and Glossary By Expert Products Sectional Committee of Bureau of India Standards, New Encyclopedia Brittanica Macropaedia, 15th Edn. Vol.21; Websters, Third New International Dictionary; Encyclopaedia of Chemical Technology By Kirk Othmer, 3rd.
Vol.21;// Book on Small Scale Steel Making By R.D.Walker, The Budget Speech of the Finance Minister, (1968) 48 ITR [Statutes] 34; (1965) 55 ITR [Statutes] 57 and 122 referred to.
|
Civil Appeal No. 325/61.
Appeal from the judgment and decree dated March 6.
1961, of the Allahabad High Court in Writ No. 3116 of 1960.
WITH Petitions Nos. 180, 181 and 205 of 1961.
Petitions Under article 32 of the Constitution of India for enforcement of Fundamental Rights.
section N. Kacker and J. P. Goyal, for the appellant (In C.A. No. 325/61) and the petitioner (In Petn.
No. 205/61).
H.N. Sanyal, Additional Solicitor General of India, K.L. Misra, Advocate General, U. P. H. N. Seth, J. K. Srivastva and C. P. Lal, for the respondents (in C.A. No. 325/61 and Petn.
No. 205 of 1961).
J. P. Goyal, for the petitioners (In petitions Nos. 180 and 181 of 1961).
C. P. Lal, for the respondents (In Petitions Nos. 180 and 181 of 1961).
December II.
The Judgment of the Court was delivered by SHAH, J.
The appeal and the writ petitions practically raise the same points and may be 78 disposed of together.
At the outset we shall briefly state the facts relevant to each of the said proceedings.
The appellant in Civil Appeal No. 325 of 1961 held a permit for plying stage carriage on the Kanpur Bela Bidhuna route via Chaubepur, in the State of Uttar Pradesh.
The entire route is 68 miles long, and a part of the route 16 miles in length i.e., Kanpur to Chaubepur, is a notified route.
This part was common between the said route and the Kanpur Chaubepur Sarai Miran route, which was a nationalised route.
A condition was, therefore, attached to the appellant 's permit that he would not be entitled to pick up passengers or drop them between Kanpur and Chaubepur.
His permit was to expire on June 10, 1960.
Before the said date, he applied for renewal of his permit, and on May 20, 1960 it was published in the U.P. Govt.
Gazette calling for objections.
On the same day, the State Government published a notification in the Gazette proposing to nationalise the said route.
As the application for renewal could not be disposed of before the expiry of the period fixed in the permit a temporary permit for the route was granted to the appellant.
On July 19, 1960 the application for renewal of the appellant 's permit was considered by the Regional Transport Authority, Kanpur, and his permit was renewed for three years with effect from July 23, 1966, only in respect of a part of the old route, namely, Chaubepur Bela Bidhuna; but under the directions of the Transport Commissioner, the Regional Transport Authority made an endorsement on the renewed permit authorizing the appellant to ply his vehicle between Kanpur and Chaubepur for a period of four months commencing from July 23, 1960.
As regards the proposed scheme of nationalization, on June 22, 1960 the appellant filed his objections thereto.
The said objections were heard by the Joint Secretary, Judicial 79 Department, who approved the scheme with some modifications.
The approved scheme was published in the Gazette on October 8, 1960.
Under the notification the scheme was to be put into operation from October 5, 1960 or thereafter.
On November 12, 1960, a notification dated November 4, 1960 was published in the Gazette under section 68F of the cancelling the appellant 's renewed permit with effect from November 27, 1960.
Under the nationalization scheme the stage carriages belonging to the State Transport Undertaking could ply on the said route without obtaining permits.
The appellant filed a petition under Art, 226 of the Constitution in the High Court of Judicature at Allahabad praying for the following reliefs: (a) That a writ in the nature of mandamus may issue to command the respondents not to interfere with the Petitioner 's right to ply on Kanpur Bela Bidhuna Via Chaubepur route under the permit duly renewed in his favour till the entire duration of the permit viz., till July 22, 1963.
(b) That a Writ in the nature of certiorari may issue to quash so much of the Resolution dated July 19, 1960 passed by the Regional Transport Authority, Kanpur, as directs imposition of illegal conditions to the renewed permit of the petitioner.
(c) That a Writ in the nature of mandamus may issue to command respondents No. 2 and 3 not to give effect to the illegal endorsements made on the petitioner 's permit on July 23, 1960 and to treat the petitioner 's permit as having been renewed without the illegal conditions attached thereto by the two endorsements dated July 23, 1960, reproduced in paragraph 15 of the affidavit.
80 (d) That a Writ in the nature of certiorari may issue to quash the notifications dated May 18, 1960 under section 68C of the Act, so also the subsequent notifications under section 68D(2) of the Act dated September 26, 1960 and the notification dated November 4, 1960 under section 68F (2) of the Act in regard to Kanpur Bela Bidhuna route.
(e) That a Writ in the nature of mandamus may issue directing the respondents Nos. 1 to 3 not to give effect to the notifications dated May 18, 1960, September 26, 1960 and November 4, 1960 in regard to Kanpur Bela Bidhuna route.
(f) That an interim direction may issue to the respondents Nos. 2 and 3 not to interfere with the Petitioner 's right to ply on the entire Kanpur Bela Bidhuna route under the renewed permit irrespective of the illegal conditions attached thereto or of the illegal scheme for the nationalization of the said route.
(g) That costs of this petition may be awarded to the Petitioners as against the opposite parties.
On December 2, 1960 the High Court made an interim order directing the State of Uttar Pradesh not to interfere with the petitioner operating his vehicle on Kanpur Bela Bidhuna route in accordance with the terms of his permit.
To that writ petition, the State of Uttar Pradesh, the Regional Transport Authority, and the Secretary to Regional Transport Authority, were made respondents.
The respondents opposed the petition.
On March 6, 1961 a Division Bench of the High Court, accepting the contentions raised by the respondents, dismissed the petition.
Hence the appeal.
81 Writ Petition No. 205 of 1961 is filed in this Court by another operator under article 32 of the Constitution.
He was plying his stage carriage on the Jaunpur Shahganj route in Uttar Pradesh under Permit No. 430, which was valid upto March 15, The State Government published in the Gazette dated July 23, 1960 a notification dated July 15, 1960 under section 68C of the Act proposing to nationalize the said route along with another route.
The petitioner and others filed objections against the scheme within the time prescribed.
The objections were heard by the Joint Secretary, Judicial Department, who approved the scheme.
The approved scheme was published in the U. P. Official Gazette dated February 25, 1961.
Thereafter, the Secretary to the Regional Transport Authority, Allahabad, issued a notification dated July 29, 1961 wherein it was stated that the permits of the operators on the said routes including that of the petitioner would stand cancelled and that the notification would come into force upon the expiry of 15 days from the date of publication of the said notification.
The petitioner has filed the present writ petition asking for the following reliefs: (a) A writ in the nature of certiorari quashing the notification (Annexures A, B and C to this writ petition).
(b) A writ in the nature of mandamus directing the respondents not to give effect to the notifications.
(c) A writ in the nature of mandamus commanding the respondents not to interfere with the rights of the petitioner to ply his stage carriage on the aforesaid route (Jaunpur Shahganj route), due to the aforesaid scheme.
(d) Award the costs of this petition to the petitioner.
82 Writ Petitions Nos.
180 and 181 of 1961 relate to the route Robertasgunj Dudhi Mamhani.
The State Government issued a notification dated July 13. 1960, proposing to nationalize the said route and published the same in the Gazette on July 23, 1960.
The petitioners filed objections against the scheme and the said objections were heard by the Joint Secretary, Judicial Department, and the scheme was finally approved by him.
The approved scheme was notified in the Gazette on May 20, 1961.
Under the said notification, the State Transport Undertaking would commence to operate its stage carriage service on the said route from July 15, 1961 or thereabout.
Aggrieved by the said scheme, the petitioners filed the said petition for writs in this Court for reliefs similar to those in the other petition.
Mr. Kacker, learned counsel for the petitioner in Writ Petition No. 205 of 1961, raised the following points: (1) Under section 68C of the , the State Transport Undertaking has to form its opinion and prepare a scheme for nationalisation and publish it in the manner prescribed thereunder, but in the present cases the State Government initiated the schemes and, therefore, the schemes were not validly made; (2) As neither the objection to the proposed scheme were heard nor were they approved by the State Government as they should be under section 68D of the , the schemes were invalid; (3) The Regional Transport Authority acted illegally in curtailing the period of renewal this question arises only in the appeal; (4) The Regional Transport Authority had not applied its mind in dealing with the renewal application but mechanically followed the provisions in the proposed schemes and, therefore, its order was bad; (5) Even after the approval of the nationalisation schemes, the State owned buses were required to apply for and get permits under the Act and plying of buses 83 by the State without permits was illegal; and (6) The Secretary to the Regional Transport Authority had no jurisdiction to issue an order under section 68F (2) of the , since under the said section only the Regional Transport Authority had the power to do so this question arises only in Writ Petition No. 205 of 1961.
To appreciate the first argument it is necessary to notice briefly the relevant provisions of Ch.
IVA of the (IV of 1939) hereinafter called the Act.
Section 68A(b) defines "State transport undertaking" to mean "any undertaking providing road transport service, where such undertaking is carried on by (i) the Central Government or a State Government.
Section 68C reads: "Where any State transport undertaking is of opinion that for the purpose of providing an efficient, adequate, economical and properly coordinated road transport service, it is necessary in the public interest that road transport services in general or any particular class of such service in relation to any area or route or portion thereof should be run and operated by the State transport undertaking, whether to the exclusion, complete or partial, of other persons or otherwise, the State transport undertaking may prepare a scheme giving particulars of the nature of the services proposed to be rendered, the area or route proposed to be covered and such other particulars respecting thereto as may be prescribed and shall cause every such scheme to be published in the Official Gazette and also in such other manner as the State Government may direct".
Section 68D reads: "(1) Any person affected by the scheme published under section 68C may, within 84 thirty days from the date of the publication of the scheme in the Official Gazette, file objections thereto before the State Government.
(2) The State Government may, after considering the objections and after giving an opportunity to the objector or his representatives and the representatives of the State Transport undertaking to be heard in the matter, if they so desire, approve or modify the scheme." Section 68E provides for the cancellation or modification of the scheme by the State transport undertaking and in that event the same procedure prescribed for framing a scheme is to be followed.
The effect of the said provisions, in so far as they are relevant to the present inquiry, may be stated thus: The State transport undertaking is an undertaking providing road transport service which is carried on by the State or any other corporation or authority mentioned in section 68A.
The definition creates a statutory authority distinct from authorities which run it.
This is made clear by section 68C whereunder it is the State transport undertaking that will have to form the requisite opinion.
This is further elucidated by the fact that under section 68C of the Act the state transport undertaking is required to publish the proposed scheme in the Official Gazette and also in such other manner as the State Government may direct.
This distinction between the two entities is further made clear by section 68D(2) whereunder the State Government has to hear the representatives of the State Transport undertaking.
Briefly stated, under the said provisions, a statutory authority called the State transport undertaking is created it is authorised to initiate a scheme of nationlisation of road transport, the aggrieved parties are given opportunity to file objections thereto, and 85 the State Government is empowered to hear both the parties and approve or modify the scheme, as the case may be.
Counsel for the appellant contends that the underlying scheme of the Act cannot be worked out unless a clear distinction is maintained between the State transport undertaking and the State Government, for, if one is equated with the other, the State Government would become a judge of its own cause, and that, therefore, it was incumbent upon the Government to form a separate and distinct, authority to enable it to initiate a scheme in accordance with law.
Counsel for the State contends that a transport undertaking run by a State Government is a State transport undertaking and, therefore, the scheme initiated by the State Government which runs the State undertaking is a scheme initiated by the said undertaking.
It is true that the provisions maintain a distinction between a State transport undertaking and the State Government.
It is also true that the State Government has to hear the objections of the aggrieved parties and also the representatives of the State transport undertaking before approving or modifying the scheme, indicating thereby that the State Government has to decide the dispute that may arise between the two contestants.
Though the functions of the different bodies are clearly demarcated in the case of undertakings run by corporations, there is overlapping in the case of an undertaking run by a State Government.
This may lead to anomalous position, but in practice it can be avoided, if the State Government creates a department to be in charge of the undertaking and hears the objections and approves or modifies the scheme in a manner without violating the principles of natural justice.
86 A State transport undertaking means, inter alia, an undertaking run by a State.
The statutory authority created is an undertaking run by a State.
The State can only run an undertaking through its officers; it may entrust the conduct of the transport service to a particular officer or to a department of the State; in either event, it is the State Government that runs the undertaking.
The statutory authority, namely, the State transport undertaking, has to form an opinion within the meaning of section 68C of the Act, and the opinion must necessarily be that of the State Government which runs it.
If the State Government running an undertaking forms an opinion, it can legitimately be said that the statutory authority i. e., the State transport undertaking, has formed the opinion.
In Gullapalli Nageswara Rao vs Andhra Pradesh State Road Transport Corporation (1) before the State of Andhra was formed in November, 1956, the Motor Vehicles (Hyderabad Amendment) Act, 1956 was in force in Telengana area.
Under the said Act the State transport undertaking was defined to mean the road transport department of the State providing road service.
After the Andhra Pradesh State was formed, that department initiated the scheme and this Court held that the said department clearly fell within the definition of state transport undertaking.
This Court observed in that case: "The State Government maintained the department for providing road transport service and therefore the department clearly falls within the definition of State Transport Undertaking.
" If a state directly runs an undertaking, it can only be through a department.
In law there cannot be any difference between an undertaking run by a department of a State Government and that run 87 by the State Government.
In either undertaking is run by the State and that undertaking is a State transport undertaking within the meaning of section 68C of the Act.
The opinion must necessarily be formed by somebody to whom, under the rules of business, the conduct of the business is entrusted and that opinion, in law, will be the opinion of the State Government.
It is stated in the counter affidavit that all the concerned officials in the Department of Transport considered the draft scheme and the said scheme was finally approved by the Secretary of the Transport Department before the notification was issued.
It is not denied that the Secretary of the said Department has power under the rules of business to act for the State Government in that behalf.
We, therefore, hold that in the present case the opinion was formed by the State transport undertaking within the meaning of section 68C of the Act, and that there was nothing illegal in the manner of initiation of the said scheme.
The second ground urged by counsel for the appellant that the scheme was invalid because the objections to the scheme were heard and the scheme was approved by the Joint Secretary, Judicial Department, who was not lawfully invested with authority in that behalf is for reasons to be presently stated not open to the appellant.
By the first sub section of section 68D which we have already set out persons affected by a transport scheme are entitled to file objections thereto.
By sub section (2), the State Government is authorised to approve or modify, the scheme after considering the objections, if any, and after giving an opportunity of being heard in the matter to the objector or his representatives and the representatives of the State transport undertaking.
Sub section (3) provides for the publication of the 88 approved or modified scheme in the Official Gazette by the State Government and on such publication the scheme becomes final.
It must at once be observed that neither in the petition under article 226 of the Constitution to the High Court, out of which Civil Appeal No. 325 of 1961 arises, nor in the Writ Petition under article 32 (No. 205 of 1961) presented to this Court, was the plea raised that the Joint Secretary to the Judicial Department was not authorised to hear the objection and to approve the scheme.
In the petition (No. 205 of 1961) under article 32 of the Constitution it was averred by the petitioner in para 10 that "the petitioner filed objections under section 68D(1) of the Act, against the scheme of the State Government, and it also heard its own representatives in opposition to the petition" and again it was averred in the same paragraph "at the time of hearing of the petitioner 's objections under section 68 D, Before the State Government it was argued on behalf of the petitioner that the aforesaid scheme was bad. " In the petition under article 226 of the Constitution it was averred in paragraph 25 "That no State Transport Undertaking having been constituted the State Government initiated the scheme and heard its own representatives on 13.8.1960.
The petitioner has bonafide belief that the Joint Secretary to the Government of Uttar Pradesh (Judicial Department) who heard the objections acted with bias against the petitioner.
" Even in the petition for special leave to appeal to this Court, no such objection was raised.
There is also no reference to any such contention in the judgment of the High Court.
The validity of the scheme on this ground is sought to be raised for the first time in this Court, and, according to the settled practice of this Court the appellant except in exceptional circumstances and there are none such in this case is not entitled to raise this argument for the first time at the hearing in this Court.
It was urged in the course of the 89 argument that by Rule 7 of the State Land Transport Services Development Rules 1958, which at the material time read as follows: "(1) The objections received shall be considered by the judicial Secretary to Government of U.P. or an officer of his department, not below the rank of Joint Secretary nominated by the former for the purpose.
x x x x x x x x x x (5) After hearing of such parties as appear, the officer shall give a decision whether the scheme be approved or modified as he may deem proper", no authority was lawfully conferred upon the Joint Secretary, and the proceedings of the Joint Secretary in purported exercise of powers under section 68D (2) were without jurisdiction.
But this is another facet of the same argument, and it is clear from a perusal of the petitions before the High Court and this Court and the judgment of the High Court that it was never raised.
There is no doubt that the scheme has been duly published under section 68D(3) and if the objection to the invalidity of the scheme on the ground that the objection were not heard by an authority competent in that behalf cannot be permitted to be raised in this Court for the first time during the course of the arguments, the statutory consequences prescribed by section 68F must ensue.
It is necessary to bear certain facts and considerations in mind in dealing with the remaining contentions.
By the scheme (cl. 7) the permit of the appellant was cancelled.
The scheme as approved was published in the U.P. Gazette on October 8, 1960, and was to come into operation on October 15, 1960, or thereafter.
A notification was published on November 4, 1960, under section 68F(2) 90 of the Act cancelling the appellant 's permit with effect from November 27, 1960.
The appellant therefore ceased to have any right to ply his vehicles on the route and he had no right to object to the vehicles of the State transport undertaking plying on that route.
If the scheme was validly promulgated and became final within the meaning of section 68D(3), it had the effect of extinguishing all rights of the appellant to ply his vehicles under his permit.
After cancellation of his permit, he could not maintain a petition for writ under article 226 because a right to maintain such a petition postulates a subsisting personal right in the claim which the petitioner makes and in the protection of which he is personally interested.
It is true that the appellant did at the date of the petition filed in the High Court hold a permit which was to enure till the 27th November, 1960.
But if the permit was validly terminated from the date specified, he will not be entitled to relief even if he had on the date of the petition a subsisting right.
Ground No. 2 must therefore fail.
Grounds 3 and 4 of the appellant that the Regional Transport Authority acted illegally in curtailing the period of renewal and that, in any event, it did not apply its mind in dealing with the renewal application but mechanically followed the provisions of the scheme may now be considered.
The Regional Transport Authority was by the terms of the scheme left no discretion in the matter.
It was by the scheme that the right of the appellant was restricted and if the scheme became final and binding the Regional Transport Authority had no authority to permit the appellant to ply his vehicles.
The order passed by the Regional Transport Authority was purely consequential on the scheme, and if the scheme is not open to challenge, orders consequential thereon will not 91 also be open to challenge.
We are supported in this view by the observations of this Court in Abdul Gafoor: Proprietor, Shaheen Motor Service vs The State of Mysore (1) that: "It appears to us that when deciding what action to take under section 68F(1) the authority is tied down by the terms and conditions of the approved scheme and his duty is merely to do what is necessary to give effect to the provisions of the schemes.
The refusal to entertain applications for renewal of permits or cancellation of permits or modification of terms of existing permits really flow from the scheme.
The duty is therefore merely mechanical and it will be incorrect to say that there is in these matters any lie between the existing operators and the State Transport Authority.
There is no justification therefore for saying that when taking action under section 68F(2) is really independent of the issue of the permits under section 68F(1).
Once the scheme has been approved, action under section 68F(1) flows from it and at the same time action under section 68F(2) flows from the same scheme".
We are bound by the decision.
We are not called upon to consider whether the State owned buses are being validly plied without obtaining permits under section 68F(1) of the Act.
If the right of the appellant to ply his buses is lawfully extinguished, he is not entitled to maintain an appeal challenging the right of the State Transport undertaking to ply their buses with or without permits.
Nor is any fundamental right of the appellant infringed by the State Transport undertaking plying its buses without permits, and a petition under article 32 of the Constitution cannot be maintained unless a fundamental right of the applicant is infringed.
92 Nor is there any substance in the last contention.
The orders passed under.
sections 68F(2)(a) and (b) flow from the publication of the scheme duly approved and the issue of an order, which is not quasi judicial but administrative, by the Secretary on behalf of the Regional Transport Authority is not open to challenge.
It is not the case of the Petitioner in W. P. 209/61 in which alone this contention is raised that the order unauthorised.
what is contended above this contention is raised that the order is being quasi judicial, power to make it cannot be delegated.
But for reasons already set out the order is not quasi judicial; it is purely administrative.
In our view, therefore, the appeal and the petitions must fail, and are dismissed with costs.
|
The appellant, whose permit for plying stage carriage was shortly to expire, applied for its renewal.
The renewal application was published in the Gazette calling for objections.
The State Government published a notification proposing to nationalise the route.
The permit was renewed for three years for a part of the route but an endorsement was made thereon authorising the appellant to ply on the remaining part of the route for four months.
The appellants filed objections to the proposed scheme for nationalisation.
The objections were heard by the Joint Secretary, Judicial Department, who approved the scheme with certain modifications.
The scheme was published in the Gazette.
Thereafter, a notification was issued under section 68F of the cancelling the appellant 's renewed permit.
Under the Scheme the stage carriages of the State Transport Undertaking could ply on the route without obtaining permits.
The appellant challenged the validity of the scheme and the cancellation of his licence.
^ Held, that the scheme was valid and the appellant 's licence was properly cancelled.
Section 68C of the required the scheme to be initiated by the State Transport Undertaking.
Even though the scheme in the present case was actually initiated by the State Government there was no non compliance with the provisions of section 68C.
There was no difference between an undertaking run by a department of the State Government and that run by the State Government.
In either case the undertaking was run by the State and it was a State transport undertaking within the meaning of section 68C. Initiation of the scheme by the State Government running an undertaking was initiation by the statutory authority i.e., the State Transport undertaking.
The appellant could not be allowed to challenge the validity of the scheme on the ground that the Joint Secretary was not lawfully invested with the authority to hear objections and to approve the scheme as the point was not raised at the proper stage.
77 Gullapalli Nageswara Rao vs Andhra Pradesh State Road Transport Corporation, [1959] Supp. 1 S.C.R. 319, applied.
The scheme having been validly promulgated and having become final under section 68D(3) it had the effect of extinguishing all rights of the appellant to ply his stage carriage under his permit and he could not maintain a petition under article 226 of the Constitution.
The order passed by the Regional Transport Authority cancelling the appellant 's permit was purely consequential on the scheme and could not be challenged if the scheme was valid.
Once the right of the appellant to ply his stage carriage was validly extinguished he could not question the right of the State transport authority to ply their stage carriages with or without permits.
Abdul Gafoor, Proprietor, Shaheen Motor Service vs State of Mysore, ; , applied.
|
Civil Appeal No. 282 of 1955.
Appeal by special leave from the judgment and order dated March 20, 1953, of the Bombay High Court in Income tax Reference No. 31 of 1951.
A. V. Viswanatha Sastri and I. N. Shroff, for the appellants.
K. N. Rajagopal Sastri and D. Gupta, for the respondent.
April 12.
The Judgment of the Court was delivered by KAPUR, J.
This is an appeal against the judgment and order of the High Court of Bombay in a reference under section 8(5) of the Taxation on Income (Investigation Commission) Act, 1947 (Act XXX of 1947), hereinafter termed the 'Act '.
The assessee company was the applicant before the High Court and is the appellant 919 before us and the Commissioner of Income tax, Bombay City, was the respondent in the High Court and is the respondent here also.
Being a reference under section 8(5) of the Act, it was heard and decided by three judges of the High Court.
The assessee company is a private limited company which was incorporated on May 6, 1943, with a paid up capital of Rs. 20 lacs.
It was promoted by two groups of persons who for the sake of convenience may be called the 'Morarka Group ' and the 'Bubna Group '.
The Apollo Mills Co., Ltd. of Bombay with a capital of Rs. 50 lacs divided into 25 lacs shares of Rs. 2 each, had as its Managing Agents M/s. E. D. Sassoon & Co. Ltd., who for the sake of brevity, will be referred to in this judgment as the Sassoons '.
They held 19,76,000 shares out of the 25 lacs.
The promoters of the assessee company entered into an agreement with the Sassoons on April 27, 1943, by which the Sassoons agreed to transfer their Managing Agency in the Mill Co. for Rs. 12 1/2 lacs to the promoters of the assessee company and the whole of their holding of 19,76,000 shares at Rs. 4 4 0 per share, i.e., for Rs. 83,98,000.
These shares were to be transferred to the promoters or to the company which they were proposing to float.
By clause (3) of this agreement the sale of the Managing Agency and the transfer of the shares was to be simultaneously completed and neither party could require the completion of the one without the other.
On November 1, 1943, a tripartite agreement was entered into between the Sassoons as Assignors, the promoters of the company as Confirming Parties and the assessee company as Assignees.
By that agreement the Managing Agency rights were for .ally transferred to the assessee company so also the Share Certificates for the whole of holding of the Sassoons in the Mill Co. and the necessary blank transfer deeds went) Before the agreement of April 27, 1943, and during the course of negotiations with the Sassoons the promoters of the assessee company entered into an arrangement with some share brokers for the sale of a large portion of the total holding of 19,76,000 shares 920 of the Mill Co. The price of these shares varied from Rs. 5 8 0 to Rs. 5 13 0.
In all 10,00,000 shares out of the total holding of the Mill Co. were sold to these brokers and: they in turn sold these block of shares in smaller lots to a number of purchasers.
Some shares were sold later; 1,20,000 shares were transferred to 13 nominees of the Morarka Group at cost price.
As a result of sale of all these 13,74,000 shares the assessee company received a sum of Rs. 16,52,600 as excess over the purchase price.
The remaining shares the assessee company retained.
The assessee company submitted that the profits of the entire holding of the shares had not been worked out and had therefore not been transferred to the profit and loss account.
The assessee company was taxed by the Income tax Officer but the sum of Rs. 16,52,600 which was the excess of the sale price over the purchase price of 13,74,000 shares was held not to be profit and therefore not taxable.
When the Act came into force the case of the assessee company was referred to the Investigation Commission by the Central Government and the Investigation Commission made its report on November 9, 1949, in Case No. 406A.
By this report the Commission directed that appropriate assessment be made under the Indian Income tax Act for the assessment year 1945 46 and the Excess Profits Tax Act for the corresponding chargeable accounting period.
At the instance of the assessee company the Commissioner of Income tax, Bombay City, by his order dated May 1, 1951, referred the following question to the High Court: "Whether on the facts found by the Commission the sum of Rs. 16,52,600 being the excess price realised by the sale of 13,74,000 shares of the Mill Company, was 'profit ' and as such taxable or whether it was either of the nature of a capital appreciation or a casual and non recurring receipt and as such exempt from taxation under Section 4(3)(vii) of the Income tax Act." The High Court reformulated the question as follows: 921 "Whether there were materials to justify the finding of the Tribunal that the transaction of purchase and sale of 13,74,000 shares was an adventure in the nature of trade?" and answered the question so formulated in the affirmative and therefore against the assessee company.
In its application for reference under section 8(5) of the Act the assessee company wanted some other questions also to be referred but the Investigation Commission only referred the question which has been set out above.
The assessee company therefore took out a Notice of Motion on November 8, 1952, which was dismissed by the High Court on the ground that either the questions which were sought to be raised did not arise out of the finding of the Commission or they were included in the question which had been referred and answered by the High Court.
Although the High Court did not so hold, the Notice of Motion was barred by time, being filed after more than six months allowed under section 66(2) of the Indian Income tax Act.
Against this judgment and order of the High Court the assessee company has come in appeal to this Court by special leave.
This appeal is brought against the judgment of the High Court answering the question referred and therefore in its advisory jurisdiction.
The jurisdiction which this Court exercises in appeal is of the same character and therefore any question which was not referred to the High Court cannot be allowed to be raised at this stage.
Consequently the constitutional question in regard to discrimination under article 14 of the Constitution which is now sought to be raised cannot be raised.
The main question which would then survive for decision is the nature of transaction relating to the sale of 13 lacs odd shares and whether or not the sale was an adventure in the nature of trade and therefore the amount of Rs. 16,52,600 the excess of sale price over the purchase price of the share is a Revenue Receipt and therefore taxable profits or is it a Capital Receipt and therefore not liable to tax.
The Investigation Commission by their order dated May 1, 1949, found: 922 (1) that a distinction should be made between the 6 lacs shares which the assessee company intended to and did retain and the 13 lacs odd shares which it intended to and did sell; the former was kept in order to enable the assessee company to make their Managing Agency rights effective.
(2) During the negotiations between the Sassoons and the promoters of the.
assessee company, the promoters of the assessee company had started negotiations with certain brokers for the transfer of 13 lacs odd shares soon after the arrangement between the Sassoons and the assessee company was completed.
(3) From the very beginning the intention of the promoters of the assessee company was to sell all the 13 lacs odd shares and in pursuance thereof they were sold.
(4) The paid up capital of the assessee company was Rs. 20 lacs only and according to the agreement they had to take the whole block of shares belonging to the Sassoons and pay for the shares as well as for the Managing Agency both of which were separately valued in the agreement.
It was therefore necessary and it was intended to sell the 13 lacs odd shares in order to pay off the Sassoons both for the Managing Agency and the shares.
The inference drawn from this by the Commission was that a distinction had to be drawn between the 6 lacs shares which the assessee company intended to retain and did in fact retain and the 13 lacs odd shares which they intended to sell and did sell.
(5) that the intention to sell which the assessee company entertained from the very outset was a complete answer to the argument that the acquisition was in the nature of an investment.
In giving its finding the Commission said: "Aggregating the 121 lakhs paid for the Manag ing Agency right and the full price of 6 lakhs and odd shares at Rs. 4 4 0 per share, the capital investment must amount to 121 lakhs and 251 lakhs, i.e., 38 lacs and odd.
By deducting therefrom the profits of Rs. 16,52,600, the Company showed a capital investment of Rs. 21,54,200 and with the addition 923 of a few sundry items, it was brought up to Rs. 22,06,408 (see para 7 supra).
" From this finding the inference drawn by the Commission was that the sale of 13 lacs odd shares was an adventure in the nature of trade.
The High Court reformulated the question which has already been quoted and it was contended that the High Court was in error in narrowing down the scope of the question referred by the Commission.
It is not necessary to adjudicate upon this argument because in our opinion taking the question as referred to be a proper question arising out of the report of the Investigation Commission the answer to the first part thereof would,still be in the affirmative.
Inconsidering the question whether the transaction is or is not an adventure in the nature of trade we have to take into consideration the intention of the assessee keeping in view the "legal requirements which are associated with the concept of trade or business".
The inference from the facts found by the Investigation Commission, i.e., whether the assessee company 's transaction in purchasing and selling 13 lacs odd shares is or is not an adventure in the nature of trade is a mixed question of law and fact and the legal effect of the facts found by the Investigation Tribunal is a question of law.
See M/s. Ramnarain Sons (Pr.) Ltd. vs Commissioner of Income tax, Bombay (1).
It was argued on behalf of the assessee company that: (1) that the dominant idea with which the whole transaction was entered into was to obtain the Managing Agency of the Apollo Mills; (2) that the assessee company was forced to buy the whole block of shares, i.e., 19,76,000 shares by the Sassoons because they were not prepared to part with the Managing Agency without the whole of their stock in the mill company; (3) that as the assessee company did not not have sufficient amount of money, their capital being only Rs. 20 lacs, it was to implement the tripartite agreement dated November 1, 1943, that the sale was made; and (1) (1961] 2 S.C.R. 904, 908. 924 (4) that the Memorandum of Association of the assessee company showed that it was a holding company and dealing in shares was not one of its objects.
The agreement shows that the Sassoons had separately evaluated the Managing Agency and the shares held in the Apollo Mills Co.
As the Investigation Commission has found, it was never the intention of the assessee company to retain the whole block of shares.
Before the agreement was entered into they had made arrangement for the sale of the bulk of shares which were to be transferred by the Sassoons and therefore division of the shares into two sets was made by the promoters of the assessee company and the assessee company themselves and was not the result of anything done by the Investigation Commission.
In; support of his contention that the amount of Rs. 16,52,600 was in the nature of Capital Receipt, reliance was placed on the judgment of this Court in M/s. Ramnarain 's case (1) but there are certain features and details which distinguish that case from the present case.
It was held in that case that the question had to be decided in the light of the intention of the assessee and the assessee in that case bad purchased the shares of the Dawn Mills not as a business transaction.
That was clear from the fact that the assessee bad purchased the shares at Rs. 2,321 8 0 per share and the market price was only Rs. 1,610, and the purpose of acquisition of such a large block of shares at a price exceeding the market price by a million rupees was the acquisition of the Managing Agency, which yielded the inference that the intention of purchasing the shares in that case was not to acquire them as a part of the trade of the assessee in shares but for obtaining the Managing Agency of the Mills.
There was no separate price paid for the Managing Agency and the shares purchased and the Managing Agency acquired were both assets of a capital nature and the shares did not constitute stock in trade of a trading venture.
In the present case the facts as shown were entirely different.
(1) ; , 908. 925 Counsel for the assessee company also relied on Kishan Prasad & Co. Ltd. vs Commissioner of Income tax, Punjab (1).
In that case the Managing Director of the company which was formed for the purpose of carrying on general business and trade of commercial undertaking and dealing in bills, hundis and other securities, entered into an agreement with a sugar syndicate by which the company was to be given the Managing Agency of a Mill of the sugar syndicate when such mill was erected in lieu of the company subscribing shares worth 3 lacs, and undertaking to sell shares worth 2 lacs.
It was further provided that if the mill was not erected the assessee company was to be paid a commission on the amount invested by them.
The Managing Director died and the assessee company sold the shares and thus received Rs. 2 lacs more than they had expended.
The question was whether Rs. 2 lacs were receipts from business and not a mere appreciation in capital.
It was held that that amount was not a result of an adventure in the nature of trade but was merely the result of an investment.
It was found as a fact that the object of the company was merely to obtain the Managing Agency of the mill which would have been an asset of an enduring nature bringing profits but there was from the very inception no intention on the part of the company to resell the shares either at profit or otherwise.
It appears that it was not contested that the conclusion to be drawn from those facts was that the investment in the purchase of shares in the circumstances of the case of a capital nature, and profits arising therefrom were an accretion to the capital.
In that ease the court was trying to find out the intention of the assessee (the company) and taking all the circumstances into consideration it, came to the conclusion that it was a case not of profits arising out of an adventure in the nature of trade but the, intention of the assessee company was to invest its monies and therefore the excess arising out of sale of the shares was an accretion to the capital.
That case must be taken to have been decided on its facts as (1) 926 indeed was the decision in M/s. Ramnarain Son 's case (1).
Counsel for the assessee company referred to other cases: Tata Hydro Electric Agencies, Bombay vs The Commissioner of Income tax, Bombay Presidency & Aden (2); Commissioner of Income tax, Central and United Provinces, Lucknow vs Messrs. Motiram Nandram (3), Jones vs Leeming (4) and Commissioner of Inland Revenue vs Reinhold (5).
It is unnecessary to re view these cases in any detail because they are clearly distinguishable in material respects and were decided on their own special facts.
In Tata Hydro Electric Agencies ' case (2) the question for decision was whether 25% of the commission earned which was paid to the two financiers was expenditure deductible under section 10(2)(ix) and it was held that it was not because the obligation to make the payment was in consideration of acquiring the Managing Agency and the right to conduct business and not for the purpose of producing profits in the conduct of business.
Similarly in Commissioner of Income tax vs Messrs. Motiram Nandram (3) the expenditure was for securing the agency which was to carry on business.
Sir George Rankin said at p. 81: "The question in such a case a,% the present must be "what is the object of the expenditure?" and it must be answered from the standpoint of the assessees at the time they made it that is, when they were embarking upon the business of organizing agents for the company." Jones vs Leeming (4) was a case of an isolated transaction.
The finding was that it was not in the nature of trade.
Commissioner of Inland Revenue vs Reinhold(5) was ' decided on its own facts.
Another case decided by this court upon which counsel for the appellant relied was Saroj Kumar Mazumdar vs Commissioner of Income tax, West Bengal, Calcutta (6) but that case was also decided on its own facts and it was held that there was no clear evidence in support of (1) [1961] 2.C.R. 004, 908 (3) (1939) L. R. 67 I. A. 71 (5) (1953) 34 T C. 389.
(2) (1937) L. R. 64 I. A. 215.
(4) (6) [1959] SUPP.
2 S C.R. 846.
927 the inference of the Appellate Tribunal that the land was purchased with the sole intention of selling it later at a profit.
The English and Scottish cases on which the appellant relied were considered by the House of Lords in Edwards vs Bairstow (1).In that case the assessees who were the respondents embarked on a joint venture to purchase and complete a spinning plant agreeing between themselves not to hold it but to make a quick resale.
With that object in view they approached and there were diverse negotiations and the whole plant was sold in about two years ' time at a profit of about pound 18,000 and for that purpose incurred commission for help in effecting sales, for insurance and other expenses.
The General Commissioners found that it was not an adventure in the nature of trade to justify an assessment to income tax under Case 1 of Schedule D to the Income tax Act, 1918.
It was held that the facts led inevitably to the conclusion that the transaction was an adventure in the nature of trade and that the Commissioner 's inference to the contrary should be set aside.
Counsel for the respondent next relied on a Judgment of this Court in G. Venkataswami Naidu & Co. vs The Commissioner of Income tax (2) in which it was held that the presence of all the relevant factors may help the Court to draw the inference that the transaction is in the nature of trade but it is not a matter of counting the number of facts and circumstances for and against.
What is important is to consider the distinctive character and it is the total effect of all the relevant factors that determines the character of the transaction.
All these cases are illustrative.
As was said by Gajendragadkar, J., in the above mentioned case the totality of circumstances of a case and the pros and cons have to be considered and inference drawn from those facts whether a particular transaction was in the nature of trade or was merely an investment and the resulting excess from the transaction was therefore profit which was taxable or was merely an accretion to the capital.
In the instant case (1) ; (2) [1959] SUPP.
1 S.C.R. 646.
928 the pi of its from the transaction that consisted of buying the Managing Agency of the Mill Company and the block of shares held by the Sassoons were in our view the profits of an adventure in the nature of trade.
The two groups, Morarka and Bubnas, put Rs. 20 lacs into the assessee company which was floated for the acquisition of the Managing Agency and shares of the Mill Company which were beyond the holding capacity of the assessee company.
That company never intended to hold the whole block of shares.
It or its promoters before even entering into the agreement of purchase and during the course of negotiations for the purchase had entered into arrangements with different brokers for the sale of shares or at least of a bulk of those shares which were subsequently sold at a profit and but for that sale the transact ion could not have been completed by the assessee company.
The purchase of shares was not with the intention of holding them, the intention of the assessee was just the contrary and by the sale at a profit of the shares actually sold the assessee company expected to and did finance the completion of the transaction and thus was enabled to secure the Managing Agency and keep 6 lacs shares.
This inescapably was a transaction of a commercial nature.
It had all the attributes of an adventure in the nature of trade.
The contention that dealing in buying and selling of shares was not one of its objects is without substance.
The Investigation Commission found that dealing in shares was within the objects of the assessee company and this is one circumstance in the totality of the circumstances which must be considered, though by itself it is not determinative of the question.
All the circumstances lead to the inference which was rightly drawn by the Investigation Commission and by the High Court.
The answer to the first part of the question referred by the Investigation Commission must therefore be in the affirmative.
It was contended that the question should not have been reframed and we have therefore proceeded to answer the question as framed by the Investigation Commission.
In our opinion the question even as framed must be answered in the affirmative.
929 The Notice of Motion to raise other questions in the High Court was rightly dismissed.
Apart from the fact that the Notice of Motion was barred by time and there was no application for condonation of delay, the questions which were sought to be raised were rightly held either to be covered by the question answered or they did not arise at all.
The constitutional question under article 14 of the Constitution cannot be raised in these proceedings because as we have said above this Court is exercising its advisory jurisdiction and its power is confined to the questions which arise in an appeal.
This appeal must therefore be dismissed with costs.
Appeal dismissed.
|
The assessee company was promoted with the idea of obtaining the Managing Agency of the Appollo Mills from M/s. Sassoon total of 25 lakhs shares of RS.
2 each.
According to the agreement the assessee company bad to take the whole of the block of shares belonging to the Sassoons and pay at Rs. 4 4 0 per share Rs. 12 1/2 lakhs for the managing agency.
As the assessee company had only RS.
20 lakhs as its paid up capital, it was necessary to sell 13 lakhs odd shares in order to pay off the Sassoons both for the Managing Agency and the shares.
Therefore during the course of negotiations the promoters of the assessee company entered into an agreement with some brokers for the sale of Rs. 19,76,000 shares.
As a result of the sale of shares the assessee company received a sum of Rs. 16,52.600 as excess over the purchase price which amount on taxation was held by the Income tax Officer not to be profits and therefore not taxable.
The case of the assessee company was referred to the Investigation Commission.
The Commission found that it was not the intention of the assessee company to retain the whole block of shares and that the sale of 13 lakhs odd shares was an adventure in the nature of trade, and directed that appropriate assessment be made, under the Indian Income tax Act and Excess Profits Tax Act.
At the instance of the assessee company the question was referred to the High Court under section 8(5) of the Taxation on Income (Investigation Commission) Act, 1947, which held that there were materials to justify the finding of the Commission that the purchase and sale of about 13 lakhs odd shares was an adventure in the nature of trade.
An appeal was taken to the Supreme Court against this order.
Held, that in considering the question whether the transac tion was or was not an adventure in the nature of trade, the court had to take into consideration the intention of the assessee 918 keeping in view the "legal requirements which are associated with the concept of trade or business" In the present case, the transaction that consisted of buy ing the managing agency of the Mill Company and the block of shares held by Sassoons was inescapably one of a commercial nature and had all the attributes of an adventure in the nature If of trade.
Held, further, that the jurisdiction which this Court would exercise in appeal was of the same character that a High Court would exercise.
Thus the question under article 14 of the Constitution could not be raised in these proceedings because this Court like the High Court was exercising its advisory jurisdiction and its power was confined to the question which arose before the High Court.
M/s. Ramnarain Sons (Pr.) Ltd. vs Commissioner of Income tax, Bombay; , , Tata Hydro Electric Agencies, Bombay vs The Commissioner of Income tax, Bombay Presidency & Aden, (1037) L.R. 64 I.A. 215, Commissioner of, Income tax, Central and United Provinces, Lucknow vs M/s. Motiram Nandram, (1939) L.R. 67 I.A. 71, Jones vs Leeming, [1930) A.C. 415, Commissioner of Inland Revenue vs Reinhold, and Saroj Kumar Mazumdar vs Commissioner of Income tax, West Bengal, Calcutta, [1959] SUPP.
2 S.C.R. 846, distinguished.
Kishan Prasad & Co. vs Commissioner of Income tax, Punjab, , Edwards vs Bairstow, ; and G. Venkataswami Naidu & Co. vs The Commissioner of Income tax, [1959] SUPP.
1 S.C.R. 646, discussed.
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"The Roster of Sitting of the Hon’bl e Judges of this Court effec tive from 28.11.2022 is as under(...TRUNCATED)
| "The Delhi High Court's Intellectual Property (IP) Division has had a change in its roster. \nWith e(...TRUNCATED)
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"1. CRL.M.C. 533/2021 has been filed for quashing FIR No.239/2017\ndated 12.05.2017, registered(...TRUNCATED)
| "Ruling that time has come to initiate action against persons who file frivolous complaints under Se(...TRUNCATED)
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"ivil Appeal No. 4031 of 1988.\nFrom the Judgment and Order dated 14.4.1988 of the Patna High PG NO (...TRUNCATED)
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